[Federal Register Volume 81, Number 113 (Monday, June 13, 2016)]
[Proposed Rules]
[Pages 38398-38456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13549]



[[Page 38397]]

Vol. 81

Monday,

No. 113

June 13, 2016

Part IV





Department of Energy





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10 CFR Parts 429 and 430





Energy Conservation Program: Energy Conservation Standards for Portable 
Air Conditioners; Proposed Rule

  Federal Register / Vol. 81 , No. 113 / Monday, June 13, 2016 / 
Proposed Rules  

[[Page 38398]]


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DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[Docket Number EERE-2013-BT-STD-0033]
RIN 1904-AD02


Energy Conservation Program: Energy Conservation Standards for 
Portable Air Conditioners

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

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

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, sets forth various provisions designed to improve energy 
efficiency for consumer products and certain commercial and industrial 
equipment. In addition to specifying a list of covered residential 
products and commercial equipment, EPCA contains provisions that enable 
the Secretary of Energy to classify additional types of consumer 
products as covered products. The U.S. Department of Energy (DOE) has 
previously published a proposed determination of coverage to classify 
portable air conditioners (ACs) as covered consumer products under the 
applicable provisions in EPCA. In this document, DOE proposes energy 
conservation standards for portable ACs following its notice of final 
determination of coverage. This document also announces a public 
meeting to receive comment on these proposed standards and associated 
analyses and results.

DATES: Comments: DOE will accept comments, data, and information 
regarding this NOPR before and after the public meeting, but no later 
than August 12, 2016. See section VIII, ``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 August 12, 2016.
    Meeting: DOE will hold a public meeting on Wednesday, July 20, 
2016, from 9:00 a.m. to 4:00 p.m., in Washington, DC. The meeting will 
also be broadcast as a webinar. See section VIII, ``Public 
Participation'' for webinar registration information, participant 
instructions, and information about the capabilities available to 
webinar participants.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue SW., 
Washington, DC 20585.
    Instructions: Any comments submitted must identify the NOPR for 
Energy Conservation Standards for Portable Air Conditioners, and 
provide docket number EERE-2013-BT-STD-0033 and/or regulatory 
information number (RIN) number 1904-AD02. Comments may be submitted 
using any of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: [email protected]. Include the docket 
number and/or RIN in the subject line of the message. Submit electronic 
comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and 
avoid the use of special characters or any form of encryption.
    3. Postal Mail: 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 compact disc (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 CD, in which case it is not necessary to 
include printed copies.
    For detailed instructions on submitting comments and additional 
information on the rulemaking process, see section VIII of this 
document (``Public Participation'').
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
[email protected].
    EPCA requires the Attorney General to provide DOE a written 
determination of whether the proposed standard is likely to lessen 
competition. The U.S. Department of Justice Antitrust Division invites 
input from market participants and other interested persons with views 
on the likely competitive impact of the proposed standard. Interested 
persons may contact the Division at [email protected] before 
July 13, 2016. Please indicate in the ``Subject'' line of your email 
the title and Docket Number of this rulemaking notice.
    Docket: The docket, which includes Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available for review at www.regulations.gov. 
All documents in the docket are listed in the www.regulations.gov 
index. However, some documents listed in the index may not be publicly 
available, such as those containing information that is exempt from 
public disclosure.
    A link to the docket Web page can be found at: https://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/79. This Web page will contain a link to the docket for this 
proposed rulemaking 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 VIII, ``Public Participation,'' for further information on how 
to submit comments through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: 
    Mr. Bryan Berringer, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies, EE-5B, 1000 
Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 
586-0371. Email: [email protected].
    Ms. Sarah Butler, U.S. Department of Energy, Office of the General 
Counsel, Mailstop GC-33, 1000 Independence Ave. SW., Washington, DC 
20585-0121. Telephone: 202-586-1777; 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
III. General Discussion
    A. Product Classes and Scope of Coverage
    B. Test Procedure
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria

[[Page 38399]]

    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared to Increase in Price
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion
    A. Market and Technology Assessment
    1. Definition and Scope of Coverage
    2. Product Classes
    a. Preliminary Analysis Proposals
    b. Comments and Responses
    c. NOPR Proposals
    3. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Additional Comments
    3. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Levels
    a. Baseline Efficiency Levels
    b. Higher Energy Efficiency Levels
    2. Manufacturer Production Cost Estimates
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model (GRIM)
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    3. Manufacturer Interviews
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Development of Social Cost of Carbon Values
    c. Current Approach and Key Assumptions
    2. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    8. Summary of National Economic Impacts
    C. Conclusion
    1. Benefits and Burdens of Trial Standard Levels Considered for 
Portable ACs
    2. Summary of Annualized Benefits and Costs of the Proposed 
Standards
VI. Certification Reporting and Enforcement Requirements
VII. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    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
VIII. 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
IX. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified), established the Energy Conservation Program for Consumer 
Products Other Than Automobiles.\2\ In addition to specifying a list of 
covered residential products and commercial equipment, EPCA contains 
provisions that enable the Secretary of Energy to classify additional 
types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) 
In a final determination of coverage published in the Federal Register 
on April 18, 2016 (the ``April 18, 2016 final coverage 
determination''), DOE classified portable ACs as covered consumer 
products under EPCA. 81 FR 22514.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2015, 
Public Law 114-11 (Apr. 30, 2015).
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    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that is technologically feasible and economically justified. 
(42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must 
result in a significant conservation of energy. (42 U.S.C. 
6295(o)(3)(B))
    In accordance with these and other statutory provisions discussed 
in this proposed rule, DOE proposes new energy conservation standards 
for portable ACs. The proposed standards, which correspond to trial 
standard level (TSL) 2 (described in section V.A), are minimum 
allowable combined energy efficiency ratio (CEER) standards, which are 
expressed in British thermal units (Btu) per watt-hour (Wh), are shown 
in Table I.1. These proposed standards, if adopted, would apply to all 
single-duct portable ACs and dual-duct portable ACs that are 
manufactured in, or imported into, the United States starting on the 
date five years after the publication of the final rule for this 
rulemaking.\3\
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    \3\ For more information regarding portable ACs for which DOE is 
not proposing energy conservation standards in this NOPR, see 
section IV.A.1 and section IV.A.2 of this notice.

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[[Page 38400]]

[GRAPHIC] [TIFF OMITTED] TP13JN16.003

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on consumers of portable ACs, as measured by the 
average life-cycle cost (LCC) savings and the payback period (PBP).\4\ 
The average LCC savings are positive and the PBP is less than the 
average lifetime for portable ACs, which is approximately 10 years (see 
section IV.F.6).
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    \4\ The average LCC savings are measured relative to the 
efficiency distribution in the no-new-standards case, which depicts 
the market in the compliance year in the absence of standards (see 
section IV.F.9). The simple PBP, which is designed to compare 
specific efficiency levels, is measured relative to the baseline 
model (see section IV.C.1.a).

     Table I.2--Impacts of Proposed Energy Conservation Standards on
                 Consumers of Portable Air Conditioners
------------------------------------------------------------------------
                                         Average LCC     Simple payback
            Consumer type              savings (2014$)   period (years)
------------------------------------------------------------------------
Residential.........................               144               2.2
Commercial..........................               292               1.2
All.................................               162               2.1
------------------------------------------------------------------------

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

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 (2016 to 2050). Using a real discount rate of 6.60 
percent,\5\ DOE estimates that the INPV for manufacturers of portable 
ACs is $725.5 million.\6\ Under the proposed standards, DOE expects 
that manufacturers may lose up to 30.6 percent of their INPV, which is 
approximately $221.7 million over the 35 years of the analysis period. 
DOE also recognizes there may be additional compliance burden for those 
manufacturers of portable ACs that also produce other appliances which 
are currently regulated by DOE. DOE has identified existing or pending 
Federal energy conservation standards for three other appliance 
categories with compliance dates that will take effect 3 years before 
or after the anticipated 2021 compliance date of the portable AC rule. 
This cumulative regulatory burden is described in more detail in 
section V.B.2.e of this notice. However, based on DOE's interviews with 
the manufacturers of portable ACs, DOE does not expect significant 
impacts on domestic manufacturing capacity or loss of employment for 
the industry as a whole to result from the proposed standards for 
portable ACs.
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    \5\ The real discount rate is the weighted-average cost of 
capital derived from industry financials and modified based on 
feedback received during confidential interviews with manufacturers.
    \6\ All monetary values in this section are expressed in 2014 
dollars; discounted values are discounted to 2015 unless explicitly 
stated otherwise.
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    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this proposed rule.

C. National Benefits and Costs

    DOE's analyses indicate that the proposed energy conservation 
standards for portable ACs would save a significant amount of energy. 
Relative to the case without new standards, the lifetime energy savings 
for portable ACs purchased in the 30-year period that begins in the 
anticipated year of compliance with the new standards (2021-2050) 
amount to 0.53 quadrillion Btu (quads).\7\ This represents a savings of 
8.6 percent relative to the energy use of these products in the case 
without new standards (referred to as the ``no-new-standards case'').
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    \7\ A quad is equal to 10 \15\ British thermal units (Btu). The 
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy 
savings includes the energy consumed in extracting, processing, and 
transporting primary fuels (i.e., coal, natural gas, petroleum 
fuels), and, thus, presents a more complete picture of the impacts 
of energy efficiency standards. For more information on the FFC 
metric, see section IV.H.2.
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    The cumulative net present value (NPV) of total consumer costs and 
savings of the proposed standards for portable ACs ranges from $2.15 
billion (at a 7-percent discount rate) to $5.20 billion (at a 3-percent 
discount rate). This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product costs for 
portable ACs purchased in 2021-2050.
    In addition, the proposed standards for portable ACs are projected 
to yield significant enviornmental benefits. DOE estimates that the 
proposed standards would result in cumulative emission reductions (over 
the same period as for energy savings) of 37.7 million metric tons (Mt) 
\8\ of carbon dioxide (CO2), 20.2 thousand tons of sulfur 
dioxide (SO2), 69.6 thousnd tons of nitrogen oxides 
(NOX), 165.3 thousand tons of methane (CH4), 0.4 
thousnad tons of nitrous oxide (NXO), and 0.07 tons of 
mercury (Hg).\9\ The cumulative reduction in CO2

[[Page 38401]]

emissions through 2030 amounds to 6.7 Mt, which is the equilavent to 
the emissions resulting from the annual electricity use of over 900,000 
homes.
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    \8\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presetned in short tons.
    \9\ DOE calculated emissions reduction relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy 
Outlook 2015 (AEO 2015) Reference case. AEO 2015 generally 
represents current legislation environmental regulations for which 
implementing regulations were available as of October 31, 2014.
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    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the ``Social Cost of Carbon'', or SCC) developed by a Federal 
interagency working group.\10\ The derivation of the SCC values is 
discussed in section IV.L. Using discount rates appropriate for each 
set of SCC values (see Table I.3), DOE estimates the present monetary 
value of the CO2 emissions reduction (not including 
CO2 equivalent emissions of other gases with global warming 
potential) is between $0.3 billion and $3.6 billion, with a value of 
$1.2 billion using the central SCC case represented by $40.0/t in 2015. 
DOE also estimates the present monetary value of the NOX 
emissions reduction to be $0.05 billion at a 7-percent discount rate 
and $0.12 billion at a 3-percent discount rate.\11\
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    \10\ 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: https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
    \11\ DOE is currently investigating valuation of avoided 
SO2 and Hg emissions.
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    Table I.3 summarizes the national economic benefits and costs 
expected to result from the proposed standards for portable ACs. Table 
I.4 presents the impacts to manufacturers and consumers expected to 
result from these proposed standards.

 Table I.3--Summary of National Economic Benefits and Costs of Proposed
Energy Conservation Standards for Portable Air Conditioners (TSL 2) 2021-
                                 2050 *
------------------------------------------------------------------------
                                          Present values
                Category                     (billion      Discount rate
                                              2014$)            (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings.........             2.4               7
                                                     5.7               3
CO2 Reduction Monetized Value ($12.2/t               0.3               5
 case) **...............................
CO2 Reduction Monetized Value ($40.0/t               1.2               3
 case) **...............................
CO2 Reduction Monetized Value ($62.3/t               1.9             2.5
 case) **...............................
CO2 Reduction Monetized Value ($117/t                3.6               3
 case) **...............................
NOX Reduction Monetized Value [dagger]..            0.05               7
                                                    0.12               3
Total Benefits [dagger][dagger].........             3.6               7
                                                     7.0               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....            0.27               7
                                                    0.51               3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction                      3.4               7
 Monetized Value [dagger][dagger].......
                                                     6.5               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with portable
  ACs shipped in 2021-2050. These results include benefits to consumers
  which accrue after 2050 from the products purchased in 2021-2050. The
  costs account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in
  preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2014$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series incorporate an
  escalation factor. The value for NOX is the average of high and low
  values found in the literature.
[dagger] The $/ton values used for NOX are described in section IV.L.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
  using the series corresponding to average SCC with 3-percent discount
  rate ($40.0/t case).


[[Page 38402]]


  Table I.4--Manufacturer (2016-2050) and Consumer (2021-2050) Impacts
      From Proposed Energy Conservation Standards for Portable Air
                          Conditioners (TSL 2)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Manufacturer Impacts
------------------------------------------------------------------------
Industry NPV (2014$ millions)       503.8 to 521.7.
 (Base Case INPV = 725.5).
Industry NPV (% change)...........  (30.6%) * to (28.1%).*
------------------------------------------------------------------------
                  Consumer Average LCC Savings (2014$)
------------------------------------------------------------------------
Residential.......................  144.
Commercial........................  292.
All...............................  162.
------------------------------------------------------------------------
                       Consumer Simple PBP (years)
------------------------------------------------------------------------
Residential.......................  2.2.
Commercial........................  1.2.
All...............................  2.1.
------------------------------------------------------------------------
                 % of Consumers that Experience Net Cost
------------------------------------------------------------------------
Residential.......................  13.
Commercial........................  2.
All...............................  12.
------------------------------------------------------------------------
* Parentheses indicate negative (-) values.

    The benefits and costs of the proposed standards, for portable ACs 
sold in 2021-2050, can also be expressed in terms of annualized values. 
The monetary values for the total annualized net benefits are the sum 
of: (1) The national economic value of the benefits in reduced 
operating costs, minus (2) the increase in product purchase prices and 
installation costs, plus (3) the value of the benefits of 
CO2 and NOX emission reductions, all 
annualized.\12\
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    \12\ 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.3. Using the present value, DOE then 
calculated the fixed annual payment over a 30-year period, starting 
in the compliance year that yields the same present value.
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    Although the values of operating cost savings and CO2 
emission reductions are both important, two issues are relevant. First, 
the national operating savings are domestic U.S. consumer monetary 
savings that occur as a result of market transactions, whereas the 
value of CO2 reductions is based on a global value. Second, 
the assessments of operating cost savings and CO2 savings 
are performed with different methods that use different time frames for 
analysis. The national operating cost savings is measured for the 
lifetime of portable ACs shipped in 2021-2050. Because CO2 
emissions have a very long residence time in the atmosphere,\13\ the 
SCC values in future years reflect future CO2-emissions 
impacts that continue beyond 2100.
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    \13\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, MZ (2005), ``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.
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    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.5. 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/t in 2015),\14\ the estimated cost of the standards 
proposed in this rule is $30 million per year in increased equipment 
costs, while the estimated annual benefits are $273 million in reduced 
equipment operating costs, $70 million in CO2 reductions, 
and $ 5.4 million in reduced NOX emissions. In this case, 
the net benefit amounts to $318 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/t in 2015, the estimated cost of the proposed 
standards is $30 million per year in increased equipment costs, while 
the estimated annual benefits are $338 million in reduced operating 
costs, $70 million in CO2 reductions, and $7.2 million in 
reduced NOX emissions. In this case, the net benefit amounts 
to $385 million per year.
---------------------------------------------------------------------------

    \14\ DOE used a 3-percent discount rate because the SCC values 
for the series used in the calculation were derived using a 3-
percent discount rate (see section IV.L).

           Table I.5--Annualized Benefits and Costs of Proposed Energy Conservation Standards for Portable Air Conditioners (TSL 2) 2021-2050
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                                                     -----------------------------------------------------------------------------------
                                              Discount rate                                        Low net benefits estimate  High net benefits estimate
                                                                          Primary  estimate *             * [Dagger]                       *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7%..............................  273.......................  125.......................  296.
                                    3%..............................  338.......................  153.......................  371.
CO2 Reduction Value ($12.2/t case)  5%..............................  21........................  10........................  23.
 **.
CO2 Reduction Value ($40.0/t case)  3%..............................  70........................  33........................  75.
 **.
CO2 Reduction Value ($62.3/t case)  2.5%............................  102.......................  48........................  109.
 **.
CO2 Reduction Value ($117/t case)   3%..............................  213.......................  100.......................  228.
 **.
NOX Reduction Monetized Value       7%..............................  5.4.......................  3.........................  12.9.
 [dagger].
                                    3%..............................  7.2.......................  3.........................  17.4.
Total Benefits [dagger][dagger]...  7% plus CO2 range...............  300 to 492................  137 to 227................  331 to 537.
                                    7%..............................  348.......................  160.......................  383.
                                    3% plus CO2 range...............  366 to 558................  167 to 256................  411 to 616.
                                    3%..............................  415.......................  189.......................  463.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed      7%..............................  30........................  31........................  27.
 Product Costs.
                                    3%..............................  30........................  31........................  26.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............  7% plus CO2 range...............  269 to 462................  106 to 196................  304 to 510.
                                    7%..............................  318.......................  129.......................  357.
                                    % plus CO2 range................  336 to 528................  135 to 225................  385 to 590.

[[Page 38403]]

 
                                    3%..............................  385.......................  158.......................  437.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with portable ACs shipped in 2021-2050. These results include benefits to consumers
  which accrue after 2050 from the products purchased in 2021-2050. The results account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates
  utilize projections of energy prices from the EIA's AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In
  addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high
  decline rate in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.H.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount
  rate ($40.0/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.
[Dagger] In addition to the AEO 2015 Low Economic Growth case, the Low Net Benefits Estimate reflects a 50 percent reduction in the number of operating
  hours. Details of the sensitivity analysis can be found in appendix 8F.

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

D. Conclusion

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

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposed rule, as well as some of the relevant 
historical background related to the establishment of standards for 
portable ACs.

A. Authority

    Title III, Part B of the Energy Policy and Conservation Act of 1975 
(EPCA or the Act), Public Law 94-163 (codified as 42 U.S.C. 6291-6309) 
established the Energy Conservation Program for Consumer Products Other 
Than Automobiles, a program covering most major household appliances 
(collectively referred to as ``covered products'').
    EPCA, as amended, grants DOE authority to prescribe an energy 
conservation standard for any type (or class) of covered products of a 
type specified in 42 U.S.C. 6292(a)(19) \15\ if the requirements of 42 
U.S.C. 6295(o) and (p) are met and the Secretary determines that--
---------------------------------------------------------------------------

    \15\ On April 18, 2016, DOE published a final coverage 
determination in which DOE determined that portable ACs qualify as a 
covered product because classifying products of such type as covered 
products is necessary or appropriate to carry out the purposes of 
EPCA, and the average U.S. household energy use for portable ACs is 
likely to exceed 100 kilowatt-hours per year. 81 FR 22514.
---------------------------------------------------------------------------

    (1) the average per household energy use within the United States 
by products of such type (or class) exceeded 150 kilowatt-hours (kWh) 
(or its Btu equivalent) for any 12-month period ending before such 
determination;
    (2) the aggregate household energy use within the United States by 
products of such type (of class) exceeded 4,200,000,000 kWh (or its Btu 
equivalent) for any such 12-month period;
    (3) Substantial improvement in the energy efficiency of products of 
such type (or class) is technologically feasible; and
    (4) the application of a labeling rule under 42 U.S.C. 6294 to such 
type (or class) is not likely to be sufficient to induce manufacturers 
to produce, and consumers and other persons to purchase, covered 
products of such type (or class) which achieve the maximum energy 
efficiency which is technologically feasible and economically 
justified. (42 U.S.C. 6295(l)(1))
    DOE has determined that portable ACs meet the four criteria 
outlined in 42 U.S.C. 6295(l)(1) to prescribe energy conservation 
standards for new covered products. Specifically, DOE has determined 
that the average per household energy use within the United States by 
portable ACs exceeded 150 kWh for a 12-month period ending before such 
determination (see chapter 7 of the NOPR technical support document 
(TSD)). DOE has also determined that the aggregate household energy use 
within the United States by portable ACs exceeded 4,200,000,000 kWh (or 
its Btu equivalent) for such a 12-month period (see chapter 10 of the 
NOPR TSD). Further, DOE has determined that substantial improvement in 
the energy efficiency of portable ACs is technologically feasible (see 
section IV.C of this NOPR and chapter 5 of the NOPR TSD), and has 
determined that the application of a labeling rule under 42 U.S.C. 6294 
to portable ACs is not likely to be sufficient to induce manufacturers 
to

[[Page 38404]]

produce, and consumers and other persons to purchase, portable ACs that 
achieve the maximum energy efficiency which is technologically feasible 
and economically justified (see chapter 17 of the NOPR TSD).
    Pursuant to EPCA, DOE's energy conservation program consists 
essentially of four parts: (1) Testing, (2) labeling, (3) the 
establishment of Federal energy conservation standards, and (4) 
certification and enforcement procedures. The Federal Trade Commission 
(FTC) is primarily responsible for labeling, and DOE implements the 
remainder of the program. Subject to certain criteria and conditions, 
DOE is required to develop test procedures to measure the energy 
efficiency, energy use, or estimated annual operating cost of each 
covered product. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of 
covered products must use the prescribed DOE test procedure as the 
basis for certifying to DOE that their products comply with the 
applicable energy conservation standards adopted under EPCA and when 
making representations to the public regarding the energy use or 
efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) 
Similarly, DOE must use these test procedures to determine whether the 
products comply with standards adopted pursuant to EPCA. (42 U.S.C. 
6295(s)) The DOE test procedure for portable ACs was recently 
established in a Final Rule issued on April 26, 2016 (the ``April 26, 
2016 TP Final Rule''), and appears at title 10 of the Code of Federal 
Regulations (CFR) part 430, subpart B, appendix CC (appendix CC).
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including portable ACs. Any new 
or amended standard for a covered product must be designed to achieve 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) 
Furthermore, DOE may not adopt any standard that would not result in 
the significant conservation of energy. (42 U.S.C. 6295(o)(3)) 
Moreover, DOE may not prescribe a standard: (1) For certain products, 
including portable ACs, if no test procedure has been established for 
the product, or (2) if DOE determines by rule that the proposed 
standard is not technologically feasible or economically justified. (42 
U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make 
this determination after receiving comments on the proposed standard, 
and by considering, to the greatest extent practicable, the following 
seven statutory factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered products in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered products that are likely to result from the standard;
    (3) The total projected amount of energy (or as applicable, water) 
savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the covered 
products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary of Energy (Secretary) considers 
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    EPCA states that the Secretary may not prescribe an amended or new 
standard if interested persons have established by a preponderance of 
the evidence that the standard is likely to result in the 
unavailability in the United States in any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of product that has the same function or intended use, if DOE 
determines that products within such group: (A) Consume a different 
kind of energy from that consumed by other covered products within such 
type (or class); or (B) have a capacity or other performance-related 
feature which other products within such type (or class) do not have 
and such feature justifies a higher or lower standard. (42 U.S.C. 
6294(q)(1)) In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE must 
consider such factors as the utility to the consumer of the feature and 
other factors DOE deems appropriate. Id. Any rule prescribing such a 
standard must include an explanation of the basis on which such higher 
or lower level was established. (42 U.S.C. 6295(q)(2))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers 
of Federal preemption for particular State laws or regulations, in 
accordance with the procedures and other provisions set forth under 42 
U.S.C. 6297(d).
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, 
any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into 
a single standard, or, if that is not feasible, adopt a separate 
standard for such energy use for that product. (42 U.S.C. 
6295(gg)(3)(A)-(B)) DOE's recently established test procedures for 
portable ACs address standby mode and off mode energy use. In this 
rulemaking, DOE proposes to adopt a single energy conservation standard 
that addresses active, off, and standby modes.

B. Background

    DOE has not previously conducted an energy conservation standards 
rulemaking for portable ACs. Consequently, there are currently no 
Federal energy conservation standards for portable ACs.
    Under the authority established in EPCA, DOE published the April 
18, 2016 final coverage determination that portable ACs qualify as a 
covered product because classifying products of such type as a covered 
product is necessary or appropriate to carry out the purposes of EPCA, 
and the average U.S. household energy use for portable ACs

[[Page 38405]]

is likely to exceed 100 kWh per year. 81 FR 22514 (April 18, 2016).
    DOE published a notice of data availability (NODA) on May 9, 2014 
(the May 2014 NODA), reviewing various industry test procedures for 
portable ACs and presenting results from its investigative testing. DOE 
requested comment and additional information regarding the results and 
potential methodologies. 79 FR 26639. Comments received on the May 2014 
NODA helped DOE identify issues related to the provisional analyses, as 
well as informed the analysis for the test procedure rulemaking.
    On February 27, 2015, DOE published an energy conservation 
standards notice of public meeting and notice of availability of 
preliminary TSD for portable ACs (February 2015 Preliminary Analysis). 
In the preliminary analysis, DOE conducted in-depth technical analyses 
in the following areas: (1) Engineering; (2) markups to determine 
product price; (3) energy use; (4) life-cycle cost and payback period; 
and (5) national impacts. The preliminary TSD that presented the 
methodology and results of each of these analyses is available at 
http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0033-
0007.
    DOE also conducted, and included in the preliminary TSD, several 
other analyses that supported the major analyses or were expanded upon 
for this NOPR. These analyses included: (1) The market and technology 
assessment; (2) the screening analysis, which contributes to the 
engineering analysis; and (3) the shipments analysis,\16\ which 
contributes to the LCC and PBP analysis and national impact analysis 
(NIA). In addition to these analyses, DOE began preliminary work on the 
manufacturer impact analysis and identified the methods to be used for 
the consumer subgroup analysis, the emissions analysis, the employment 
impact analysis, the regulatory impact analysis, and the utility impact 
analysis. 80 FR 10628 (Feb. 27, 2015).
---------------------------------------------------------------------------

    \16\ Industry data track shipments from manufacturers into the 
distribution chain. Data on national unit retail sales are lacking, 
but are presumed to be close to shipments under normal 
circumstances.
---------------------------------------------------------------------------

    DOE held a public meeting on March 18, 2015, to discuss the 
analyses and solicit comments from interested parties regarding the 
preliminary analysis it conducted. The meeting covered the analytical 
framework, models, and tools that DOE uses to evaluate potential 
standards; the results of preliminary analyses performed by DOE for 
this product; the potential energy conservation standard levels derived 
from these analyses that DOE could consider for this product; and any 
other issues relevant to the development of energy conservation 
standards for portable ACs.
    Interested parties discussed at the public meeting and followed up 
with written comments regarding the following major issues: Rulemaking 
schedule with respect to the test procedure availability and timing; 
covered product configurations; product classes and impacts on consumer 
utility; technology options; efficiency levels (ELs); incremental 
costs; sources of data; and cumulative regulatory burden.
    Comments received in response to the February 2015 Preliminary 
Analysis helped DOE identify and resolve issues related to the 
preliminary analysis. After reviewing these comments, DOE gathered 
additional information, held further discussions with manufacturers, 
and completed and revised the various analyses described in the 
preliminary analysis. The results of these analyses are presented in 
this NOPR.

III. General Discussion

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

A. Product Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q))
    In the February 2015 Preliminary Analysis, DOE did not consider 
energy conservation standards for portable ACs other than single-duct 
or dual-duct protable ACs, as the test procedure proposed at that time 
did not include provisions for testing other portable ACs, and DOE did 
not separate portable ACs into multiple product classes following a 
determination that there is no unique utility associated with single-
duct or dual-duct portable ACs.
    In this NOPR, DOE maintains the proposals from the February 2015 
Preliminary Analysis to consider standards for one product class for 
all single-duct and dual-duct portable ACs. Comments received relating 
to the scope of coverage and product classes are discussed in section 
IV.A of this proposed rule.

B. Test Procedure

    DOE initiated a test procedure rulemaking by publishing the May 
2014 NODA to request feedback on potential testing options. In the May 
2014 NODA, DOE discussed various industry test procedures and presented 
results from its investigative testing that evaluated existing 
methodologies and alternate approaches adapted from these methodologies 
that could be incorporated in a future DOE test procedure, should DOE 
determine that portable ACs are covered products. 79 FR 26639 (May 9, 
2014).
    On February 25, 2015, DOE published a NOPR (hereinafter referred to 
as ``February 2015 TP NOPR'') in which it proposed to establish test 
procedures for single-duct and dual-duct portable ACs. The proposed 
test procedures were based upon industry methods to determine energy 
consumption in active modes, off-cycle mode, standby modes, and off 
mode, with certain modifications to ensure the test procedures are 
repeatable and representative. 80 FR 10211.
    On November 27, 2015, DOE published a supplemental notice of 
proposed rulemaking (SNOPR) (hereinafter referred to as ``November 2015 
TP SNOPR''), in which it proposed revisions to the test procedure 
proposed in the February 2015 TP NOPR, to improve repeatability, reduce 
test burden, and ensure the test procedure is representative of typical 
consumer usage. 80 FR 74020.
    On April 26 2016, DOE issued the April 2016 TP Final Rule that 
established appendix CC. DOE based its analysis in this proposed rule 
on capacities and CEERs determined according to the appendix CC test 
procedure.
    DOE received comments expressing concern about the timing of the 
portable AC test procedure rulemaking in relation to the February 2015 
Preliminary Analysis and this NOPR.
    The Association of Home Appliance Manufacturers (AHAM) expressed 
concern that the preliminary analysis was developed in the absence of a 
final test procedure, which it expected would be published around the 
same time as this NOPR. AHAM stated that if a test procedure is not 
finalized in a sufficient period of time before a proposed rule is 
issued, interested parties will not have sufficient opportunity to 
evaluate design options and proposed standard levels.

[[Page 38406]]

AHAM commented that the industry is unable to determine and provide 
market representative performance data to DOE without a final test 
procedure, and that DOE's test and teardown sample of units may not be 
suitable to inform appropriate baseline and higher efficiency levels 
representative of the majority of products currently on the market. 
However, AHAM believes that once the final test procedure is published, 
manufacturers would be more willing to test their products and 
determine performance according to the DOE portable AC test procedure. 
Therefore, AHAM urged DOE to release the final test procedure before it 
continues with its standards analysis and manufacturer interviews. 
(AHAM, Public Meeting Transcript, No. 11 at pp. 9-11, 21-22, 57; AHAM, 
No. 16 at pp. 1-4) 17 18 De' Longhi Appliances s.r.l. (De' 
Longhi) agreed that energy conservation standards can only be developed 
when a test procedure has been completely defined. (De' Longhi, Public 
Meeting Transcript, No. 11 at p. 5; De' Longhi, No. 12 at p. 1)
---------------------------------------------------------------------------

    \17\ A notation in the form ``AHAM, Public Meeting Transcript, 
No. 11 at pp. 9-11, 21-22, 57'' identifies an oral comment that DOE 
received on March 18, 2015 during the Preliminary Analysis public 
meeting, was recorded in the public meeting transcript in the docket 
for this test procedure rulemaking (Docket No. EERE-2013-BT-STD-
0033). This particular notation refers to a comment (1) made by the 
Association of Home Appliance Manufacturers (AHAM) during the public 
meeting; (2) recorded in document number 11, which is the public 
meeting transcript that is filed in the docket of this test 
procedure rulemaking; and (3) which appears on pages 9 through 11, 
21 through 22, and 57 of document number 11.
    \18\ A notation in the form ``AHAM, No. 16 at pp. 1-4'' 
identifies a written comment: (1) Made by AHAM; (2) recorded in 
document number 16 that is filed in the docket of this standards 
rulemaking (Docket No. EERE-2013- BT-TP-0033) and available for 
review at www.regulations.gov; and (3) which appears on pages 1 
through 4 of document number 16.
---------------------------------------------------------------------------

    As described previously in this section, on April 26, 2016 DOE 
issued the April 26, 2016 TP Final Rule to establish the portable AC 
test procedure in appendix CC. April 2016 issued TP Final Rule. 
Manufacturers may use appendix CC to test their products and evaluate 
the standard levels proposed in this NOPR.
    Other comments that DOE received from interested parties related to 
specific provisions of the portable AC test procedure were addressed in 
that rulemaking. For further information, please see the docket for 
test procedures for portable ACs: http://www.regulations.gov/#!docketDetail;D=EERE-2014-BT-TP-0014. In this NOPR analysis, all 
presented product capacities and efficiencies are consistent with the 
appendix CC test procedures.

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 develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially available products or in working prototypes to be 
technologically feasible. 10 CFR part 430, subpart C, appendix A, 
section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; and (3) adverse impacts on 
health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its 
analysis any proprietary technology that is a unique pathway to achieve 
a certain efficiency level. Section IV.B of this proposed rule 
discusses the results of the screening analysis for portable ACs, 
particularly the designs DOE considered, those it screened out, and 
those that are the basis for the standards considered in this 
rulemaking. For further details on the screening analysis for this 
rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt a new or amended standard for a type or 
class of covered product, it must determine the maximum improvement in 
energy efficiency or maximum reduction in energy use that is 
technologically feasible for such product. (42 U.S.C. 6295(p)(1)) 
Accordingly, in the engineering analysis, DOE determined the maximum 
technologically feasible (``max-tech'') improvements in energy 
efficiency for portable ACs, using the design parameters for the most 
efficient products available on the market or in working prototypes. 
The max-tech levels that DOE determined for this rulemaking are 
described in section IV.C.1.b of this proposed rule and in chapter 5 of 
the NOPR TSD.

D. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings at the TSL for portable 
ACs purchased in the 30-year period that begins in the year of 
compliance with the proposed standards (2021-2050).\19\ The savings are 
measured over the entire lifetime of portable ACs purchased in the 
above 30-year period. DOE quantified the energy savings attributable to 
each TSL as the difference in energy consumption between each standards 
case and the no-new-standards case. The no-new-standards case 
represents a projection of energy consumption that reflects how the 
market for a product would likely evolve in the absence of any energy 
conservation standards.
---------------------------------------------------------------------------

    \19\ Each TSL is comprised of specific efficiency levels for 
each product class. The TSLs considered for this NOPR are described 
in section V.A. DOE conducted a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE used its NIA spreadsheet model to estimate energy savings from 
potential new standards for portable ACs. The NIA spreadsheet model 
(described in section IV.H of this proposed rule) calculates savings in 
site energy, which is the energy directly consumed by products at the 
locations where they are used. Based on the site energy, DOE calculates 
national energy savings (NES) in terms of primary energy savings at the 
site or at power plants, and also in terms of full-fuel-cycle (FFC) 
energy savings. The FFC metric includes the energy consumed in 
extracting, processing, and transporting primary fuels (i.e., coal, 
natural gas, petroleum fuels), and thus presents a more complete 
picture of the impacts of energy conservation standards.\20\ DOE's 
approach is based on the calculation of an FFC multiplier for each of 
the energy types used by covered products or equipment. For more 
information on FFC energy savings, see section IV.H.2 of this proposed 
rule.
---------------------------------------------------------------------------

    \20\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as 
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt any new or amended standards for a covered product, DOE 
must determine that such action would result in ``significant'' energy 
savings. (42 U.S.C. 6295(o)(3)(B)) Although the term ``significant'' is 
not defined in the

[[Page 38407]]

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.'' The energy savings for all of the TSLs considered in this 
rulemaking, including the proposed standards (presented in section 
V.B.3.a), are nontrivial, and, therefore, DOE considers them 
``significant'' within the meaning of section 325 of EPCA.

E. Economic Justification

1. Specific Criteria
    As noted above, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of potential new standards on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include: (1) INPV, which 
values the industry on the basis of expected future cash flows; (2) 
cash flows by year; (3) changes in revenue and income; and (4) other 
measures of impact, as appropriate. Second, DOE analyzes and reports 
the impacts on different types of manufacturers, including impacts on 
small manufacturers. Third, DOE considers the impact of standards on 
domestic manufacturer employment and manufacturing capacity, as well as 
the potential for standards to result in plant closures and loss of 
capital investment. Finally, DOE takes into account cumulative impacts 
of various DOE regulations and other regulatory requirements on 
manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and PBP associated with new or amended standards. These 
measures are discussed further in the following section. For consumers 
in the aggregate, DOE also calculates the national net present value of 
the consumer costs and benefits expected to result from particular 
standards. DOE also evaluates the impacts of potential standards on 
identifiable subgroups of consumers that may be affected 
disproportionately by a standard.
b. Savings in Operating Costs Compared To Increase in Price
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and discount rates appropriate for 
consumers. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that consumers will 
purchase the covered products in the first year of compliance with new 
standards. The LCC savings for the considered efficiency levels are 
calculated relative to the case that reflects projected market trends 
in the absence of standards. DOE's LCC and PBP analysis is discussed in 
further detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section III.D, DOE uses the NIA spreadsheet models to 
project national energy savings.
d. Lessening of Utility or Performance of Products
    In evaluating design options and the impact of potential standard 
levels, DOE evaluates potential standards that would not lessen the 
utility or performance of the considered products. (42 U.S.C. 
6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards 
proposed in this proposed rule would not reduce the utility or 
performance of the products under consideration in this rulemaking. For 
more information on consumer utility and product performance of 
portable ACs, see section IV.A.2 and section IV.C of this proposed 
rule.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General that is 
likely to result from a proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard and to transmit such determination to the 
Secretary within 60 days of the publication of a proposed rule, 
together with an analysis of the nature and extent of the impact. (42 
U.S.C. 6295(o)(2)(B)(ii))
    To assist the Attorney General in making such determination, DOE 
will provide the Department of Justice (DOJ) with copies of the NOPR 
and NOPR 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. DOE invites comment from 
the public regarding the competitive impacts that are likely to result 
from this proposed rule. In addition, stakeholders may also provide 
comments separately to DOJ regarding these potential impacts. See the 
ADDRESSES section for information to send comments to DOJ.
f. Need for National Energy Conservation
    DOE also considers the need for national energy conservation in 
determining whether a new or amended standard is economically 
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the 
proposed standards are likely to provide improvements to the security 
and reliability of the nation's

[[Page 38408]]

energy system. Reductions in the demand for electricity also may result 
in reduced costs for maintaining the reliability of the nation's 
electricity system. DOE conducts a utility impact analysis to estimate 
how standards may affect the nation's needed power generation capacity, 
as discussed in section IV.M.
    The proposed standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases (GHGs) associated with energy production and use. DOE 
conducts an emissions analysis to estimate how potential standards may 
affect these emissions, as discussed in section IV.K; the emissions 
impacts are reported in section V.B.3 of this proposed rule. DOE also 
estimates the economic value of emissions reductions resulting from the 
considered TSLs, as discussed in section IV.L.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) 
To the extent interested parties submit any relevant information 
regarding economic justification that does not fit into the other 
categories described above, DOE could consider such information under 
``other factors.''
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic analysis that considers 
the full range of impacts to consumers, manufacturers, the nation, and 
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section IV.F.9 of this proposed rule.

IV. Methodology and Discussion

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to portable ACs. Separate subsections address 
each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards proposed in this document. The first tool is a spreadsheet 
that calculates LCC savings and PBP of potential new energy 
conservation standards. The national impact analysis uses a second 
spreadsheet set that provides shipments forecasts and calculates 
national energy savings and net present value of total consumer costs 
and savings expected to result from potential standards. DOE uses the 
third spreadsheet tool, the Government Regulatory Impact Model (GRIM), 
to assess manufacturer impacts of potential standards. These three 
spreadsheet tools are available on the DOE Web site for this 
rulemaking: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/76. Additionally, DOE used output from the 
latest version of Energy Information Administration (EIA)'s Annual 
Energy Outlook (AEO), a widely known energy forecast for the United 
States, for the emissions and utility impact analyses.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly available 
information. The subjects addressed in the market and technology 
assessment for this rulemaking include: (1) A determination of the 
scope of the rulemaking and product classes; (2) manufacturers and 
industry structure; (3) existing efficiency programs; (4) shipments 
information; (5) market and industry trends; and (6) technologies that 
could improve the energy efficiency of portable ACs. The key findings 
of DOE's market assessment are summarized below. See chapter 3 of the 
NOPR TSD for further discussion of the market and technology 
assessment.
1. Definition and Scope of Coverage
    DOE conducted the February 2015 Preliminary Analysis based on the 
portable AC definition proposed in the February 2015 Test Procedure 
NOPR, which stated that a portable AC is an encased assembly, other 
than a ``packaged terminal air conditioner,'' ``room air conditioner,'' 
or ``dehumidifier,'' that is designed as a portable unit to deliver 
cooled, conditioned air to an enclosed space. A portable AC is powered 
by single-phase power and may rest on the floor or elevated surface. It 
includes a source of refrigeration and may include additional means for 
air circulation and heating. 80 FR 10212, 10215 (Feb. 25, 2015).
    In the April 18, 2016 final coverage determination, DOE codified 
this definition at 10 CFR 430.2, with minor editorial revisions that do 
not modify the intent or scope of the definition:
    A portable encased assembly, other than a ``packaged terminal air 
conditioner,'' ``room air conditioner,'' or ``dehumidifier,'' that 
delivers cooled, conditioned air to an enclosed space, and is powered 
by single-phase electric current. It includes a source of refrigeration 
and may include additional means for air circulation and heating. 81 FR 
22514.
    The Pacific Gas and Electric Company (PG&E), Southern California 
Gas Company (SCGC), Southern California Edison (SCE), and San Diego Gas 
and Electric Company (SDG&E) (hereinafter the ``California IOUs''), 
AHAM, and De' Longhi supported the analysis of portable ACs for future 
energy conservation standards. (California IOUs, No. 15 at p. 1; AHAM, 
No. 16 at pp. 1-2; De' Longhi, Public Meeting Transcript, No. 11 at p. 
5; De' Longhi, No. 12 at p. 1)
    DENSO expressed concern about defining covered products on the 
basis of supply power, noting that some commercial/industrial portable 
ACs are powered by single-phase power. According to DENSO, commercial 
units may be differentiated from residential ones on the basis of more 
rugged construction and the tendency to be larger and heavier for a 
given cooling capacity. (DENSO, No. 13 at pp. 3-4)
    DOE notes that the definition for ``portable air conditioner'' in 
10 CFR 430.2 excludes units that could not be normally used as a 
consumer product. Therefore, a product that requires three-phase power, 
a requirement that is not appropriate for consumer products, is not 
covered under the definition of portable AC. Conversely, any product 
with single-phase power that otherwise meets the definition for a 
portable AC

[[Page 38409]]

would be considered by DOE to be such a covered product regardless of 
the manufacturer-intended application or installation location. DOE 
also recognized that certain portable ACs that exhaust condenser air 
within the conditioned space (``spot coolers'') do not provide net 
cooling to the typical conditioned consumer space. In addition, spot 
coolers incorporate different design features and a wider variety of 
installation types and usage patterns than single-duct and dual-duct 
portable ACs. For these reasons, DOE did not identify a test procedure 
that would measure representative performance of spot coolers. DOE 
instead established a test procedure for single-duct and dual-duct 
portable ACs in its recent rulemaking that established appendix CC (80 
FR 10211, 10213, 10214-10215 (Feb. 25, 2015); April 26, 2016 issued TP 
Final Rule), and correspondingly is proposing standards only for 
single-duct and dual-duct portable ACs in this NOPR. DOE welcomes 
comment on this decision and its rationale for proposing standards for 
single-duct and dual-duct portable ACs.
2. Product Classes
    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q))
    Portable ACs only recently became a covered product when DOE issued 
the April 18, 2016 final coverage determination, and therefore do not 
have previous energy conservation standards or product class divisions. 
81 FR 22515
a. Preliminary Analysis Proposals
    Following an evaluation of the portable AC market in preparation of 
the February 2015 Preliminary Analysis, DOE determined that there are 
three types of duct configurations that affect product performance: 
Single-duct, dual-duct, and spot cooler. DOE noted in the February 2015 
Preliminary Analysis that the DOE test procedure proposed in the 
February 2015 Test Procedure NOPR did not include measures of spot 
cooler performance, and therefore as discussed previously, DOE did not 
consider standards for spot coolers. See chapter 3 of the preliminary 
TSD for more information.
    DOE further evaluated if there was any consumer utility associated 
with the single-duct and dual-duct configurations under consideration. 
As detailed in chapter 3 of the preliminary TSD, DOE investigated 
installation locations and noise levels, and found that duct 
configuration had no impact on either of these key consumer utility 
variables. Therefore, DOE determined in the February 2015 Preliminary 
Analysis that a single product class is appropriate for portable ACs.
b. Comments and Responses
Spot Coolers
    DENSO supported the exclusion of spot coolers from potential energy 
conservation standards. It commented that its spot coolers, which may 
also be operated with optional adapters to configure them as single-
duct or dual-duct portable ACs, are typically installed in commercial 
applications such as a warehouses, auto repair shops, or similar 
businesses, and are not appropriate for a typical retail commercial 
establishment or residential application. DENSO believes that these 
units should therefore be exempt from the rulemaking, particularly due 
to the low market volume compared to other currently covered products. 
According to DENSO, annual shipments of spot coolers are approximately 
15,000 units, or about 1.6 percent of the DOE-estimated portable AC 
market. DENSO further commented that there is little differentiation in 
energy efficiency ratio (EER) across all spot coolers on the market 
with capacities ranging from 12,000 to 60,000 Btu/hr. (DENSO, No. 13 at 
pp. 1, 5, 9) DENSO expressed concern regarding the features that DOE 
proposed to distinguish commercial and industrial portable ACs from 
residential portable ACs. According to DENSO, it is presumed to be 
mutually agreed that units powered from a three-phase power source are 
commercial/industrial units, but there are some units powered by 
single-phase power which are clearly commercial/industrial products. 
(DENSO, No. 13 at pp. 3-4)
    The California IOUs urged DOE to include spot coolers in the energy 
conservation standards rulemaking analyses and to adopt active mode 
test procedures for spot coolers utilizing existing industry test 
procedures such as ANSI/ASHRAE Standard 128-2011. The California IOUs 
noted that 321 of the 427 spot cooler models in the California Energy 
Commission (CEC) Appliance Efficiency Database have cooling capacities 
below 14,000 Btu/hr and as low as 4,000 Btu/hr. Assuming this 
distribution is an indicator of widespread market availability of 
products below 14,000 Btu/hr, the California IOUs urged DOE to adopt 
test procedures and performance standards for spot coolers. (California 
IOUs, No. 15 at p. 2)
    While the portable AC definition excludes products with a 3-phase 
power supply, DOE agrees with DENSO that certain spot coolers that 
operate with a single-phase power supply would meet the portable AC 
definition. Because spot coolers with a single-phase power supply could 
be used as a consumer product, DOE is maintaining the approach in the 
February 2015 Preliminary Analysis in which such spot coolers would be 
included as covered products. As discussed in section IV.A.1, however, 
DOE has established a test procedure for single-duct and dual-duct 
portable ACs at this time and is proposing energy conservation 
standards only for these portable ACs in this NOPR. DOE further notes 
that, upon review of the spot cooler entries in the CEC Appliance 
Efficiency Database,\21\ it concludes that a number of listed products 
would meet DOE's definitions of single-duct or dual-duct portable ACs.
---------------------------------------------------------------------------

    \21\ The CEC Appliance Efficiency Database is accessible at: 
https://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx.
---------------------------------------------------------------------------

Single Product Class
    The Appliance Standards Awareness Project (ASAP), Alliance to Save 
Energy (ASE), American Council for an Energy-Efficient Economy (ACEEE), 
National Consumer Union (CU), and Northwest Energy Efficiency Alliance 
(NEEA) (hereinafter the ``Joint Commenters'') and the California IOUs 
agreed with DOE that there is no unique consumer utility associated 
with duct configuration and support establishing a single product class 
for portable ACs. The California IOUs noted that the negative pressure 
within a room created by a single-duct portable AC can lead to more 
infiltration air from outside the conditioned space, which can result 
in lower efficiencies than for dual-duct units. The California IOUs, 
therefore, asserted that adopting performance standards for a single 
product class that includes both single-duct and dual-duct portable ACs 
would incentivize manufacturers to produce higher efficiency units. 
(ASAP, Public Meeting Transcript, No. 11 at p. 17; Joint Commenters, 
No. 14 at p. 1; California IOUs, No. 15 at pp. 1-2)
    AHAM and De' Longhi commented that duct configuration warrants

[[Page 38410]]

separate product classes. They believe that single-duct portable ACs 
offer unique consumer utility in terms of smaller size and slimmer 
profiles, greater portability and versatility, and easier installation. 
AHAM stated that portability and size are a key issue for consumers, 
and that consumers indicate to manufacturers that they prefer slimmer 
designs. According to AHAM, maintaining smaller unit sizes can impact a 
manufacturer's ability to improve efficiency because of limitations on 
air flow, which in turn impact performance. AHAM further commented that 
if manufacturers are required to improve efficiency while maintaining 
smaller, more portable units, then noise would increase, thereby 
impacting consumer utility. AHAM further stated that single-duct and 
dual-duct portable ACs may have different applications. For example, 
dual-duct units are more often used in commercial applications, such as 
computer server rooms. AHAM suggested that without separate product 
classes, single-duct portable ACs would likely be eliminated from the 
market. (AHAM, No. 16 at p. 2; De' Longhi, No. 12 at p. 2)
    DOE reviewed the comments and, with the input from manufacturer 
interviews and additional research, further analyzed the differences 
between single-duct and dual-duct portable ACs. DOE recognizes that the 
additional duct for dual-duct units results in shipping packages that 
are slightly larger than for single-duct units, with a corresponding 
impact on shipping costs and consumer portability prior to unpacking. 
However, the size differences do not significantly impact product 
availability or consumer utility during operation. Additionally, DOE 
found that window mounting brackets are typically the same size, 
regardless of whether they are configured for one or two ducts, and 
therefore a mounting bracket for two ducts would not reduce consumer 
utility. Further, DOE estimates from its engineering analysis that a 
dual-duct portable AC would be less than 5 pounds heavier than a 
comparable single-duct unit with the same capacity, and with wheels on 
all units, portability of a dual-duct unit is not reduced when 
relocating the unit within the home. DOE also determined that many 
portable AC profiles and chassis sizes are a function of the heat 
exchanger dimensions rather than the number of ducts. The potential 
standards that DOE is contemplating would impose no restrictions on 
what side of the unit a duct should be located, and therefore 
manufacturers are free to determine the form factor of their portable 
ACs to suit customer preferences. Noise is a concern for consumers when 
operating all portables ACs, but DOE did not find a substantive 
difference in noise levels between the two duct configurations. DOE 
believes that insulation and case sealing to reduce infiltration air 
would offset any additional noise associated with the increased fan 
power of a dual-duct portable AC. DOE received feedback from 
manufacturers during interviews indicating that their customers are not 
typically aware of any functional difference between single-duct and 
dual-duct units, and that consumer preference hinges primarily on the 
aesthetics of the product, rated cooling capacity, and purchase price. 
Additionally, DOE is not aware of any significant difference between 
the typical applications of single-duct and dual-duct portable ACs. 
Therefore, DOE has found no unique consumer utility associated with the 
number of ducts for portable ACs that would warrant a division of 
single-duct and dual-duct units into separate product classes. 
Furthermore, as described in section IV.C, testing according to the 
test procedure in appendix CC results in no significant performance 
differences between single-duct and dual-duct portable ACs. Therefore, 
due to the lack of consumer utility differences and lack of energy 
efficiency differentiation, DOE has determined that separate product 
classes for single-duct and dual-duct portable ACs are not warranted.
    The definitions established in the April 26, 2016 TP Final Rule for 
single-duct and dual-duct portable ACs describe the various duct 
configurations based on differences in air flow patterns. DOE further 
established, in the April 26, 2016 TP Final Rule, that single-duct and 
dual-duct portable ACs distributed in commerce with multiple duct 
configuration options must be tested in each applicable configuration 
and the performance in each tested configuration must comply with any 
applicable energy conservations standards. April 2016 issued TP Final 
Rule. This NOPR analysis was performed in accordance with appendix CC 
established by the issued April 2016 TP Final Rule.
c. NOPR Proposals
    In summary, DOE proposes to maintain the February 2015 Preliminary 
Analysis approach, in which only single-duct and dual-duct portable ACs 
would be considered, and would be classified as one product class, for 
the purposes of energy conservation standards. For portable ACs that 
can be optionally configured in both single-duct and dual-duct 
configurations, DOE further proposes that operation with both duct 
configurations be certified under any future portable AC energy 
conservation standards.
3. Technology Options
    In the preliminary market analysis and technology assessment, DOE 
identified 16 technology options in four different categories that 
would be expected to improve the efficiency of portable ACs, as shown 
in the following Table IV.1:

     Table IV.1--Technology Options for Portable Air Conditioners--
                          Preliminary Analysis
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
    1. Increased frontal coil area.
    2. Increased depth of coil (add tube rows).
    3. Increased fin density.
    4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
    5. Improved fin design.
    6. Improved tube design.
    7. Spray condensate onto condenser coil.
    8. Microchannel heat exchangers.
Component Improvements:
    9. Improved compressor efficiency.
    10. Improved blower/fan efficiency.
    11. Low-standby-power electronic controls.
    12. Ducting insulation.
    13. Improved duct connections.
    14. Case insulation.
Part-Load Technology Improvements:
    15. Variable-speed compressors.
    16. Thermostatic or electronic expansion valves.
------------------------------------------------------------------------

    AHAM commented that the Significant New Alternatives Policy (SNAP) 
final rule, published by the Environmental Protection Agency (EPA) on 
April 10, 2015, approved the use of propane (R-290) and R-32 for 
portable ACs. 80 FR 19454. AHAM asserted that these refrigerants would 
result in capacity and efficiency improvements, compared with the 
common refrigerants currently in use. AHAM suggested that DOE consult 
with manufacturers regarding their plans to use these refrigerants in 
future designs and determine the associated performance improvements. 
(AHAM, No. 16 at p. 9) DOE observes that propane refrigerant is widely 
used for portable ACs manufactured and sold internationally, and that 
R-32 is being introduced in some markets outside the United States for 
portable and room ACs, albeit primarily because it has a low global 
warming potential (GWP). Based on this product availability and 
discussions with manufacturers, DOE agrees that

[[Page 38411]]

propane and possibly other alternative refrigerants could improve 
portable AC efficiencies. Accordingly, DOE has included alternative 
refrigerants as a potential technology option in the technology 
assessment.
    DOE also notes that a potential means of improving portable AC 
efficiencies, air flow optimization, was not included as a technology 
option in the February 2015 Preliminary Analysis. DOE did, however, 
consider optimized air flow in the engineering analysis in both the 
February 2015 Preliminary Analysis and has addressed this technology 
further in this NOPR. Accordingly, DOE has included it as a technology 
option in the technology assessment. Therefore, in addition to the 
technology options considered in the preliminary analysis, DOE 
additionally considered alternative refrigerants and air flow 
optimization when conducting this NOPR analysis, as shown in Table 
IV.2.

   Table IV.2--Technology Options for Portable Air Conditioners--NOPR
                                Analysis
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
    1. Increased frontal coil area.
    2. Increased depth of coil (add tube rows).
    3. Increased fin density.
    4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
    5. Improved fin design.
    6. Improved tube design.
    7. Spray condensate onto condenser coil.
    8. Microchannel heat exchangers.
Component Improvements:
    9. Improved compressor efficiency.
    10. Improved blower/fan efficiency.
    11. Low-standby-power electronic controls.
    12. Ducting insulation.
    13. Improved duct connections.
    14. Case insulation.
Part-Load Technology Improvements:
    15. Variable-speed compressors.
    16. Thermostatic or electronic expansion valves.
Alternative Refrigerants:
    17. Propane and R-32.
Reduced Infiltration Air:
    18. Air flow Optimization.
------------------------------------------------------------------------

    After identifying all potential technology options for improving 
the efficiency of portable ACs, DOE performed a screening analysis (see 
section IV.B of this proposed rule and chapter 4 of the NOPR TSD) to 
determine which technologies merited further consideration in the 
engineering analysis.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:
    1. Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will not 
be considered further.
    2. Practicability to manufacture, install, and service. If it is 
determined that mass production and reliable installation and servicing 
of a technology in commercial products could not be achieved on the 
scale necessary to serve the relevant market at the time of the 
projected compliance date of the standard, then that technology will 
not be considered further.
    3. Impacts on product utility or product availability. If it is 
determined that a technology would have significant adverse impact on 
the utility of the product to significant subgroups of consumers or 
would result in the unavailability of any covered product type with 
performance characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the United States at the time, it will not be 
considered further.
    4. Adverse impacts on health or safety. If it is determined that a 
technology would have significant adverse impacts on health or safety, 
it will not be considered further.

(10 CFR part 430, subpart C, appendix A, 5(b))
    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the above four criteria, it 
will be excluded from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed 
below.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
Ducting Insulation
    In the February 2015 Preliminary Analysis, DOE identified duct 
insulation as a potential means for improving portable AC efficiency, 
as less heat from the condenser air would be transferred through the 
duct wall and would instead be transferred out of the conditioned 
space. During interviews, manufacturers indicated that they have 
considered insulated ducts to improve performance but have not 
identified any insulated ducts that are collapsible for packaging and 
shipping. No portable AC in DOE's teardown sample for the engineering 
analysis included insulated ducts. In the absence of a collapsible 
design, such an insulated duct would need to be packaged for shipment 
in its fully expanded configuration, significantly increasing the 
package size. Because of this significantly increased packaging size 
for non-collapsible insulated ducts and unavailability on the market of 
collapsible designs, DOE determined that insulated ducts are not 
technologically feasible, are impractical to manufacture and install, 
and would impact consumer utility. Therefore, DOE screened out 
insulated ducts as a design option for portable ACs in the February 
2015 Preliminary Analysis. DOE received no feedback on this tentative 
proposal and maintains this approach for the NOPR analysis.
Alternative Refrigerants
    The SNAP rule limits the maximum allowable charge of alternative 
refrigerants in portable ACs to 300 grams for R-290 (propane), 2.45 
kilograms for R-32, and 330 grams for R-441A. The SNAP rule limits were 
consistent with those included for portable room ACs in Underwriter's 
Laboratories (UL) Standard 484, ``Standard for Room Air Conditioners'' 
(UL 484), eighth edition. However, the most recent version of UL 484, 
the ninth edition, reduces the allowable amount of flammable 
refrigerant (e.g., propane and R-441A) to less than 40 percent of the 
SNAP limits. Manufacturers informed DOE that the new UL charge limits 
for portable ACs are not feasible for providing the necessary minimum 
cooling capacity, and therefore it would not be feasible to manufacture 
a portable AC with an alternative refrigerant for the U.S. market while 
complying with the UL safety standard. DOE reviewed propane refrigerant 
charges for portable ACs available internationally and found a typical 
charge of 300 grams. DOE also investigated other similar AC products 
that utilize propane refrigerant and found that the minimum charge for 
capacities in a range expected for portable ACs was 265 grams, which is 
still above the maximum allowable propane charge for portable ACs in 
the ninth edition of UL 484. Therefore, although portable ACs are 
currently available internationally with amounts of flammable 
refrigerants acceptable under the SNAP rule, manufacturers are unable 
to sell those products in the U.S.

[[Page 38412]]

market while complying with the ninth edition of UL 484. In addition, 
DOE is aware of very few portable or room ACs available commercially in 
other markets that utilize the mildly flammable R-32. Therefore, DOE 
screened out alternative refrigerants as a design option for portable 
ACs as they are not practicable to manufacture at this time while 
meeting all relevant safety standards. DOE invites comment on the 
determination that alternative refrigerants should be screened out as a 
design option for portable ACs.
2. Additional Comments
Improved Compressor Efficiency
    DENSO suggested that the portable AC industry is too small to drive 
compressor efficiencies. DENSO further stated that there is little 
efficiency improvement available associated with compressors. (DENSO, 
No. 13 at p. 7) AHAM commented that improved compressor efficiency 
would increase the stack height of the compressor motor, increasing the 
size and weight of the portable AC. (AHAM, No. 16 at p. 8) DOE notes 
that the units in its teardown sample implemented compressors with a 
range of efficiencies and capacities (see chapter 5 of the NOPR TSD for 
additional information regarding DOE's test sample and teardown 
observations). DOE further researched the maximum efficiency of 
compressors available on the market with capacities suitable for 
portable ACs. As discussed further in section IV.C.1.b, DOE considered 
compressor improvements associated with the compressor types currently 
implemented in portable ACs up to the maximum available efficiency on 
the market or those compressor types that may be implemented in 
portable ACs in the foreseeable future, which would not impact the size 
or weight of the portable ACs to the extent that consumer utility would 
be significantly affected. Accordingly, DOE did not eliminate 
compressor efficiency improvements from further consideration in the 
NOPR analysis.
Increased Heat-Transfer Surface Area
    AHAM and DENSO stated that larger heat exchangers, fans with higher 
air flow rates, and larger ducting components would increase 
efficiency, but size and noise would limit the extent those design 
options could be implemented. They further commented that increasing 
the frontal coil area, depth of the coil, and fin density would 
increase product sizes, due to larger heat exchangers or fans. In 
addition, AHAM and DENSO believe that increased fin density may cause 
reliability and safety concerns because it would result in increased 
dust and dirt accumulation. (AHAM, No. 16 at p. 8; DENSO, No. 13 at p. 
6) DOE agrees that increased heat exchanger areas may require an 
increase in enclosure size. For that reason, the heat exchanger changes 
that DOE considered in the February 2015 Preliminary Analysis were 
limited to a 10-percent increase at the highest efficiency level. In 
this NOPR analysis, DOE considered further heat exchanger area 
increases, up to 20 percent of the existing heat exchanger area for the 
units in DOE's test sample, discussed in section IV.C.1.b and in 
chapter 5 of the NOPR TSD. DOE observed in its test sample that heat 
exchanger areas varied significantly from unit to unit. Additionally, 
DOE observed a significant range in heat exchanger area among the units 
in its test sample. The range in observed heat exchanger area suggests 
that manufacturers have more latitude to increase heat exchanger areas 
for a substantial number of units than DOE had estimated in the 
February 2015 Preliminary Analysis. Based on the range of observed heat 
exchanger areas in its test sample and the strong correlation between 
heat exchanger area and cooling capacity, DOE determined that a 20-
percent increase in area is a more appropriate limit. See chapter 5 of 
the NOPR TSD for additional details regarding the 20-percent threshold. 
DOE considered all subsequent component and chassis size increases 
related to this heat exchanger size increase. Accordingly, while there 
may be some increase in product sizes with increased heat exchanger 
area, DOE did not eliminate this technology option from further 
consideration because consumer utility could be maintained. DOE did not 
screen out increased fin density due to reliability concerns from dirt 
or dust accumulation because these issues could potentially be 
prevented with better inlet air filtering. However, increased fin 
density is not a design option that DOE assumed manufacturers would 
pursue to reach higher efficiencies because, as discussed further in 
chapter 5 of the NOPR TSD, other design options are more effective in 
achieving efficiency improvements.
Improved Blower/Fan Efficiency
    DENSO expressed concern that improved blower motor efficiency would 
require an electronically commutated motor (ECM), which, according to 
DENSO, would add substantial cost and control complexity. (DENSO, 
Public Meeting Transcript, No. 11 at pp. 34-35; DENSO, No. 13 at p. 7) 
As discussed in chapter 3 of the NOPR TSD, DOE considered blower motor 
efficiency improvements associated with substituting an ECM, with 
efficiencies as high as 80 percent, for the typical permanent split 
capacitor (PSC) motor with efficiencies ranging from 60 to 65 percent. 
Although an ECM is more expensive than a PSC motor, this is not a 
criteria for screening out a particular technology option. Therefore, 
DOE has retained this technology option in its NOPR analysis. DOE has 
factored the incremental cost associated with the ECM and its controls 
into the engineering analysis (see section IV.C of this NOPR and 
chapter 5 of the NOPR TSD).
Variable-Speed Compressors
    AHAM observed that any efficiency improvement due to variable-speed 
compressors would not be captured under the proposed test procedure 
because portable ACs would be tested at the maximum fan speed and 
therefore commented that DOE should not consider variable-speed 
compressors in its analysis for proposed standards. (AHAM, No. 16 at p. 
8) DOE notes that variable-speed compressors offer the highest 
efficiencies available in the capacity range appropriate for portable 
ACs whether operating at single or variable speeds. Because this 
technology option meets the screening criteria set forth in 10 CFR part 
430, subpart C, appendix A, 4, DOE has retained it for consideration in 
the engineering analysis for this NOPR.
3. Remaining Technologies
    Through a review of each technology, DOE tentatively concludes that 
all of the identified technologies, with the exception of insulated 
ducts and alternative refrigerants, as discussed in section IV.B.1, met 
all four screening criteria to be examined further as design options in 
DOE's NOPR analysis, as shown in Table IV.3. For additional details, 
see chapter 4 of the NOPR TSD.

   Table IV.3--Remaining Design Options for Portable Air Conditioners
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
    1. Increased frontal coil area.
    2. Increased depth of coil (add tube rows).
    3. Increased fin density.
    4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
    5. Improved fin design.
    6. Improved tube design.
    7. Spray condensate onto condenser coil.
    8. Microchannel heat exchangers.
Component Improvements:

[[Page 38413]]

 
    9. Improved compressor efficiency.
    10. Improved blower/fan efficiency.
    11. Low-standby-power electronic controls.
    12. Improved duct connections.
    13. Case insulation.
Part-Load Technology Improvements:
    14. Variable-speed compressors.
    15. Thermostatic or electronic expansion valves.
Reduced Infiltration Air:
    16. Air flow Optimization.
------------------------------------------------------------------------

C. Engineering Analysis

    In the engineering analysis DOE establishes the relationship 
between the manufacturer production cost (MPC) and improved portable AC 
efficiency. This relationship serves as the basis for cost-benefit 
calculations for individual consumers, manufacturers, and the Nation. 
DOE typically structures the engineering analysis using one of three 
approaches: (1) Design option; (2) efficiency level; or (3) reverse 
engineering (or cost assessment). The design-option approach involves 
adding the estimated cost and associated efficiency of various 
efficiency-improving design changes to the baseline to model different 
levels of efficiency. The efficiency-level approach uses estimates of 
costs and efficiencies of products available on the market at distinct 
efficiency levels to develop the cost-efficiency relationship. The 
reverse-engineering approach involves testing products for efficiency 
and determining cost from a detailed bill of materials (BOM) derived 
from reverse engineering representative products.
    In the preliminary engineering analysis, DOE used a hybrid approach 
of the design-option and reverse-engineering approaches described 
above. This approach involved physically disassembling commercially 
available products, reviewing publicly available cost information, and 
modeling equipment cost. From this information, DOE estimated the MPCs 
for a range of products available at that time on the market. DOE then 
considered the steps manufacturers would likely take to improve product 
efficiencies. In its analysis, DOE determined that manufacturers would 
likely rely on certain design options to reach higher efficiencies. 
From this information, DOE estimated the cost and efficiency impacts of 
incorporating specific design options at each efficiency level.
    For this NOPR, DOE followed the same general approach as for the 
preliminary engineering analysis, but modified the analysis based on 
the newly established appendix CC test procedure, comments from 
interested parties, and the most current available information. This 
section provides more detail on how DOE selected the efficiency levels 
used for its analysis and developed the MPC at each level. Chapter 5 of 
the NOPR TSD contains further description of the engineering analysis.
1. Efficiency Levels
a. Baseline Efficiency Levels
    A baseline unit typically just meets current energy conservation 
standards and provides basic consumer utility. Because there are no 
existing energy conservation standards for portable ACs, DOE observed 
whether units tested with lower efficiencies incorporated similar 
design options or features, and considered these features when defining 
a baseline configuration. To determine energy savings that will result 
from a new energy conservation standard, DOE compares energy use at 
each of the higher efficiency levels to the energy consumption of the 
baseline unit. Similarly, to determine the changes in price to the 
consumer that will result from an energy conservation standard, DOE 
compares the price of a unit at each higher efficiency level to the 
price of a unit at the baseline.
    DOE noted in chapter 5 of the preliminary analysis TSD that the air 
flow pattern through a portable AC has a significant effect on measured 
cooling capacity and energy efficiency ratio. For units that draw air 
from the conditioned space over the condenser and then exhaust it 
outside of the conditioned space, an equivalent amount of infiltration 
air must enter the conditioned space due to the net negative pressure 
differential that is created between the conditioned and unconditioned 
spaces. Because the test conditions proposed in the February 2015 Test 
Procedure NOPR (the current proposal at the time of the preliminary 
analysis) specify that infiltration air would be at a higher 
temperature than the conditioned air, the infiltration air offsets a 
portion of the cooling provided by the portable AC. The greater the 
amount of infiltration air, the lower the overall cooling capacity will 
be. Based on the measured condenser exhaust air flow rates and the 
corresponding calculated magnitudes of the infiltration air heating 
effect, DOE determined in the February 2015 Preliminary Analysis that 
single-duct units (i.e., units that draw all of the condenser intake 
air from within the conditioned space and exhaust to the unconditioned 
space via a duct) would represent the baseline efficiency level for 
portable ACs.
    After the February 2015 Preliminary Analysis, DOE established the 
portable AC test procedure in appendix CC, which incorporates two 
cooling mode test conditions and weighting factors to determine overall 
performance. Because the additional test condition is at a lower 
outdoor temperature and has a significantly larger weighting factor 
than the original test condition, the impact of infiltration air on 
overall performance is greatly reduced. Therefore, the approach of 
considering a baseline unit to be a single-duct portable AC with 
typical system components is no longer valid for this rulemaking. DOE 
instead pursued an alternate analysis approach in this NOPR, which 
utilizes the results from all units in DOE's test sample, including 24 
portable ACs (one test sample was tested in both a single-duct and 
dual-duct configuration) covering a range of configurations, product 
capacities, and efficiency as tested according the DOE test procedure 
in appendix CC.
    DOE developed a relationship between cooling mode power and 
seasonally adjusted cooling capacity (SACC), which is a measure of 
cooling capacity that weights the performance at each of the cooling 
mode test conditions in appendix CC, using a best fit curve. DOE then 
used this relationship to develop an equation to determine nominal CEER 
for a given SACC based on the results of DOE's testing according to the 
test procedure in appendix CC, shown below.
[GRAPHIC] [TIFF OMITTED] TP13JN16.004

    DOE assessed the relative efficiency of each unit in the test 
sample by comparing the measured CEER from testing to the nominal CEER 
as defined by the equation above (DOE will refer to this ratio of 
actual CEER to nominal

[[Page 38414]]

CEER as the performance ratio (PR) for a given unit). DOE proposes to 
define baseline performance as a PR of 0.72, which is based on the 
minimum PR observed for units in the test sample. Additional details on 
the baseline units may be found in chapter 5 of the NOPR TSD DOE 
invites comment on the baseline performance level proposal and the 
determination based on the minimum PR observed in DOE's test sample.
b. Higher Energy Efficiency Levels
Preliminary Analysis Proposal
    For the February 2015 Preliminary Analysis, DOE developed 
incremental efficiency levels based on the design options manufacturers 
would likely use to improve portable AC efficiency. Recognizing that 
the presence of infiltration air has a large impact on unit 
performance, DOE expected that when improving efficiencies beyond the 
baseline, manufacturers would first make improvements to incrementally 
reduce the amount of infiltration air. While certain technology options 
identified in Table IV.1 of this NOPR and discussed in chapter 3 of the 
preliminary analysis TSD meet all the screening criteria and may 
produce energy savings in certain real-world situations, DOE did not 
further consider them in the preliminary analysis because specific 
efficiency gains were either not clearly defined or the DOE test 
procedure would not capture those potential improvements. Thus, DOE did 
not expect manufacturers to rely on these features to meet higher 
efficiency levels. Such technology options included: (1) Adding a 
subcooler or condenser coil, (2) increasing the heat transfer 
coefficients, (3) improving duct connections, (4) improving case 
insulation, and (5) implementing part-load technologies. Further 
discussion of these technology options and the reasons why DOE 
tentatively concluded that they would be unlikely to be implemented to 
improve efficiency can be found in chapter 5 of the preliminary 
analysis TSD.
    The first efficiency level beyond the baseline in the February 2015 
Preliminary Analysis, Efficiency Level 1 (EL 1), represented the first 
improvement a manufacturer would make for a single-duct unit. This 
efficiency level assumed manufacturers would convert single-duct units 
to a dual-duct configuration, although the units would still have 
infiltration air flow equal to half of the total air flow over the 
condenser (i.e., half of the condenser air flow is from the conditioned 
space, and the other half is from the unconditioned space via the 
condenser inlet duct). This amount of infiltration air flow was 
approximately equal to the average value observed for the dual-duct 
units in DOE's test sample.
    Efficiency Level 2 (EL 2) in the February 2015 Preliminary Analysis 
represented dual-duct units with infiltration air flow reduced to 25 
percent of the total condenser air flow. Efficiency Level 3 (EL 3) 
represented a dual-duct unit that is perfectly sealed with no 
infiltration air, such that 100 percent of the condenser air flow is 
drawn from outside the conditioned space. DOE noted in the preliminary 
analysis that it did not observe units with zero infiltration air in 
its test sample, but included such a configuration in the analysis 
because DOE tentatively concluded it is technically feasible and would 
result in a significant increase in efficiency.
    Efficiency Level 4 (EL 4) in the February 2015 Preliminary Analysis 
corresponded to the max-tech level as determined by DOE. This level 
combined the ideal dual-duct air flow configuration described for EL 3 
with additional design option changes to improve efficiency. Although 
DOE did not observe any portable ACs in its sample with these 
additional design options, DOE regarded each of them as options that 
manufacturers would likely consider incorporating to achieve the 
highest possible efficiencies. At EL 4, units would incorporate more 
efficient compressors and blower motors, larger heat exchangers, and 
low-standby-power electronic controls. Similar to EL 3, DOE's test 
sample did not include any portable ACs incorporating all of the design 
options associated with EL 4, but DOE estimated the potential 
performance improvements for products incorporating these design 
changes based on available information and modeling described in 
chapter 5 of the preliminary analysis TSD.
    From this data, DOE derived relationships between cooling capacity 
\22\ and cooling mode energy efficiency ratio, EERcm, at 
each of the efficiency levels. DOE presented the following general 
relationship in the February 2015 Preliminary Analysis, based on 
observed trends at each efficiency level:
---------------------------------------------------------------------------

    \22\ DOE notes that the cooling capacity analyzed in the 
preliminary analysis is equal to the adjusted cooling capacity (ACC) 
as proposed in the February 2015 Test Procedure NOPR.
[GRAPHIC] [TIFF OMITTED] TP13JN16.005

    Table IV.4 below provides the coefficients A, in Wh/Btu, and B, in 
watts (W), for each analyzed efficiency level in the February 2015 
Preliminary Analysis that would be used to determine EERcm 
in Btu/Wh. Figure IV-1 plots each efficiency level curve for cooling 
capacities from 0 to 10,000 Btu/h. DOE noted that the cooling capacity 
and EERcm were based upon how products would be expected to 
perform under the test procedure proposed in the February 2015 TP NOPR, 
and thus the range of values for each metric in DOE's analysis did not 
necessarily correspond to manufacturer-advertised ratings or data in 
the CEC Appliance Efficiency Database.

     Table IV.4--Portable Air Conditioner Efficiency Level Equation
                   Coefficients--Preliminary Analysis
------------------------------------------------------------------------
                                           A coefficient   B coefficient
            Efficiency level                 (Wh/Btu)           (W)
------------------------------------------------------------------------
Baseline................................           0.113           855.5
EL1.....................................          0.1201           685.4
EL2.....................................          0.1222           566.3
EL3.....................................          0.1256           426.9
EL4.....................................          0.1205           355.1
------------------------------------------------------------------------


[[Page 38415]]

[GRAPHIC] [TIFF OMITTED] TP13JN16.006

Comments and Responses
1. Efficiency Versus Capacity Relationship
    In response to the February 2015 Preliminary Analysis, DOE received 
multiple comments regarding its proposal to define efficiency levels as 
a function of cooling capacity.
    The Joint Commenters, California IOUs, and AHAM agreed that DOE's 
test data showed a relationship between capacity and efficiency for 
units in the test sample when measured by the proposed DOE test 
procedure. However, these commenters did not agree that there is an 
inherent relationship between capacity and efficiency for all portable 
ACs, variously citing the following reasons:

    (1) Both metrics are sensitive to infiltration air and other 
heating effects;
    (2) other product features or configurations may contribute to 
efficiency, including improved air flow and compressor or blower 
motor efficiency;
    (3) the observed trend between efficiency and capacity is 
specific only to DOE's test sample and is not representative of the 
market in its entirety; and
    (4) this trend is atypical of heating and cooling equipment, 
which typically show a general decline in efficiency with increased 
cooling capacity.

    The California IOUs stated that portable ACs with lower capacities 
may be capable of increasing EER via design options that do not affect 
capacity, so that lower standard levels for these units may fail to 
capture technologically feasible energy savings. The Joint Commenters 
noted that while the current standards for dehumidifiers 
(refrigeration-based products similar to portable ACs with comparable 
capacities) are higher for units with higher capacities, the difference 
in required efficiency for small-capacity and large-capacity 
dehumidifiers is significantly less than the range of efficiencies 
within each proposed portable AC efficiency level curve. According to 
the Joint Commenters, the availability of dehumidifiers with capacities 
as low as 25 pints/day that meet the current ENERGY STAR specification 
(which specifies the same energy factor for all dehumidifiers with 
capacities up to 75 pints/day) also suggests that there may not be an 
inherent relationship between capacity and efficiency for portable ACs. 
Accordingly, the Joint Commenters and the California IOUs urged DOE to 
consider portable AC standards that would require the same minimum 
efficiency level for all units. DENSO recommended that DOE evaluate the 
trends in room AC efficiency as a function of capacity because the 
engineering analysis in the February 2015 Preliminary Analysis was 
based in part on room ACs. (ASAP, Public Meeting Transcript, No. 11 at 
pp. 17-18, 40; Joint Commenters, No. 14 at pp. 2-4; California IOUs, 
No. 15 at pp. 2-3; AHAM, No. 16 at p. 5; DENSO, No. 13 at p. 5)
    DOE's test sample included 24 portable ACs covering a range of 
configurations and product capacities. Although this sample represents 
only a portion of the portable AC market, DOE observed little 
substantive variation in the design and construction between the test 
units and expects that all units available on the market use similar 
technologies. Therefore, DOE expects that the results from this test 
sample likely reflect typical performance of the overall portable AC 
market.
    Although DOE expected that manufacturers would rely on air flow 
optimization to reach higher efficiency levels as part of the February 
2015 Preliminary Analysis, DOE agrees that certain design options would 
increase efficiency at a relatively constant capacity. However, for the 
preliminary analysis, DOE estimated that air flow optimization was the 
most cost-effective pathway for manufacturers to move to higher 
efficiency levels. In this NOPR analysis, DOE based its analysis on the 
portable AC test procedure in appendix CC. Under this test procedure, 
air flow optimization does not have a significant impact on efficiency. 
Accordingly, DOE has revised its engineering analysis to reflect 
primarily a component-based approach to achieving higher efficiencies.
    DOE notes that although room ACs have similar components as 
portable ACs, the efficiency versus capacity trends for room ACs do not 
necessarily apply to portable ACs due to the

[[Page 38416]]

significant chassis size constraints on room ACs. Therefore, each 
product must be analyzed separately due to unique consumer use, 
installation, and component configuration. Similarly, although 
dehumidifiers and portable ACs utilize many of the same internal 
components, the configuration of these components significantly impacts 
the resulting functionality and delivered benefit to consumers. 
Dehumidifiers are arranged in a configuration to optimize latent heat 
transfer or removal of condensate, while portable ACs are configured to 
provide sensible cooling, with latent heat removal as a secondary 
function. Further, the two products are tested with different test 
procedures that produce incomparable capacity and efficiency metrics. 
Therefore, although they share many components, dehumidifier trends in 
efficiency versus capacity do not necessarily inherently apply to 
portable ACs.
    DENSO commented that efficiency levels should be based on inherent 
product characteristics and not on performance related to installation. 
DENSO stated this would be consistent with packaged central ACs, which 
are typically installed as ducted units but are tested unducted, with 
the rating based on unit performance with a modest allowance for 
ducting. (DENSO, No. 13 at p. 4) The efficiency levels developed for 
this NOPR analysis are based on testing in accordance with the DOE test 
procedure for portable ACs in appendix CC. The DOE test procedure, 
which incorporates industry standards, establishes a repeatable test 
setup and method to determine representative and repeatable measure of 
portable AC performance that is comparable among single-duct and dual-
duct configurations. DOE further notes that packaged central ACs differ 
from portable ACs in that the duct exhausting the hot condenser air is 
outside the conditioned space, and it is only the cooler evaporator 
ducts that interface with the conditioned space. Therefore, the impacts 
of duct heat transfer to the conditioned space would be significantly 
different for portable ACs than for packaged central ACs, and the 
general approach for testing packaged central ACs is not applicable to 
portable ACs.
2. Efficiency Level Equations
    Several commenters expressed concern about the distillation of 
DOE's data points into discrete efficiency levels. The Joint Commenters 
\23\ stated that modeled EERcm values do not all fall along 
the efficiency level curves. For example, they commented that units in 
DOE's sample with cooling capacities at EL 4 ranging from about 3,500 
to 9,500 Btu/h achieve modeled EERcm values as high as 
approximately 7 Btu/Wh, but, the EL 4 curve does not exceed 6.5 Btu/Wh 
for cooling capacities up to 10,000 Btu/h. The Joint Commenters 
asserted, therefore, that it is inappropriate to use average values in 
determining the efficiency levels, particularly the max-tech EL 4. 
(ASAP, Public Meeting Transcript, No. 11 at pp. 48-49; Joint 
Commenters, No. 14 at pp. 4-5) DENSO suggested that the R-squared value 
for the curve fits may be low, and therefore the equations may not 
represent the data accurately. (DENSO, Public Meeting Transcript, No. 
11 at pp. 43-45)
---------------------------------------------------------------------------

    \23\ For some issues, the Appliance Standards Awareness Project 
submitted substantively similar comments both individually and as a 
signatory to the Joint Commenters' submission. In those instances, 
DOE provides citations to both comments.
---------------------------------------------------------------------------

    DOE notes that because there are currently no energy conservation 
standards for portable ACs, the limited data that are available are not 
necessarily measured on a consistent basis. DOE therefore conducted 
testing and modeling to characterize the performance of portable ACs on 
the market. For the February 2015 Preliminary Analysis, DOE's modeling 
of air flow optimization resulted in a range of product efficiencies. 
To minimize potential impacts of outliers or error in the modeling, DOE 
used best-fit curves to characterize the efficiency versus capacity 
trends for each corresponding design option. For the NOPR analysis, DOE 
determined efficiency levels based on the range of observed and modeled 
performance according to appendix CC for units in its test sample. The 
baseline efficiency level represents the lowest observed efficiency and 
the max-tech efficiency level represents the highest modeled 
efficiency. Accordingly, the efficiency levels for the NOPR analysis 
span the range of observed and modeled data and no longer rely on best-
fit trends for a set of data points at a given efficiency level.
    The Joint Commenters encouraged DOE to ensure that units with 
negative cooling capacities would not be able to meet potential 
efficiency standards. They noted that at negative cooling capacities, 
the EERcm values for all efficiency levels above the 
baseline are lower than the baseline values, and the units tested by 
DOE that have negative cooling capacities have EERcm values 
that are higher than all of the efficiency levels evaluated. (ASAP, 
Public Meeting Transcript, No. 11 at pp. 46-48; Joint Commenters, No. 
14 at pp. 7-8) The data presented in the February 2015 Preliminary 
Analysis showed the potential for negative efficiencies and cooling 
capacities. However, the preliminary analysis was based on the test 
procedure proposed in the February 2015 TP NOPR. The newly established 
test procedure in appendix CC incorporates a lower-temperature outdoor 
condition and weights performance under this condition heavily in the 
final performance calculations. As a result, DOE does not expect any 
negative SACC or CEER results, and is not proposing standards that 
would account for these negative values.
3. Design Approaches for Higher Efficiency Levels
    AHAM and De' Longhi expressed concern about basing higher 
efficiency levels on reduced or zero infiltration air, pointing out 
that DOE did not find any portable ACs with zero infiltration air. De' 
Longhi suggested that completely sealed dual-duct portable ACs should 
not be considered as an efficiency level because these units are 
hypothetical and only included in the analysis based on their technical 
feasibility. (AHAM, No. 16 at p. 4; De' Longhi, No. 12 at pp. 2-3, 5-6; 
De' Longhi, Public Meeting Transcript, No. 11 at pp. 6, 38, 42)
    As discussed previously in section IV.C.1.a of this NOPR, DOE 
revised its analysis for this NOPR, including updated efficiency levels 
based on the newly established test procedure in appendix CC. Under 
testing according to appendix CC, air flow optimization that would lead 
to zero infiltration air is no longer associated with improved 
efficiencies.
    The Joint Commenters stated that, in general, portable ACs with 
higher cooling capacities typically employ higher-capacity compressors, 
larger heat exchangers, and more powerful fans than units with lower 
cooling capacities. The Joint Commenters objected to DOE not including 
these design options at higher capacities. They also noted that units 
in DOE's test sample may include various design features that impact 
efficiency, some of which may not be captured in DOE's modeling of 
design options. For example, they referred to DOE's finding in the 
February 2015 TP NOPR that uninsulated ducts and leaks in duct 
connections contributed 460 to 1,300 Btu/h in its test sample, which 
correlated to percentages of uninsulated cooling capacity ranging from 
18 to 199 percent. 80 FR 10212, 10227 (Feb. 25, 2015). The Joint 
Commenters asserted that these data suggest that some current

[[Page 38417]]

designs are more effective than others at minimizing duct heat transfer 
and leakage. (ASAP, Public Meeting Transcript, No. 11 at pp. 48-49; 
Joint Commenters, No. 14 at pp. 4-5)
    The California IOUs recommended that DOE consider product component 
improvements, including increased heat exchanger area, improved 
compressor efficiency, improved blower motor efficiency, and low-
standby-power electronic controls for all efficiency levels and not 
just the max-tech EL 4. Because DOE's analysis did not show a 
significant increase in capacity when moving from EL 3 to EL 4, the 
California IOUs believe that these component improvements may increase 
EERcm without affecting product capacity. By not limiting 
these component improvements to the max-tech level, DOE would ensure 
that these technology options would be considered for potential 
standards. (California IOUs, No. 15 at p. 3) In the February 2015 
Preliminary Analysis, DOE expected that when improving efficiencies 
beyond the single-duct baseline, manufacturers would first make 
improvements to incrementally reduce the amount of infiltration air. 
Those changes would likely be made prior to component changes, such as 
more efficient compressors or blower motors or larger heat exchangers, 
due to their lower cost and significant improvement in capacity and 
efficiency. Although DOE no longer considered duct configuration and 
air flow optimization in the development of efficiency levels, DOE 
maintained the component improvement approach for this NOPR analysis, 
wherein increasing heat exchanger area, compressor efficiency, and 
blower motor efficiency all result in improved portable AC 
efficiencies. The estimated MPCs associated with these changes at each 
efficiency level are discussed in section IV.C.2 of this proposed rule. 
DOE also notes that, depending upon their current product designs, 
manufacturers may choose to achieve higher efficiencies using 
combinations of component improvements that may vary from the expected 
component improvements for the units in DOE's test sample.
    The Joint Commenters questioned DOE's approach to use an industry 
average for the max-tech efficiency level (EL 4). ASAP and AHAM were 
concerned about DOE's use of modeling to determine the max-tech 
efficiency level, which is higher than the efficiencies observed in the 
limited test sample. (Joint Commenters, No. 14 at pp. 4-5; ASAP, Public 
Meeting Transcript, No. 11 at pp. 49-50; AHAM, No. 16 at p. 3) Although 
DOE used an average-performance approach to define each efficiency 
level in the February 2015 Preliminary Analysis, DOE has revised its 
efficiency level construction in this NOPR. DOE based the NOPR analysis 
efficiency levels on the performance of units in its test sample. The 
baseline level is established by the least efficient unit in the test 
sample, EL 2 corresponds to the maximum available efficiency that can 
be achieved across a range of capacities, EL 3 represents an 
incremental improvement above EL 2 and is the single most efficient 
unit in DOE's test sample, and EL 4, the max-tech level, is a 
theoretical level representing the maximum modeled efficiency after 
applying additional component improvements to EL 3. EL 1 represents an 
intermediate gap-fill level within the range of tested efficiencies.
    De' Longhi commented that increased heat exchanger sizes at EL 4 
may significantly impact portability, in terms of both larger product 
dimensions and heavier weight. (De' Longhi, No. 12 at p. 3) DOE limited 
its preliminary analysis to a 10-percent increase in heat exchanger 
size, the maximum heat exchanger size increase that it deemed 
acceptable without impacting consumer utility. However, for this NOPR 
analysis, DOE has increased the maximum heat exchanger size increases 
to 20 percent. As described in chapter 5 of the NOPR TSD, DOE observed 
in its test sample that heat exchanger areas varied significantly from 
unit to unit. DOE determined the relationship between SACC and heat 
exchanger area, and observed that the heat exchangers areas for units 
in the test sample ranged from approximately 20 percent below to 20 
percent above the average trend. The range in observed heat exchanger 
areas suggests that manufacturers have an opportunity to increase heat 
exchanger areas beyond what DOE had estimated for the February 2015 
Preliminary Analysis. Based on the range of observed heat exchanger 
areas in its test sample and the strong correlation between heat 
exchanger area and cooling capacity, DOE determined that a 20-percent 
increase in heat exchanger area is a more appropriate limit. DOE does 
not expect this increase in heat exchanger size, and the resulting 
increase in case size, to impact product portability, in part because 
all single-duct and dual-duct portable ACs that DOE identified 
incorporate wheels. DOE is not aware of any significant changes in a 
consumer's ability to move, install, or store the product if the case 
dimensions were to change to accommodate a 20-percent larger heat 
exchanger.
    The Joint Commenters encouraged DOE to consider room AC 
efficiencies in evaluating efficiency levels for portable ACs. They 
noted that the current CEER standards for room ACs are 1.7 to 2.3 times 
higher than the max-tech EERcm values at EL 4 that DOE 
proposed for portable ACs for a similar range of cooling capacities, 
and that the difference in calculating CEER and EERcm are 
not substantive. Similarly, the Joint Commenters noted that the CEER 
values for room ACs in the ENERGY STAR 4.0 specification are 1.9 to 2.5 
times higher than the max-tech portable AC EERcm values. 
They noted that the primary difference between room ACs and portable 
ACs is that room ACs do not use ducts. However, they do not believe 
that this difference fully explains the gap in performance between the 
two types of cooling equipment. The Joint Commenters also noted that 
the difference between the two products may be due to DOE's use of 
average values in determining each efficiency level. Therefore, they 
encourage DOE to consider the efficiency levels of room ACs in 
evaluating the achievable efficiency of portable ACs and to investigate 
whether the achievable efficiency levels of portable ACs may be higher 
than the EL 4 in the preliminary analysis. (Joint Commenters, No. 14 at 
pp. 5-6) De' Longhi stated that data from room ACs are not relevant for 
this analysis. (De' Longhi, No. 12 at p. 3)
    Although room ACs and portable ACs incorporate similar components, 
the DOE room AC test procedure (10 CFR part 430, subpart B, appendix F) 
differs substantively from that in appendix CC for portable ACs. 
Notably, portable ACs are tested under two different outdoor conditions 
while room ACs only use a single condition. Additionally, the impacts 
of infiltration air and duct heat transfer affect portable AC cooling 
capacity and CEER, but are not applicable to room ACs. Therefore, the 
two product types would not necessarily be able to achieve the same 
efficiency for a given cooling capacity. Each product must be analyzed 
independently to determine appropriate efficiency levels for potential 
standards based on the design options and their subsequent impacts on 
capacity and efficiency as determined by the relevant test procedures.
    The Joint Commenters and California IOUs encouraged DOE to consider 
additional component efficiency improvements beyond those considered at 
EL 4. The Joint Commenters further stated that additional heat 
exchanger increases would be feasible, and that DOE neglected to 
incorporate

[[Page 38418]]

microchannel heat exchangers (found to increase coefficient of 
performance (COP) by 6 to 10 percent, as discussed in chapter 3 of the 
preliminary analysis TSD) and permanent magnet motors in the 
preliminary engineering analysis. These commenters also noted that the 
design options incorporated in the 2011 final rule for room ACs, 
including increased heat transfer surface area, microchannel heat 
exchangers, improved compressor and fan motor efficiency, and standby 
power reductions, resulted in a 24 to 33-percent increase in CEER 
relative to the baseline. The Joint Commenters note that for portable 
ACs, the max-tech EL 4 represents an increase in EERcm of 
only about 10 percent over the EERcm at EL 3. They believe 
that because portable ACs are not currently subject to energy 
conservation standards, greater improvements in efficiency, similar to 
those from the 2011 room AC final rule, would be expected from 
component efficiency improvements. (Joint Commenters, No. 14 at pp. 6-
7; California IOUs, No. 15 at p. 3)
    DOE noted in the February 2015 Preliminary Analysis that 
manufacturers do not currently implement microchannel designs in 
existing heat exchangers, and there is limited data on the potential 
efficiency improvements for portable ACs. DOE therefore did not 
consider that design option in the preliminary engineering analysis. 
DOE emphasizes that efficiency and capacity gains associated with 
specific design options for other related products do not necessarily 
translate to portable ACs due to variations in installation and typical 
consumer usage that are reflected in their respective test procedures. 
DOE incorporated the other mentioned design options, improved 
compressor and fan motor efficiency and standby power reductions, in 
its preliminary analysis at EL 4.
NOPR Proposal
    For the NOPR analysis, DOE updated the efficiency levels to reflect 
performance based on the newly established DOE test procedure for 
portable ACs in appendix CC, which was modified from the test procedure 
proposal that was the basis of the February 2015 Preliminary Analysis. 
Appendix CC includes a second cooling mode outdoor test condition for 
dual-duct units and infiltration air condition for both single-duct and 
dual-duct units, modifying the CEER metric for both single-duct and 
dual-duct units to address performance at the two cooling mode test 
conditions. Appendix CC also no longer includes provisions from the 
test procedure NOPR for measuring case heat transfer, which 
substantively affected this NOPR analysis. Issued April 2016 TP Final 
Rule.
    As discussed in the February 2015 Preliminary Analysis, although 
the initial test procedure proposal included a CEER metric that 
combined energy use in cooling mode with that in heating mode and 
various low-power modes, the preliminary analysis was conducted using 
EERcm as the basis for energy conservation standards instead 
of CEER. DOE analyzed EERcm because cooling is the primary 
function for portable ACs, and DOE expected that manufacturers would 
likely focus on improving efficiency in this mode to achieve higher 
CEERs. Because the test procedure established in appendix CC does not 
include a heating mode test and includes a second cooling mode test 
condition, the CEER metric as codified combines the performance at both 
cooling mode test conditions with energy use in the low-power modes. 
Accordingly, DOE utilized CEER as the basis for its proposed portable 
AC energy conservation standards in this NOPR. DOE also based the NOPR 
analysis on the SACC measured in appendix CC, a weighted combination of 
the adjusted cooling capacities at the two cooling mode test 
conditions.
    The two cooling mode test conditions in appendix CC are weighted 
based on the percentage of annual hours for each test condition, on 
average, for geographical locations that correspond to expected 
portable AC ownership. The majority (80 percent) of the total hours 
were estimated to relate to the lower of the two outdoor temperatures, 
83 degrees Fahrenheit ([deg]F) dry-bulb. Because at this lower outdoor 
temperature, there is only a 3 [deg]F dry-bulb temperature differential 
and subsequent 0.38 Btu per pounds of dry air enthalpy differential 
between the indoor and outdoor air, the potential impact of 
infiltration air heating effects on the overall CEER metric is 
substantially reduced. For this reason, DOE now finds no significant 
relationship between duct configuration or air flow optimization and 
improved efficiency, and therefore alternatively considered component 
efficiency improvements as the primary means to increase CEER. 
Accordingly, in this NOPR DOE has defined its efficiency levels, other 
than the max-tech, based on the performance observed in its test 
sample, independent of duct configuration or level of air flow 
optimization.
    As discussed previously in section IV.C.1.a, DOE characterized and 
compared performance among all portable ACs in its test sample and 
determined a relationship between SACC and a general representation of 
expected CEER as follows:
[GRAPHIC] [TIFF OMITTED] TP13JN16.007

    As discussed in section IV.C.1.a, DOE assessed individual unit 
performance relative to this CEER relationship and identified a 
baseline efficiency level at PR = 0.72, with PR defined as the ratio of 
actual CEER to nominal CEER.
    For EL 2, DOE determined the PR that corresponded to the maximum 
available efficiency across a full range of capacities (1.14), and then 
selected an intermediate efficiency level for EL 1 based on a PR 
between the baseline and EL 2 (0.94). For EL 3, DOE identified the PR 
for the single highest efficiency unit observed in its test sample 
(1.31).
    Due to the variations in performance among units in DOE's test 
sample, DOE conducted additional performance modeling to augment its 
test data when estimating efficiency and manufacturing costs at each 
efficiency level. DOE numerically modeled component improvements for 
each of the 21 out of 24 test units for which detailed component 
information were available to estimate potential efficiency 
improvements to existing product configurations. The component 
improvements were performed in three steps for each unit.
    The first incremental improvement for each unit included a 10-
percent increase in heat exchanger frontal area and raising the 
compressor energy efficiency ratio (EER) to 10.5 Btu/Wh, the maximum 
compressor efficiency identified at the time of the February 2015 
Preliminary Analysis.
    The second incremental component efficiency improvement step for 
each unit included a 15-percent increase in heat exchanger frontal area 
from the original test unit and an improvement in compressor efficiency 
to an EER of 11.1 Btu/Wh, which DOE identified as the

[[Page 38419]]

maximum efficiency for currently available single-speed R-410A rotary 
compressors of the type typically found in portable ACs and other 
similar products. As with the 10-percent heat exchanger area increase, 
DOE expects that a chassis size and weight increase would be necessary 
to fit a 15-percent increased heat exchanger, but believes portability 
and consumer utility would not be significantly impacted.
    DOE included all available design options in the third efficiency 
improvement step for each unit, including a 20-percent increase in heat 
exchanger frontal area from the original test unit, more efficient ECM 
blower motor(s), and a variable-speed compressor with an EER of 13.7 
Btu/Wh. DOE believes that a 20-percent increase in heat exchanger size 
is the maximum allowable increase for consumer utility and portability 
to be retained. DOE also improved standby controls efficiency in this 
final step, adjusting the standby power for each test unit to the 
minimum observed standby power of 0.46 W in its test sample. With these 
design options modeled for units in its test sample, DOE found that the 
single, theoretical maximum-achievable efficiency among all modeled 
units corresponded to a PR of 1.75, which DOE defined as EL 4.
    Table IV.5 summarizes the specific improvements DOE made to model 
the performance of higher efficiency design options applied to each 
test unit.

                                   Table IV.5--Component Improvements Summary
----------------------------------------------------------------------------------------------------------------
                                                                                                      Standby
    Heat exchanger area (% increase)        Compressor EER (Btu/Wh)       Blower motor (type)         (watts)
----------------------------------------------------------------------------------------------------------------
10......................................  10.5 (single-speed).......  (\1\).....................  ..............
15......................................  11.1 (single-speed).......  ..........................  ..............
20......................................  13.7 (variable-speed).....  ECM (variable-speed)......            0.46
----------------------------------------------------------------------------------------------------------------
\1\ No blower motor or standby power changes were applied to the first two incremental steps.

    Table IV.5 does not necessarily represent the design options 
associated with each efficiency level beyond the baseline. Baseline 
through EL 3 are defined by the range of test data, while EL 4 is 
defined by the maximum theoretical PR after modeling all design options 
listed in Table IV.5.
    In this NOPR, DOE analyzed efficiency levels based on test samples 
and modeled performance according to the following equation and the PR 
values listed in Table IV.6:
[GRAPHIC] [TIFF OMITTED] TP13JN16.008


 Table IV.6--Portable Air Conditioner Efficiency Levels and Performance
                          Ratios--NOPR Analysis
------------------------------------------------------------------------
                                     Efficiency level       Performance
        Efficiency level               description          ratio (PR)
------------------------------------------------------------------------
Baseline.......................  Minimum Observed.......            0.72
EL 1...........................  Intermediate Level.....            0.94
EL 2...........................  Maximum Available for              1.14
                                  All Capacities.
EL 3...........................  Maximum Observed.......            1.31
EL 4...........................  Max-Tech (Maximum of               1.75
                                  Modeled Component
                                  Improvements).
------------------------------------------------------------------------

    Figure IV-2 plots each efficiency level curve for SACCs from 50 to 
10,000 Btu/h, based on the nominal CEER curve scaled by the PR assigned 
to each efficiency level.

[[Page 38420]]

[GRAPHIC] [TIFF OMITTED] TP13JN16.009

    Additional details on the selection of efficiency levels may be 
found in chapter 5 of the NOPR TSD.
2. Manufacturer Production Cost Estimates
    Based on product teardowns and cost modeling conducted in the 
preliminary analysis, DOE developed overall cost-efficiency 
relationships for each considered efficiency level. DOE selected 
products covering the range of efficiencies available on the market for 
the teardown analysis. During the teardown process, DOE created 
detailed BOMs that included all components and processes used to 
manufacture the products. DOE used the BOMs from the teardowns as an 
input to a cost model, which calculated the MPC for products covering 
the range of efficiencies available on the market. The MPC accounts for 
labor, material, overhead, and depreciation costs that a manufacturer 
would incur in producing a specific portable AC.
    For the preliminary analysis, DOE estimated that the costs for 
these products reflected the costs for typical units at their 
respective efficiency levels, consistent with the efficiency-level 
approach. DOE then used the design-option approach to apply the 
technology options it determined manufacturers were most likely to 
incorporate, air flow optimization and improved component efficiencies, 
to evaluate the necessary changes to each unit in DOE's teardown sample 
and the associated capacity and efficiency changes at each efficiency 
level. DOE constructed cost-efficiency curves for each unit and then 
averaged the costs for all units at each efficiency level to determine 
the industry-representative incremental MPC. Table IV.7 shows the 
incremental MPCs developed in the preliminary analysis for each product 
class at each of the analyzed efficiency levels compared to the 
baseline MPC. For the preliminary analysis, EL 1 through EL 3 
represented changes to the air flow to reduce or eliminate infiltration 
air by means of a dual-duct configuration. The small incremental costs 
at these efficiency levels represented the cost for an additional duct 
and larger blower motor. At EL 4, the incremental MPC was significantly 
higher due to higher-cost design options incorporated at this level, 
including larger heat exchangers (and the additional cost of a larger 
case and other internal component adjustments) and more efficient 
compressors and blower motors. The incremental MPCs were presented in 
2013 dollars (2013$), which reflected the year in which the preliminary 
analysis teardowns and modeling were performed.

Table IV.7--Portable Air Conditioner Incremental Manufacturer Production
                   Costs (2013$)--Preliminary Analysis
------------------------------------------------------------------------
                                                            Incremental
                    Efficiency level                        MPC (2013$)
------------------------------------------------------------------------
Baseline................................................  ..............
EL1.....................................................          $ 4.09
EL2.....................................................            4.67
EL3.....................................................            5.26
EL4.....................................................           47.76
------------------------------------------------------------------------

    Chapter 5 of the preliminary analysis TSD contains additional 
details on the analysis conducted in support of developing these MPC 
estimates.
    DOE received several comments from interested parties on the MPC 
estimates developed for the preliminary analysis. AHAM commented that 
it would attempt to provide DOE with MPC data. (AHAM No. 16 at p. 8) 
DOE did not receive any manufacturer cost information from AHAM for 
consideration in the NOPR analysis.
    DENSO questioned what capacity was used to determine the 
incremental costs, since an incremental efficiency improvement at lower 
capacities would entail different MPCs than the same efficiency 
improvement at higher capacities. (DENSO, Public Meeting Transcript, 
No. 11 at p. 52) The incremental costs presented in the preliminary 
analysis were an average across all of the units in DOE's test

[[Page 38421]]

sample. The sample included units covering the range of available 
capacities, and therefore the incremental MPCs reflected the average of 
all costs associated with units of varying capacities. Additional 
information can be found in chapter 5 of the preliminary TSD.
    For the NOPR analysis, DOE updated the incremental MPC estimates 
from the preliminary analysis based on the changes to the efficiency 
levels detailed above in section IV.C.1, and also based on feedback 
from interested parties and on information gathered in additional 
manufacturer interviews. When assigning costs to efficiency levels in 
this analysis, DOE considered all units that performed between two 
efficiency levels as representative of the lower of the two efficiency 
levels. DOE determined an average baseline MPC based on the units in 
DOE's test sample with a CEER below EL 1 (PR = 0.94). Six units in the 
test sample tested below EL 1. DOE expects the average MPCs from these 
units to reflect the baseline for the overall portable AC market 
because the average capacity of these units was within approximately 
200 Btu/hr of the overall average capacity for the entire test sample.
    DOE subsequently determined the costs for all other torn-down and 
modeled units, and determined the average costs associated with each 
incremental component efficiency improvement when moving between 
efficiency levels. In addition to the costs associated with the 
improved components themselves, DOE also considered the increased costs 
associated with other related product changes, such as increasing case 
sizes to accommodate larger heat exchangers.
    Although DOE's test and modeled data resulted in a range of PRs 
from 0.72 to 1.75, DOE observed that not all units in its test sample 
were capable of reaching higher PRs with the identified design option 
changes. For example, the modeled max-tech PR represents a unit in the 
test sample that had a high PR as a starting point (near EL 3). 
Modeling increased heat exchanger sizes and a more efficient compressor 
in this unit resulted in a higher modeled PR than could be achieved 
theoretically by applying the same design options to baseline units. 
For these units that start at lower PRs, DOE expects that manufacturers 
would have to undertake a complete product redesign and optimization to 
reach higher PRs, rather than just apply the identified design options. 
As a result, manufacturers of these units would incur higher MPCs to 
reach the higher efficiency levels and also significant conversion 
costs associated with updating their product lines. These conversion 
costs are discussed further in sections IV.J and V.B.2 of this proposed 
rule and chapter 12 of the NOPR TSD.
    With this approach, DOE found that only three units in the teardown 
sample would be capable of reaching EL 3 without significant product 
redesign (i.e., the one unit that tested at EL 3 and two units that 
could theoretically achieve EL 3 with highest efficiency single-speed 
compressors and increasing the heat exchanger area no more than 20 
percent). At EL 4 (max-tech), DOE expects all products to require 
redesigns. EL 4 represents the maximum modeled efficiency with a 20-
percent increase in heat exchanger area and the most efficient 
variable-speed compressor. DOE expects that manufacturers would 
undertake a product redesign when switching from a single-speed to a 
variable-speed compressor. Additionally, DOE notes that the ability of 
a product to reach EL 3 or EL 4 would be dependent on the availability 
of the most efficient components. However, compressor availability for 
portable ACs is largely driven by the room AC industry, so the most 
efficient single-speed and variable-speed compressors may not be 
available over the entire range of capacities necessary for all 
portable AC product capacities. As a result, moving to EL 3 or EL 4 may 
necessitate manufacturers to remove certain portable AC cooling 
capacities from the market.
    Products that would require a redesign to reach a certain 
efficiency level with the identified design options would subsequently 
incur additional incremental MPCs to achieve any improvement beyond 
that efficiency. Although DOE does not expect manufacturers to actually 
implement the associated design changes for the reasons discussed 
below, DOE included them for completeness to estimate MPCs 
representative of the full capacity range at all efficiency levels. To 
estimate increased material costs after manufacturers undertake a 
product redesign, DOE allowed the heat exchanger area to increase 
beyond the 20-percent limit where necessary, resulting in higher costs 
for the heat exchangers and associated case changes. Similarly, DOE 
modeled compressors with efficiencies higher than those that it is 
aware of on the market to simulate the increased component costs after 
a product redesign (i.e., DOE used the price premium associated with 
more efficient compressors to estimate the costs associated with other 
component changes that would be made in a product redesign). While 
DOE's estimates related to product redesigns resulted in increased MPCs 
at the higher efficiency levels, the more significant financial impact 
of a redesign would be associated with the conversion costs incurred by 
manufacturers, as described in sections IV.J and V.B.2 of this NOPR and 
in chapter 12 of the NOPR TSD.
    DOE calculated all MPCs in 2014$, the most recent year for which 
full-year data was available at the time of this NOPR analysis. Table 
IV.8 presents the updated MPC estimates DOE developed for this NOPR.

Table IV.8--Portable Air Conditioner Incremental Manufacturer Production
                      Costs (2014$)--NOPR Analysis
------------------------------------------------------------------------
                                                            Incremental
                    Efficiency level                        MPC (2014$)
------------------------------------------------------------------------
Baseline................................................  ..............
EL1.....................................................          $29.78
EL2.....................................................           45.13
EL3.....................................................           60.35
EL4.....................................................          108.99
------------------------------------------------------------------------

    Additional details on the development of the incremental cost 
estimates may be found in chapter 5 of the NOPR TSD.

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the manufacturer selling price (MSP) 
estimates derived in the engineering analysis to consumer prices, which 
are then used in the LCC and PBP analysis and in the MIA. At each step 
in the distribution channel, companies mark up the price of the product 
to cover business costs and profit margin. For portable ACs, the main 
parties in the distribution chain are manufacturers, retailers, and 
consumers.
    The manufacturer markup converts MPC to MSP. DOE developed an 
average manufacturer markup by examining the annual Securities and 
Exchange Commission (SEC) 10-K reports filed by publicly traded 
manufacturers primarily engaged in appliance manufacturing and whose 
combined product range includes portable ACs.
    For retailers, DOE developed separate markups for baseline products 
(baseline markups) and for the incremental cost of more-efficient 
products (incremental markups). Incremental markups are coefficients 
that relate the change in the MSP of higher-efficiency models to the 
change in the retailer sales price. DOE relied on economic data from 
the U.S.

[[Page 38422]]

Census Bureau to estimate average baseline and incremental markups.
    AHAM objected to DOE's reliance on the concept of incremental 
markups, stating that this theory has been disproved and it is in 
contradiction to empirical evidence. (AHAM, No. 16 at p. 8) In an 
attachment to AHAM's comment, Shorey Consulting, Inc. stated that (1) 
DOE requires a strong form of economic theory, since it is saying that 
something will happen solely because theory says it should; and (2) an 
a priori resort to economic theory without clear empirical support is 
highly problematic. Shorey Consulting interviewed a sample of local/
regional and national appliance retailers and reported that, with very 
few exceptions, they reacted to the DOE concept that percentage margins 
will be lower in a post-standards situation with incredulity. It 
concluded that DOE needs to abandon the incremental margin approach and 
revert to the average margin approach that corresponds to actual 
industry practice. (AHAM, No. 16 at pp. A-10-11)
    DOE disagrees that the theory behind the concept of incremental 
markups has been disproved. The concept is based on a simple notion: An 
increase in profitability, which is implied by keeping a fixed markup 
when the product price goes up, is not likely to be viable over time in 
a business that is reasonably competitive. DOE agrees that empirical 
data on markup practices would be desirable, but such information is 
closely held and difficult to obtain.
    Regarding the interviews with appliance retailers, it is difficult 
for DOE to evaluate the characterization of the responses without 
knowing what questions were posed to the retailers. DOE's analysis 
necessarily considers a very simplified version of the world of 
appliance retailing: Namely, a situation in which nothing changes 
except for those changes in appliance offerings that occur in response 
to new standards. DOE implicitly asks: Assuming the product cost 
increases while the other costs remain constant (no change in labor, 
material and operating costs), are retailers still able to keep the 
same markup over time as before? DOE recognizes that retailers are 
likely to seek to maintain the same markup on appliances if the price 
they pay goes up as a result of appliance standards, but DOE believes 
that over time adjustment is likely to occur due to competitive 
pressures. Other retailers may find that they can gain sales by 
reducing the markup and maintaining the same per-unit operating profit. 
The incremental markup approach embodies the same perspective as the 
``preservation of per-unit operating profit markup scenario'' used in 
the MIA (see section IV.J of this document).
    In summary, DOE acknowledges that its approach to estimating 
retailer markup practices after new standards take effect is an 
approximation of real-world practices that are both complex and varying 
with business conditions. However, DOE continues to believe that its 
assumption that standards do not facilitate a sustainable increase in 
profitability is reasonable. DOE welcomes information that could 
support improvement in its methodology.
    Chapter 6 of the NOPR TSD provides details on DOE's development of 
markups for portable ACs.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of portable ACs at different efficiencies in 
representative U.S. homes.\24\ The energy use analysis estimates the 
range of energy use of portable ACs in the field (i.e., as they are 
actually used by consumers). The energy use analysis provides the basis 
for other analyses DOE performed, particularly assessments of the 
energy savings and the savings in consumer operating costs that could 
result from adoption of amended or new standards.
---------------------------------------------------------------------------

    \24\ DOE estimated that 12 percent of portable ACs are used in 
used retail or office buildings, and it also estimated energy use by 
these consumers. The percentage is equivalent to the market 
distribution of residential and commercial installations of 
residential room AC products.
---------------------------------------------------------------------------

    DOE determined a range of annual energy use consumption of portable 
ACs as a function of the unit's annual operating hours to meet the 
cooling demand, which depends on the efficiency of the unit, power 
(watts) of three modes of operation (cooling, fan, and standby), and 
the percentage of time in each mode.
    EIA's Residential Energy Consumption Survey (RECS) provides 
information on whether households use a room AC. Because portable ACs 
and room ACs often serve a similar function,\25\ DOE developed a sample 
of households that use room ACs from RECS 2009, which is the latest 
available RECS.\26\ DOE selected the subset of RECS 2009 records that 
met relevant criteria.\27\
---------------------------------------------------------------------------

    \25\ It is assumed that portable ACs may perform supplemental 
cooling to a particular space, but that the cooling loads between 
room ACs and portable ACs are similar. For example, a portable AC 
may be used to provide cooling to a single room in place of a 
central AC to cool an entire home. For the purposes of estimating 
energy use, DOE assumed that portable ACs are operated under similar 
cooling loads as room ACs, given their similar cooling capacities.
    \26\ U.S. Department of Energy--Energy Information 
Administration. Residential Energy Consumption Survey. 2009. <http://www.eia.gov/consumption/residential/data/2009/>.
    \27\ RECS household use criteria: (1) At least one room AC was 
present in the household; (2) The energy consumption of the room AC 
was greater than zero; (3) The capacity of the room AC was less than 
14,000 Btu/hr (a cooling capacity comparable to portable ACs as 
measured by industry test methods); and (4) The room being cooled 
measured no more than 1,000 square feet.
---------------------------------------------------------------------------

    To estimate the cooling operating hours of room ACs, DOE used the 
same method as was used in the 2011 direct final rule for room ACs. 76 
FR 22454 (Apr. 21, 2011). For each sample household, RECS provides the 
estimated energy use for cooling by room ACs. After assigning an 
efficiency and capacity to the room AC, DOE could then estimate its 
operating hours in cooling mode. DOE then adjusted the operating hours 
in cooling mode to account for the likelihood that improvement in 
building shell efficiency would reduce the cooling load and operating 
hours.\28\ The estimated average cooling operating hours for a room AC 
is 585 hours/year.
---------------------------------------------------------------------------

    \28\ To account for increased building efficiency at the time 
that the proposed standard would take effect, DOE used the 2021 
building shell index factor of 0.97 for space cooling in all 
residences from the EIA's Annual Energy Outlook. (Energy Information 
Administration. Annual Energy Outlook 2014 with Projections to 2014. 
April 2014.)
---------------------------------------------------------------------------

    The annual operating hours of the existing room AC were used as a 
proxy for the operating hours of a baseline portable AC. DOE then 
estimated what the operating hours would be if portable ACs of higher 
efficiency units were used instead. Generally, higher efficiency 
reduces the operating hours required to meet a given cooling demand.
    To estimate the number of hours in fan-only mode, DOE utilized a 
field metering analysis of a sample of portable ACs in 19 homes.\29\ 
The survey provided data on cooling-mode and fan-only mode hours of 
operation. DOE derived a distribution of the ratio of fan-only mode 
hours to cooling-mode hours, and used this distribution to randomly 
assign a ratio to each of the sample households, which allows 
estimation of fan-only mode hours of operation. DOE assumed portable 
ACs would only be plugged in during months with 5 or more cooling 
degree days. The annual hours in standby mode were derived by 
subtracting the cooling-mode and fan-only mode hours of operation from 
the total number of hours in a months with 5 or more cooling degree 
days.
---------------------------------------------------------------------------

    \29\ Burke, Thomas, et al. 2014. Using Field-Metered Data to 
Quantify Annual Energy Use of Portable Air Conditioners. http://www.osti.gov/scitech/servlets/purl/1166989.
---------------------------------------------------------------------------

    To estimate the operating hours of portable ACs used in commercial

[[Page 38423]]

settings, DOE developed a building sample from the 2003 Commercial 
Buildings Energy Consumption Survey (CBECS),\30\ again using the 
operating hours of room ACs as a proxy. The method is described in 
chapter 7 of the NOPR TSD. DOE invites comment on the energy use 
methodology and data sources/studies described here and in Chapter 7.
---------------------------------------------------------------------------

    \30\ U.S. Department of Energy--Energy Information 
Administration. Commercial Buildings Energy Consumption Survey. 
2003. http://www.eia.gov/consumption/commercial/data/2003/.
---------------------------------------------------------------------------

    Commenting on the preliminary TSD, AHAM asserted that DOE's energy 
use analysis is based on insufficient and inaccurate data. AHAM noted 
that consumers use portable ACs and room ACs differently, including the 
time of year and frequency of use. AHAM expressed concern that DOE is 
reliant on RECS data that are appropriate for room ACs, but do not 
include data specific to portable ACs. (AHAM, No. 16 at pp. 5-6) DENSO 
also questioned the accuracy of DOE's energy use assumptions. (DENSO, 
No. 13 at p. 8)
    DOE believes that portable ACs are used similarly to room ACs and 
assumes that in some residential and commercial scenarios, portable ACs 
may perform supplemental cooling to central ACs. DOE has based the NOPR 
energy use analysis on room AC usage data as DOE believes such data is 
the closest proxy available. To account for any potential differences 
between consumer use of portable ACs and room ACs, DOE also conducted a 
sensitivity analysis which assumes lower annual hours of use for 
portable ACs in comparison to room ACs. Specifically, in this 
sensitivity analysis for use differences between products, DOE scaled 
the room AC cooling mode hours of use by 50 percent while maintaining 
the assumption that portable ACs are used during the same time of year 
as room ACs, since the use of both types of cooling equipment is likely 
to be consistent seasonally. The results of this sensitivity analysis 
estimate half the energy bill savings relative to the primary estimate. 
More details are presented in appendix 8F and appendix 10E of the NOPR 
TSD. DOE welcomes any specific data on operation of portable ACs that 
could inform further analysis on consumer use.
    DENSO commented that room AC operating hours are not representative 
of industrial portable AC (I-PAC) operating hours. DOE is not analyzing 
industrial products (including I-PACS) in this rulemaking.
    OceanAire inquired whether DOE's estimate for ``commercial'' 
referred to portable ACs in commercial settings or commercial units. 
(DENSO, No. 13 at pp. 7-8; OceanAire, Public Meeting Transcript, No. 11 
at p. 62) The proposed rule applies to single-duct and dual-duct 
portable ACs that meet the definitions in 10 CFR 430.2, and DOE 
considered such units that operate in light commercial settings, such 
as food service, office and retail buildings.
    Chapter 7 of the NOPR TSD provides details on DOE's energy use 
analysis for portable ACs.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential energy conservation standards for 
portable ACs. The effect of new or amended energy conservation 
standards on individual consumers usually involves a reduction in 
operating cost and an increase in purchase cost. DOE used the following 
two metrics to measure consumer impacts:
     The LCC (life-cycle cost) is the total consumer expense of 
an appliance or product over the life of that product, consisting of 
total installed cost (manufacturer selling price, distribution chain 
markups, sales tax, and installation costs) plus operating costs 
(expenses for energy use, maintenance, and repair). To compute the 
operating costs, DOE discounts future operating costs to the time of 
purchase and sums them over the lifetime of the product.
     The PBP (payback period) is the estimated amount of time 
(in years) it takes consumers to recover the increased purchase cost 
(including installation) of a more-efficient product through lower 
operating costs. DOE calculates the PBP by dividing the change in 
purchase cost at higher efficiency levels by the change in annual 
operating cost for the year that the new standard is assumed to take 
effect.
    For a given efficiency level, DOE calculates LCC savings as the 
change in LCC in a standards case relative to the LCC in the no-new-
standards case, which reflects the estimated efficiency distribution of 
portable ACs in the absence of new or amended energy conservation 
standards. In contrast, the PBP for a given efficiency level is 
measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and commercial buildings that use portable ACs. DOE used 
the EIA's 2009 RECS to develop household samples for portable ACs based 
on households that use room ACs. DOE also used the EIA's 2003 CBECS to 
develop a sample of commercial buildings that use portable ACs, again 
based on buildings that use room ACs. For each sample household or 
commercial building, DOE determined the energy consumption for the 
portable ACs and the appropriate electricity price. By developing a 
representative sample of households, the analysis captured the 
variability in energy consumption and energy prices associated with the 
use of portable ACs.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Note in 
the case of portable ACs, DOE assumed that installation costs would not 
change with efficiency. So the difference of installation cost between 
the baseline and higher efficiency levels is then $0. Inputs to the 
calculation of operating expenses include annual energy consumption, 
energy prices and price projections, repair and maintenance costs, 
product lifetimes, and discount rates. DOE created distributions of 
values for product lifetime and discount rates with probabilities 
attached to each value, to account for their uncertainty and 
variability. Sales tax and electricity prices are tied to the 
geographic locations of purchasers drawn from the residential and 
commercial samples.
    The model DOE uses to calculate the LCC and PBP relies on a Monte 
Carlo simulation to incorporate uncertainty and variability into the 
analysis. The Monte Carlo simulation randomly samples input values from 
the probability distributions and portable AC user samples. The model 
calculated the LCC and PBP for products at each efficiency level for 
10,000 housing units or commercial buildings per simulation run.
    DOE calculated the LCC and PBP for all consumers as if each were to 
purchase a new product in the expected year of compliance with new 
standards. Any new standards would apply to portable ACs manufactured 5 
years after the date on which any new standard is published. (42 U.S.C. 
6295(l)(2)) At this time, DOE estimates publication of a final rule in 
2016. Therefore, for purposes of its analysis, DOE used 2021 as the 
first year of compliance with any new standards.
    Table IV.9 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. For energy use, RECS and CBECS were used 
for number of hours

[[Page 38424]]

of use. A field metering report provided information regarding the fan-
mode of portable ACs.\31\ Details of the spreadsheet model, and of all 
the inputs to the LCC and PBP analyses, are contained in chapter 8 of 
the NOPR TSD and its appendices.
---------------------------------------------------------------------------

    \31\ Burke, Thomas, et al. 2014. Using Field-Metered Data to 
Quantify Annual Energy Use of Portable Air Conditioners. http://www.osti.gov/scitech/servlets/purl/1166989.

Table IV.9--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
                    Inputs                           Source/method
------------------------------------------------------------------------
Product Cost.................................  Derived by multiplying
                                                MPCs by manufacturer and
                                                retailer markups and
                                                sales tax, as
                                                appropriate. Producer
                                                Price Index (PPI) series
                                                for small household
                                                electronics fit to an
                                                exponential model.
Installation Costs...........................  Assumed no installation
                                                costs with baseline unit
                                                and no cost with
                                                efficiency level.
Annual Energy Use............................  Power in each mode
                                                multiplied by the hours
                                                per year in each mode.
                                                Average number of hours
                                                based on 2009 RECS, 2003
                                                CBECS, and field
                                                metering data.
                                               Variability: Based on the
                                                2009 RECS and 2003
                                                CBECS.
Energy Prices................................  Electricity: Based on
                                                2014 average and
                                                marginal electricity
                                                price data from the
                                                Edison Electric
                                                Institute.
                                               Variability: Marginal
                                                electricity prices vary
                                                by season, U.S. region,
                                                and baseline electricity
                                                consumption level.
Energy Price Trends..........................  Based on AEO 2015 price
                                                forecasts. Trends are
                                                dependent on census
                                                divisions.
Repair and Maintenance Costs.................  Assumed no change with
                                                efficiency level.
Product Lifetime.............................  Weibull distribution
                                                using parameters from
                                                room ACs.
Discount Rates...............................  Approach involves
                                                identifying all possible
                                                debt or asset classes
                                                that might be used to
                                                purchase the considered
                                                appliances, or might be
                                                affected indirectly.
                                                Primary data source was
                                                the Federal Reserve
                                                Board's Survey of
                                                Consumer Finances.
Compliance Date..............................  2021.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the NOPR TSD.

1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described above 
(along with sales taxes). DOE used different markups for baseline 
products and higher-efficiency products, because DOE applies an 
incremental markup to the increase in MSP associated with higher-
efficiency products.
    Economic literature and historical data suggest that the real costs 
of many products may trend downward over time according to ``learning'' 
or ``experience'' curves. Experience curve analysis implicitly includes 
factors such as efficiencies in labor, capital investment, automation, 
materials prices, distribution, and economies of scale at an industry-
wide level.\32\ DOE used the most representative Producer Price Index 
(PPI) series for portable ACs to fit to an exponential model to develop 
an experience curve. DOE obtained historical PPI data for ``small 
electric household appliances, except fans'' from the Labor 
Department's Bureau of Labor Statistics (BLS) for 1983 to 2014.\33\ 
Although this PPI series encompasses more than portable ACs, no PPI 
data specific to portable ACs were available. The PPI data reflect 
nominal prices, adjusted for changes in product quality. DOE calculated 
an inflation-adjusted (deflated) price index by dividing the PPI series 
by the Gross Domestic Product Chained Price Index.
---------------------------------------------------------------------------

    \32\ Taylor, M. and Fujita, K.S. Accounting for Technological 
Change in Regulatory Impact Analyses: The Learning Curve Technique. 
LBNL-6195E. Lawrence Berkeley National Laboratory, Berkeley, CA. 
April 2013. http://escholarship.org/uc/item/3c8709p4#page-1.
    \33\ U.S. Department of Labor Bureau of Labor Statistics./
Producer Price Index for 1983-2013/. PPI series ID: 
PCU33521033521014. (Last accessed September 8, 2014.) http://www.bls.gov/ppi/.
---------------------------------------------------------------------------

2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product. Available evidence 
indicated that no installation costs would be incurred for baseline 
installation or be impacted with increased efficiency levels.
3. Annual Energy Consumption
    For each sampled household and building, DOE determined the energy 
consumption for a portable AC at different efficiency levels using the 
approach described in section IV.E of this proposed rule.
4. Energy Prices
    DOE used average prices (for baseline products) and marginal prices 
(for higher-efficiency products) which vary by season, region, and 
baseline electricity consumption level for the LCC. DOE estimated these 
prices using data published with the Edison Electric Institute (EEI) 
Typical Bills and Average Rates reports for summer and winter 2014.\34\ 
For the residential sector each report provides, for most of the major 
investor-owned utilities (IOUs) in the country, the total bill assuming 
household consumption levels of 500, 750, and 1,000 kWh for the billing 
period. For the commercial sector the report provides typical bills for 
several combinations of monthly electricity peak demand and total 
consumption.
---------------------------------------------------------------------------

    \34\ Edison Electric Institute. Typical Bills and Average Rates 
Report. Winter 2014 published April 2014, Summer 2014 published 
October 2014. See http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx.
---------------------------------------------------------------------------

    For both the residential and commercial sectors, DOE defined the 
average price as the ratio of the total bill to the total electricity 
consumption. For the residential sector, DOE used the EEI data to also 
define a marginal price as the ratio of the change in the bill to the 
change in energy consumption. For the commercial sector, marginal 
prices cannot be estimated directly from the EEI data, so DOE used a 
different approach, as described in chapter 8 of the NOPR TSD.
    Regionally weighted-average values for each type of price were 
calculated for the nine census divisions and four large states (CA, FL, 
NY and TX). Each EEI utility in a division was assigned a weight based 
on the number of consumers it serves. Consumer counts were taken from 
the most recent EIA Form 861 data (2012).\35\ DOE adjusted these 
regional weighted-average prices to account for systematic differences 
between IOUs and publicly-owned utilities, as the latter are not 
included in the EEI data set.
---------------------------------------------------------------------------

    \35\ U.S. Department of Energy, Energy Information 
Administration. Form EIA-861 Annual Electric Power Industry 
Database. http://www.eia.doe.gov/cneaf/electricity/page/eia861.html.
---------------------------------------------------------------------------

    DOE assigned seasonal average and marginal prices to each household 
or commercial building in the LCC sample based on its location and its 
baseline monthly electricity consumption for an

[[Page 38425]]

average summer or winter month. For a detailed discussion of the 
development of electricity prices, see appendix 8F of the NOPR TSD.
    To estimate future prices, DOE used the projected annual changes in 
average residential and commercial electricity prices in the Reference 
case projection in AEO 2015. The AEO price trends do not distinguish 
between marginal and average prices, so DOE used the same trends for 
both. DOE reviewed the EEI data for the years 2007 to 2014 and 
determined that there is no systematic difference in the trends for 
marginal vs. average prices in the data.
5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance. Maintenance costs are 
associated with maintaining the operation of the product. Based on 
available data and low product purchase prices, DOE concluded that 
repair frequencies are low and do not increase for higher-capacity or 
higher-efficiency units. DOE assumed a zero cost for all efficiency 
levels.
6. Product Lifetime
    The product lifetime is the age at which the product is retired 
from service. Given similar mechanical components and uses, DOE 
considered that the lifetime distribution of portable ACs is the same 
as that of room ACs, as estimated for the 2011 direct final rule. 76 FR 
22454 (April 21, 2011). The average lifetime is 10 years. Chapter 8 of 
the NOPR TSD provides details on DOE's development of lifetimes for 
portable ACs.
    DENSO noted that DOE had limited data regarding portable AC 
lifetimes and stated that since portable ACs are used less frequently 
than room ACs, the lifetime should reflect the usage difference. 
(DENSO, No. 13 at p. 7) DOE acknowledges that lower usage of portable 
ACs compared to room ACs could lead to longer lifetimes for portable 
ACs. However given limited supporting data, DOE is concerned that using 
a longer lifetime could bias upwards the LCC savings from higher 
efficiency. Therefore, for this analysis, DOE continued to use room AC 
lifetime as a proxy for portable AC lifetime.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to households to estimate the present value of future operating costs. 
DOE estimated a distribution of residential and commercial discount 
rates for portable ACs based on consumer financing costs and 
opportunity cost of funds related to appliance energy cost savings and 
maintenance costs.
    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes to approximate 
a consumer's opportunity cost of funds related to appliance energy cost 
savings. DOE estimated the average percentage shares of the various 
types of debt and equity by household income group using data from the 
Federal Reserve Board's Survey of Consumer Finances \36\ (SCF) for 
1995, 1998, 2001, 2004, 2007, and 2010. Using the SCF and other 
sources,\37\ DOE developed a distribution of rates for each type of 
debt and asset by income group to represent the rates that may apply in 
the year in which new standards would take effect. DOE assigned each 
sample household a specific discount rate drawn from one of the 
distributions. The average rate across all types of household debt and 
equity and income groups, weighted by the shares of each type, is 4.63 
percent. See chapter 8 of the NOPR TSD for further details on the 
development of consumer discount rates.
---------------------------------------------------------------------------

    \36\ The Federal Reserve Board, SCF 1989, 1992, 1995, 1998, 
2001, 2004, 2007, 2010. http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
    \37\ Federal Reserve Board time-series data, Cost of Savings 
Index data, annual returns on the Standard and Poor's. See the 
reference section of chapter 8 of the NOPR TSD for on-line data 
locations.
---------------------------------------------------------------------------

    To establish commercial discount rates for the LCC analysis, DOE 
estimated the cost of capital for companies that purchase a portable 
AC. The weighted average cost of capital is commonly used to estimate 
the present value of cash flows to be derived from a typical company 
project or investment. Most companies use both debt and equity capital 
to fund investments, so their cost of capital is the weighted average 
of the cost to the firm of equity and debt financing as estimated from 
financial data for publicly traded firms in the sectors that purchase 
computers. For this analysis, DOE used Damadoran \38\ online as the 
source of information about company debt and equity financing. The 
average rate across all types of companies, weighted by the shares of 
each type, is 4.9 percent. See chapter 8 of the NOPR TSD for further 
details on the development of commercial discount rates.
---------------------------------------------------------------------------

    \38\ Damodaran, A. Cost of Capital by Sector. January 2014. 
(Last accessed September 25, 2014.) New York, NY. http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm.
---------------------------------------------------------------------------

8. Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies in the no-new-
standards case (i.e., the case without amended or new energy 
conservation standards). For the preliminary analysis, to estimate the 
efficiency distribution of portable ACs, DOE summed the number of 
portable AC models available from online retailers to obtain the 
percentages of single-duct and dual-duct models. The single-duct models 
were allocated to the baseline efficiency level. The dual-duct models 
were split between EL 1 and EL 2. For the NOPR analysis, DOE estimated 
the no-new standards case based on 24 portable AC units tested in 
development of the engineering analysis (chapter 5 of this NOPR TSD). 
DOE assumed that the efficiency distribution of units tested is 
representative of the market as a whole.
    Commenting on the preliminary analysis, De' Longhi wondered how 
efficiency distribution was tied to product duct configuration. (De' 
Longhi, No. 11 at p. 73) Based on the engineering analysis, DOE found 
that gains in efficiency were achieved by utilizing more efficient 
components in existing test units. DOE used product component 
characteristics to estimate the current efficiency distribution of 
portable ACs on the market. As discussed above, DOE based EL 1, EL2, 
and EL 3 on the performance observed in its test sample. Therefore, DOE 
estimated a share of 29 percent at the baseline, 50 percent for EL 1, 
21 percent for EL 2, and no share at EL 3. EL 3 represents the maximum 
performance observed in DOE's test sample; however, the test unit 
representing EL 3 performed significantly better than the next most 
efficient units, and does not represent the maximum available across a 
full range of capacities that would comprise a significant portion of 
the market. Accordingly, DOE has not assigned any market share to this 
efficiency level. The estimated market shares for the no-new-standards 
case for portable ACs and the average EER and CEER values for each 
efficiency level are shown in Table IV.10. See chapter 8 of the NOPR 
TSD for further information on the derivation of the efficiency 
distributions.

[[Page 38426]]



               Table IV.10--Portable Air Conditioner No-New-Standards Case Efficiency Distribution
----------------------------------------------------------------------------------------------------------------
                                                                                                   Market share
                        Efficiency level                                EER            CEER             (%)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................            5.09            5.07              29
1...............................................................            5.99            5.97              50
2...............................................................            7.20            7.19              21
3...............................................................            8.48            8.47               0
4...............................................................           10.54           10.52               0
----------------------------------------------------------------------------------------------------------------

9. Payback Period Analysis
    The PBP is the amount of time it takes the consumer to recover the 
additional installed cost of more-efficient products, compared to 
baseline products, through energy cost savings. PBPs are expressed in 
years. PBPs that exceed the life of the product mean that the increased 
total installed cost is not recovered in reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. The 
PBP calculation uses the same inputs as the LCC analysis, except that 
discount rates are not applied.
    As noted above, EPCA, as amended, establishes a rebuttable 
presumption that a standard is economically justified if the Secretary 
finds that the additional cost to the consumer of purchasing a product 
complying with an energy conservation standard level will be less than 
three times the value of the first year's energy savings resulting from 
the standard, as calculated under the applicable test procedure. (42 
U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
forecast for the year in which compliance with the new standards would 
be required.

G. Shipments Analysis

    DOE uses forecasts of annual product shipments to calculate the 
national impacts of potential new energy conservation standards on 
energy use, NPV, and future manufacturer cash flows. The shipments 
model takes an accounting approach, tracking the vintage of units in 
the stock. Stock accounting uses product shipments as inputs to 
estimate the age distribution of in-service product stocks for all 
years. The age distribution of in-service product stocks is a key input 
to calculations of both the NES and NPV, because operating costs for 
any year depend on the age distribution of the stock.
    In the preliminary analysis for portable ACs, DOE used a model with 
two market segments to estimate shipments of portable ACs: Replacement 
of existing products and first-time owners. AHAM stated that DOE's 
assumption that portable ACs account for approximately ten percent of 
the total shipments of room air conditioners is not accurate. Based on 
AHAM room AC shipment data for 2012-2014, the percentage assumed in the 
preliminary analysis for portable ACs is not consistent and, therefore, 
room AC shipments do not appear to be an accurate proxy for portable AC 
shipments. (AHAM, No. 16 at p. 7) DENSO also objected to DOE's use of 
room AC shipments to derive portable AC shipments. (DENSO, No. 13 at p. 
9)
    Subsequent to the preliminary analysis, DOE received data on 
portable AC shipments in 2014 from manufacturer interviews, so it was 
not necessary to use room AC shipments data as a proxy for portable AC 
shipments for the NOPR analysis. DOE also used information obtained in 
manufacturer interviews which suggested that the average annual growth 
in portable AC shipments between 2004 and 2013 was 30 percent. To 
estimate historical shipments prior to 2004, DOE interpolated between 
1985 (the date that portable ACs were introduced to the residential 
market) and 2004.
    To project future shipments, DOE estimated a saturation rate to 
project shipments of portable ACs. DOE assumed that the portable AC 
saturation rate would be no greater than half the current room AC 
saturation rate (based on RECS 2009) by the end of the analysis period, 
i.e., 2050. For each year of the projection period, the saturation rate 
of portable ACs was determined from a combination of the total stock of 
the product and total housing stock. The total stock of portable ACs 
was based on product lifetime and the survival function developed in 
the LCC analysis. DOE used total housing stock from AEO 2015. Based on 
this revised approach, DOE estimated that the shipments of portable ACs 
would increase from 1.32 million in 2014 to 1.67 million in 2050 at an 
annual growth rate of 0.65 percent.
    For the NOPR analysis, DOE applied price and efficiency elasticity 
parameters to estimate the effect of new standards on portable AC 
shipments. DOE estimated the price and efficiency elasticity parameters 
from a regression analysis that incorporated shipments, purchase price, 
and efficiency data specific to several residential appliances during 
1989-2009. Based on evidence that the price elasticity of demand is 
significantly different over the short run and long run for other 
consumer goods (i.e., automobiles), DOE assumed that these elasticities 
decline over time. DOE estimated shipments in each standards case using 
the price and efficiency elasticity along with the change in the 
product price and operating costs between a standards case and the no-
new-standards case.
    For details on the shipments analysis, see chapter 9 of the NOPR 
TSD for further information.

H. National Impact Analysis

    The NIA assesses the NES and the national NPV from a national 
perspective of total consumer \39\ costs and savings that would be 
expected to result from new or amended standards at specific efficiency 
levels.\40\ DOE calculates the NES and NPV based on projections of 
annual product shipments, along with the annual energy consumption and 
total installed cost data from the energy use and LCC analyses. For the 
present analysis, DOE forecasted the energy savings, operating cost 
savings, product costs, and NPV of consumer benefits over the lifetime 
of portable ACs sold from 2021 through 2050.
---------------------------------------------------------------------------

    \39\ ``Consumer'' in this context refers to consumers of the 
product being regulated.
    \40\ The NIA accounts for impacts in the 50 States and the U.S. 
territories.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new energy conservation

[[Page 38427]]

standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market if DOE adopted new or amended 
standards at specific energy efficiency levels (i.e., the TSLs or 
standards cases). For the standards cases, DOE considers how a given 
standard would likely affect the market shares of products with 
efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
on the Input and Summary worksheet within the spreadsheet https://www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0033. The NIA 
spreadsheet model uses typical values (as opposed to probability 
distributions) as inputs.
    Table IV.11 summarizes the inputs and methods DOE used for the NIA 
analysis for the NOPR. Discussion of these inputs and methods follows 
the table. See chapter 10 of the NOPR TSD for further details.

   Table IV.11--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
                    Inputs                               Method
------------------------------------------------------------------------
Shipments....................................  Annual shipments from
                                                shipments model.
Compliance Date of Standard..................  2021.
Efficiency Trends............................  No-new-standards case:
                                                Annual increase in
                                                efficiency of 0.25
                                                percent between 2021 and
                                                2050.
                                               Standards cases: Roll-up
                                                plus shift scenario.
Annual Energy Consumption per Unit...........  Annual weighted-average
                                                values are a function of
                                                energy use at each TSL.
Total Installed Cost per Unit................  Annual weighted-average
                                                values are a function of
                                                cost at each TSL.
                                               Incorporates projection
                                                of future product prices
                                                based on historical
                                                data.
Annual Energy Cost per Unit..................  Annual weighted-average
                                                values as a function of
                                                the annual energy
                                                consumption per unit and
                                                energy prices.
Repair and Maintenance Cost per Unit.........  Annual values do not
                                                change with efficiency
                                                level.
Energy Prices................................  Average and marginal
                                                electricity prices for
                                                residential and
                                                commercial sectors from
                                                life-cycle cost and
                                                payback period analysis.
Energy Price Trend...........................  AEO 2015 forecasts (to
                                                2040) and extrapolation
                                                through 2050 for
                                                residential and
                                                commercial sectors
Energy Site-to-Primary and FFC Conversion....  A time-series conversion
                                                factor based on AEO
                                                2015.
Discount Rate................................  Three and seven percent.
Present Year.................................  2015.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the forecast period. To project the trend in efficiency 
for portable ACs over the entire shipments projection period, DOE used 
as a starting point the shipments-weighted cooling energy efficiency 
ratio (SWEERcm) estimated for 2021 in the LCC analysis and 
assumed an annual increase in efficiency equal to the increase 
estimated for room AC in the 2011 direct final rule: 0.25 percent 
between 2021 and 2050. 76 FR 22454 (April 21, 2011).
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipments-weighted average energy efficiency for 2021. 
Using this approach, product energy efficiencies in the no-new-
standards case that do not meet the standard level under consideration 
would ``roll up'' to meet the new standard level. Product energy 
efficiencies in the no-new-standards case that exceed the standard 
level under consideration would not be affected. For years after 2021, 
DOE developed SWEERcms growth trends for each standard level 
that maintained, throughout the analysis period (2021-2050), the same 
difference in per-unit average cost as was determined between the no-
new-standards case and each standards case in 2021. The approach is 
further described in chapter 10 of the NOPR TSD.
2. National Energy Savings
    The NES analysis involves a comparison of national energy 
consumption of the considered products in each potential standards case 
(TSL) with consumption in the case with no-new or new energy 
conservation standards. DOE calculated the national energy consumption 
by multiplying the number of units (stock) of each product (by vintage 
or age) by the unit energy consumption (also by vintage). DOE 
calculated annual NES based on the difference in national energy 
consumption for the no-new-standards case and for each higher 
efficiency standard case. DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy (i.e., the energy consumed by power plants to 
generate site electricity) using annual conversion factors derived from 
AEO 2015. Cumulative energy savings are the sum of the NES for each 
year over the timeframe of the analysis.
    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use FFC measures of energy use and GHG 
and other emissions in the NIA and emissions analyses included in 
future energy conservation standards rulemakings. 76 FR 51281 (August 
18, 2011). After evaluating the approaches discussed in the August 18, 
2011 notice, DOE published a statement of amended policy in which DOE 
explained its determination that EIA's National Energy Modeling System 
(NEMS) is the most appropriate tool for its FFC analysis and its 
intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). 
NEMS is a public domain, multi-sector, partial equilibrium model of the 
U.S. energy sector \41\ that EIA uses to prepare its AEO. The approach 
used for deriving FFC measures of energy use and emissions is described 
in appendix 10B of the NOPR TSD.
---------------------------------------------------------------------------

    \41\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581 (98) (Feb.1998) 
(Available at: http://www.eia.gov/oiaf/aeo/overview/).
---------------------------------------------------------------------------

3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are: (1) Total annual installed cost; (2) 
total annual

[[Page 38428]]

savings in operating costs; and (3) a discount factor to calculate the 
present value of costs and savings. DOE calculates net savings each 
year as the difference between the no-new-standards case and each 
standards case in terms of total savings in operating costs versus 
total increases in installed costs. DOE calculates operating cost 
savings over the lifetime of each product shipped during the forecast 
period.
    As discussed in section IV.F.1 of this proposed rule, DOE developed 
portable AC price trends based on historical PPI data. DOE applied the 
same trends to forecast prices at each considered efficiency level. By 
2050, which is the end date of the forecast period, the average 
portable AC price is projected to drop 51 percent relative to 2013. 
DOE's projection of product prices is described in appendix 10C of the 
NOPR TSD.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of different product price 
forecasts on the consumer NPV for the considered TSLs for portable ACs. 
In addition to the default price trend, DOE considered two product 
price sensitivity cases: (1) A high price decline case based on the AEO 
2015 deflator for ``furniture and appliances''; and (2) a low price 
decline case based on BLS' inflation-adjusted PPI for small electric 
household appliances spanning 1998-2014. The derivation of these price 
trends and the results of these sensitivity cases are described in 
appendix 10C of the NOPR TSD.
    The operating cost savings are energy cost savings, which are 
calculated using the estimated energy savings in each year and the 
projected price of the appropriate form of energy. To estimate energy 
prices in future years, DOE multiplied the average regional electricity 
prices by the forecast of annual national-average residential and 
commercial electricity price changes in the Reference case from AEO 
2015, which has an end year of 2040. To estimate price trends after 
2040, DOE used the average annual rate of change in prices from 2020 to 
2040. As part of the NIA, DOE also analyzed scenarios that used inputs 
from the AEO 2015 Low Economic Growth and High Economic Growth cases. 
Those cases have higher and lower energy price trends compared to the 
Reference case. NIA results based on these cases are presented in 
appendix 10C of the NOPR TSD.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
NOPR, DOE estimated the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\42\ The discount rates for the determination of NPV are in 
contrast to the discount rates used in the LCC analysis, which are 
designed to reflect a consumer's perspective. The 7-percent real value 
is an estimate of the average before-tax rate of return to private 
capital in the U.S. economy. The 3-percent real value represents the 
``social rate of time preference,'' which is the rate at which society 
discounts future consumption flows to their present value.
---------------------------------------------------------------------------

    \42\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis,'' (Sept. 17, 2003), section E (Available at: 
www.whitehouse.gov/omb/memoranda/m03-21.html).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended standards on 
consumers, DOE evaluates the impact on identifiable subgroups of 
consumers that may be disproportionately affected by a new or amended 
national standard. DOE evaluates impacts on particular subgroups of 
consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels. For this NOPR, DOE analyzed 
the impacts of the considered standard levels on low-income households 
and senior-only households for the residential sector and small 
businesses for the commercial sector. DOE found that low-income 
households and senior-only households would experience higher LCC 
savings than would the national population. Chapter 11 in the NOPR TSD 
describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impacts of new 
energy conservation standards on manufacturers of portable ACs and to 
estimate the potential impacts of such standards on employment and 
manufacturing capacity. The MIA has both quantitative and qualitative 
aspects and includes analyses of forecasted industry cash flows, the 
INPV, investments in research and development (R&D) and manufacturing 
capital, and domestic manufacturing employment. Additionally, the MIA 
seeks to determine how new energy conservation standards might affect 
manufacturing employment, capacity, and competition, as well as how 
standards would contribute to overall regulatory burden. Finally, the 
MIA serves to identify any disproportionate impacts on manufacturer 
subgroups, including small business manufacturers.
    The quantitative part of the MIA primarily relies on the GRIM, an 
industry cash flow model with inputs specific to this rulemaking. The 
key GRIM inputs include data on the industry cost structure, unit 
production costs, product shipments, manufacturer markups, and 
investments in R&D and manufacturing capital required to produce 
compliant products. The key GRIM outputs are the INPV, which is the sum 
of industry annual cash flows over the analysis period, discounted 
using the industry-weighted average cost of capital, and the impact to 
domestic manufacturing employment. The model uses standard accounting 
principles to estimate the impacts of new energy conservation standards 
on the portable AC industry by comparing changes in INPV and domestic 
manufacturing employment between a no-new-standards case and the 
various TSLs in the standards case. To capture the uncertainty relating 
to manufacturer pricing strategy following new standards, the GRIM 
estimates a range of possible impacts under different markup scenarios.
    The qualitative part of the MIA addresses manufacturer 
characteristics and market trends. Specifically, the MIA considers such 
factors as manufacturing capacity, competition within the industry, the 
cumulative impact of other DOE and non-DOE regulations, and impacts on 
manufacturer subgroups. The complete MIA is outlined in chapter 12 of 
the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared a profile of the portable AC manufacturing 
industry based on the market and technology assessment, preliminary 
manufacturer interviews, and publicly available information. This 
included a top-down analysis of portable AC manufacturers that DOE used 
to derive preliminary financial inputs for the GRIM (e.g., revenues; 
materials, labor, overhead, and depreciation expenses; selling, 
general, and administrative expenses (SG&A); and R&D expenses). DOE 
also used public sources of information to further calibrate its 
initial characterization of the portable AC manufacturing industry, 
including SEC 10-K filings,\43\ Standard & Poor's stock

[[Page 38429]]

reports,\44\ and corporate annual reports released by both public and 
privately held companies.
---------------------------------------------------------------------------

    \43\ Available online at www.sec.gov.
    \44\ Available online at www.standardandpoors.com.
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared a framework industry cash flow 
analysis to quantify the impacts of new energy conservation standards. 
The GRIM uses several factors to determine a series of annual cash 
flows starting with the announcement of the standard and extending over 
a 30-year period following the effective date of the standard. These 
factors include annual expected revenues, costs of sales, SG&A and R&D 
expenses, taxes, and capital expenditures. In general, energy 
conservation standards can affect manufacturer cash flow in three 
distinct ways: (1) Create a need for increased investment; (2) raise 
production costs per unit; and (3) alter revenue due to higher per-unit 
prices and changes in sales volumes.
    In addition, during Phase 2, DOE developed interview guides to 
distribute to manufacturers of portable ACs in order to develop other 
key GRIM inputs, including product and capital conversion costs, and to 
gather additional information on the anticipated effects of energy 
conservation standards on revenues, direct employment, capital assets, 
manufacturing capacity, industry competitiveness, and subgroup impacts.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with representative manufacturers. During these interviews, 
DOE discussed engineering, manufacturing, procurement, and financial 
topics to validate assumptions used in the GRIM and to identify key 
issues or concerns. See section IV.J.3 for a description of the key 
issues raised by manufacturers during the interviews. In Phase 3, DOE 
used manufacturer feedback to qualitatively assess impacts of new 
standards on manufacturing capacity, direct employment, and cumulative 
regulatory burden.
    Additionally, as part of Phase 3, DOE evaluated subgroups of 
manufacturers that may be disproportionately impacted by new standards 
or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash flow analysis. Such 
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers (LVMs), niche players, and/or manufacturers 
exhibiting a cost structure that largely differs from the industry 
average. DOE identified one potential portable AC manufacturer subgroup 
(small businesses) for which average cost assumptions may not hold.
    Based on the size standards published by the Small Business 
Administration (SBA),\45\ to be categorized as a small business 
manufacturer of portable ACs under North American Industry 
Classification System (NAICS) code 333415 (``Air-Conditioning and Warm 
Air Heating Equipment and Commercial and Industrial Refrigeration 
Equipment Manufacturing''), a portable AC manufacturer and its 
affiliates may not employ more than 1,250 employees. The 1,250-employee 
threshold includes all employees in a business' parent company and any 
subsidiaries. Using this classification in conjunction with a search of 
industry databases and the SBA member directory, DOE did not identify 
any domestic small business manufacturers of single-duct and dual-duct 
portable ACs that would be subject to the standards proposed in this 
notice.\46\
---------------------------------------------------------------------------

    \45\ 65 FR 30836 (May 15, 2000), as amended at 65 FR 53533, 
53544 (Sept. 5, 2000).
    \46\ In the February 2015 TP NOPR, DOE estimated that there was 
one small business that manufactured portable ACs. DOE subsequently 
determined that this small business no longer manufactures portable 
ACs and, therefore, DOE estimates that there are no domestic 
manufacturers that meet the SBA's definition of ``small business'' 
that currently manufacture products covered by this rulemaking.
---------------------------------------------------------------------------

    The portable AC manufacturer subgroup analysis is discussed in 
greater detail in chapter 12, of the NOPR TSD and in section V.B.2.d of 
this proposed rule.
2. Government Regulatory Impact Model (GRIM)
    DOE uses the GRIM to quantify the changes in industry cash flows 
resulting from new or amended energy conservation standards. The GRIM 
uses manufacturer costs, markups, shipments, and industry financial 
information to arrive at a series of no-new-standards case annual cash 
flows absent new or amended standards, beginning with the present year, 
2016, and continuing through 2050. The GRIM then models changes in 
costs, investments, shipments, and manufacturer margins that may result 
from new or amended energy conservation standards and compares these 
results against those in the base-case forecast of annual cash flows. 
The primary quantitative output of the GRIM is the INPV, which DOE 
calculates by summing the stream of annual discounted cash flows over 
the full analysis period. For manufacturers of portable ACs, DOE used a 
real discount rate of 6.60 percent, the weighted-average cost of 
capital derived from industry financials and modified based on feedback 
received during confidential interviews with manufacturers.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between the no-new-standards case and the 
various TSLs. The difference in INPV between the no-new-standards case 
and a standards case represents the financial impact of the new 
standard on manufacturers at that particular TSL. As discussed 
previously, DOE collected the necessary information to develop key GRIM 
inputs from a number of sources, including publicly available data and 
interviews with manufacturers (described in the next section). The GRIM 
results are shown in section V.B.2.a of this proposed rule. Additional 
details about the GRIM 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 and typically more costly components. The changes in the MPCs 
of the analyzed products can affect the revenues, gross margins, and 
cash flow of the industry, making product cost data key GRIM inputs for 
DOE's analysis. For each efficiency level, DOE used the MPCs developed 
in the engineering analysis, as described in section IV.C.2 of this 
proposed rule and further detailed in chapter 5 of the NOPR TSD. 
Additionally, DOE used information from its teardown analysis, 
described in section IV.C of this proposed rule, to disaggregate the 
MPCs into material and labor costs. These cost breakdowns and equipment 
markups were validated with manufacturers during interviews.
No-New-Standards Case Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of shipments by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
used the NIA's annual shipment forecasts derived from the shipments 
analysis from 2016 (the base year) to 2050 (the end of the analysis 
period). See chapter 9 of the NOPR TSD for additional details on the 
shipments analysis.

[[Page 38430]]

Standards Case Shipments Forecast
    For each standards case, the GRIM assumes a small, constant 
percentage shift in shipments to higher efficiency levels, reflecting 
the idea that some efficiency improvements will occur independent of 
new standards. The GRIM also assumes all remaining shipments of 
products below the projected minimum standard levels would roll up 
(i.e., be added) to the standard levels in response to an increase in 
energy conservation standards. The GRIM also assumes that demand for 
higher-efficiency equipment (that is, above the minimally compliant 
level) is a function of price, and is independent of the standard 
level.
Product and Capital Conversion Costs
    New energy conservation standards may cause manufacturers to incur 
one-time conversion costs to bring their production facilities and 
product designs into compliance with the new standards. (See chapter 12 
of the NOPR TSD.) For the purpose of the MIA, DOE classified these one-
time conversion costs into two major groups: (1) Product conversion 
costs and (2) capital conversion costs. Product conversion costs are 
one-time investments in research, development, testing, and marketing, 
focused on making product designs comply with the new energy 
conservation standard. Capital conversion expenditures are one-time 
investments in property, plant, and equipment to adapt or change 
existing production facilities so that new product designs can be 
fabricated and assembled.
Stranded Assets
    If new or amended energy conservation standards require investment 
in new manufacturing capital, there also exists the possibility that 
they will render existing manufacturing capital obsolete. If the 
obsolete manufacturing capital is not fully depreciated at the time new 
or amended standards go into effect, these assets would be stranded and 
the manufacturer would have to write-down the residual value that had 
not yet been depreciated.
    DOE used multiple sources of data to evaluate the level of product 
and capital conversion costs and stranded assets manufacturers would 
likely face to comply with new energy conservation standards. DOE used 
manufacturer interviews to gather data on the level of investment 
anticipated at each proposed efficiency level and validated these 
assumptions using estimates of capital requirements derived from the 
product teardown analysis and engineering model described in section 
IV.C of this proposed rule. These estimates were then aggregated and 
scaled to derive total industry estimates of product and capital 
conversion costs and to protect confidential information.
    In general, DOE assumes that all conversion-related investments 
occur between the year the final rule is published and the year by 
which manufacturers must comply with the new or amended standards. The 
investment figures used in the GRIM can be found in section V.B.2 of 
this proposed rule. For additional information on the estimated product 
conversion and capital conversion costs, see chapter 12 of the NOPR 
TSD.
b. Government Regulatory Impact Model Scenarios
No-New-Standards Case Markup
    As discussed in section IV.D of this proposed rule, MSPs include 
direct manufacturing production costs (i.e., labor, material, overhead, 
and depreciation 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 manufacturer markups to the MPCs 
estimated in the engineering analysis. Based on publicly available 
financial information for manufacturers of portable ACs and comments 
from manufacturer interviews, DOE assumed the industry average no-new-
standards case markup on production costs to be 1.42. This markup takes 
into account the two sourcing structures that characterize the portable 
AC market. Single-duct and dual-duct portable ACs sold in the United 
States are manufactured by overseas original equipment manufacturers 
(OEMs) either for sale by contract to an importer or for direct sale to 
retailers and builders. The engineering analysis, as detailed in 
chapter 5 of the NOPR TSD, estimates the cost of manufacturing at the 
OEM. For the OEM to importer sourcing structure, this production cost 
is marked up once by the OEM and again by the contracting the company 
who imports the product and sells it to retailers.
Markup Scenarios
    Modifying the aforementioned base-case 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 new energy 
conservation standards: (1) A preservation of gross margin \47\ 
(percentage) scenario; and (2) a preservation of per-unit operating 
profits scenario. These scenarios lead to different markup values that, 
when applied to the MPCs, result in varying revenue and cash flow 
impacts.
---------------------------------------------------------------------------

    \47\ ``Gross margin'' is defined as revenues minus cost of goods 
sold. On a unit basis, gross margin is selling price minus 
manufacturer production cost. In the GRIMs, markups determine the 
gross margin because various markups are applied to the manufacturer 
production costs to reach manufacturer selling price.
---------------------------------------------------------------------------

    The preservation of gross margin as a percentage of revenues markup 
scenario assumes that the baseline markup of 1.42 is maintained for all 
products in the standards case. Typically, this scenario represents the 
upper bound of industry profitability as manufacturers are able to 
fully pass through additional costs due to standards to their customers 
under this scenario.
    The preservation of per-unit operating profits markup scenario is 
similar to the preservation of gross margin as a percentage of revenues 
markup scenario with the exception that in the standards case, 
minimally compliant products lose a fraction of the baseline markup. 
Typically, this scenario represents the lower bound profitability and a 
more substantial impact on the industry as manufacturers accept a lower 
margin in an attempt to offer price competitive entry level products 
while maintaining the same level of absolute operating profits, on a 
per-unit basis, that they saw prior to new or amended standards. Under 
this scenario, gross margin as a percentage decreases in the standards 
case.
3. Manufacturer Interviews
    To inform the MIA, DOE interviewed manufacturers with an estimated 
combined market share of 65 to 70 percent. These confidential 
interviews provided information that DOE used to evaluate the impacts 
of new energy conservation standards on manufacturer cash flows, 
manufacturing capacities, and employment levels in the portable AC 
industry.
    During the interviews, DOE asked manufacturers to describe the 
major issues they anticipate to result from the energy conservation 
standards proposed in this rulemaking. DOE notes that manufacturer 
comments and concerns expressed during these interviews (and outlined 
below) relate to the engineering analysis presented in the February 
2015 Preliminary Analysis. Information gained during these interviews 
helped to inform the updated analysis and

[[Page 38431]]

proposal reflected in this NOPR.\48\ The following sections describe 
the most significant issues identified by manufacturers relating to 
DOE's preliminary analysis, some of which have been addressed by the 
updated analysis in this NOPR. These concerns are also presented in 
chapter 12 of the NOPR TSD.
---------------------------------------------------------------------------

    \48\ Section IV.C of this NOPR describes the updated engineering 
analysis based on the test procedure in Appendix CC.
---------------------------------------------------------------------------

Ramifications of a Single Product Class
    Most manufacturers interviewed expressed concerns over the 
classification of single-duct and dual-duct portable ACs as in one 
product class for the purpose of DOE's analysis of proposed standards 
for portable ACs, as this means that the two inherently different 
product configurations will be required to meet the same standard 
level. Manufacturers stated that DOE should create multiple product 
classes defined by different product configurations and capacity 
ranges, similar to DOE's treatment of room ACs and dehumidifiers. 
Manufacturers' justification for multiple product classes related to 
differences in product utility between single-duct and dual-duct 
portable ACs, and the potential cost burden associated with having to 
redesign single-duct portable AC platforms to accommodate an additional 
condenser duct.
    Manufacturers stated that the lower price point for single-duct 
units offers a distinct utility relative to more expensive dual-duct 
portable ACs. Most manufacturers agreed that U.S. portable AC consumers 
are intolerant to price changes. They think that a 5 to 20-percent 
increase in price will significantly harm the portable AC industry 
overall, with customers instead purchasing room ACs if price increases 
necessitated by standards become intolerable. Additionally, some 
manufacturers claimed that single-duct products are less complex, 
easier to use, more portable, and take up less space. Other 
manufacturers stated that the two product types are intended and used 
for different applications. Single-duct units are intended to cool a 
zone, rather than an entire space, and are well-suited for placement in 
garages and warehouses when localized cooling is desired. Conversely, 
dual-duct products are able to cool entire spaces and can be used 
similarly to room ACs.
    However, some of the same manufacturers also commented that 
consumers typically do not understand the difference between single-
duct and dual-duct products. These manufacturers stated that consumers 
buy single-duct units expecting to be able to cool an entire space, and 
that the lack of such capability has led to product returns. No 
manufacturer could identify a situation in which a dual-duct portable 
AC could not be installed in the same location as a single-duct 
portable AC.
    Manufacturers indicated that there would be substantial conversion 
costs related to redesigning single-duct platforms to accommodate an 
additional condenser duct. At a minimum, this change would require 
manufacturers to retool the back of the case, which would require 
significant upfront investments.
    DOE responds to similar concerns expressed in public comments in 
section IV.A.2.b of this proposed rule. Details regarding DOE's updated 
engineering analysis approach can be found in section IV.C of this 
proposed rule.
Feasibility of Design Options
    Besides the cost burdens associated with adding a second duct to 
single-duct portable ACs, some manufacturers commented that reaching 
zero-percent infiltration air is not feasible using existing assembly 
lines, and would require an increased duct diameter in order to 
overcome the static pressure.
    DOE's updated engineering approach no longer assumed manufacturers 
would rely on airflow optimization to improve efficiency. Details 
regarding DOE's updated engineering analysis approach can be found in 
section IV.C of this proposed rule.
Test Procedure
    All of the manufacturers interviewed stated that a standardized 
test procedure that would establish a consistent rating system for 
portable AC capacity and efficiency is vital for the industry. 
Manufacturers commented that, as a result of the lack of standardized 
test procedure, some portable AC manufacturers have been able to 
misrepresent the capacity of their products.
    As discussed in section III.B of this proposed rule, the April 2016 
issued TP Final Rule established the current portable AC test procedure 
included in appendix CC.
Impacts on Small Foreign Businesses
    Some manufacturers interviewed believe that small overseas 
manufacturers producing portable ACs for the U.S. market may not be 
able to handle the potentially large investments needed to comply with 
new standards and test procedures. One manufacturer further noted that, 
at a minimum, to stay competitive, these small manufacturers would have 
to narrow their product offering to one or two platforms.
    DOE outlines the criteria for a manufacturer to be analyzed as a 
small business in section IV.J.1 of this proposed rule. As discussed in 
that section, DOE did not identify any domestic small business 
manufacturers of single-duct or dual-duct portable ACs.
Impact on Shipping
    Manufacturers expressed concern that transitioning from 
manufacturing single-duct to dual-duct units would increase shipping 
costs. This change would increase the size of the unit packaging and 
reduce the number of units that can be shipped in a standard shipping 
container, consequently increasing the shipping cost per unit.
    For this NOPR, DOE has revised its engineering analysis approach, 
and no longer assumes that manufacturers would switch from single-duct 
to dual-duct configuration to meet any of the considered efficiency 
levels (the additional duct was the main driver for concerns relating 
to impacts on shipping costs). Details regarding DOE's updated 
engineering analysis approach can be found in section IV.C of this 
proposed rule.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional GHG, CH4 and N2O, as 
well as the reductions to emissions of all species due to ``upstream'' 
activities in the fuel production chain. These upstream activities 
comprise extraction, processing, and transporting fuels to the site of 
combustion. The associated emissions are referred to as upstream 
emissions.
    The analysis of power sector emissions uses marginal emissions 
factors that were derived from data in AEO 2015, as described in 
section IV.M. The 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.\49\ The FFC

[[Page 38432]]

upstream emissions are estimated based on the methodology described in 
chapter 15 of the NOPR TSD. The upstream emissions include both 
emissions from fuel combustion during extraction, processing, and 
transportation of fuel, and ``fugitive'' emissions (direct leakage to 
the atmosphere) of CH4 and CO2.
---------------------------------------------------------------------------

    \49\ Available at: http://www2.epa.gov/climateleadership/center-corporate-climate-leadership-ghg-emission-factors-hub.
---------------------------------------------------------------------------

    The emissions intensity factors are expressed in terms of physical 
units per MWh or MMBtu of site energy savings. Total emissions 
reductions are estimated using the energy savings calculated in the 
NIA.
    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' GWP over a 100-year time 
horizon. Based on the Fifth Assessment Report of the Intergovernmental 
Panel on Climate Change,\50\ DOE used GWP values of 28 for 
CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \50\ Intergovernmental Panel on Climate Change (IPCC), 2013: 
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 (eds.)]. Cambridge University Press, 
Cambridge, United Kingdom and New York, NY, USA. Chapter 8.
---------------------------------------------------------------------------

    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO 2015 generally represents current 
legislation and environmental regulations, including recent government 
actions, for which implementing regulations were available as of 
October 31, 2014. DOE's estimation of impacts accounts for the presence 
of the emissions control programs discussed in the following 
paragraphs.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (D.C.). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and D.C. were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR 
created an allowance-based trading program that operates along with the 
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court 
of Appeals for the District of Columbia Circuit, but it remained in 
effect.\51\ In 2011, EPA issued a replacement for CAIR, the Cross-State 
Air Pollution Rule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR,\52\ and the 
court ordered EPA to continue administering CAIR. On April 29, 2014, 
the U.S. Supreme Court reversed the judgment of the D.C. Circuit and 
remanded the case for further proceedings consistent with the Supreme 
Court's opinion.\53\ On October 23, 2014, the D.C. Circuit lifted the 
stay of CSAPR.\54\ Pursuant to this action, CSAPR went into effect (and 
CAIR ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------

    \51\ 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).
    \52\ 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).
    \53\ 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.
    \54\ See Georgia v. EPA, Order (D.C. Cir. filed October 23, 
2014) (No. 11-1302).
---------------------------------------------------------------------------

    EIA was not able to incorporate CSAPR into AEO 2015, so it assumes 
implementation of CAIR. Although DOE's analysis used emissions factors 
that assume that CAIR, not CSAPR, is the regulation in force, the 
difference between CAIR and CSAPR is not relevant for the purpose of 
DOE's analysis of emissions impacts from energy conservation standards.
    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an efficiency standard could be used to permit 
offsetting increases in SO2 emissions by any regulated EGU. 
In past rulemakings, DOE recognized that there was uncertainty about 
the effects of efficiency standards on SO2 emissions covered 
by the existing cap-and-trade system, but it concluded that negligible 
reductions in power sector SO2 emissions would occur as a 
result of standards.
    Beginning in 2016, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants. 
77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a 
standard for hydrogen chloride as a surrogate for acid gas hazardous 
air pollutants (HAP), and also established a standard for 
SO2 (a non-HAP acid gas) as an alternative equivalent 
surrogate standard for acid gas HAP. The same controls are used to 
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be 
reduced as a result of the control technologies installed on coal-fired 
power plants to comply with the MATS requirements for acid gas. AEO 
2015 assumes that, in order to continue operating, coal plants must 
have either flue gas desulfurization or dry sorbent injection systems 
installed by 2016. Both technologies, which are used to reduce acid gas 
emissions, also reduce SO2 emissions. Under the MATS, 
emissions will be far below the cap established by CAIR, so it is 
unlikely that excess SO2 emissions allowances resulting from 
the lower electricity demand would be needed or used to permit 
offsetting increases in SO2 emissions by any regulated 
EGU.\55\ Therefore, DOE believes that energy conservation standards 
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------

    \55\ DOE notes that the Supreme Court recently determined that 
EPA erred by not considering costs in the finding that regulation of 
hazardous air pollutants from coal- and oil-fired electric utility 
steam generating units is appropriate. See Michigan v. EPA (Case No. 
14-46, 2015). The Supreme Court did not vacate the MATS rule, and 
DOE has tentatively determined that the Court's decision on the MATS 
rule does not change the assumptions regarding the impact of energy 
efficiency standards on SO2 emissions. Further, the 
Court's decision does not change the impact of the energy efficiency 
standards on mercury emissions. DOE will continue to monitor 
developments related to this case and respond to them as 
appropriate.
---------------------------------------------------------------------------

    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\56\ Energy conservation standards 
are expected to have little effect on NOX emissions in those 
States covered by CAIR because excess NOX emissions 
allowances resulting from the lower electricity demand could be used to 
permit offsetting increases in NOX emissions from other 
facilities. However, standards would be expected to reduce 
NOX emissions in the States not affected by the caps, so DOE 
estimated NOX emissions reductions from the standards 
considered in this NOPR for these States.
---------------------------------------------------------------------------

    \56\ CSAPR also applies to NOX and it supersedes the 
regulation of NOX under CAIR. As stated previously, the 
current analysis assumes that CAIR, not CSAPR, is the regulation in 
force. The difference between CAIR and CSAPR with regard to DOE's 
analysis of NOX emissions is slight.
---------------------------------------------------------------------------

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

[[Page 38433]]

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 NOPR.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) climate-change-related 
changes in net agricultural productivity, human health, property 
damages from increased flood risk, and the value of ecosystem services. 
Estimates of the SCC are provided in dollars per metric ton of 
CO2. A domestic SCC value is meant to reflect the value of 
damages in the United States resulting from a unit change in 
CO2 emissions, while a global SCC value is meant to reflect 
the value of damages worldwide.
    Under section 1(b) of Executive Order 12866, ``Regulatory Planning 
and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent 
permitted by law, ``assess both the costs and the benefits of the 
intended regulation and, recognizing that some costs and benefits are 
difficult to quantify, propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs.'' The purpose of the SCC estimates presented here is 
to allow agencies to incorporate the monetized social benefits of 
reducing CO2 emissions into cost-benefit analyses of 
regulatory actions. The estimates are presented with an acknowledgement 
of the many uncertainties involved and with a clear understanding that 
they should be updated over time to reflect increasing knowledge of the 
science and economics of climate impacts.
    As part of the interagency process that developed these SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    When attempting to assess the incremental economic impacts of 
CO2 emissions, the analyst faces a number of challenges. A 
report from the National Research Council \57\ points out that any 
assessment will suffer from uncertainty, speculation, and lack of 
information about: (1) Future emissions of GHGs; (2) the effects of 
past and future emissions on the climate system; (3) the impact of 
changes in climate on the physical and biological environment; and (4) 
the 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.
---------------------------------------------------------------------------

    \57\ 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 values 
appropriate for that year. The NPV of the benefits can then be 
calculated by multiplying each of these future benefits by an 
appropriate discount factor and summing across all affected years.
    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 Federal agencies, the Administration 
sought to develop a transparent and defensible method, specifically 
designed for the rulemaking process, to quantify avoided climate change 
damages from reduced CO2 emissions. The interagency group 
did not undertake any original analysis. Instead, it combined SCC 
estimates from the existing literature to use as interim values until a 
more comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approach and Key Assumptions
    After the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specially, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC: The FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and were used in the last 
assessment of the Intergovernmental Panel on Climate Change (IPCC). 
Each model was given equal weight in the SCC values that were 
developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models, while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models: Climate sensitivity, socio-economic and emissions 
trajectories, and discount rates. A probability distribution for 
climate sensitivity was specified as an input into all three models. In 
addition, the interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the interagency group selected four sets of SCC values for 
use in regulatory analyses. Three sets of values are based on the 
average SCC from the three integrated assessment

[[Page 38434]]

models, at discount rates of 2.5, 3, and 5 percent. The fourth set, 
which represents the 95th percentile SCC estimate across all three 
models at a 3-percent discount rate, was included to represent higher-
than-expected impacts from climate change further out in the tails of 
the SCC distribution. The values grow in real terms over time. 
Additionally, the interagency group determined that a range of values 
from 7 percent to 23 percent should be used to adjust the global SCC to 
calculate domestic effects,\58\ although preference is given to 
consideration of the global benefits of reducing CO2 
emissions. Table IV.12 presents the values in the 2010 interagency 
group report,\59\ which is reproduced in appendix 14A of the NOPR TSD.
---------------------------------------------------------------------------

    \58\ It is recognized that this calculation for domestic values 
is approximate, provisional, and highly speculative. There is no a 
priori reason why domestic benefits should be a constant fraction of 
net global damages over time.
    \59\ Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. Interagency Working Group on Social Cost of 
Carbon, United States Government (February 2010) (Available at: 
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table IV.12--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 proposed rule 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).\60\ Table IV.13 shows the updated sets of SCC estimates from the 
latest interagency update in 5-year increments from 2010 to 2050. The 
full set of annual SCC values between 2010 and 2050 is reported in 
appendix 14B of the NOPR TSD. The central value that emerges is the 
average SCC across models at the 3-percent discount rate. However, for 
purposes of capturing the uncertainties involved in regulatory impact 
analysis, the interagency group emphasizes the importance of including 
all four sets of SCC values.
---------------------------------------------------------------------------

    \60\ 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.13--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
                                            [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              10              31              50              86
2015............................................              11              36              56             105
2020............................................              12              42              62             123
2025............................................              14              46              68             138
2030............................................              16              50              73             152
2035............................................              18              55              78             168
2040............................................              21              60              84             183
2045............................................              23              64              89             197
2050............................................              26              69              95             212
----------------------------------------------------------------------------------------------------------------

    It is important to recognize that a number of key uncertainties 
remain, and that current SCC estimates should be treated as provisional 
and revisable because they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned previously points out that there is tension 
between the goal of producing quantified estimates of the economic 
damages from an incremental ton of carbon and the limits of existing 
efforts to model these effects. There are a number of analytical 
challenges that are being addressed by the research community, 
including research programs housed in many of the Federal agencies 
participating in the interagency process to estimate the SCC. The 
interagency group intends to periodically review and reconsider those 
estimates to reflect increasing

[[Page 38435]]

knowledge of the science and economics of climate impacts, as well as 
improvements in modeling.\61\
---------------------------------------------------------------------------

    \61\ In November 2013, OMB announced a new opportunity for 
public comment on the interagency technical support document 
underlying the revised SCC estimates. 78 FR 70586. In July 2015 OMB 
published a detailed summary and formal response to the many 
comments that were received. 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, DOE used the values from the 
2013 interagency report (revised July 2015), adjusted to 2014$ using 
the implicit price deflator for gross domestic product (GDP) from the 
Bureau of Economic Analysis. For each of the four sets of SCC cases 
specified, the values for emissions in 2015 were $12.2, $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 decrease power sector NOX 
emissions in those 22 States not affected by the CAIR. DOE estimated 
the monetized value of net NOX emissions reductions 
resulting from each of the TSLs considered for this NOPR based on 
estimates developed by EPA for 2016, 2020, 2025, and 2030. The values 
reflect estimated mortality and morbidity per ton of directly emitted 
NOX reduced by electricity generating units. EPA developed 
estimates using a 3-percent and a 7-percent discount rate to discount 
future emissions-related costs. The values in 2016 are $5,562/ton using 
a 3-percent discount rate and $4,920/ton using a 7-percent discount 
rate (2014$). DOE extrapolated values after 2030 using the average 
annual rate of growth in 2016-2030. DOE multiplied the emissions 
reduction (tons) in each year by the associated $/ton values, and then 
discounted each series using discount rates of 3 percent and 7 percent 
as appropriate.
    DOE is evaluating appropriate monetization of avoided 
SO2 and Hg emissions in energy conservation standards 
rulemakings. DOE has not included monetization of those emissions in 
the current analysis.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the 
electric power industry that would result from the adoption of new or 
amended energy conservation standards. The utility impact analysis 
estimates the changes in installed electrical capacity and generation 
that would result for each TSL. The analysis is based on published 
output from the NEMS associated with AEO 2015. NEMS produces the AEO 
Reference case, as well as a number of side cases that estimate the 
economy-wide impacts of changes to energy supply and demand. DOE uses 
published side cases to estimate the marginal impacts of reduced energy 
demand on the utility sector. These marginal factors are estimated 
based on the changes to electricity sector generation, installed 
capacity, fuel consumption and emissions in the AEO Reference case and 
various side cases. Details of the methodology are provided in the 
appendices to chapters 13 and 15 of the NOPR TSD.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of new or amended 
energy conservation standards.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a proposed standard. Employment impacts from new or 
amended energy conservation standards include both direct and indirect 
impacts. Direct employment impacts are any changes in the number of 
employees of manufacturers of the products subject to standards, their 
suppliers, and related service firms. The MIA addresses those impacts. 
Indirect employment impacts are changes in national employment that 
occur due to the shift in expenditures and capital investment caused by 
the purchase and operation of more-efficient appliances. Indirect 
employment impacts from standards consist of the net jobs created or 
eliminated in the national economy, other than in the manufacturing 
sector being regulated, caused by: (1) Reduced spending by end users on 
energy; (2) reduced spending on new energy supply by the utility 
industry; (3) increased consumer spending on new products to which the 
new standards apply; and (4) the effects of those three factors 
throughout the economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the BLS.\62\ 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.\63\ There are many reasons for these 
differences, including wage differences and the fact that the utility 
sector is more capital-intensive and less labor-intensive than other 
sectors. Energy conservation standards have the effect of reducing 
consumer utility bills. Because reduced consumer expenditures for 
energy likely lead to increased expenditures in other sectors of the 
economy, the general effect of efficiency standards is to shift 
economic activity from a less labor-intensive sector (i.e., the utility 
sector) to more labor-intensive sectors (e.g., the retail and service 
sectors). Thus, based on the BLS data alone, DOE believes net national 
employment may increase due to shifts in economic activity resulting 
from energy conservation standards.
---------------------------------------------------------------------------

    \62\ Data on industry employment, hours, labor compensation, 
value of production, and the implicit price deflator for output for 
these industries are available upon request by calling the Division 
of Industry Productivity Studies (202-691-5618) or by sending a 
request by email to [email protected].
    \63\ See Bureau of Economic Analysis, Regional Multipliers: A 
User Handbook for the Regional Input-Output Modeling System (RIMS 
II), U.S. Department of Commerce (1992).
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this NOPR using an input/output model of the U.S. 
economy called Impact of Sector Energy Technologies version 3.1.1 
(ImSET).\64\ ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among 187 
sectors most relevant to industrial,

[[Page 38436]]

commercial, and residential building energy use.
---------------------------------------------------------------------------

    \64\ J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact 
of Sector Energy Technologies, PNNL-18412, Pacific Northwest 
National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------

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

V. Analytical Results

    The following section addresses the results from DOE's analyses 
with respect to potential energy conservation standards for portable 
ACs. It addresses the TSLs examined by DOE and the projected impacts of 
each of these levels if adopted as energy conservation standards for 
portable ACs. Additional details regarding DOE's analyses are contained 
in the NOPR TSD supporting this proposed rule.

A. Trial Standard Levels

    DOE analyzed the benefits and burdens of four TSLs for portable 
ACs. These TSLs were developed by combining specific efficiency levels 
for each of the product classes analyzed by DOE. DOE presents the 
results for the TSLs in this document, while the results for all 
efficiency levels that DOE analyzed are in the NOPR TSD.
    Table V.1 presents the TSLs, corresponding efficiency levels, and 
average EERs and CEERs at each level for portable ACs. TSL 4 represents 
the maximum technologically feasible (``max-tech'') energy efficiency. 
TSL 3 consists of an intermediate efficiency level below the max-tech 
level, corresponding to the single highest efficiency observed in DOE's 
test sample. TSL 2 represents the maximum available efficiency across 
the full range of capacities, and TSL 1 represents an intermediate 
level between the baseline and TSL 2.

     Table V.1--Trial Standard Levels for Portable Air Conditioners
------------------------------------------------------------------------
                    TSL                        EL        EER      CEER
------------------------------------------------------------------------
1.........................................         1      5.99      5.97
2.........................................         2      7.20      7.19
3.........................................         3      8.48      8.47
4.........................................         4     10.54     10.52
------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on portable AC consumers by 
looking at the effects potential new standards at each TSL would have 
on the LCC and PBP. DOE also examined the impacts of potential 
standards on consumer subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency products affect consumers in two 
ways: (1) Increase of purchase price, and (2) decrease of annual 
operating costs. Inputs used for calculating the LCC and PBP include 
total installed costs (i.e., product price plus installation costs), 
and operating costs (i.e., annual energy use, energy prices, energy 
price trends, repair costs, and maintenance costs). The LCC calculation 
also uses product lifetime and a discount rate. Chapter 8 of the NOPR 
TSD provides detailed information on the LCC and PBP analyses.
    Table V.2 through Table V.7 show the LCC and PBP results for the 
TSL and efficiency levels considered for portable ACs for both sectors, 
residential, and commercial. The LCC results presented in Table V.2 and 
Table V.3 combined the results for residential and commercial users, 
which means that DOE had to assign an appropriate weight to the results 
for each type of user. Using the weighting from the room AC 
rulemaking,\65\ DOE assumed that 88 percent of shipments are to the 
residential sector and 12 percent are to the commercial sector. In the 
first of each pair of tables, the simple payback is measured relative 
to the baseline product (EL 0). In the second table, the impacts are 
measured relative to the efficiency distribution in the no-new-
standards case in the compliance year (see section IV.F of this 
proposed rule). Because some consumers purchase products with higher 
efficiency in the no-new-standards case, the average savings are less 
than the difference between the average LCC of EL 0 and the average LCC 
at each TSL. The savings refer only to consumers who are affected by a 
standard at a given TSL. Those who already purchase a product with 
efficiency at or above a given TSL are not affected. Consumers for whom 
the LCC increases at a given TSL experience a net cost.
---------------------------------------------------------------------------

    \65\ Room AC Standards Rulemaking, Direct Final Rule, Chapter 8, 
page 51. April 18, 2011. http://www.regulations.gov/#!documentDetail;D=EERE-2007-BT-STD-0010-0053.

                                     Table V.2--Average LCC and PBP Results by Efficiency Level, Residential Setting
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                          years      lifetime years
                                                          Installed cost  operating cost  operating cost        LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             583             125           1,067           1,650  ..............              10
1.......................................               1             629             110             937           1,565             3.0              10
2.......................................               2             652              94             800           1,452             2.2              10
3.......................................               3             676              82             697           1,372             2.1              10
4.......................................               4             750              67             573           1,324             2.9              10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


[[Page 38437]]


          Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Residential Setting
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                          TSL                                    EL          savings * 2014$     experience net
                                                                                                      cost
----------------------------------------------------------------------------------------------------------------
1......................................................                  1                 84                  9
2......................................................                  2                144                 13
3......................................................                  3                194                 19
4......................................................                  4                242                 31
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                     Table V.4--Average LCC and PBP Results by Efficiency Level, Commercial Setting
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                          years      lifetime years
                                                          Installed cost  operating cost  operating cost        LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             583             234           1,881           2,463  ..............              10
1.......................................               1             629             205           1,648           2,276             1.6              10
2.......................................               2             652             175           1,403           2,055             1.2              10
3.......................................               3             676             152           1,219           1,895             1.1              10
4.......................................               4             750             126           1,008           1,759             1.5              10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


           Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Commercial Setting
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                          TSL                                    EL          savings * 2014$     experience net
                                                                                                      cost
----------------------------------------------------------------------------------------------------------------
1......................................................                  1                188                  2
2......................................................                  2                292                  2
3......................................................                  3                392                  3
4......................................................                  4                528                  9
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                        Table V.6--Average LCC and PBP Results by Efficiency Level, Both Sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Average costs 2014$
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                          years      lifetime years
                                                          Installed cost  operating cost  operating cost        LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             583             139           1,165           1,747  ..............              10
1.......................................               1             629             122           1,022           1,651             2.8              10
2.......................................               2             652             104             872           1,524             2.1              10
3.......................................               3             676              90             759           1,435             2.0              10
4.......................................               4             750              74             626           1,376             2.7              10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


              Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Both Sectors
----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent of
                                                                               Average LCC       consumers that
                          TSL                                    EL          savings * 2014$     experience net
                                                                                                      cost
----------------------------------------------------------------------------------------------------------------
1......................................................                  1                 97                  9
2......................................................                  2                162                 12
3......................................................                  3                218                 17
4......................................................                  4                276                 28
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


[[Page 38438]]

    As discussed in section IV.E, DOE conducted a sensitivity analysis 
that assumes consumers use portable ACs 50 percent less than room ACs. 
For the proposed standard, TSL 2, the average LCC savings declines to 
$60 and 26 percent of consumers experience a net cost under the 
sensitivity analysis. See appendix 8F of the NOPR TSD for additional 
information.
b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households, senior-only households, and 
small businesses. Table V.8 compares the average LCC savings and PBP at 
each EL for the three consumer subgroups, along with the average LCC 
savings for the entire sample. In most cases, the average LCC savings 
and PBP for low-income households and small businesses at the 
considered efficiency levels are not substantially different from the 
average for all households. Chapter 11 of the NOPR TSD presents the 
complete LCC and PBP results for the subgroups.

               Table V.8--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households Plus Light-Commercial Establishments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Average life-cycle cost savings (2014$)                  Simple payback period (years)
                                                 -------------------------------------------------------------------------------------------------------
                       TSL                         Low-income  Senior-only     Small         Both      Low-income  Senior-only     Small         Both
                                                   households   households   businesses    sectors     households   households   Businesses    sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................          115           84          171           97          2.4          3.0          1.6          2.8
2...............................................          187          144          267          162          1.8          2.2          1.2          2.1
3...............................................          250          194          358          218          1.7          2.1          1.1          2.0
4...............................................          324          242          477          276          2.4          2.9          1.5          2.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section III.E.2, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for a product that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. In calculating a rebuttable 
presumption payback period for each of the considered TSLs, DOE used 
discrete values, and, as required by EPCA, based the energy use 
calculation on the DOE test procedure for portable ACs. In contrast, 
the PBPs presented in section V.B.1.a were calculated using 
distributions for input values, with energy use based on field metering 
studies and RECS data.
    Table V.9 presents the rebuttable-presumption payback periods for 
the considered TSLs. While DOE examined the rebuttable-presumption 
criterion, it considered whether the standard levels considered for the 
NOPR are economically justified through a more detailed analysis of the 
economic impacts of those levels, pursuant to 42 U.S.C. 
6295(o)(2)(B)(i), that considers the full range of impacts to the 
consumer, manufacturer, Nation, and environment. The results of that 
analysis serve as the basis for DOE to definitively evaluate the 
economic justification for a potential standard level, thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification. Table V.9 shows the rebuttable presumption PBPs 
for the considered TSLs for portable ACs.

                              Table V.9--Portable Air Conditioners: Rebuttable PBPs
                                                     [Years]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
Residential.....................................             2.1             1.5             1.5             2.0
Commercial......................................             2.8             2.1             2.0             2.8
Both sectors....................................             2.2             1.6             1.6             2.1
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of new energy 
conservation standards on portable AC manufacturers. The section below 
describes the expected impacts on manufacturers at each TSL. Chapter 12 
of the NOPR TSD explains the analysis in further detail.
a. Industry Cash Flow Analysis Results
    The following tables illustrate the estimated financial impacts 
(represented by changes in INPV) of new energy conservation standards 
on portable AC manufacturers, as well as the conversion costs that DOE 
estimates manufacturers would incur at each TSL. To evaluate the range 
of cash-flow impacts on the portable AC manufacturing industry, DOE 
used two different markup scenarios to model the range of anticipated 
market responses to new energy conservation standards.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a flat markup of 1.42 (i.e., the baseline 
manufacturer markup) is applied across all efficiency levels. In this 
scenario, DOE assumed that a manufacturer's absolute dollar markup 
would increase as production costs increase in the new energy 
conservation standards case. During interviews, manufacturers have 
indicated that it is optimistic to assume that they would be able to 
maintain the same gross margin markup as their production costs 
increase in response to a new energy conservation standard, 
particularly at higher TSLs.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of per-unit operating profit 
markup scenario, which assumes that manufacturers would not be able to 
preserve the same overall gross margin, but instead would cut their 
markup for minimally compliant

[[Page 38439]]

products to maintain a cost competitive product offering while 
maintaining the same overall level of operating profit in absolute 
dollars as in the no-new-standards case. The two tables below show the 
range of potential INPV impacts for manufacturers of portable ACs. 
Table V.10 reflects the lower bound of impacts (higher profitability) 
and Table V.11 represents the upper bound of impacts (lower 
profitability).
    Each scenario 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 sum of discounted cash flows through 
2050, the difference in INPV between the no-new-standards case and each 
standards case, and the total industry conversion costs required for 
each standards case.

             Table V.10--Manufacturer Impact Analysis Under the Preservation of Gross Margin Percentage Markup Scenario for Analysis Period
                                                                       [2016-2050]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                      Units                   No-new-    ---------------------------------------------------------------
                                                                          standards case         1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................  2014$ Millions.................           725.5           637.9           521.7           419.1           404.5
Change in INPV.........................  2014$ Millions.................  ..............          (87.6)         (203.8)         (306.2)         (320.9)
                                         (%)............................  ..............         (12.1%)         (28.1%)          (42.2)         (44.2%)
Free Cash Flow (2020)..................  2014$ Millions.................            49.2           (6.8)          (72.2)         (131.7)         (146.4)
Change in Free Cash Flow (2020)........  (%)............................  ..............        (113.7%)        (246.7%)        (367.5%)        (397.2%)
Product Conversion Costs...............  2014$ Millions.................  ..............            53.4           113.9           161.8           170.8
Capital Conversion Costs...............  2014$ Millions.................  ..............            86.5           188.9           282.0           305.7
                                        ----------------------------------------------------------------------------------------------------------------
    Total Conversion Costs.............  2014$ Millions.................  ..............           139.9           302.8           443.8           476.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.


            Table V.11--Manufacturer Impact Analysis Under the Preservation of Per-Unit Operating Profit Markup Scenario for Analysis Period
                                                                       [2016-2050]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                      Units                   No-new-    ---------------------------------------------------------------
                                                                          standards case         1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................  2014$ Millions.................           725.5           631.3           503.8           378.6           301.9
Change in INPV.........................  2014$ Millions.................  ..............          (94.2)         (221.7)         (346.8)         (423.5)
                                         (%)............................  ..............         (13.0%)         (30.6%)         (47.8%)         (58.4%)
Free Cash Flow (2020)..................  2014$ Millions.................            49.2           (6.8)          (72.2)         (131.7)         (146.4)
Change in Free Cash Flow (2020)........  (%)............................  ..............        (113.7%)        (246.7%)        (367.5%)        (397.2%)
Product Conversion Costs...............  2014$ Millions.................  ..............            53.4           113.9           161.8           170.8
Capital Conversion Costs...............  2014$ Millions.................  ..............            86.5           188.9           282.0           305.7
                                        ----------------------------------------------------------------------------------------------------------------
    Total Conversion Costs.............  2014$ Millions.................  ..............           139.9           302.8           443.8           476.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.

    Beyond impacts on INPV, DOE includes a comparison of free cash flow 
between the no-new-standards case and the standards case at each TSL in 
the year before new standards take effect to provide perspective on the 
short-run cash flow impacts in the discussion of the results below.
    At TSL 1, DOE estimates the impact on INPV for manufacturers of 
portable ACs to range from -94.2 million to -$87.6 million, or a 
decrease in INPV of 13.0 percent to 12.1 percent under the preservation 
of gross margin percentage markup scenario and the preservation of per-
unit operating profit markup scenario, respectively. At this TSL, 
industry free cash flow is estimated to decrease by approximately 113.7 
percent to $6.8 million, compared to the no-new-standards case value of 
$49.2 million in 2020, the year before the projected compliance date.
    At TSL 1, the industry as a whole is expected to incur $53.4 
million in product conversion costs attributed to upfront research, 
development, testing, and certification; as well as $86.5 million in 
one-time investments in property, plant, and equipment (PP&E) necessary 
to manufacture updated platforms. The industry conversion cost burden 
at TSL 1 would be associated with updates for portable ACs sold in the 
U.S. that are currently at the baseline, approximately 38 percent of 
platforms and 29 percent of shipments. At TSL 1, roughly half of non-
compliant platforms will require some new components, including a 
higher efficiency heat exchanger (with increases in efficiency ranging 
from 10 to 20 percent). Higher efficiency heat exchangers are larger 
and will necessitate larger chassis sizes. The remaining non-compliant 
portable ACs will likely require a complete platform redesign, 
necessitating all new components and high associated re-tooling and R&D 
costs.
    At TSL 2, DOE estimates the impact on INPV for manufacturers of 
portable ACs to range from -$221.7 million to -203.8 million, or a 
decrease in INPV of 30.6 percent to 28.1 percent under the preservation 
of gross margin percentage markup scenario and the preservation of per-
unit operating profit markup scenario, respectively. At this TSL, 
industry free cash flow is estimated to decrease by approximately 246.7 
percent to -$72.2 million, compared to the no-new-standards case value 
of $49.2 million in 2020, the year before the projected compliance 
date.
    At TSL 2, the industry as a whole is expected to incur $113.9 
million in product conversion costs associated with the upfront 
research, development,

[[Page 38440]]

testing, and certification; as well as $188.9 million in one-time 
investments in PP&E for products requiring platform updates. The 
industry conversion cost burden at this TSL would be associated with 
updates for portable ACs sold in the U.S. that are currently below the 
efficiency level corresponding to TSL 2, approximately 77 percent of 
platforms and 79 percent of shipments. At TSL 2, roughly 40 percent of 
non-compliant platforms will require some new components, including a 
higher efficiency heat exchanger (with increases in efficiency ranging 
from 10 to 20 percent). Higher efficiency heat exchangers are larger 
and will necessitate larger chassis sizes. The remaining non-compliant 
portable ACs will likely require a complete platform redesign, 
necessitating all new components and high associated re-tooling and R&D 
costs.
    At TSL 3, DOE estimates the impact on INPV for manufacturers of 
portable ACs to range from -$346.8 million to -$306.2 million, or a 
decrease in INPV of 47.8 percent to 42.2 percent under the preservation 
of gross margin percentage markup scenario and the preservation of per-
unit operating profit markup scenario, respectively. At this TSL, 
industry free cash flow is estimated to decrease by approximately 367.5 
percent to -$131.7 million, compared to the no-new-standards case value 
of $49.2 million in 2020, the year before the projected compliance 
date.
    At TSL 3, the industry as a whole is expected to incur $161.8 
million in product conversion costs associated with the upfront 
research, development, testing, and certification; as well as $282.0 
million in one-time investments in PP&E for products requiring platform 
redesigns. Again, the industry conversion cost burden at this TSL would 
be associated with updates for portable ACs sold in the U.S. that are 
currently below the efficiency level corresponding to TSL 3, 
approximately 100 percent of platforms and 100 percent of shipments. At 
TSL 3, roughly 16 percent of non-compliant platforms will require some 
new components, including a higher efficiency heat exchanger (with 
increases in efficiency ranging from 10 to 20 percent). Higher 
efficiency heat exchangers are larger and will necessitate larger 
chassis sizes. The remaining 84 percent of non-compliant portable ACs 
will likely require a complete platform redesign, necessitating all new 
components and high associated re-tooling and R&D costs.
    At TSL 4, DOE estimates the impact on INPV for manufacturers of 
portable ACs to range from -$423.5 million to -$320.9 million, or a 
decrease in INPV of 58.4 percent to 44.2 percent under the preservation 
of gross margin percentage markup scenario and the preservation of per-
unit operating profit markup scenario, respectively. At this TSL, 
industry free cash flow is estimated to decrease by approximately 397.2 
percent to -$146.4 million, compared to the base-case value of $49.2 
million in 2020, the year before the projected compliance date.
    At TSL 4, the industry as a whole is expected to spend $170.8 
million in product conversion costs associated with the research and 
development and testing and certification, as well as $305.7 million in 
one-time investments in PP&E for complete platform redesigns. The 
industry conversion cost burden at this TSL would be associated with 
updates for portable ACs sold in the U.S. that are currently below the 
efficiency level corresponding to TSL 4, approximately 100 percent of 
platforms and 100 percent of shipments. At TSL 4, 100 percent of non-
compliant portable ACs will likely require a complete platform 
redesign, necessitating all new components and high associated re-
tooling and R&D costs.
b. Impacts on Employment
    DOE used the GRIM to estimate the domestic labor expenditures and 
number of domestic production workers in the no-new-standards case and 
at each TSL from 2016 to 2050. DOE used statistical data from the U.S 
Census Bureau's 2013 Annual Survey of Manufactures, the results of the 
engineering analysis, and interviews with manufacturers to determine 
the inputs necessary to calculate industry-wide labor expenditures and 
domestic employment levels at each TSL. Labor expenditures for the 
manufacture of a product are a function of the labor intensity of the 
product, the sales volume, and an assumption that wages in real terms 
remain constant.
    DOE notes that the MIA assessment of impacts on manufacturing 
employment focuses specifically on the production workers manufacturing 
the covered products in question, rather than a manufacturer's broader 
operations. Thus, the estimated number of impacted employees in the MIA 
is separate and distinct from the total number of employees used to 
determine whether a manufacturer is a small business for purposes of 
analysis under the Regulatory Flexibility Act.
    The estimates of production workers in this section only cover 
those up to and including the line-supervisor level that are directly 
involved in fabricating and assembling a product within the OEM 
facility. In addition, workers that perform services that are closely 
associated with production operations are included. Employees above the 
working-supervisor level are excluded from the count of production 
workers. Thus, the labor associated with non-production functions 
(e.g., factory supervision, advertisement, sales) is explicitly not 
covered.\66\ In addition, DOE's estimates only account for production 
workers that manufacture the specific products covered by this 
rulemaking. Finally, because DOE does not expect that this standard 
will impact shipments, this analysis also does not factor in the 
dependence by some manufacturers on production volume to make their 
operations viable.
---------------------------------------------------------------------------

    \66\ The U.S. Census Bureau's 2013 Annual Survey of Manufactures 
provides the following definition: ``The `production workers' number 
includes workers (up through the line-supervisor level) engaged in 
fabricating, processing, assembling, inspecting, receiving, storing, 
handling, packing, warehousing, shipping (but not delivering), 
maintenance, repair, janitorial and guard services, product 
development, auxiliary production for plant's own use (e.g., power 
plant), recordkeeping, and other services closely associated with 
these production operations at the establishment covered by the 
report. Employees above the working-supervisor level are excluded 
from this item.''
---------------------------------------------------------------------------

    In the GRIM, DOE used the labor content of each product and the 
manufacturing production costs from the engineering analysis to 
estimate the annual labor expenditures in the portable AC manufacturing 
industry. DOE used information gained through interviews with 
manufacturers to estimate the portion of the total labor expenditures 
that can be attributed to domestic production labor.
    Because industry research and manufacturer feedback indicates that 
there are no single-duct or dual-duct portable ACs produced in the 
United States, DOE does not provide an estimate of direct employment 
impacts. Employment impacts in the broader U.S. economy are documented 
in chapter 16 of the NOPR TSD.
c. Impacts on Manufacturing Capacity
    As noted in the previous section, no single-duct or dual-duct 
portable ACs are manufactured in the United States. Therefore, new 
energy conservation standards would have no impact on U.S. production 
capacity.
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop an industry cash flow 
estimate is not adequate for assessing differential impacts among 
subgroups of manufacturers. Small manufacturers, niche players, or 
manufacturers

[[Page 38441]]

exhibiting a cost structure that differs significantly from the 
industry average could be affected differently. DOE used the results of 
the industry characterization to group manufacturers exhibiting similar 
characteristics.
    As previously mentioned, DOE did not identify any domestic small 
business manufacturers of single-duct or dual-duct portable ACs.
    Additional information about the small business analysis is found 
in chapter 12 of the NOPR TSD and section V.B of this proposed rule.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden is the cumulative 
impact of multiple DOE standards and the regulatory actions of other 
Federal agencies and States that affect the manufacturers of a covered 
product or equipment. While any one regulation may not impose a 
significant burden on manufacturers, the combined effects of several 
existing or impending regulations may have serious consequences for 
some manufacturers, groups of manufacturers, or an entire industry.
    Companies that produce a wider range of regulated products, 
including those that producecomponents of other products subject to 
regulation, may be faced with more capital and product development 
expenditures than their competitors. This can prompt those companies to 
exit the market or reduce their product offerings, potentially reducing 
competition. Smaller companies can be especially affected, since they 
have lower sales volumes over which to amortize the costs of compliance 
with new regulations.
    DOE aims to recognize and seeks to mitigate the overlapping effects 
on manufacturers of new or revised DOE standards and other regulatory 
actions affecting the same products, components and other equipment. In 
addition to DOE's proposed energy conservation regulations for portable 
ACs, several other existing and pending regulations apply to portable 
ACs products and other equipment produced by the same manufacturers. 
DOE evaluates these regulations that could affect portable AC 
manufacturers that will take effect approximately 3 years before or 
after the 2021 compliance date of the new energy conservation standards 
for portable ACs and the associated costs of these rulemakings 
Additionally, DOE will evaluate its approach to assessing cumulative 
regulatory burden for use in future rulemakings to ensure that it is 
effectively capturing the overlapping impacts of its regualtions. In 
particular, DOE will assess whether looking at rules where any portion 
of the compliance period potentially overlaps with the compliance 
period for the subject rulemaking would yield more a more accurate 
reflection of cumulative regulatory burdens. In this regard, DOE 
recognizes that if it were to undertake a rulemaking to amend the 
standards for Consumer Room ACs pursuant to the 6-year look back 
requirement under 42 U.S.C. 6295(m), that future Consumer Room AC rule 
could have a cumulative impact with this PACs rule during the portable 
ACs compliance period. The compliance years and expected industry 
conversion costs of energy conservation standards that may also impact 
portable AC manufacturers are indicated in Table V.12. DOE seeks public 
comment on the cumulative regulatory burden to manufacturers associated 
with the proposed portable AC standard and on the approach DOE used in 
evaluating cumulative regulatory burden, including the timeframes and 
regulatory dates evaluated.

   Table V.12--Compliance Dates and Expected Conversion Expenses of DOE Federal Energy Conservation Standards
                                       Affecting Portable AC Manufacturers
----------------------------------------------------------------------------------------------------------------
                                                                                  Estimated total  industry
            DOE regulation                  Approximate compliance dates               conversion costs
----------------------------------------------------------------------------------------------------------------
Microwave Ovens 78 FR 36316 (June 17,   June 17, 2016......................  43.1 M (2011$)
 2013).
Residential Clothes Washers 77 FR       January 1, 2018....................  $418.5M (2010$)
 32308 (May 31, 2012).
Dehumidifiers 80 FR 31646 (June 3,      June 2019..........................  $50.7M (2013$)[dagger]
 2015).
----------------------------------------------------------------------------------------------------------------
[dagger] The final rule for this energy conservation standard has not been published. Therefore, the compliance
  date is an estimate and analysis of conversion costs have not been finalized at this time. If a value is
  provided for total industry conversion costs, this value represents an estimate from the NOPR.

    In addition to other Federal energy conservation standards, 
manufacturers cited potential restrictions on the use of certain 
refrigerants and State-level refrigerant recovery regulations as 
sources of cumulative regulatory burden for portable AC manufacturers. 
For more details, see chapter 12, section 12.7.3 of the NOPR TSD.
3. National Impact Analysis
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential standards 
for portable ACs, DOE compared their energy consumption under the no-
new-standards case to their anticipated energy consumption under each 
TSL. The savings are measured over the entire lifetime of products 
purchased in the 30-year period that begins in the year of anticipated 
compliance with new standards (2021-2050). Table V.13 presents DOE's 
projections of the NES for each TSL considered for portable ACs. The 
savings were calculated using the approach described in section IV.H.2 
of this proposed rule.

        Table V.13--Cumulative National Energy Savings for Portable Air Conditioners Shipped in 2021-2050
----------------------------------------------------------------------------------------------------------------
                                                                   Trial standard level (quads)
                     Savings                     ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
Source Energy Savings...........................            0.21            0.51            0.75            1.10
Full Fuel Cycle Energy Savings..................            0.22            0.53            0.78            1.15
----------------------------------------------------------------------------------------------------------------


[[Page 38442]]

    OMB Circular A-4 \67\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE undertook a sensitivity analysis using nine, rather than 30, years 
of product shipments. The choice of a nine-year period is a proxy for 
the timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\68\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to portable ACs. Thus, such results 
are presented for informational purposes only and are not indicative of 
any change in DOE's analytical methodology. The NES sensitivity 
analysis results based on a nine-year analytical period are presented 
in Table V.14. The impacts are counted over the lifetime of portable 
ACs purchased in 2021-2050.
---------------------------------------------------------------------------

    \67\ U.S. OMB, ``Circular A-4: Regulatory Analysis'' (Sept. 17, 
2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
    \68\ Section 325(m) of EPCA requires DOE to review its standards 
at least once every 6 years, and requires, for certain products, a 
3-year period after any new standard is promulgated before 
compliance is required, except that in no case may any new standards 
be required within 6 years of the compliance date of the previous 
standards. While adding a 6-year review to the 3-year compliance 
period adds up to 9 years, DOE notes that it may undertake reviews 
at any time within the 6 year period and that the 3-year compliance 
date may yield to the 6-year backstop. A 9-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some consumer products, 
the compliance period is 5 years rather than 3 years.

  Table V.14--Cumulative National Energy Savings for Portable Air Conditioners; Nine Years of Shipments (2021-
                                                      2029)
----------------------------------------------------------------------------------------------------------------
                                                                   Trial standard level (quads)
                     Savings                     ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
Source Energy Savings...........................            0.04            0.14            0.23            0.34
Full-Fuel-Cycle Energy Savings..................            0.05            0.14            0.24            0.36
----------------------------------------------------------------------------------------------------------------

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 portable ACs. 
In accordance with OMB's guidelines on regulatory analysis,\69\ DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V.15 shows the consumer NPV results with impacts counted 
over the lifetime of products purchased in 2021-2050.
---------------------------------------------------------------------------

    \69\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis,'' section E, (Sept. 17, 2003) (Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4/).

  Table V.15--Cumulative Net Present Value of Consumer Benefits for Portable Air Conditioners Shipped in (2021-
                                                      2050)
----------------------------------------------------------------------------------------------------------------
                                                                Trial standard level (billion 2014$)
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
3 percent.......................................            2.08            5.20            7.64           10.64
7 percent.......................................            0.81            2.15            3.23            4.46
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.16. The impacts are counted over the 
lifetime of products purchased in 2021-2029. As mentioned previously, 
such results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology or decision 
criteria.

   Table V.16--Cumulative Net Present Value of Consumer Benefits for Portable Air Conditioners; Nine Years of
                                              Shipments (2021-2029)
----------------------------------------------------------------------------------------------------------------
                                                               Trial standard level (billion 2014$)
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
3 percent.......................................            0.55            1.78            2.87            4.05
7 percent.......................................            0.30            1.01            1.63            2.28
----------------------------------------------------------------------------------------------------------------

    The above results reflect the use of a default trend to estimate 
the change in price for portable ACs over the analysis period (see 
section IV.F.1 of this document). DOE also conducted a sensitivity 
analysis that considered one scenario with a lower rate of price 
decline than the reference case and one scenario with a higher rate of 
price decline than the reference case. The results of these alternative 
cases are presented in appendix 10C of the NOPR

[[Page 38443]]

TSD. In the high-price-decline case, the NPV of consumer benefits is 
higher than in the default case. In the low-price-decline case, the NPV 
of consumer benefits is lower than in the default case.
c. Indirect Impacts on Employment
    DOE expects energy conservation standards for portable ACs to 
reduce energy bills for consumers of those products, with the resulting 
net savings being redirected to other forms of economic activity. These 
expected shifts in spending and economic activity could affect the 
demand for labor. As described in section IV.N of this document, DOE 
used an input/output model of the U.S. economy to estimate indirect 
employment impacts of the TSLs that DOE considered in this rulemaking. 
DOE 9understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term timeframes 
(2021-2050), where these uncertainties are reduced.
    The results suggest that the proposed standards are likely to have 
a negligible impact on the net demand for labor in the economy. The net 
change in jobs is so small that it would be imperceptible in national 
labor statistics and might be offset by other, unanticipated effects on 
employment. Chapter 16 of the NOPR TSD presents detailed results 
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    Based on testing conducted in support of this proposed rule, 
discussed in chapter 5 of the NOPR TSD, DOE has tentatively concluded 
that the standards proposed in this NOPR would not reduce the utility 
or performance of the portable ACs under consideration in this 
rulemaking. Manufacturers of these products currently offer units that 
meet or exceed the proposed standards.
5. Impact of Any Lessening of Competition
    As discussed in section III.E.1.e, the Attorney General determines 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard, and transmits such determination in writing 
to the Secretary, together with any analysis of the nature and extent 
of such impact. To assist the Attorney General in making such 
determination, DOE has provided DOJ with copies of this NOPR and the 
accompanying TSD for review. DOE will consider DOJ's comments on the 
proposed rule in determining whether to proceed to a final rule. DOE 
will publish and respond to DOJ's comments in that document. DOE 
invites comment from the public regarding the competitive impacts that 
are likely to result from this proposed rule. In addition, interested 
parties may also provide comments separately to DOJ regarding these 
potential impacts. See the ADDRESSES section for information to send 
comments to DOJ.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. As a measure of this reduced 
demand, chapter 15 in the NOPR TSD presents the estimated reduction in 
generating capacity, relative to the no-new-standards case, for the 
TSLs that DOE considered in this rulemaking.
    Energy conservation resulting from new standards for portable ACs 
is expected to yield environmental benefits in the form of reduced 
emissions of air pollutants and GHGs. Table V.17 provides DOE's 
estimate of cumulative emissions reductions expected to result from the 
TSLs considered in this rulemaking. The table includes both power 
sector emissions and upstream emissions. The emissions were calculated 
using the multipliers discussed in section IV.K. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the NOPR TSD.

          Table V.17--Cumulative Emissions Reduction for Portable Air Conditioners Shipped in 2021-2050
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................            14.6            35.7            52.7            77.2
SO2 (thousand tons).............................             8.0            19.8            29.3            43.0
NOX (thousand tons).............................            16.5            40.2            59.3            86.9
Hg (tons).......................................            0.03            0.07            0.11            0.16
CH4 (thousand tons).............................             1.2             2.9             4.2             6.2
N2O (thousand tons).............................             0.2             0.4             0.6             0.9
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................             0.8             2.1             3.0             4.4
SO2 (thousand tons).............................             0.2             0.4             0.6             0.8
NOX (thousand tons).............................            12.2            29.4            43.2            63.2
Hg (tons).......................................            0.00            0.00            0.00            0.00
CH4 (thousand tons).............................            67.3           162.5           238.8           349.3
N2O (thousand tons).............................            0.01            0.02            0.03            0.04
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................            15.5            37.7            55.7            81.6
SO2 (thousand tons).............................             8.2            20.2            29.9            43.9
NOX (thousand tons).............................            28.7            69.6           102.6           150.1
Hg (tons).......................................            0.03            0.07            0.11            0.16
CH4 (thousand tons).............................            68.5           165.3           243.0           355.5
CH4 (thousand tons CO2eq) *.....................           1,917           4,629           6,804           9,954
N2O (thousand tons).............................             0.2             0.4             0.6             0.9
N2O (thousand tons CO2eq) *.....................            45.5           111.8           165.6           242.8
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same GWP.


[[Page 38444]]

    As part of the analysis for this proposed rule, DOE estimated 
monetary benefits likely to result from the reduced emissions of 
CO2 and NOX that DOE estimated for each of the 
considered TSLs for portable ACs. As discussed in section IV.L of this 
document, for CO2, DOE used the most recent values for the 
SCC developed by an interagency process. The four sets of SCC values 
for CO2 emissions reductions in 2015 resulting from that 
process (expressed in 2014$) are represented by $12.2/metric ton (the 
average value from a distribution that uses a 5-percent discount rate), 
$40.0/metric ton (the average value from a distribution that uses a 3-
percent discount rate), $62.3/metric ton (the average value from a 
distribution that uses a 2.5-percent discount rate), and $117/metric 
ton (the 95th-percentile value from a distribution that uses a 3-
percent discount rate). The values for later years are higher due to 
increasing damages (public health, economic and environmental) as the 
projected magnitude of climate change increases.
    Table V.18 presents the global value of CO2 emissions 
reductions at each TSL. For each of the four cases, DOE calculated a 
present value of the stream of annual values using the same discount 
rate as was used in the studies upon which the dollar-per-ton values 
are based. DOE calculated domestic values as a range from 7 percent to 
23 percent of the global values; these results are presented in chapter 
14 of the NOPR TSD.

   Table V.18--Estimates of Global Present Value of CO2 Emissions Reduction for Products Shipped in 2021-2050
----------------------------------------------------------------------------------------------------------------
                                                                    SCC case * (million 2014$)
                                                 ---------------------------------------------------------------
                       TSL                                                                          3% discount
                                                    5% discount     3% discount    2.5% discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................              96             450             718           1,374
2...............................................             241           1,119           1,781           3,411
3...............................................             362           1,666           2,648           5,078
4...............................................             532           2,445           3,885           7,452
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................               5              26              41              79
2...............................................              14              64             102             195
3...............................................              20              95             150             288
4...............................................              30             139             221             423
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................             101             476             760           1,453
2...............................................             255           1,182           1,882           3,606
3...............................................             382           1,761           2,799           5,367
4...............................................             562           2,584           4,106           7,875
----------------------------------------------------------------------------------------------------------------
* 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 GHGs).

    DOE is aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
world economy continues to evolve rapidly. Thus, any value placed on 
reduced CO2 emissions in this rulemaking is subject to 
change. DOE, together with other Federal agencies, will continue to 
review various methodologies for estimating the monetary value of 
reductions in CO2 and other GHG emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological assumptions and issues. However, consistent with DOE's 
legal obligations, and taking into account the uncertainty involved 
with this particular issue, DOE has included in this proposed rule the 
most recent values and analyses resulting from the interagency review 
process.
    DOE also estimated the cumulative monetary value of the economic 
benefits associated with NOX emissions reductions 
anticipated to result from the considered TSLs for portable ACs. The 
dollar-per-ton value that DOE used is discussed in section IV.L of this 
document. Table V.19 presents the cumulative present values for 
NOX emissions for each TSL calculated using 7-percent and 3-
percent discount rates.

  Table V.19--Estimates of Present Value of NOX Emissions Reduction for
             Portable Air Conditioners Shipped in 2021-2050
------------------------------------------------------------------------
                                                     Million 2014$
                                             ---------------------------
                     TSL                       3% Discount   7% Discount
                                                  rate          rate
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1...........................................          26.6          10.1
2...........................................          67.4          27.0
3...........................................         101.2          41.4
4...........................................         148.8          61.2
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1...........................................          21.3           7.9
2...........................................          53.5          21.0
3...........................................          80.0          32.1
4...........................................         117.5          47.4
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
1...........................................          47.9          18.0
2...........................................         120.9          47.9
3...........................................         181.2          73.5

[[Page 38445]]

 
4...........................................         266.3         108.6
------------------------------------------------------------------------

7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.20 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of consumer savings calculated for each TSL considered in this 
rulemaking, at both a 7-percent and 3-percent discount rate. The 
CO2 values used in the columns of each table correspond to 
the four sets of SCC values discussed above.

Table V.20--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                                            NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                           Consumer NPV at 3% Discount rate added with: (Billion 2014$)
                                 -------------------------------------------------------------------------------
               TSL                  SCC Case $12.2/     SCC Case $40.0/     SCC Case $62.3/     SCC Case $117/
                                   metric ton and 3%   metric ton and 3%   metric ton and 3%   metric ton and 3%
                                       NOX value           NOX value           NOX value           NOX value
----------------------------------------------------------------------------------------------------------------
1...............................                 2.2                 2.6                 2.9                 3.6
2...............................                 5.6                 6.5                 7.2                 8.9
3...............................                 8.2                 9.6                10.6                13.2
4...............................                11.5                13.5                15.0                18.8
----------------------------------------------------------------------------------------------------------------


 
                                           Consumer NPV at 7% Discount rate added with: (Billion 2014$)
                                 -------------------------------------------------------------------------------
               TSL                  SCC Case $12.2/     SCC Case $40.0/     SCC Case $62.3/     SCC Case $117/
                                   metric ton and 7%   metric ton and 7%   metric ton and 7%   metric ton and 7%
                                       NOX value           NOX value           NOX value           NOX value
----------------------------------------------------------------------------------------------------------------
1...............................                 0.9                 1.3                 1.6                 2.3
2...............................                 2.5                 3.4                 4.1                 5.8
3...............................                 3.7                 5.1                 6.1                 8.7
4...............................                 5.1                 7.1                 8.7                12.4
----------------------------------------------------------------------------------------------------------------

    Two issues are relevant in considering the above results. First, 
the national operating cost savings are domestic U.S. monetary savings 
that occur as a result of market transactions, while the value of 
CO2 reductions is based on a global value. Second, the 
assessments of operating cost savings and the SCC are performed with 
different methods that use different time frames for analysis. The 
national operating cost savings is measured for the lifetime of 
products shipped in 2021 to 2050. Because CO2 emissions have 
a very long residence time in the atmosphere,\70\ the SCC values in 
future years reflect future CO2-emissions impacts that 
continue beyond 2100.
---------------------------------------------------------------------------

    \70\ 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).
---------------------------------------------------------------------------

C. Conclusion

    When considering proposed standards, the new or amended energy 
conservation standard that DOE adopts for any type (or class) of 
covered product must be designed to achieve the maximum improvement in 
energy efficiency that the Secretary determines is technologically 
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In 
determining whether a standard is economically justified, the Secretary 
must determine whether the benefits of the standard exceed its burdens, 
considering to the greatest extent practicable the seven statutory 
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or 
amended standard must also ``result in significant conservation of 
energy.'' (42 U.S.C. 6295(o)(3)(B))
    DOE considered the impacts of standards at each TSL, beginning with 
a 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 TSL that is 
both technologically feasible and economically justified and saves a 
significant amount of energy.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables 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, such as low-income households and 
seniors, who may be disproportionately affected by a national standard 
(see section V.B.2.d).
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of (1) a lack of 
information; (2) a lack of sufficient salience of the long-term or 
aggregate benefits; (3) a lack of sufficient savings to warrant 
delaying or altering purchases; (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments; (5) computational 
or other

[[Page 38446]]

difficulties associated with the evaluation of relevant tradeoffs; and 
(6) a divergence in incentives (that is, renter versus owner; builder 
versus purchaser). Other literature indicates that with less than 
perfect foresight and a high degree of uncertainty about the future, 
consumers may trade off these types of investments at a higher than 
expected rate between current consumption and uncertain future energy 
cost savings. This undervaluation suggests that regulation that 
promotes energy efficiency can produce significant net private gains 
(as well as producing social gains by, for example, reducing 
pollution).
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego a 
purchase of a product in the standards case, this decreases sales for 
product manufacturers and the impact on manufacturers attributed to 
lost revenue is included in the MIA. Second, DOE accounts for energy 
savings attributable only to products actually used by consumers in the 
standards case; if a regulatory option decreases the number of products 
used by consumers, this decreases the potential energy savings from an 
energy conservation standard. However, DOE's current analysis does not 
explicitly control for heterogeneity in consumer preferences, 
preferences across subcategories of products or specific features, or 
consumer price sensitivity variation according to household income.\71\
---------------------------------------------------------------------------

    \71\ P.C. Reiss and M.W. White, Household Electricity Demand, 
Revisited, Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------

    In its energy use and economic analyses, DOE did not consider 
product switching as a result of setting portable AC standards. There 
is no literature informing whether a substitution effect may be 
occurring between portable ACs or room ACs. Therefore, DOE is 
requesting input and data from interested parties as to whether product 
switching is occurring between these different types of cooling 
products and, if so, whether switching to room or central ACs would be 
significantly increased due to DOE establishing portable AC standards.
    DOE did consider the impact of portable AC standards on product 
utilization through the use of a direct rebound effect. Higher-
efficiency portable ACs reduce the operating costs for a consumer, 
which can lead to greater use of the product. A direct rebound effect 
occurs when a piece of equipment that is made more efficient is used 
more intensively, such that the expected energy savings from the 
efficiency improvement may not fully materialize. For the NOPR 
analysis, DOE examined a 2009 review of empirical estimates of the 
rebound effect for various energy-using products.\72\ There are 
relatively few estimates of the direct rebound effect for household 
cooling. The two studies discussed in the review are relatively old 
studies, conducted during the period of rising energy prices and using 
small sample sizes. One shows a short-run rebound effect of 4 
percent,\73\ while the other reported a wide range of 1-26 percent.\74\ 
In the recent NOPR for residential furnaces, DOE chose to use a rebound 
effect of 15 percent, which is roughly in the center of the range 
reported for household cooling. 80 FR 13120, 13148 (May 12, 2015).\75\ 
For consistency, DOE used a rebound effect of 15 percent for portable 
ACs in all of the estimates in this rulemaking.
---------------------------------------------------------------------------

    \72\ Steven Sorrell, et al., Empirical Estimates of the Direct 
Rebound Effect: A Review, 37 Energy Pol'y 1356-71 (2009).
    \73\ Hausman, J.A. Individual Discount Rates and the Purchase 
and Utilization of Energy-Using Durables. The Bell Journal of 
Economics. 1979. 10(1): pp. 33-54.
    \74\ Dubin, J.A., A.K. Miedema, and R.V. Chandran. Price effects 
of energy-efficient technologies--a study of residential demand for 
heating and cooling. Rand Journal of Economics. 1976. 17(3): pp. 
310-25.
    \75\ U.S. Department of Energy-Office of Energy Efficiency and 
Renewable Energy. Federal Register. May 12, 2015. vol. 80, no. 97: 
pp. 28851-28852. (Last accessed August 12, 2015.) http://www.gpo.gov/fdsys/pkg/FR-2015-05-20/pdf/2015-12218.pdf.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance energy efficiency 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\76\ DOE 
welcomes comments on how to more fully assess the potential impact of 
energy conservation standards on consumer choice and how to quantify 
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------

    \76\ Alan Sanstad, Notes on the Economics of Household Energy 
Consumption and Technology Choice, Lawrence Berkeley National 
Laboratory (2010) (Available at: https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf).
---------------------------------------------------------------------------

1. Benefits and Burdens of Trial Standard Levels Considered for 
Portable ACs
    Table V.21 and Table V.22 summarize the quantitative impacts 
estimated for each TSL for portable ACs. The efficiency levels 
contained in each TSL are described in section V.A of this proposed 
rule.

                       Table V.21--Summary of Analytical Results for Portable Air Conditioner TSLs: (National Impacts, 2021-2050)
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Category                         TSL 1                          TSL 2                         TSL 3                         TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Cumulative FFC National Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 0.22.........................  0.53........................  0.78........................  1.15.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   NPV of Consumer Costs and Benefits (2014$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate...............  2.08.........................  5.20........................  7.64........................  10.64.
--------------------------------------------------------------------------------------------------------------------------------------------------------
7% discount rate...............  0.81.........................  2.15........................  3.23........................  4.46.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Cumulative FFC Emissions Reduction (Total FFC Emission)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......  15.5.........................  37.7........................  55.7........................  81.6.

[[Page 38447]]

 
SO2 (thousand tons)............  8.2..........................  20.2........................  29.9........................  43.9.
NOX (thousand tons)............  28.7.........................  69.6........................  102.6.......................  150.1.
Hg (tons)......................  0.03.........................  0.07........................  0.11........................  0.16.
CH4 (thousand tons)............  68.5.........................  165.3.......................  243.0.......................  355.5.
CH4 (thousand tons CO2eq) *....  1,917........................  4,629.......................  6,804.......................  9,954.
N2O (thousand tons)............  0.2..........................  0.4.........................  0.6.........................  0.9.
N2O (thousand tons CO2eq) *....  45.5.........................  111.8.......................  165.6.......................  242.8.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ billion) **.........  0.101 to 1.453...............  0.255 to 3.606..............  0.382 to 5.367..............  0.562 to 7.875.
NOX--3% discount rate (2014$     47.9 to 109.3................  120.9 to 275.6..............  181.2 to 413.2..............  266.3 to 607.2.
 million).
NOX--7% discount rate (2014$     18.0 to 40.6.................  47.9 to 108.1...............  73.5 to 165.7...............  108.6 to 244.8.
 million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same GWP.
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.


                 Table V.22-- Portable Air Conditioner Trial Standard Levels: Manufacturer (2016-2050) and Consumer Impacts (2021-2050)
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Category                         TSL 1                          TSL 2                         TSL 3                         TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ millions)    631.3 to 637.9...............  503.8 to 521.7..............  378.6 to 419.2..............  301.9 to 404.5.
 (Base Case INPV = 725.5).
Industry NPV (% change)........  (13.0%) to (12.1%)...........  (30.6%) to (28.1%)..........  (47.8%) to (42.2%)..........  (58.4%) to (44.2%).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Consumer Average LCC Savings (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential....................  84...........................  144.........................  194.........................  242.
Commercial.....................  188..........................  292.........................  392.........................  528.
All............................  97...........................  162.........................  218.........................  276.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential....................  3.0..........................  2.2.........................  2.1.........................  2.9.
Commercial.....................  1.6..........................  1.2.........................  1.1.........................  1.5.
All............................  2.8..........................  2.1.........................  2.0.........................  2.7.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         % of Consumers that Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential....................  9............................  13..........................  19..........................  31.
Commercial.....................  2............................  2...........................  3...........................  9.
All............................  9............................  12..........................  17..........................  28.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.

    DOE first considered TSL 4, which represents the max-tech 
efficiency level. TSL 4 would save 1.15 quads of energy, an amount DOE 
considers significant. Under TSL 4, the NPV of consumer benefit would 
be $4.46 billion using a discount rate of 7 percent, and $10.64 billion 
using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 81.6 Mt of 
CO2, 43.9 thousand tons of SO2, 150.1 thousand 
tons of NOX, 0.16 tons of Hg, 355.5 thousand tons of 
CH4, and 0.9 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 4 
ranges from $562 million to $7,875 million.
    At TSL 4, the average LCC impact is a savings of $242 for 
residential, $528 for commercial, and $276 for both sectors. The simple 
payback period is 2.9 years for residential, 1.5 years for commercial, 
and 2.7 years for both sectors. The fraction of all consumers 
experiencing a net LCC cost is 28 percent.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$423.5 million to a decrease of $320.9 million, which correspond to 
decreases of 58.4 percent and 44.2 percent, respectively. DOE estimates 
that no portion of the market will meet the efficiency standard 
specified by this TSL in 2020, the year before the compliance year. As 
such, manufacturers would have to redesign all products by the expected 
2021 compliance date to meet demand. Redesigning all units to meet the 
max-tech efficiency level would require considerable capital and 
product conversion expenditures. At TSL 4, the capital conversion costs 
total as much as $305.7 million, roughly 13.1 times the industry annual 
ordinary capital expenditure in 2020 (the year leading up to new 
standards). DOE estimates that complete platform redesigns would cost 
the industry $170.8 million in product conversion costs. These 
conversion costs largely relate to the extensive research programs 
required to develop new products that meet the efficiency standards at 
TSL 4. These costs are equivalent to 17.8 times the industry annual 
budget for research and development. As such, the conversion costs 
associated with the changes in products and manufacturing facilities

[[Page 38448]]

required at TSL 4 would require significant use of manufacturers' 
financial reserves (manufacturer capital pools), impacting other areas 
of business that compete for these resources and significantly reducing 
INPV. In addition, manufacturers could face a substantial impact on 
profitability at TSL 4. Because manufacturers are more likely to reduce 
their margins to maintain a price-competitive product at higher TSLs, 
especially in the lower-capacity portable segment, DOE expects that TSL 
4 would yield impacts closer to the high end of the range of INPV 
impacts. If the high end of the range of impacts is reached, as DOE 
expects, TSL 4 could result in a net loss to manufacturers of 58.4 
percent of INPV.
    Beyond the direct financial impact on manufacturers, TSL 4 may also 
contribute to the unavailability of portable ACs at certain cooling 
capacities. The efficiency at TSL 4 is a theoretical level that DOE 
developed by modeling the most efficient components available. However, 
DOE is aware that the highest-efficiency compressors that are necessary 
to meet TSL 4 may not be available to all manufacturers for the full 
range of capacities of portable ACs. Because specific high-efficiency 
components available are driven largely by the markets for other 
products with higher shipments (e.g., room ACs), portable AC 
manufacturers may be constrained in their design choices. This may have 
the potential to eliminate portable ACs of certain cooling capacities 
from the market, should TSL 4 be selected.
    The Secretary tentatively concludes that at TSL 4 for portable ACs, 
the benefits of energy savings, positive NPV of consumer benefits, 
emission reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the economic burden on some 
consumers, and the impacts on manufacturers, including the conversion 
costs and profit margin impacts that could result in a large reduction 
in INPV. Consequently, the Secretary has tentatively concluded that TSL 
4 is not economically justified.
    DOE then considered TSL 3, which would save an estimated 0.78 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be $3.23 billion using a discount rate of 7 
percent, and $7.64 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 55.7 Mt of 
CO2, 29.9 thousand tons of SO2, 102.6 thousand 
tons of NOX, 0.11 tons of Hg, 243.0 thousand tons of 
CH4, and 0.6 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 3 
ranges from $382 million to $5,367 million.
    At TSL 3, the average LCC impact is a savings of $194 for 
residential, $392 for commercial, and $218 for both sectors. The simple 
payback period is 2.1 years for residential, 1.1 years for commercial, 
and 2.0 years for both sectors. The fraction of all consumers 
experiencing a net LCC cost is 17 percent.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$346.8 million to a decrease of $306.2 million, which correspond to 
decreases of 47.8 percent and 42.2 percent, respectively. Again, DOE 
estimates that no portion of the market will meet the efficiency 
standard specified by this TSL in 2020, the year before the compliance 
year. As such, manufacturers would have to make upgrades to all 
products by the 2021 projected compliance date to meet demand. 
Redesigning all units to meet TSL 3 would require considerable capital 
and product conversion expenditures. The estimated capital conversion 
costs total as much as $282.0 million, which is 12.1 times the industry 
annual capital expenditure in 2020 (the year leading up to the new 
standards). DOE estimates that the redesigns necessary to meet these 
standards would cost the industry $161.8 million in product conversion 
costs. These conversion costs largely relate to the research programs 
and re-testing required to develop products that meet the efficiency 
standards set forth by TSL 3, and are 16.8 times the industry annual 
budget for research and development in 2020, the year leading up to new 
standards. As such, the conversion costs associated with the changes in 
products and manufacturing facilities required at TSL 3 would still 
require significant use of manufacturers' financial reserves, impacting 
other areas of business that compete for these resources and 
significantly reducing INPV. Because manufacturers are more likely to 
reduce their margins to maintain a price-competitive product at higher 
TSLs, DOE expects that TSL 3 would yield impacts closer to the high end 
of the range of INPV impacts as indicated by the preservation of per-
unit operating profit markup scenario. If this is the case, TSL 3 could 
result in a net loss of 47.8 percent in INPV to manufacturers of 
portable ACs.
    Similar to TSL 4, beyond the direct financial impact on 
manufacturers, TSL 3 may also contribute to the unavailability of 
portable ACs at certain cooling capacities. TSL 3 is based on the 
single highest efficiency unit in DOE's test sample. However, DOE 
believes few, if any, other units on the market are able to achieve 
these efficiencies and that the highest efficiency single-speed 
compressors likely necessary to meet TSL 3 may not be available to all 
manufacturers for the full range of capacities of portable ACs. Because 
high-efficiency components available at any given time are driven 
largely by the markets for other products with higher shipments (e.g., 
room ACs), portable AC manufacturers may be constrained in their design 
choices. This may have the potential to eliminate portable ACs of 
certain cooling capacities from the market.
    The Secretary tentatively concludes that at TSL 3 for portable ACs, 
the benefits of energy savings, positive NPV of consumer benefits, 
emission reductions, and the estimated monetary value of the emissions 
reductions would be outweighed by the negative impacts on some 
consumers and on manufacturers, including the conversion costs that 
could result in a large reduction in INPV for manufacturers. 
Consequently, the Secretary has tentatively concluded that TSL 3 is not 
economically justified.
    DOE then considered TSL 2, which would save an estimated 0.53 quads 
of energy, an amount DOE considers significant. Under TSL 2, the NPV of 
consumer benefit would be $2.15 billion using a discount rate of 7 
percent, and $5.20 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 2 are 37.7 Mt of 
CO2, 20.2 thousand tons of SO2, 69.6 thousand 
tons of NOX, 0.07 tons of Hg, 165.3 thousand tons of 
CH4, and 0.4 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 2 
ranges from $255 million to $3,606 million.
    At TSL 2, the average LCC impact is a savings of $144 for 
residential, $292 for commercial, and $162 for both sectors. The simple 
payback period is 2.2 years for residential, 1.2 years for commercial, 
and 2.1 years for both sectors. The fraction of all consumers 
experiencing a net LCC cost is 12 percent.
    At TSL 2, the projected change in INPV ranges from a decrease of 
$221.7 million to a decrease of $203.8 million, which correspond to 
decreases of 30.6 percent and 28.1 percent, respectively. DOE estimates 
that approximately 23 percent of available platforms and 21 percent of 
shipments will meet the efficiency standards specified by this TSL in 
2020, the year before the compliance year. As such, manufacturers would 
have to make upgrades to 77 percent of platforms by

[[Page 38449]]

the 2021 projected compliance date to meet demand. At TSL 2, 
manufacturers will incur conversion costs associated with the 
integration of higher efficiency components. The estimated capital 
conversion costs total as much as $188.9 million, which is 8.1 times 
the industry annual capital expenditure in 2020 (the year leading up to 
the new standards). DOE estimates that the redesigns necessary to meet 
these standards would cost the industry $113.9 million in product 
conversion costs. These conversion costs largely relate to the research 
programs and re-testing required to develop products that meet the 
efficiency standards set forth by TSL 2, and are 11.8 times the 
industry annual budget for research and development in 2020, the year 
leading up to new standards. Because manufacturers are more likely to 
reduce their margins to maintain a price-competitive product at higher 
TSLs, DOE expects that TSL 2 would yield impacts closer to the high end 
of the range of INPV impacts as indicated by the preservation of per-
unit operating profit markup scenario. If this is the case, TSL 2 could 
result in a net loss of 30.6 percent in INPV to manufacturers of 
portable ACs.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has tentatively concluded that at TSL 2 for 
portable ACs, the benefits of energy savings, positive NPV of consumer 
benefits, emission reductions, the estimated monetary value of the 
emissions reductions, and positive average LCC savings would outweigh 
the negative impacts on some consumers and on manufacturers, including 
the conversion costs that could result in a reduction in INPV for 
manufacturers. Accordingly, the Secretary has tentatively concluded 
that TSL 2 would offer the maximum improvement in efficiency that is 
technologically feasible and economically justified, and would result 
in the significant conservation of energy.
    Therefore, based on the above considerations, DOE proposes to adopt 
the energy conservation standards for portable ACs at TSL 2. The 
proposed new energy conservation standards for portable ACs, which are 
expressed as CEER, are shown in Table V.23.
[GRAPHIC] [TIFF OMITTED] TP13JN16.010

2. Summary of Annualized Benefits and Costs of the Proposed Standards
    The benefits and costs of the proposed standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
the sum of: (1) The annualized national economic value (expressed in 
2014$) of the benefits from operating products that meet the proposed 
standards (consisting primarily of operating cost savings from using 
less energy, minus increases in product purchase costs, and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.\77\
---------------------------------------------------------------------------

    \77\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2014, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(2020, 2030, etc.), and then discounted the present value from each 
year to 2015. The calculation uses discount rates of 3 and 7 percent 
for all costs and benefits except for the value of CO2 
reductions, for which DOE used case-specific discount rates. Using 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period, starting in the compliance year that yields the 
same present value.
---------------------------------------------------------------------------

    Table V.24 shows the annualized values for portable ACs under TSL 
2, expressed in 2014$. The results under the primary estimate are as 
follows.
    Using a 7-percent discount rate for benefits and costs other than 
CO2 reductions (for which DOE used a 3-percent discount rate 
along with the average SCC series corresponding to a value of $40.0/ton 
in 2015 (2014$)), the estimated cost of the proposed standards for 
portable ACs is $30 million per year in increased equipment costs, 
while the estimated benefits are $273 million per year in reduced 
equipment operating costs, $70 million per year in CO2 
reductions, and $5.4 million per year in reduced NOX 
emissions. In this case, the net benefit amounts to $318 million per 
year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series corresponding to a value of $40.0/ton in 2015 
(2014$), the estimated cost of the proposed standards for portable ACs 
is $30 million per year in increased equipment costs, while the 
estimated annual benefits are $338 million in reduced operating costs, 
$70 million in CO2 reductions, and $7.2 million in reduced 
NOX emissions. In this case, the net benefit amounts to $385 
million per year.

                          Table V.24--Annualized Benefits and Costs of Proposed Standards (TSL 2) for Portable Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                                                     -----------------------------------------------------------------------------------
                                              Discount rate                                        Low net benefits estimate  High net benefits estimate
                                                                          Primary  estimate *             * [Dagger]                       *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7%..............................  273.......................  125.......................  296.

[[Page 38450]]

 
                                    3%..............................  338.......................  153.......................  371.
CO2 Reduction at $12.2/t **.......  5%..............................  21........................  10........................  23.
CO2 Reduction at $40.0/t **.......  3%..............................  70........................  33........................  75.
CO2 Reduction at $62.3/t **.......  2.5%............................  102.......................  48........................  109.
CO2 Reduction at $117/t **........  3%..............................  213.......................  100.......................  228.
NOX Reduction at $2,684/t [dagger]  7%..............................  5.4.......................  3.........................  12.9.
                                    3%..............................  7.2.......................  3.........................  17.4.
Total [dagger][dagger]............  7% plus CO2 range...............  300 to 492................  137 to 227................  331 to 537.
                                    7%..............................  348.......................  160.......................  383.
                                    3% plus CO2 range...............  366 to 558................  167 to 256................  411 to 616.
                                    3%..............................  415.......................  189.......................  463.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs  7%..............................  30........................  31........................  27.
                                    3%..............................  30........................  31........................  26.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Total Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............  7% plus CO2 range...............  269 to 462................  106 to 196................  304 to 510.
                                    7%..............................  318.......................  129.......................  357.
                                    3% plus CO2 range...............  336 to 528................  135 to 225................  385 to 590.
                                    3%..............................  385.......................  158.......................  437.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with portable ACs shipped in 2021-2050. These results include benefits to consumers
  which accrue after 2050 from the products purchased in 2021-2050. The results account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates
  utilize projections of energy prices from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In
  addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high
  decline rate in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.H.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
  percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount
  rate ($40.0/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
  labeled discount rate, and those values are added to the full range of CO2 values.
[Dagger] In addition to the AEO 2015 Low Economic Growth case, the Low Net Benefits Estimate reflects a 50-percent reduction in the number of operating
  hours. Details of the sensitivity analysis can be found in appendix 8F.

VI. Certification Reporting and Enforcement Requirements

    In a recent test procedure rulemaking, DOE established sampling 
plan requirements for portable ACs in 10 CFR 429.62, to enable 
manufacturers to make representations of energy consumption or 
efficiency metrics. DOE proposes in this rulemaking that certain 
product specific information be included when a manufacturer wishes to 
certify their products with DOE and demonstrate compliance with any 
energy conservation standards established as a result of this 
rulemaking. DOE proposes in this NOPR that portable AC certification 
reports include CEER and SACC, as determined by the DOE test procedure 
in appendix CC, in addition to the duct configuration (single-duct, 
dual-duct, or ability to operate in both configurations), presence of 
heating function, and primary condensate removal feature (auto-
evaporation, gravity drain, removable internal collection bucket, or 
condensate pump).
    In this NOPR, DOE is also establishing a new section within 10 CFR 
429.134 to include enforcement requirements for portable ACs. The 
enforcement provisions clarify how the SACC would be used for 
determining the minimum allowable CEER for a tested basic model.
    DOE requests comment on the proposed certification reporting 
requirements and enforcement requirements for portable ACs.

VII. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems that the proposed standards set forth in this NOPR are 
intended to address are as follows:
    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information leads some consumers to miss 
opportunities to make cost-effective investments in energy efficiency.
    (2) In some cases the benefits of more efficient equipment are not 
realized due to misaligned incentives between purchasers and users. An 
example of such a case is when the equipment purchase decision is made 
by a building contractor or building owner who does not pay the energy 
costs.
    (3) There are external benefits resulting from improved energy 
efficiency of appliances and equipment

[[Page 38451]]

that are not captured by the users of such products. These benefits 
include externalities related to public health, environmental 
protection, and national energy security that are not reflected in 
energy prices, such as reduced emissions of air pollutants and GHGs 
that impact human health and global warming. DOE attempts to quantify 
some of the external benefits through use of social cost of carbon 
values.
    The Administrator of the Office of Information and Regulatory 
Affairs (OIRA) in the OMB has determined that the proposed regulatory 
action is a significant regulatory action under section (3)(f) of 
Executive Order 12866. Accordingly, pursuant to section 6(a)(3)(B) of 
the Order, DOE has provided to OIRA: (i) The text of the draft 
regulatory action, together with a reasonably detailed description of 
the need for the regulatory action and an explanation of how the 
regulatory action will meet that need; and (ii) An assessment of the 
potential costs and benefits of the regulatory action, including an 
explanation of the manner in which the regulatory action is consistent 
with a statutory mandate. DOE has included these documents in the 
rulemaking record.
    Furthermore, 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 TSD for this rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of cumulative regulations; (3) select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity); 
(4) to the extent feasible, specify performance objectives, rather than 
specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, OIRA has emphasized that such techniques may include 
identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes. For the 
reasons stated in the preamble, DOE believes that this NOPR is 
consistent with these principles, including the requirement that, to 
the extent permitted by law, benefits justify costs and that net 
benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking'' 67 FR 53461 (Aug. 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE 
has prepared the following IRFA for the products that are the subject 
of this rulemaking.
    For manufacturers of portable ACs, the SBA has set a size 
threshold, which defines those entities classified as ``small 
businesses'' for the purposes of the statute. DOE used the SBA's small 
business size standards to determine whether any small entities would 
be subject to the requirements of the rule. See 13 CFR part 121. The 
size standards are listed by NAICS code and industry description and 
are available at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Manufacturing of portable ACs is classified 
under NAICS 333415, ``Air-Conditioning and Warm Air Heating Equipment 
and Commercial and Industrial Refrigeration Equipment Manufacturing 
Other Major Household Appliance Manufacturing.'' The SBA sets a 
threshold of 1,250 employees or less for an entity to be considered as 
a small business for this category.
    To estimate the number of companies that could be small business 
manufacturers of products covered by this rulemaking, DOE first 
surveyed the AHAM member directory. DOE then consulted publicly 
available data, purchased company reports from vendors such as Dun and 
Bradstreet, and contacted manufacturers, where needed, to determine the 
number of manufacturers with manufacturing facilities located within 
the United States that meet the SBA's definition of a ``small business 
manufacturing facility.'' DOE screened out companies that do not 
manufacture products covered by this rulemaking or are foreign owned 
and operated. In the February 2015 TP NOPR, DOE estimated that there 
was one small business that manufactured portable ACs. DOE subsequently 
determined that this small business no longer manufactures portable ACs 
and, therefore, DOE estimates that there are no domestic manufacturers 
of single-duct or dual-duct portable ACs that meet the SBA's definition 
of a ``small business.''
    Based on the discussion above, DOE certifies that the standards for 
portable ACs set forth in this proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, DOE has not prepared a regulatory flexibility analysis for 
this rulemaking. DOE will transmit this certification to the SBA as 
required by 5 U.S.C. 605(b).

C. Review Under the Paperwork Reduction Act

    DOE has determined that portable ACs are a covered product under 
EPCA. 81 FR 22514 (April 18, 2016). Because portable ACs are a covered 
product, manufacturers would need to certify to

[[Page 38452]]

DOE that their products comply with any applicable energy conservation 
standards. In certifying compliance, manufacturers must test their 
products according to the DOE test procedures, including any amendments 
adopted for those test procedures. DOE has established regulations for 
the certification and recordkeeping requirements for all covered 
consumer products and commercial equipment, including portable ACs. 76 
FR 12422 (Mar. 7, 2011); 80 FR 5099 (Jan. 30, 2015). The collection-of-
information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). This requirement has been approved by OMB under OMB control 
number 1910-1400. Public reporting burden for the certification is 
estimated to average 30 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

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

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
imposes certain requirements on Federal agencies formulating and 
implementing policies or regulations that preempt State law or that 
have Federalism implications. The Executive Order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. The Executive Order 
also requires agencies to have an accountable process to ensure 
meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications. 
On March 14, 2000, DOE published a statement of policy describing the 
intergovernmental consultation process it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
proposed rule and has tentatively determined that it would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. EPCA 
governs and prescribes Federal preemption of State regulations as to 
energy conservation for the products that are the subject of this 
proposed rule. States can petition DOE for exemption from such 
preemption to the extent, and based on criteria, set forth in EPCA. (42 
U.S.C. 6297) 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). Regarding the review required by section 3(a), 
section 3(b) of Executive Order 12988 specifically requires that 
Executive agencies make every reasonable effort to ensure that the 
regulation: (1) Clearly specifies the preemptive effect, if any; (2) 
clearly specifies any effect on existing Federal law or regulation; (3) 
provides a clear legal standard for affected conduct while promoting 
simplification and burden reduction; (4) specifies the retroactive 
effect, if any; (5) adequately defines key terms; and (6) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. Section 3(c) of 
Executive Order 12988 requires Executive agencies to review regulations 
in light of applicable standards in section 3(a) and section 3(b) to 
determine whether they are met or it is unreasonable to meet one or 
more of them. DOE has completed the required review and determined 
that, to the extent permitted by law, this proposed rule meets the 
relevant standards of Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 199

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531) 
For a proposed regulatory action likely to result in a rule that may 
cause the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    This proposed rule does not contain a Federal intergovernmental 
mandate because it does not require expenditures of $100 million or 
more in any one year by the private sector. The proposed rule will 
likely result in a final rule that could result in expenditures of $100 
million or more, but there is no proposed requirement that mandates 
that result. Potential expenditures may include: (1) Investment in R&D 
and in capital expenditures by portable AC manufacturers in the years 
between the final rule and the projected compliance date for the new 
standards, and (2) incremental additional expenditures by

[[Page 38453]]

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

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

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

I. Review Under Executive Order 12630

    Pursuant to Executive Order 12630, ``Governmental Actions and 
Interference with Constitutionally Protected Property Rights'' 53 FR 
8859 (Mar. 18, 1988), DOE has determined that this proposed rule would 
not result in any takings that might require compensation under the 
Fifth Amendment to the U.S. Constitution.

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

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

K. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA 
at OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgates or is expected to lead to promulgation of 
a final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
proposes new energy conservation standards for portable ACs, 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.'' Id. at 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-0.

VIII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this proposed 
rule. If you plan to attend the public meeting, please notify 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 of this fact as soon as possible by contacting Ms. Regina 
Washington at (202) 586-1214 or by email ([email protected])

[[Page 38454]]

so that the necessary procedures can be completed.
    DOE requires visitors to have laptops and other devices, such as 
tablets, checked upon entry into the Forrestal Building. Any person 
wishing to bring these devices into the building will be required to 
obtain a property pass. Visitors should avoid bringing these devices, 
or allow an extra 45 minutes to check in. Please report to the 
visitor's desk to have devices checked before proceeding through 
security.
    Due to the REAL ID Act implemented by the Department of Homeland 
Security (DHS), there have been recent changes regarding identification 
(ID) requirements for individuals wishing to enter Federal buildings 
from specific States and U.S. territories. As a result, driver's 
licenses from several States or territory will not be accepted for 
building entry, and instead, one of the alternate forms of ID listed 
below will be required. DHS has determined that regular driver's 
licenses (and ID cards) from the following jurisdictions are not 
acceptable for entry into DOE facilities: Alaska, American Samoa, 
Arizona, Louisiana, Maine, Massachusetts, Minnesota, New York, 
Oklahoma, and Washington. Acceptable alternate forms of Photo-ID 
include: U.S. Passport or Passport Card; an Enhanced Driver's License 
or Enhanced ID-Card issued by the States of Minnesota, New York or 
Washington (Enhanced licenses issued by these States are clearly marked 
Enhanced or Enhanced Driver's License); a military ID or other Federal 
government issued Photo-ID card.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: https://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/79. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

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

C. Conduct of the Public Meeting

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

[[Page 38455]]

comments are being processed simultaneously, your comment may not be 
viewable for up to several weeks. Please keep the comment tracking 
number that www.regulations.gov provides after you have successfully 
uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery/courier, or 
mail also will be posted to www.regulations.gov. If you do not want 
your personal contact information to be publicly viewable, do not 
include it in your comment or any accompanying documents. Instead, 
provide your contact information in a cover letter. Include your first 
and last names, email address, telephone number, and optional mailing 
address. The cover letter will not be publicly viewable as long as it 
does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No facsimiles 
(faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. 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 or available from other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person that would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    1. The proposal to maintain one product class for single-duct and 
dual-duct portable ACs (see section IV.A.2 of this proposed rule or 
chapter 3 of the NOPR TSD).
    2. The determination that alternative refrigerants should be 
screened out as a design option for portable ACs because products 
incorporating these refrigerants are not practicable to manufacture at 
this time while meeting all applicable safety standards (see section 
IV.B.1 of this proposed rule or chapter 4 of the NOPR TSD).
    3. Data from interested parties that characterize portable AC 
performance based on the DOE test procedure in appendix CC (see section 
IV.C.1 of this proposed rule or chapter 5 of the NOPR TSD).
    4. The general approach and technological feasibility of the 
efficiency levels considered for this analysis. Specifically, the 
determination that the baseline performance be represented by the 
minimum performance ratio observed for units in DOE's test sample. DOE 
also seeks comment on potential utility impacts at any of the analyzed 
efficiency levels (see section IV.C.1 of this proposed rule or chapter 
5 of the NOPR TSD).
    5. The specific efficiency improvements associated with 
microchannel designs in portable AC heat exchangers (see section IV.C.1 
of this proposed rule or chapter 5 of the NOPR TSD).
    6. Whether to promote installation of any of the design options, 
including thermostatic or electronic expansion valves, even though the 
resulting efficiency gains would not be measurable with the existing 
test procedure (see section IV.C.1 of this proposed rule or chapter 5 
of the NOPR TSD).
    7. The incremental manufacturer production costs DOE estimated at 
each efficiency level (see section IV.C.2 of this proposed rule or 
chapter 5 of the NOPR TSD).
    8. The use of room AC consumer usage data from RECS 2009 to 
establish operating hours for portable ACs. DOE's literature review 
performed to establish a distribution of energy use values for portable 
ACs revealed limited available data pertaining to how portable ACs are 
operated in the field. DOE assumed that the distribution of use 
calculated for rooms ACs represented the hours of use in cooling mode 
for a baseline portable AC unit. DOE conducted a sensitivity analysis 
that assumed hours of operation to be 50 percent of the hours used in 
the LCC analysis. DOE seeks data on operating hours and seasonal usage 
specific to portable AC (see section IV.E of this proposed rule, 
chapter 7 of the NOPR TSD, or appendix 8F of the NOPR TSD).
    9. The determination that there are no domestic small business 
manufacturers of single-duct and dual-duct portable ACs that would be 
impacted by the proposed standards (see sections IV.J and V.B.2.d of 
this proposed rule or chapter 12 of the NOPR TSD).
    10. The market share distribution of portable ACs in residential 
(88 percent) and commercial (12 percent) settings (see section V.B.1.a 
of this proposed rule or chapter 9 of the NOPR TSD).
    11. The use of room AC lifetime as input data to determine portable 
AC lifetime (see section IV.F of this proposed rule or chapter 8 of the 
NOPR TSD).
    12. Data on historic trends in portable AC efficiency (see section 
IV.F of this proposed rule or chapter 8 of the NOPR TSD).
    13. The proposed certification reporting requirements for portable 
ACs (see section VI of this proposed rule).
    14. Information demonstrating that product switching is occurring 
between portable ACs and room or central ACs. If data demonstrates 
switching is occurring, additional data on whether switching to room or 
central ACs would be significantly increased due to DOE establishing 
portable AC standards.

[[Page 38456]]

    15. DOE seeks public comment on the cumulative regulatory burden to 
manufacturers associated with the proposed portable AC standard and on 
the approach DOE used in evaluating cumulative regulatory burden, 
including the timeframes and regulatory dates evaluated.

IX. Approval of the Office of the Secretary

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

List of Subjects

10 CFR Part 429

    Confidential business information, Energy conservation, Household 
appliances, Imports, Incorporation by reference, Reporting and 
recordkeeping requirements.

10 CFR Part 430

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

    Issued in Washington, DC, on April 27, 2016.
David Friedman,
Principal Assistant Secretary, Energy Efficiency and Renewable Energy.
    For the reasons set forth in the preamble, DOE proposes to amend 
parts 429 and 430 of chapter II, subpart C, of title 10 of the Code of 
Federal Regulations, as set forth below:

PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER 
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 429 continues to read as follows:

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

0
2. Section Sec.  429.12 is amended by:
0
a. Removing in paragraph (b)(13) ``Sec. Sec.  429.14 through 429.60'' 
and adding in its place, ``Sec. Sec.  429.14 through 429.62''; and
0
b. Adding a ninth row to the table in paragraph (d) to read as follows:


Sec.  429.12  General requirements applicable to certification reports.

* * * * *
    (d) * * *

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Portable air conditioners.................  February 1.
------------------------------------------------------------------------

* * * * *
0
3. Section Sec.  429.62 [proposed at 81 FR 35242 (June 1, 2016)] is 
amended by adding paragraph (b) to read as follows:


Sec.  429.62  Portable Air Conditioners.

* * * * *
    (b) Certification reports. (1) The requirements of Sec.  429.12 are 
applicable to single-duct and dual-duct portable air conditioners; and
    (2) Pursuant to Sec.  429.12(b)(13), a certification report shall 
include the following public product-specific information: The combined 
energy efficiency ratio (CEER in British thermal units per Watt-hour 
(Btu/Wh)), the seasonally adjusted cooling capacity in British thermal 
units per hour (Btu/h), the duct configuration (single-duct, dual-duct, 
or ability to operate in both configurations), presence of heating 
function, and primary condensate removal feature (auto-evaporation, 
gravity drain, removable internal collection bucket, or condensate 
pump).
0
4. Section Sec.  429.134 is amended by adding paragraph (n) to read as 
follows:


Sec.  429.134  Product-specific enforcement provisions.

* * * * *
    (n) Portable air conditioners. Verification of seasonally adjusted 
cooling capacity. The seasonally adjusted cooling capacity will be 
measured pursuant to the test requirements of 10 CFR part 430 for each 
unit tested. The results of the measurement(s) will be averaged and 
compared to the value of seasonally adjusted cooling capacity certified 
by the manufacturer. The certified seasonally adjusted cooling capacity 
will be considered valid only if the average measured seasonally 
adjusted cooling capacity is within five percent of the certified 
seasonally adjusted cooling capacity.
    (1) If the certified seasonally adjusted cooling capacity is found 
to be valid, the certified value will be used as the basis for 
determining the minimum allowed combined energy efficiency ratio for 
the basic model.
    (2) If the certified seasonally adjusted cooling capacity is found 
to be invalid, the average measured seasonally adjusted cooling 
capacity will be used to determine the minimum allowed combined energy 
efficiency ratio for the basic model.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
5. The authority citation for part 430 continues to read as follows:

    Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

0
6. In Sec.  430.32, add paragraph (z) to read as follows:


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

* * * * *
    (z) Portable air conditioners. Single-duct portable air 
conditioners and dual-duct portable air conditioners manufactured on or 
after [DATE 5 YEARS AFTER THE PUBLICATION OF THE FINAL RULE] must have 
a combined energy efficiency ratio (CEER) in Btu/Wh no less than:
[GRAPHIC] [TIFF OMITTED] TP13JN16.011

SACC: Seasonally adjusted cooling capacity in Btu/h

[FR Doc. 2016-13549 Filed 6-10-16; 8:45 am]
BILLING CODE 6450-01-P