[Federal Register Volume 81, Number 209 (Friday, October 28, 2016)]
[Rules and Regulations]
[Pages 75194-75263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24759]
[[Page 75193]]
Vol. 81
Friday,
No. 209
October 28, 2016
Part II
Department of Energy
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10 CFR Part 430
Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products; Final Rule
Federal Register / Vol. 81 , No. 209 / Friday, October 28, 2016 /
Rules and Regulations
[[Page 75194]]
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DEPARTMENT OF ENERGY
10 CFR Part 430
[Docket Number EERE-2011-BT-STD-0043]
RIN 1904-AC51
Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Direct final rule.
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Synopsis: The Energy Policy and Conservation Act of 1975, as
amended, established the Energy Conservation Program for Consumer
Products Other Than Automobiles. Based on provisions in EPCA that
enable the Secretary of Energy to classify additional types of consumer
products as covered products, the U.S. Department of Energy (DOE)
classified miscellaneous refrigeration products as covered consumer
products under EPCA. In this direct final rule, DOE is adopting new
energy conservation standards for these products that correspond to the
recommendations submitted jointly by interested persons that are fairly
representative of relevant points of view. DOE has determined that the
new energy conservation standards for these products would result in
significant conservation of energy, and are technologically feasible
and economically justified. A notice of proposed rulemaking that
proposes identical energy efficiency standards is published elsewhere
in this Federal Register. If DOE receives adverse comment and
determines that such comment may provide a reasonable basis for
withdrawal, DOE will withdraw the direct final rule and will proceed
with the proposed rule.
DATES: The effective date of this rule is February 27, 2017 unless
adverse comment is received by February 15, 2017. If adverse comments
are received that DOE determines may provide a reasonable basis for
withdrawal of the final rule, a timely withdrawal of this rule will be
published in the Federal Register. If no such adverse comments are
received, compliance with the new standards established in this direct
final rule will be required for miscellaneous refrigeration products as
detailed in the SUPPLEMENTARY INFORMATION section of this document.
Compliance with these new standards for miscellaneous refrigeration
products is required starting on October 28, 2019.
ADDRESSES: Any comments submitted must identify the direct final rule
for Energy Conservation Standards for miscellaneous refrigeration
products and provide docket number EERE-2011-BT-STD-0043 and/or
regulatory information number (RIN) 1904-AC51. 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: Appliance and Equipment Standards Program, 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: Appliance and Equipment Standards
Program, U.S. Department of Energy, Building Technologies Office, 950
L'Enfant Plaza SW., 6th Floor, Washington, DC 20024. Telephone: (202)
586-6636. If possible, please submit all items on a CD, in which case
it is not necessary to include printed copies.
No telefacsimilies (faxes) will be accepted. For detailed
instructions on submitting comments and additional information on the
rulemaking process, see section VII of this document (``Public
Participation'').
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://www.regulations.gov/docket?D=EERE-2011-BT-STD-0043. This Web page
contains a link to the docket for this document on the
www.regulations.gov site. The www.regulations.gov Web page contains
simple instructions on how to access all documents, including public
comments, in the docket. For further information on how to submit a
comment, review other public comments and the docket, or participate in
the public meeting, contact the Appliance and Equipment Standards
Program Staff at (202) 586-6636 or by email:
[email protected].
FOR FURTHER INFORMATION CONTACT: Joseph Hagerman, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Building
Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington,
DC 20585-0121. Telephone: (202) 586-4549. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Direct Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. History of Standards Rulemaking for Miscellaneous
Refrigeration Products
III. General Discussion
A. Consensus Agreement
1. Background
2. Recommendations
B. Compliance Date
C. Scope of Coverage
D. Product Classes
E. Test Procedure
F. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
G. Energy Savings
1. Determination of Savings
2. Significance of Savings
H. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
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 of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage
a. Coolers
b. Combination Cooler Refrigeration Products
c. Ice Makers
d. Non-Compressor Refrigerators
2. Product Classes
a. Coolers
b. Combination Cooler Refrigeration Products
3. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Coolers
a. Methodology
b. Efficiency Levels
[[Page 75195]]
c. Manufacturer Production Costs
2. Combination Cooler Refrigeration Products
a. Methodology
b. Efficiency Levels
c. Manufacturer Production Costs
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
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 and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Impacts on Direct Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance 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
9. Conclusion
a. Benefits and Burdens of TSLs Considered for Coolers
b. Benefits and Burdens of TSLs Considered for Combination
Cooler Refrigeration Products
c. Summary of Annualized Benefits and Costs of the Adopted
Standards
VI. 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
M. Congressional Notification
VII. Public Participation
A. Submission of Comments
B. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Synopsis of the Direct Final Rule
Title III, Part B \1\ of the Energy Policy and Conservation Act of
1975 (``EPCA'' or in context, ``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 July 18, 2016 (the July 2016 Final Coverage
Determination), DOE classified miscellaneous refrigeration products
(``MREFs'') as covered consumer products under EPCA. 81 FR 46768. The
MREF category includes refrigeration products such as coolers (e.g.,
wine chillers) and combination cooler refrigeration products (e.g.,
wine chillers combined with a refrigerator, freezer, or refrigerator-
freezer).
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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 (April 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))
DOE received a statement submitted jointly by interested persons
that are fairly representative of relevant points of view (including
representatives of manufacturers of the covered equipment at issue,
States, and efficiency advocates) containing recommendations with
respect to new energy conservation standards for MREFs (see section
III.A of this document for a description of the jointly-submitted
statement). DOE has determined that the recommended standards contained
in the statement are in accordance with 42 U.S.C. 6295(o), which
prescribes the conditions under which DOE may adopt new standards.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing
this direct final rule to establish new energy conservation standards
for MREFs.
The new MREF standards, which are expressed in maximum allowable
annual energy use (``AEU'') in kilowatt-hours per year (``kWh/yr'') as
a function of the calculated adjusted volume (``AV'') in cubic feet
(``ft\3\''), are shown in Table I.1 and Table I.2. The standards will
apply to all MREFs listed in Table I.1 and Table I.2 and manufactured
in, or imported into, the United States starting on October 28, 2019.
Table I.1--Energy Conservation Standards for Coolers
------------------------------------------------------------------------
Product class Maximum allowable AEU (kWh/yr)
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Built-in Compact...................... 7.88AV [dagger] + 155.8
Built-in..............................
Freestanding Compact..................
Freestanding..........................
------------------------------------------------------------------------
[dagger] AV = Adjusted volume, in ft\3\, as calculated according to
title 10 of the Code of Federal Regulations (``CFR'') part 430,
subpart B, appendix A.
[[Page 75196]]
Table I.2--Energy Conservation Standards for Combination Cooler Refrigeration Products
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Product class description Product class designation * Maximum allowable AEU (kWh/yr)
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Cooler with all-refrigerator--automatic C-3A............................ 4.57AV [dagger] + 130.4
defrost.
Built-in cooler with all-refrigerator-- C-3A-BI......................... 5.19AV + 147.8
automatic defrost.
Cooler with upright freezers with C-9............................. 5.58AV + 147.7
automatic defrost without an automatic
icemaker.
Built-in cooler with upright freezer with C-9-BI.......................... 6.38AV + 168.8
automatic defrost without an automatic
icemaker.
Cooler with upright freezer with C-9I............................ 5.58AV + 231.7
automatic defrost with an automatic
icemaker.
Built-in cooler with upright freezer with C-9I-BI......................... 6.38AV + 252.8
automatic defrost with an automatic
icemaker.
Compact cooler with all-refrigerator-- C-13A........................... 5.93AV + 193.7
automatic defrost.
Built-in compact cooler with all- C-13A-BI [dagger][dagger]....... 6.52AV + 213.1
refrigerator--automatic defrost.
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* These product classes are consistent with the current product classes established for refrigerators,
refrigerator-freezers, and freezers. 10 CFR 430.32.
[dagger] AV = Adjusted volume, in ft\3\, as calculated according to 10 CFR part 430, subpart B, appendix A.
[dagger][dagger] There is no current product class 13A-BI for refrigerators, refrigerator-freezers, or freezers.
A. Benefits and Costs to Consumers
Table I.3 presents DOE's evaluation of the economic impacts of the
adopted standards on consumers of MREFs, as measured by the average
life-cycle cost (``LCC'') savings and the simple payback period
(``PBP'').\3\ The average LCC savings are positive for all product
classes affected by the adopted standards, and the PBPs are less than
the average lifetime of MREFs, which is estimated to be at least 10
years (see section IV.F of this direct final rule).
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\3\ The average LCC savings are measured relative to the
efficiency distribution in the compliance year in the absence of
standards (see section IV.F of this document). The simple payback
period, which is designed to compare specific efficiency levels, is
measured relative to the lowest efficiency level in the no-new-
standards case (see section IV.F.9 of this document).
Table I.3--Impacts of New Energy Conservation Standards on Consumers of
MREFs
------------------------------------------------------------------------
Simple
Average LCC payback
Product class savings * period *
(2015$) (years)
------------------------------------------------------------------------
Coolers
------------------------------------------------------------------------
Freestanding compact coolers............ 265 1.4
Built-in compact coolers................ 28 4.6
Freestanding coolers.................... 153 1.8
Built-in coolers........................ 77 6.1
------------------------------------------------------------------------
Combination Cooler Refrigeration Products
------------------------------------------------------------------------
C-3A.................................... n.a. n.a.
C-3A-BI................................. n.a. n.a.
C-9 [dagger]............................ n.a. n.a.
C-9-BI [dagger]......................... n.a. n.a.
C-13A................................... 32 4.3
C-13A-BI................................ n.a. n.a.
------------------------------------------------------------------------
* Calculation of savings and PBP is not applicable (n.a.) if the
standard is set at an efficiency level that is already met or exceeded
in the MREF market.
[dagger] Results for C-9 and C-9-BI are also applicable to C-9I and C-9I-
BI.
DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document.
B. Impact on Manufacturers
The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the base year through the
end of the analysis period (2016 to 2048). Using a real discount rate
of 7.7 percent, DOE estimates that the INPV for manufacturers of MREFs
in the case without standards is $263.3 million for coolers and $108.2
million for combination cooler refrigeration products in 2015$. Under
the new standards, DOE expects that manufacturers may lose up to 20.8
percent of this INPV for coolers, which is approximately $54.8 million;
and manufacturers may lose up to 0.7 percent of this INPV for
combination cooler refrigeration products, which is approximately $0.8
million. Additionally, based on DOE's interviews with the manufacturers
of MREFs, DOE does not expect significant impacts on manufacturing
capacity or loss of employment for the industry as a whole to result
from the standards for MREFs adopted in this direct final rule.
DOE's analysis of the impacts of new standards on manufacturers is
described in section IV.J of this document.
C. National Benefits and Costs \4\
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\4\ All monetary values in this section are expressed in 2015
dollars and, where appropriate, are discounted to 2016 unless
explicitly stated otherwise. Energy savings in this section refer to
the full-fuel-cycle (``FFC'') savings (see section IV.H of this
document for discussion).
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DOE's analyses indicate that the adopted energy conservation
standards for MREFs would save a significant amount of energy. Relative
to the no-new-standards case, the lifetime energy
[[Page 75197]]
savings for MREFs purchased in the 30-year period that begins in the
anticipated year of compliance with the new standards (2019-2048)
amount to 1.5 quadrillion Btu (``quads'').\5\ This represents a savings
of 58 percent relative to the energy use of these products in the no-
new-standards case.
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\5\ A quad is equal to 10\15\ British thermal units (''Btu'').
The quantity refers to 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 of this document.
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The cumulative net present value (``NPV'') of total consumer costs
and savings of the standards for MREFs ranges from $4.78 billion (at a
7-percent discount rate) to $11.02 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
MREFs purchased in 2019-2048.
In addition, the standards for MREFs are projected to yield
significant environmental benefits. DOE estimates that the standards
would result in cumulative greenhouse gas emission reductions (over the
same period as for energy savings) of 91.8 million metric tons (``Mt'')
\6\ of carbon dioxide (``CO2''), 54.0 thousand tons of
sulfur dioxide (``SO2''), 164.0 tons of nitrogen oxides
(``NOX''), 387.1 thousand tons of methane
(``CH4''), 1.1 thousand tons of nitrous oxide
(``N2O''), and 0.2 tons of mercury (``Hg'').\7\ The
cumulative reduction in CO2 emissions through 2030 amounts
to 20.2 Mt, which is equivalent to the emissions resulting from the
annual electricity use of more than 2.8 million homes.
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\6\ A metric ton is equivalent to 1.1 short tons. Results for
NOX and Hg are presented in short tons.
\7\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2015 (``AEO 2015'') Reference case, which generally
represents current legislation and environmental regulations for
which implementing regulations were available as of October 31,
2014.
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The value of the CO2 reductions is calculated using a
range of values per metric ton of CO2 (otherwise known as
the ``Social Cost of Carbon,'' or ``SCC'') developed by a Federal
interagency working group.\8\ The derivation of the SCC values is
discussed in section IV.L of this document. Using discount rates
appropriate for each set of SCC values, DOE estimates that the net
present monetary value of the CO2 emissions reduction (not
including CO2 equivalent emissions of other gases with
global warming potential) is between $0.679 billion and $9.271 billion,
with a value of $3.047 billion using the central SCC case represented
by $40.6/t in 2015. DOE also estimates that the net present monetary
value of the NOX emissions reduction to be $0.142 billion at
a 7-percent discount rate, and $0.326 billion at a 3-percent discount
rate.\9\
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\8\ United States Government-Interagency Working Group on Social
Cost of Carbon. Technical Support Document: Technical Update of the
Social Cost of Carbon for Regulatory Impact Analysis Under Executive
Order 12866. May 2013. Revised July 2015. Available at https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
\9\ DOE estimated the monetized value of NOX
emissions reductions associated with electricity savings using
benefit per ton estimates from the Regulatory Impact Analysis for
the Clean Power Plan Final Rule, published in August 2015 by EPA's
Office of Air Quality Planning and Standards. Available at
www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis. See section IV.L of this document for further
discussion. The U.S. Supreme Court has stayed the rule implementing
the Clean Power Plan until the current litigation against it
concludes. Chamber of Commerce, et al. v. EPA, et al., Order in
Pending Case, 577 U.S. (2016). However, the benefit-per-ton
estimates established in the Regulatory Impact Analysis for the
Clean Power Plan are based on scientific studies that remain valid
irrespective of the legal status of the Clean Power Plan. DOE is
primarily using a national benefit-per-ton estimate for
NOX emitted from the Electricity Generating Unit sector
based on an estimate of premature mortality derived from the ACS
study (Krewski, et al. 2009). If the benefit-per-ton estimates were
based on the Six Cities study (Lepuele, et al. 2011), the values
would be nearly two-and-a-half times larger.
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Table I.4 summarizes the economic benefits and costs expected to
result from the adopted standards for MREFs.
Table I.4--Summary of Economic Benefits and Costs of New Energy
Conservation Standards for MREFs *
------------------------------------------------------------------------
Present value
Category (billion Discount rate
2015$) (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings......... 6.4 7
13.9 3
CO2 Reduction (using mean SCC at 5% 0.7 5
discount rate) **......................
CO2 Reduction (using mean SCC at 3% 3.0 3
discount rate) **......................
CO2 Reduction (using mean SCC at 2.5% 4.8 2.5
discount rate) **......................
CO2 Reduction (using 95th percentile SCC 9.3 3
at 3% discount rate) **................
NOX Reduction [dagger].................. 0.1 7
0.3 3
Total Benefits [dagger][dagger]......... 9.6 7
17.3 3
------------------------------------------------------------------------
Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs.... 1.7 7
2.9 3
------------------------------------------------------------------------
Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction 8.0 7
Monetized Value [dagger][dagger]....... 14.4 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with MREFs
shipped in 2019-2048. These results include benefits to consumers
which accrue after 2048 from the products purchased in 2019-2048. The
incremental installed costs include incremental equipment cost as well
as installation costs. The CO2 reduction benefits are global benefits
due to actions that occur nationally. Note that the Benefits and Costs
may not sum to the Net Benefits due to rounding.
[[Page 75198]]
** The interagency group selected four sets of SCC values for use in
regulatory analyses. Three sets of values are based on the average SCC
from the integrated assessment models, at discount rates of 5%, 3%,
and 2.5%. For example, for 2015 emissions, these values are $12.4/t,
$40.6/t, and $63.2/t, in 2015$, respectively. The fourth set ($118/t
in 2015$ for 2015 emissions), which represents the 95th percentile of
the SCC distribution calculated using a 3% discount rate, is included
to represent higher-than-expected impacts from temperature change
further out in the tails of the SCC distribution. The SCC values are
emission year specific. See section IV.L.1 of this document for more
details.
[dagger] DOE estimated the monetized value of NOX emissions reductions
associated with electricity savings using benefit per ton estimates
from the ``Regulatory Impact Analysis for the Clean Power Plan Final
Rule,'' published in August 2015 by EPA's Office of Air Quality
Planning and Standards. (Available at www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L of
this document for further discussion. DOE is primarily using a
national benefit-per-ton estimate for NOX emitted from the Electricity
Generating Unit sector based on an estimate of premature mortality
derived from the ACS study (Krewski et al. 2009). If the benefit-per-
ton estimates were based on the Six Cities study (Lepuele et al.
2011), the values would be nearly two-and-a-half times larger.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are
presented using only the average SCC with 3-percent discount rate.
The benefits and costs of the adopted standards for MREFs sold in
2019 to 2048 can also be expressed in terms of annualized values. The
monetary values for the total annualized net benefits are the sum of
(1) the national economic value of the benefits in reduced operating
costs, minus (2) the increases in product purchase prices and
installation costs, plus (3) the value of the benefits of
CO2 and NOX emission reductions, all
annualized.\10\
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\10\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2015, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2020 or 2030), and then discounted the present value from
each year to 2015. The calculation uses discount rates of 3 and 7
percent for all costs and benefits except for the value of
CO2 reductions, for which DOE used case-specific discount
rates, as shown in Table I.4. Using the present value, DOE then
calculated the fixed annual payment over a 30-year period, starting
in the compliance year that yields the same present value.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products. The national operating cost savings is measured for
the lifetime of MREFs shipped in 2019-2048. The CO2
reduction is a benefit that accrues globally due to decreased domestic
energy consumption that is expected to result from this rule. Because
CO2 emissions have a very long residence time in the
atmosphere, the SCC values in future years reflect future
CO2-emissions impacts that continue beyond 2100 through
2300.
Estimates of annualized benefits and costs of the adopted 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 SCC series that has a value of $40.6/t in
2015),\11\ the estimated cost of the standards in this rule is $153
million per year in increased equipment costs, while the estimated
annual benefits are $593 million in reduced equipment operating costs,
$165 million in CO2 reductions, and $13.1 million in reduced
NOX emissions. In this case, the net benefit amounts to $619
million per year.
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\11\ 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 of this document).
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Using a 3-percent discount rate for all benefits and costs and the
SCC series has a value of $40.6/t in 2015, the estimated cost of the
standards is $157 million per year in increased equipment costs, while
the estimated annual benefits are $754 million in reduced operating
costs, $165 million in CO2 reductions, and $17.7 million in
reduced NOX emissions. In this case, the net benefit amounts
to $779 million per year.
Table I.5--Annualized Benefits and Costs of New Standards for MREFs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discount rate Primary estimate Low net benefits estimate High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7%.............................. 593....................... 545....................... 649.
3%.............................. 754....................... 686....................... 839.
CO2 Reduction (using mean SCC at 5%.............................. 49........................ 46........................ 53.
5% discount rate) **.
CO2 Reduction (using mean SCC at 3%.............................. 165....................... 155....................... 179.
3% discount rate) **.
CO2 Reduction (using mean SCC at 2.5%............................ 242....................... 227....................... 263.
2.5% discount rate) **.
CO2 Reduction (using 95th 3%.............................. 502....................... 471....................... 546.
percentile SCC at 3% discount
rate) **.
NOX Reduction [dagger]............ 7%.............................. 13.1...................... 12.4...................... 31.6.
3%.............................. 17.7...................... 16.6...................... 43.6.
Total Benefits [dagger][dagger]... 7% plus CO2 range............... 655 to 1,108.............. 603 to 1,028.............. 733 to 1,226.
7%.............................. 771....................... 712....................... 860.
3% plus CO2 range............... 820 to 1,273.............. 748 to 1,173.............. 935 to 1,428.
3%.............................. 937....................... 857....................... 1,062.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs 7%.............................. 153....................... 145....................... 118.
[dagger][dagger][dagger]. 3%.............................. 157....................... 148....................... 116.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............ 7% plus CO2 range............... 503 to 956................ 459 to 884................ 615 to 1,108.
7%.............................. 619....................... 568....................... 742.
3% plus CO2 range............... 663 to 1,116.............. 601 to 1,026.............. 819 to 1,312.
[[Page 75199]]
3%.............................. 779....................... 709....................... 946.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with MREFs shipped in 2019-2048. These results include benefits to consumers which
accrue after 2048 from the MREFs purchased from 2019-2048. The incremental installed costs include incremental equipment cost as well as installation
costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High Benefits Estimates
utilize projections of energy prices and housing starts from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case,
respectively. In addition, incremental product costs reflect a constant price trend in the Primary Estimate and 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.F of this document. Note
that the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5%, 3%, and 2.5%
discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC values
are emission year specific. See section IV.L.1 of this document for more details.
[dagger] DOE estimated the monetized value of NOX emissions reductions associated with electricity savings using benefit per ton estimates from the
``Regulatory Impact Analysis for the Clean Power Plan Final Rule,'' published in August 2015 by EPA's Office of Air Quality Planning and Standards.
(Available at www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L of this document for further
discussion. For the Primary Estimate and Low Net Benefits Estimate, DOE used a national benefit-per-ton estimate for NOX emitted from the Electric
Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For DOE's High Net Benefits
Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2011), which are nearly two-and-a-half times larger than
those from the ACS study.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are presented using only the average SCC with 3-percent discount rate. In the rows labeled
``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values
are added to the full range of CO2 values.
[dagger][dagger][dagger] The value of consumer incremental product costs is lower in the low net benefits estimate than it is in the primary estimate
because both estimates use the same price trend and there are fewer shipments in the low net benefits estimate. The value of consumer incremental
product costs is lower in the high net benefits scenario than it is in the primary case because the high net benefits scenario uses a highly declining
price trend that more than offsets the increase in shipments due to higher economic growth.
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
Based on the analyses culminating in this direct final rule, DOE
found the benefits to the nation of the standards (energy savings,
consumer LCC savings, positive NPV of consumer benefit, and emission
reductions) outweigh the burdens (reduction of INPV for manufacturers).
DOE has concluded that the standards in this direct final rule
represent the maximum improvement in energy efficiency that is
technologically feasible and economically justified, and would result
in significant conservation of energy.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule to establish new energy conservation
standards for MREFs.
II. Introduction
The following section briefly discusses the statutory authority
underlying this direct final rule, as well as some of the relevant
historical background related to the establishment of standards for
MREFs.
A. Authority
As indicated above, EPCA includes provisions covering the products
addressed by this Direct final rule. EPCA addresses, among other
things, the energy efficiency of certain types of consumer products.
Relevant provisions of the Act specifically include definitions (42
U.S.C. 6291), energy conservation standards (42 U.S.C. 6295), test
procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), and
the authority to require information and reports from manufacturers (42
U.S.C. 6296).
Under 42 U.S.C. 6292(a)(20), DOE may extend coverage over a
particular type of consumer product provided that DOE determines that
classifying products of such type as covered products is necessary or
appropriate to carry out the purposes of EPCA and that the average
annual per-household energy use by products of such type is likely to
exceed 100 kilowatt-hours (``kWh'') or its British thermal unit
(``Btu'') equivalent per year. See 42 U.S.C. 6292(b)(1). EPCA sets out
the following additional requirements to establish energy conservation
standards for a new covered product: (1) The average per household
domestic energy use by such products exceeded 150 kWh or its Btu
equivalent for any 12-month period ending before such determination;
(2) the aggregate domestic household energy use by such products
exceeded 4.2 million kWh or its Btu equivalent for any such 12-month
period; (3) substantial energy efficiency of the products is
technologically feasible; and (4) applying a labeling rule is unlikely
to be sufficient to induce manufacturers to produce, and consumers and
other persons to purchase, products of such type that achieve the
maximum level of energy efficiency. See 42 U.S.C. 6295(l)(1).
Pursuant to EPCA, DOE's energy conservation program for covered
products consists essentially of four parts: (1) Testing; (2) labeling;
(3) the establishment of Federal energy conservation standards; and (4)
certification and enforcement procedures. The Federal Trade Commission
(``FTC'') is primarily responsible for labeling, and DOE implements the
remainder of the program. Subject to certain criteria and conditions,
DOE is required to develop test procedures to measure the energy
efficiency, energy use, or estimated annual operating cost of each
covered product. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of
covered products must use the prescribed DOE test procedure as the
basis for certifying to DOE that their products comply with the
applicable energy conservation standards adopted under EPCA and when
making representations to the public regarding the energy use or
efficiency of those products. (42 U.S.C. 6293(c) and 6295(s))
Similarly, DOE must use these test procedures to determine whether the
products comply with standards adopted pursuant to EPCA. (42 U.S.C.
6295(s)) The DOE test procedure for MREFs currently appears at title 10
of the Code of Federal Regulations (``CFR'') part 430, subpart B,
appendix A (appendix A).
[[Page 75200]]
DOE follows specific criteria when prescribing new or amended
standards for covered products. As indicated above, any new or amended
standard for a covered product must be designed to achieve the maximum
improvement in energy efficiency that is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A) and (3)(B))
Furthermore, DOE may not adopt any standard that would not result in
the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard: (1) For certain products,
including MREFs, if no test procedure has been established for the
product, or (2) if DOE determines by rule that the new or amended
standard is not technologically feasible or economically justified. (42
U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a new or amended 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 considering, to the greatest extent practicable, the
following seven 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 imposition of the
standard;
3. The total projected amount of energy, or as applicable, water,
savings likely to result directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the covered
products likely to result from the imposition of 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
imposition of 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 also contains what is known as an ``anti-backsliding''
provision, which prevents the Secretary from prescribing any amended
standard that either increases the maximum allowable energy use or
decreases the minimum required energy efficiency of a covered product.
(42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended
or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
Additionally, DOE may set energy conservation standards for a
covered product that has two or more subcategories. In those instances,
DOE must specify a different standard level for a type or class of
products that has the same function or intended use if DOE determines
that products within such group: (A) Consume a different kind of energy
from that consumed by other covered products within such type (or
class); or (B) have a capacity or other performance-related feature
which other products within such type (or class) do not have and such
feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In
determining whether a performance-related feature justifies a different
standard for a group of products, DOE must consider such factors as the
utility to the consumer of such a 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).
DOE is also 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 the 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
test procedures for MREFs address standby mode and off mode energy use,
as do the new standards adopted in this direct final rule.
With particular regard to direct final rules, the Energy
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140 (December 19, 2007), amended EPCA, in relevant part, to grant DOE
authority to issue a type of final rule (i.e., a ``direct final rule'')
establishing an energy conservation standard for a product on receipt
of a statement that is submitted jointly by interested persons that are
fairly representative of relevant points of view (including
representatives of manufacturers of covered products, States, and
efficiency advocates), as determined by the Secretary, and that
contains recommendations with respect to an energy or water
conservation standard. In the context of consumer products, if the
Secretary determines that the recommended standard contained in the
statement is in accordance with 42 U.S.C. 6295(o), the Secretary may
issue a final rule establishing the recommended standard. A notice of
proposed rulemaking (``NOPR'') that proposes an identical energy
efficiency standard is published simultaneously with the direct final
rule. A public comment period of at least 110 days is provided. See 42
U.S.C. 6295(p)(4). Not later than 120 days after the date on which a
direct final rule issued under this authority is published in the
Federal Register, the Secretary shall withdraw the direct final rule if
the Secretary receives one or more adverse public comments relating to
the direct final rule or any alternative joint recommendation and based
on the rulemaking record relating to the direct final rule, the
Secretary determines that such adverse public comments or alternative
joint recommendation may provide a reasonable basis for withdrawing the
direct final rule under subsection 42 U.S.C. 6295(o) or any other
applicable law. On withdrawal of a direct final rule, the Secretary
shall proceed with the NOPR published simultaneously with the direct
final rule and publish in the Federal Register the reasons why the
direct final rule was withdrawn. This direct final rule provision
applies to the products at issue in this direct final rule. See 42
U.S.C. 6295(p)(4).
DOE also notes that it typically finalizes its test procedures for
a given regulated product or equipment prior to
[[Page 75201]]
proposing new or amended energy conservation standards for that product
or equipment, see 10 CFR part 430, subpart C, appendix A, sec. 7(c)
(``Procedures, Interpretations and Policies for Consideration of New or
Revised Energy Conservation Standards for Consumer Products'' or
``Process Rule''). In this instance, although DOE has finalized its
test procedure for MREFs, rather than issue a notice of proposed
rulemaking to set standards for these products, DOE is moving forward
with a direct final rule. As part of the negotiated rulemaking that led
to the Term Sheet setting out the standards that DOE is proposing,
Working Group members recommended (with ASRAC's approval) that DOE
implement the test procedure that DOE recently finalized. See 81 FR
46768 (July 18, 2016). The approach laid out in that final rule is
consistent with the approach agreed upon by the various Working Group
members who participated in the negotiated rulemaking. Accordingly, in
accordance with section 14 of the Process Rule, DOE tentatively
concludes that deviation from the Process Rule is appropriate here.
B. History of Standards Rulemaking for Miscellaneous Refrigeration
Products
DOE has not previously established energy conservation standards
for MREFs. Consistent with its statutory obligations, DOE sought to
establish regulatory coverage over these products prior to establishing
energy conservation standards to regulate MREF efficiency. On November
8, 2011, DOE published a notice of proposed determination of coverage
(``NOPD'') to address the potential coverage of those refrigeration
products that do not use a compressor-based refrigeration system. 76 FR
69147. Rather than employing a compressor/condenser-based system
typically installed in the refrigerators, refrigerator-freezers, and
freezers found in most U.S. homes, these ``non-compressor-based''
refrigeration products use a variety of other means to introduce
chilled air into the interior of the storage cabinet of the product.
Two systems that DOE specifically examined were thermoelectric- and
absorption-based systems.\12\ The former of these systems is used in
some wine chiller applications. With respect to the latter group of
products, DOE indicated its belief that these types of products were
used primarily in mobile applications and would likely fall outside of
DOE's scope of coverage. See 42 U.S.C. 6292(a) (excluding from coverage
``those consumer products designed solely for use in recreational
vehicles and other mobile equipment'').
---------------------------------------------------------------------------
\12\ Chapter 3 of the direct final rule technical support
document provides a detailed description of each of these
refrigeration technologies.
---------------------------------------------------------------------------
On February 13, 2012, DOE published a document announcing the
availability of the framework document, ``Energy Conservation Standards
Rulemaking Framework Document for Wine Chillers and Miscellaneous
Refrigeration Products,'' and a public meeting to discuss the proposed
analytical framework for the energy conservation standards rulemaking.
77 FR 7547. In the framework document, DOE described the procedural and
analytical approaches it anticipated using to evaluate potential energy
conservation standards for four types of consumer refrigeration
products: Wine chillers, non-compressor refrigerators, hybrid
refrigerators (i.e., a wine chiller combined with a refrigerator), and
ice makers.
DOE held a public meeting on February 22, 2012, to present the
framework document, describe the analyses DOE planned to conduct during
the rulemaking, seek comments from interested parties on these
subjects, and inform them about, and facilitate their involvement in,
the rulemaking. At the public meeting and during the comment period,
DOE received multiple comments that addressed issues raised in the
framework document and identified additional issues relevant to the
rulemaking.
On October 31, 2013, DOE published in the Federal Register a
supplemental notice of proposed determination of coverage (the
``October 2013 SNOPD''), in which it tentatively determined that the
four categories of consumer products addressed in the framework
document (wine chillers, non-compressor refrigeration products, hybrid
refrigerators, and ice makers) satisfy the provisions of 42 U.S.C.
6292(b)(1). 78 FR 65223.
DOE published a notice of public meeting and availability of the
preliminary technical support document (``TSD'') for the MREF energy
conservation standards rulemaking on December 3, 2014. 79 FR 71705. The
preliminary analysis considered potential standards for the products
proposed for coverage in the October 2013 SNOPD. The preliminary TSD
includes the results of the following DOE preliminary analyses: (1)
Market and technology assessment; (2) screening analysis; (3)
engineering analysis; (4) markups analysis; (5) energy use analysis;
(6) LCC and PBP analyses; (7) shipments analysis; (8) national impact
analysis (``NIA''); and (9) preliminary manufacturer impact analysis
(``MIA'').
DOE held a public meeting on January 9, 2015, during which it
presented preliminary results for the engineering and downstream
economic analyses and sought comments from interested parties on these
subjects. At the public meeting and during the comment period, DOE
received comments that addressed issues raised in the preliminary
analysis and identified additional issues relevant to this rulemaking.
After reviewing the comments received in response to both the
preliminary analysis and a test procedure NOPR published on December
16, 2014 (the ``December 2014 Test Procedure NOPR,'' 79 FR 74894), DOE
ultimately determined that the development of test procedures and
potential energy conservation standards for MREFs would benefit from a
negotiated rulemaking process.
On April 1, 2015, DOE published a notice of intent to establish an
Appliance Standards and Rulemaking Federal Advisory Committee
(``ASRAC'') negotiated rulemaking working group for MREFs (the ``MREF
Working Group'' or in context, the ``Working Group'') to discuss and,
if possible, reach consensus on recommended scope of coverage,
definitions, test procedures, and energy conservation standards. 80 FR
17355. The MREF Working Group consisted of 15 members, including two
members from ASRAC and one DOE representative. The MREF Working Group
met in person during six sets of meetings in 2015: May 4-5, June 11-12,
July 15-16, August 11-12, September 16-17, and October 20.
On August 11, 2015, the MREF Working Group reached consensus on a
term sheet to recommend a scope of coverage, set of definitions, and
test procedures for MREFs (``Term Sheet #1'').\13\ That document laid
out the scope of products that the Working Group recommended that DOE
adopt with respect to MREFs, the definitions that would apply to MREFs
and certain other refrigeration products, and the test procedure that
manufacturers of MREFs would need to use when evaluating the energy
usage of these products. On October 20, 2015, the MREF Working Group
reached consensus on a term sheet to recommend energy conservation
standards for coolers and combination cooler refrigeration products
(``Term Sheet #2''). ASRAC approved Term Sheet #1 during an open
[[Page 75202]]
meeting on December 18, 2015, and Term Sheet #2 during an open meeting
on January 20, 2016. ASRAC subsequently sent the term sheets to the
Secretary for consideration.
---------------------------------------------------------------------------
\13\ The MREF Working Group term sheets are available in docket
ID EERE-2011-BT-STD-0043 on http://regulations.gov.
---------------------------------------------------------------------------
In addition to these steps, DOE sought to ensure that it had
obtained complete information and input regarding certain aspects
related to manufacturers of thermoelectric refrigeration products. To
this end, on December 15, 2015, DOE published a notice of data
availability (the ``December 2015 NODA'') in which it requested
additional public feedback on the methods and information used in the
development of the MREF Working Group term sheets. 80 FR 77589. DOE
noted in particular its interest in information related to
manufacturers of thermoelectric refrigeration products. Id. at 77590.
After considering the MREF Working Group recommendations and
comments received in response to the December 2015 NODA, DOE published
an SNOPD and notice of proposed rulemaking (the ``March 2016 SNOPD'')
on March 4, 2016. 81 FR 11454. The March 2016 SNOPD proposed
establishing coverage, definitions, and terminology consistent with
Term Sheet #1. It also proposed to determine that coolers and
combination cooler refrigeration products--as defined under the
proposal--would meet the requirements under EPCA to be considered
covered products. Id. at 11456-11459.
The July 2016 Final Coverage Determination established coolers and
combination cooler refrigeration products as covered products under
EPCA. Because DOE did not receive any comments in response to the March
2016 SNOPD that would substantively alter its proposals, the findings
of the final determination were unchanged from those presented in the
March 2016 SNOPD. Moreover, DOE determined in the July 2016 Final
Coverage Determination that MREFs, on average, consume more than 150
kWh/yr, and that the aggregate annual national energy use of these
products exceeds 4.2 TWh. Accordingly, these data indicate that MREFs
satisfy at least two of the four criteria required under EPCA in order
for the Secretary to set standards for a product whose coverage is
added pursuant to 42 U.S.C. 6292(b). See 42 U.S.C. 6295(l)(1)(A)-(D).
See also 81 FR 46768 at 46773-46775 (detailing the data used to
evaluate the energy usage of MREF products).
In addition to establishing coverage, the July 2016 Final Coverage
Determination established definitions for ``miscellaneous refrigeration
products,'' ``coolers,'' and ``combination cooler refrigeration
products'' in 10 CFR 430.2. The July 2016 Final Coverage Determination
also amended the existing definitions for ``refrigerator,''
``refrigerator-freezer,'' and ``freezer'' for consistency with the
newly established MREF definitions. These definitions were generally
consistent with the March 2016 SNOPD. Id. at 46775-46778.
III. General Discussion
A. Consensus Agreement
1. Background
As discussed in section II.B of this document, the MREF Working
Group approved two term sheets that recommended a scope of coverage,
definitions, test procedures, and energy conservation standards for
MREFs. ASRAC approved the two term sheets during open meetings and sent
them to the Secretary of Energy for consideration.
After carefully considering the consensus recommendations related
to new energy conservation standards for MREFs submitted by the MREF
Working Group and adopted by ASRAC, DOE has determined that these
recommendations comprise a statement submitted by interested persons
who are fairly representative of relevant points of view on this
matter. In reaching this determination, DOE took into consideration the
fact that the Working Group, in conjunction with ASRAC members who
approved the recommendations, consisted of representatives of
manufacturers of covered products, States, and efficiency advocates--
all of which are groups specifically identified by Congress as
potentially relevant parties to any consensus recommendation submitted
by ASRAC. (42 U.S.C. 6295(p)(4)(A)) As delineated above, Term Sheet #2
was submitted by a broad cross-section of interests, including the
manufacturers who produce the subject products, a trade association
representing these manufacturers, environmental and energy-efficiency
advocacy organizations, and an electric utility company. Although
States were not direct signatories to the Term Sheet, the ASRAC
Committee approving the Working Group's recommendations included one
member representing the State of California.\14\ Additionally, in spite
of the MREF Working Group meetings already being publicized and open to
all members of the public, DOE published the December 2015 NODA to
present the data and analyses used in support of developing the term
sheets to provide an opportunity for further comment from interested
parties. 80 FR 77589 (December 15, 2015). Moreover, DOE does not read
the statute as requiring absolute agreement among all interested
parties before the Department may proceed with issuance of a direct
final rule. By explicit language of the statute, the Secretary has the
discretion to determine when a joint recommendation for an energy or
water conservation standard has met the requirement for
representativeness (i.e., ``as determined by the Secretary'').
---------------------------------------------------------------------------
\14\ The individual was David Hungerford (California Energy
Commission).
---------------------------------------------------------------------------
By its plain terms, the statute contemplates that the Secretary
will exercise discretion to determine whether a given statement is
submitted jointly by interested persons that are fairly representative
of relevant points of view (including representatives of manufacturers
of covered products, States, and efficiency advocates). In this case,
given the broad range of persons participating in the process that led
to the submission--in the Working Group and in ASRAC--and given the
breadth of perspectives expressed in that process, DOE has determined
that the statements it received meet this criterion.
Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine
whether a jointly-submitted recommendation for an energy conservation
standard satisfies the criteria presented in 42 U.S.C. 6295(o). To make
this determination, DOE has conducted an analysis to evaluate whether
the potential energy conservation standards under consideration would
meet these requirements. This evaluation is the same comprehensive
approach that DOE typically conducts whenever it considers potential
energy conservation standards for a given type of product or equipment.
DOE applies the same principles to any consensus recommendations it may
receive to satisfy its statutory obligation to ensure that any energy
conservation standard that it adopts achieves the maximum improvement
in energy efficiency that is technologically feasible and economically
justified and will result in the significant conservation of energy.
Upon review, the Secretary determined that the standards recommended in
Term Sheet #2 submitted to DOE through ASRAC meet the standard-setting
criteria set forth under 42 U.S.C. 6295(o). The consensus-recommended
efficiency levels were included as trial standard level (``TSL'') 2 for
coolers and TSL 1 for combination cooler refrigeration products (see
section V.A of this document for a description of all of the considered
TSLs). The details regarding how the consensus-
[[Page 75203]]
recommended TSLs comply with the standard-setting criteria are
discussed and demonstrated in the relevant sections throughout this
document.
In sum, as the relevant criteria under 42 U.S.C. 6295(p)(4) have
been satisfied, the Secretary has determined that it is appropriate to
adopt the consensus-recommended energy conservation standards for MREFs
as presented in Term Sheet #2 through this direct final rule.
Pursuant to the same statutory provision, DOE is also
simultaneously publishing a NOPR proposing that the identical standard
levels contained in this direct final rule be adopted. Consistent with
the statute, DOE is providing a 110-day public comment period on this
direct final rule. Based on the comments received during this period,
the direct final rule will either become effective or DOE will withdraw
it if: (1) One or more adverse comments is received; and (2) DOE
determines that those comments, when viewed in light of the rulemaking
record related to the direct final rule, provide a reasonable basis for
withdrawal of the direct final rule under 42 U.S.C. 6295(o) and for DOE
to continue this rulemaking under the NOPR. (Receipt of an alternative
joint recommendation may also trigger a DOE withdrawal of the direct
final rule in the same manner.) See 42 U.S.C. 6295(p)(4)(C). Typical of
other rulemakings, it is the substance, rather than the quantity, of
comments that will ultimately determine whether a direct final rule
will be withdrawn. To this end, the substance of any adverse comment(s)
received will be weighed against the anticipated benefits of the
jointly-submitted recommendations and the likelihood that further
consideration of the comment(s) would change the results of the
rulemaking. DOE notes that, to the extent an adverse comment had been
previously raised and addressed in the rulemaking proceeding, such a
submission will not typically provide a basis for withdrawal of a
direct final rule.
2. Recommendations
The MREF Working Group recommended standards for all MREF product
classes of coolers and combination cooler refrigeration products. Table
III.1 and Table III.2 show the recommended standard levels, which are
expressed as an equation whose value varies based on the calculated AV
of a given product. The MREF Working Group recommended that these
standard levels take effect three years following the publication of
the direct final rule. See Term Sheet #2.
Table III.1--Consensus-Recommended Standard Levels for Coolers
------------------------------------------------------------------------
Product class Maximum allowable AEU (kWh/yr)
------------------------------------------------------------------------
Built-in Compact...................... 7.88AV[dagger] + 155.8
Built-in..............................
Freestanding Compact..................
Freestanding..........................
------------------------------------------------------------------------
[dagger] AV = Adjusted volume, in ft\3\, as calculated according to
title 10 CFR part 430, subpart B, appendix A.
Table III.2--Consensus-Recommended Standard Levels for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Product class description Product class designation * Maximum allowable AEU (kWh/yr)
----------------------------------------------------------------------------------------------------------------
Cooler with all-refrigerator--automatic C-3A............................ 4.57AV[dagger] + 130.4
defrost.
Built-in cooler with all-refrigerator-- C-3A-BI......................... 5.19AV + 147.8
automatic defrost.
Cooler with upright freezers with C-9............................. 5.58AV + 147.7
automatic defrost without an automatic
icemaker.
Built-in cooler with upright freezer with C-9-BI.......................... 6.38AV + 168.8
automatic defrost without an automatic
icemaker.
Cooler with upright freezer with C-9I............................ 5.58AV + 231.7
automatic defrost with an automatic
icemaker.
Built-in cooler with upright freezer with C-9I-BI......................... 6.38AV + 252.8
automatic defrost with an automatic
icemaker.
Compact cooler with all-refrigerator-- C-13A........................... 5.93AV + 193.7
automatic defrost.
Built-in compact cooler with all- C-13A-BI[dagger][dagger]........ 6.52AV + 213.1
refrigerator--automatic defrost.
----------------------------------------------------------------------------------------------------------------
* These product classes are consistent with the current product classes established for refrigerators,
refrigerator-freezers, and freezers. 10 CFR 430.32.
[dagger] AV = Adjusted volume, in ft\3\, as calculated according to 10 CFR part 430, subpart B, appendix A.
[dagger][dagger] There is no current product class 13A-BI for refrigerators, refrigerator-freezers, or freezers.
B. Compliance Date
When establishing new standards for products not previously
covered, EPCA provides that newly-established standards shall not apply
to products manufactured within five years after the publication of the
final rule. See 42 U.S.C. 6295(l)(2). As part of its set of
comprehensive recommendations, the MREF Working Group recommended that
DOE instead apply a 3-year lead time.
DOE has the authority under section 42 U.S.C. 6295(p)(4) to accept
recommendations for compliance dates contained in a joint submission
recommending amended standards. In DOE's view, the direct final rule
authority provision specifies the finding DOE has to make.
Specifically, Congress specified that if DOE determines that the
recommended standard is in accordance with 42 U.S.C. 6295(o), DOE may
issue a final rule establishing those standards. See 42 U.S.C.
6295(p)(4)(A)(i). Applying the direct final rule provision in this
manner meets Congress's goal to promote consensus agreements that
reflect broad input from interested parties who can fashion agreements
that best promote the aims of the statute. In the absence of a
consensus agreement, DOE notes that the more specific prescriptions of
EPCA would ordinarily prevail. However, when DOE receives a
recommendation resulting from the appropriate process--in this case,
the detailed procedure laid out in the direct final rule provision of
EPCA--that process provides the necessary fidelity to the statute,
along with compliance with section 6295(o), that Congress instructed
DOE to apply.
[[Page 75204]]
DOE notes that its analysis of whether the consensus-recommended
and other TSLs satisfy the criteria presented in 42 U.S.C. 6295(o)
contemplates two compliance periods. For consensus-recommended TSLs,
the analysis is based on a 2019 compliance date, as recommended by the
MREF Working Group. The analysis for all other TSLs is based on a 2021
compliance date consistent with EPCA, which provides that newly-
established standards shall not apply to products manufactured within
five years after the publication of the final rule. In other words, DOE
followed the prescriptions of EPCA for all TSLs that were not
recommended by the MREF Working Group. The two different compliance
dates are indicated in the relevant sections throughout this document.
C. Scope of Coverage
In the preliminary analysis, DOE considered potential standards for
four consumer product categories proposed for coverage in the October
2013 SNOPD: Cooled cabinets, non-compressor refrigerators, ice makers,
and hybrid products. See chapter 3 of the preliminary TSD.
Based on comments received in response to the preliminary analysis,
and on the recommendations of the MREF Working Group, DOE subsequently
proposed in the March 2016 SNOPD that consumer ice makers and non-
compressor refrigerators would not be included within MREFs. DOE
proposed to remove ice makers from the scope of MREFs because they are
significantly different from the other product types being considered
for coverage, consistent with the MREF Working Group's recommendation.
For non-compressor refrigerators, DOE is not aware of any products
available on the market that would be considered non-compressor
refrigerators. Instead, non-compressor products available on the market
would be considered coolers under the March 2016 SNOPD proposal. DOE
also revised the proposed definitions for cooled cabinets and hybrid
products to designate these products as coolers and combination cooler
refrigeration products, respectively, in accordance with the
definitions recommended by the MREF Working Group in Term Sheet #1. See
81 FR 11454, 11456, 11458-11459. Interested parties generally supported
the scope of coverage, energy use analysis, and definitions proposed in
the March 2016 SNOPD. Therefore, in the July 2016 Final Coverage
Determination, DOE determined that MREFs (including coolers and
combination cooler refrigeration products) are covered products under
EPCA. The July 2016 Final Coverage Determination also established
definitions for these products that are generally consistent with the
March 2016 SNOPD proposal. 81 FR 46768. This direct final rule
establishes energy conservation standards for MREFs as defined in the
July 2016 Final Coverage Determination.
D. 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
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility of the feature to the consumer and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q))
In this direct final rule, DOE is establishing energy conservation
standards for four product classes of coolers and nine product classes
of combination cooler refrigeration products. These product classes are
consistent with those recommended by the MREF Working Group in Term
Sheet #2. The product classes established in this direct final rule and
their descriptions are provided in Table III.3.
Table III.3--MREF Product Classes
------------------------------------------------------------------------
Product class Product class description
------------------------------------------------------------------------
Coolers
------------------------------------------------------------------------
Built-in compact............. Total refrigerated volume less than 7.75
ft \3\ and meeting the built-in
definition requirements
Built-in..................... Total refrigerated volume 7.75 ft \3\ or
greater and meeting the built-in
definition requirements
Freestanding Compact......... Total refrigerated volume less than 7.75
ft \3\ and not built-in
Freestanding................. Total refrigerated volume 7.75 ft \3\ or
greater and not built-in
------------------------------------------------------------------------
Combination Cooler Refrigeration Products
------------------------------------------------------------------------
C-3A......................... Cooler with all-refrigerator--automatic
defrost
C-3A-BI...................... Built-in cooler with all-refrigerator--
automatic defrost
C-9.......................... Cooler with upright freezer with
automatic defrost without an automatic
icemaker
C-9-BI....................... Built-in cooler with upright freezer with
automatic defrost without an automatic
icemaker
C-9I......................... Cooler with upright freezer with
automatic defrost with an automatic
icemaker
C-9I-BI...................... Built-in cooler with upright freezer with
automatic defrost with an automatic
icemaker
C-13A........................ Compact cooler with all-refrigerator--
automatic defrost
C-13A-BI..................... Built-In compact cooler with all-
refrigerator--automatic defrost
------------------------------------------------------------------------
E. Test Procedure
EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to quantify the efficiency of their product. Similarly,
DOE must use these test procedures to determine compliance with its
energy conservation standards. (42 U.S.C. 6295(s))
DOE published the December 2014 Test Procedure NOPR on December 16,
2014, in which it proposed to establish definitions and test procedures
for the product categories proposed for coverage in the October 2013
SNOPD. The proposed test procedures would measure the energy
efficiency, energy use, and estimated annual operating cost of these
products during a representative average use period and that would not
be unduly burdensome to conduct, as required under 42 U.S.C.
6293(b)(3). 79 FR 74894.
After reviewing comments responding to the December 2014 Test
Procedure NOPR, DOE ultimately determined that developing the test
procedures for these products would benefit from a negotiated
rulemaking process. Therefore, DOE included potential test procedures
within the scope of work for
[[Page 75205]]
the MREF Working Group. On August 11, 2015, the MREF Working Group
reached consensus on Term Sheet #1, which recommended scope of
coverage, definitions, and test procedures for MREFs. The MREF Working
Group generally agreed with the approach proposed in the December 2014
Test Procedure NOPR, but recommended updating usage factors, ambient
temperatures, and volume adjustment factors. See Term Sheet #1. ASRAC
approved the term sheet during an open meeting on December 18, 2015,
and subsequently sent it to the Secretary for consideration.
The test procedures for MREFs, which are consistent with the MREF
Working Group Recommendation, were codified in appendix A by the July
2016 Final Coverage Determination. 81 FR 46768. The test procedures,
which follow a similar methodology to those in place for refrigerators,
refrigerator-freezers, and freezers, provide the provisions for
determining a product's annual energy usage (kWh/yr) and total AV,
which are the basis of the energy conservation standards established in
this direct final rule.
F. Technological Feasibility
1. General
To assess the technological feasibility of setting standards for a
product, DOE conducts a screening analysis based on information
gathered on all current technology options and prototype designs that
could improve its efficiency. As the first step in such an analysis,
DOE develops a list of technology options for consideration in
consultation with manufacturers, design engineers, and other interested
parties. DOE then determines which of those means for improving
efficiency are technologically feasible. DOE considers technologies
incorporated in commercially-available products or in working
prototypes to be technologically feasible. 10 CFR part 430, subpart C,
appendix A, section 4(a)(4)(i).
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; and (3) adverse impacts on
health or safety. 10 CFR part 430, subpart C, appendix A, section
4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its
analysis any proprietary technology that is a unique pathway to
achieving a certain efficiency level. Section IV.B of this direct final
rule discusses the results of the screening analysis for MREFs,
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 direct final rule TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt a new 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 MREFs,
using the design parameters for the most efficient products available
on the market or in working prototypes. The max-tech levels that DOE
determined for this rulemaking are described in section IV.C of this
direct final rule and in chapter 5 of the direct final rule TSD.
G. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to MREFs purchased in the 30-year period that begins in the year of
compliance with any new standards (2019-2048 for the TSLs recommended
by the MREF Working Group, 2021-2050 for all other TSLs).\15\ The
savings are measured over the entire lifetime of products purchased in
the 30-year analysis period. DOE quantified the energy savings
attributable to each TSL as the difference in energy consumption
between each standards case and the no-new-standards case. The no-new-
standards case represents a projection of energy consumption that
reflects how the market for a product would likely evolve in the
absence of energy conservation standards.
---------------------------------------------------------------------------
\15\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------
DOE used its NIA spreadsheet models to estimate energy savings from
potential standards for MREFs. The NIA spreadsheet model (described in
section IV.H of this document) 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.\16\ 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 document. For natural gas,
the primary energy savings are considered to be equal to the site
energy savings.
---------------------------------------------------------------------------
\16\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------
2. Significance of Savings
To adopt standards for a covered product, DOE must determine that
such action would result in ``significant'' energy savings. (42 U.S.C.
6295(o)(3)(B)) Although the term ``significant'' is not defined in the
Act, the U.S. Court of Appeals, for the District of Columbia Circuit in
Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373
(D.C. Cir. 1985), indicated that Congress intended ``significant''
energy savings in the context of EPCA to be savings that were not
``genuinely trivial.'' The energy savings for all the TSLs considered
in this rulemaking, including the adopted standards, are nontrivial,
and, therefore, DOE considers them ``significant'' within the meaning
of section 325 of EPCA.
H. 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 energy conservation
standards on manufacturers, DOE conducts a manufacturer impact analysis
(i.e., MIA), as discussed in section IV.J of this document. DOE first
uses an annual cash-flow approach to determine the quantitative
impacts. This step includes both a short-term assessment--based on the
cost and capital requirements during the period between when a
regulation is
[[Page 75206]]
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 standards. These measures
are discussed further in the following section. For consumers in the
aggregate, DOE also calculates the national NPV of the economic impacts
applicable to a particular rulemaking. DOE often also evaluates the LCC
impacts of potential standards on identifiable subgroups of consumers
that may be affected disproportionately by a national standard, such as
low income and senior households. In the case of MREFs, the available
house sample sizes for identifiable subgroups were insufficient to
yield meaningful results.
b. Savings in Operating Costs Compared to Increase in Price (LCC and
PBP)
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 cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
standards. The LCC savings for the considered efficiency levels are
calculated relative to the case that reflects projected market trends
in the absence of new standards (the no-new-standards case). DOE's LCC
and PBP analysis is discussed in further detail in section IV.F of this
document.
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 IV.H of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes, and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards adopted in this direct final rule would
not reduce the utility or performance of the products under
consideration in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General that is
likely to result from a proposed standard. (42 U.S.C.
6295(o)(1)(B)(i)(V)) Specifically, it instructs DOE to consider the
impact of any lessening of competition, as determined in writing by the
Attorney General that is likely to result from the imposition of the
standard. DOE is simultaneously publishing a NOPR containing proposed
energy conservation standards identical to those set forth in this
direct final rule and has transmitted a copy of the rule and the
accompanying TSD to the Attorney General, requesting that the U.S.
Department of Justice (``DOJ'') provide its determination on this
issue. DOE will consider DOJ's comments on the direct final rule in
determining whether to proceed with finalizing its standards. DOE will
also publish and respond to the DOJ's comments in the Federal Register
in a separate notice.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new standard is economically justified. (42
U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the adopted
standards are likely to provide improvements to the security and
reliability of the nation's energy system. Reductions in the demand for
electricity also may result in reduced costs for maintaining the
reliability of the nation's electricity system. DOE conducts a utility
impact analysis to estimate how standards may affect the nation's
needed power generation capacity, as discussed in section IV.0 of this
document.
Additionally, apart from the savings described above, the adopted
standards also are likely to result in environmental benefits in the
form of reduced emissions of air pollutants and greenhouse gases
associated with energy production and use. DOE conducts an emissions
analysis to estimate how potential standards may affect these
emissions, as discussed in section IV.K of this document; the emissions
impacts are reported in section V.B.6 of this document. DOE also
estimates the economic value of emissions reductions resulting from the
considered TSLs, as discussed in section IV.L of this document.
g. Other Factors
In determining whether a standard is economically justified, DOE
may consider any other factors that it deems to be relevant. (42 U.S.C.
6295(o)(2)(B)(i)(VII)) In developing the direct final rule, DOE has
considered the submission of the jointly-submitted Term Sheet #2 from
the MREF Working Group. In DOE's view, the term sheet sets forth a
statement by interested persons that are fairly representative of
relevant points of view (including representatives of manufacturers of
covered equipment, States, and efficiency advocates) and contains
recommendations with respect to energy
[[Page 75207]]
conservation standards that are in accordance with 42 U.S.C. 6295(o),
as required by EPCA's direct final rule provision. See 42 U.S.C.
6295(p)(4). DOE has encouraged the submission of agreements such as the
one developed and submitted by the MREF Working Group as a way to bring
diverse stakeholders together, to develop an independent and probative
analysis useful in DOE standard setting, and to expedite the rulemaking
process. DOE also believes that the standard levels recommended in Term
Sheet #2 may increase the likelihood for regulatory compliance, while
decreasing the risk of litigation.
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 effect potential new
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 of this direct final rule.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to MREFs. Separate subsections address each
component of DOE's analyses.
DOE presented information on its initial analytical approach in the
preliminary analysis. As discussed in section II.B of this direct final
rule, DOE received comments from interested parties in response to both
the preliminary analysis and the December 2014 Test Procedure NOPR
indicating that these rulemakings would benefit from a negotiated
rulemaking process. Based on the subsequent MREF Working Group
discussions, in the July 2016 Final Coverage Determination, DOE revised
its scope of coverage, product definitions, and test procedures for
MREFs, which resulted in significant changes to the rulemaking
analysis. 81 FR 46786. Because of these significant changes, many
comments received in response to the preliminary analysis are no longer
applicable.
Additionally, the substantive comments received in response to the
preliminary analysis were from interested parties that were represented
by members of the MREF Working Group. The Working Group discussed in
detail all of the issues identified by these interested parties. As a
result of these discussions, many MREF Working Group members revised
their position on certain issues with respect to the analysis. To avoid
presenting information that may not reflect the current opinions of
Working Group members, DOE has not included summaries of comments
received from Working Group members in response to the preliminary
analysis in the following sections describing the direct final rule
analyses. Rather, DOE has included summaries of the Working Group
discussions, including citations to the relevant Working Group meeting
transcripts that addressed issues with the preliminary analysis and
recommended approaches for DOE in this direct final rule analysis.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended or new
energy conservation standards. The NIA uses a second spreadsheet set
that provides shipments forecasts and calculates national energy
savings and net present value of total consumer costs and savings
expected to result from potential energy conservation standards. DOE
uses the third spreadsheet tool, the Government Regulatory Impact Model
(``GRIM''), to assess manufacturer impacts of potential standards.
These three spreadsheet tools are available on the DOE Web site for
this rulemaking: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/71. Additionally, DOE used
output from the latest version of the Energy Information
Administration's (``EIA'') 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
1. Scope of Coverage
DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include: (1) A determination of the
scope of the rulemaking and product classes; (2) manufacturers and
industry structure; (3) existing efficiency programs; (4) shipments
information; (5) market and industry trends; and (6) technologies or
design options that could improve the energy efficiency of MREFs. The
key findings of DOE's market assessment are summarized below. See
chapter 3 of the direct final rule TSD for further discussion of the
market and technology assessment.
In the preliminary market and technology assessment, and consistent
with the October 2013 SNOPD, DOE identified four consumer product
categories that would be subject to potential energy conservation
standards. These were: Cooled cabinets, non-compressor refrigerators,
hybrid refrigerators, and ice makers. DOE received multiple comments
about the scope of coverage and the product classes considered in the
preliminary analysis, summarized in the following sections. As
described in section II.B of this document, the MREF Working Group
discussed concerns regarding scope of coverage raised in comments
received in response to the preliminary analysis.
The following sections describe how DOE has revised its scope of
coverage for MREFs since the preliminary analysis and after considering
the MREF Working Group recommendations. DOE initially proposed a
revised scope of coverage in the March 2016 SNOPD (81 FR 11454), and
finalized the scope of coverage in the July 2016 Final Coverage
Determination. 81 FR 46768.
a. Coolers
In the December 2014 Test Procedure NOPR, DOE generally proposed to
define the term ``cooled cabinet'' as a product with a refrigeration
system that requires electric energy input only that does not meet the
regulatory definition for ``refrigerator'' because its compartment
temperatures are warmer
[[Page 75208]]
than the 39 degrees Fahrenheit ([deg]F) threshold established for
refrigerators, as determined in a 72[emsp14][deg]F ambient temperature.
79 FR 74894, 74901-74902 (December 16, 2014). In the preliminary
analysis, DOE presented information regarding cooled cabinets that,
based on the proposed definition, included those products using either
vapor-compression or non-compressor refrigeration systems. See chapter
3 of the preliminary TSD.
The MREF Working Group's Term Sheet #1 recommended that DOE revise
the term ``cooled cabinet'' to ``cooler'' and incorporated a number of
other changes to the proposed definition of this new term. The Working
Group recommended that compartment temperatures be determined during
operation in a 90[emsp14][deg]F ambient temperature to maintain
consistency with the test conditions used for other refrigeration
products. (ASRAC Public Meeting Transcript, No. 44 at pp. 158-202) \17\
The Working Group also recommended excluding products designed to be
used without doors, consistent with the exclusions DOE had proposed for
the refrigerator, refrigerator-freezer, and freezer definitions in the
December 2014 Test Procedure NOPR. 79 FR 74894, 74900 (December 16,
2014). The purpose of the exclusion would be to differentiate between
consumer products and commercial equipment -- in other words, products
designed for use without doors (e.g. reach-in freezers) would be
treated as commercial equipment rather than consumer products,
consistent with the statutory coverage of refrigerators, refrigerator-
freezers, and freezers. See 42 U.S.C. 6292(a)(1). (ASRAC Public Meeting
Transcript, No. 85 at pp. 9-11; No. 92 at pp. 18-25) The Working Group
further recommended the requirement that coolers operate on single-
phase, alternating current rather than simply specifying operation with
electric energy input. This approach would exclude those products
designed for direct current or 3-phase power supplies, which, because
of the nature of these power sources, would likely apply to products
intended for use in mobile or commercial applications, respectively.
(ASRAC Public Meeting Transcript, No. 45 at pp. 83-97; No. 86 at pp.
19-21) See Term Sheet #1.
---------------------------------------------------------------------------
\17\ A notation in the form ``ASRAC Public Meeting Transcript,
No. 44 at pp. 158-202'' identifies a comment: (1) Made during an
MREF Working Group public meeting; (2) recorded in document number
44 that is filed in the docket of this energy conservation standards
rulemaking (Docket No. EERE-2011-BT-STD-0043) and available for
review at www.regulations.gov; and (3) which appears on pages 158
through 202 of document number 44.
---------------------------------------------------------------------------
In the March 2016 SNOPD, DOE proposed to define coolers based on
its proposed definition from the December 2014 Test Procedure NOPR but
updated to reflect the Working Group's recommendations. 81 FR at 11458-
11459. DOE did not receive any comments that would substantively change
this proposed updated definition in response to the March 2016 SNOPD.
Hence, in the July 2016 Final Coverage Determination, DOE established
the definition for cooler as proposed in the March 2016 SNOPD, with
minor revisions, in 10 CFR 430.2. 81 FR at 46775-46776.
b. Combination Cooler Refrigeration Products
In the December 2014 Test Procedure NOPR, DOE proposed the term
``hybrid refrigeration product'' to refer to products with a warm-
temperature compartment (e.g., a wine chiller), making up at least 50
percent of a product's volume, combined with a fresh food and/or
freezer compartment. 79 FR at 74903-74904. DOE conducted the
preliminary analysis for hybrid refrigeration products using that
proposal's definitional scope. See chapter 3 of the preliminary TSD.
The MREF Working Group discussed the proposed definition and
recommended that DOE revise the term from ``hybrid refrigeration
product'' to ``combination cooler refrigeration product'' to more
clearly describe the product category. The Working Group also
recommended that DOE refer to the warmer compartment within combination
cooler refrigeration products as a ``cooler compartment'' (defined by
the same temperature ranges as proposed for coolers) and that DOE drop
the proposed requirement that cooler compartments make up at least 50
percent of a combination cooler refrigeration product's total volume.
The Working Group noted that all products with cooler compartments
would likely be used in the same way and asserted that the 50-percent
threshold was an arbitrary cutoff. It further recommended that DOE
exclude products designed for use without doors from the combination
cooler refrigeration product definitions for the same reasons discussed
for coolers (i.e., differentiating between commercial equipment and
consumer products). (ASRAC Public Meeting Transcript, No. 85 at pp. 31-
52; No. 91 at pp. 55-58) See Term Sheet #1.
DOE agreed with the recommended changes from the MREF Working Group
and the Working Group's reasoning for each of them. The term
``combination cooler refrigeration product'' more clearly describes the
characteristics of the products that would fall in this category.
Additionally, the recommendation to remove the 50-percent threshold
would limit the potential for circumvention by manufacturing products
with cooler compartment volumes either just above or below the
threshold. Removing the cooler compartment volume threshold ensures
that all products with cooler compartments (which are likely to be used
in the same way, as indicated by the MREF Working Group) are
categorized consistently. Therefore, DOE proposed to define terms for
combination cooler refrigeration products in the March 2016 SNOPD
consistent with the definitions included in Term Sheet #1. See 81 FR at
11459 (detailing DOE's rationale for adopting the Working Group's
approach). DOE did not receive any comments that would substantively
change the proposed definitions of combination cooler refrigeration
products in response to the March 2016 SNOPD; therefore, DOE
subsequently codified the definition, with only minor revisions, in 10
CFR 430.2 through the July 2016 Final Coverage Determination. Further,
the July 2016 Final Coverage Determination codified the definition for
``cooler compartment'' as recommended by the MREF Working Group into
appendix A. See 81 FR at 46776-46777.
c. Ice Makers
In the preliminary analysis, DOE presented information regarding
ice makers, which DOE tentatively defined as a consumer product other
than a refrigerator, refrigerator-freezer, freezer, hybrid
refrigeration product, non-compressor refrigerator, or cooled cabinet
designed to automatically produce and harvest ice, but excluding any
basic model that is certified under American National Standards
Institute (ANSI)/NSF International (NSF) 12-2012 ``Automatic Ice Making
Equipment.'' \18\ Such a product would also include a means for storing
ice, dispensing ice, or storing and dispensing ice. See chapter 3 of
the preliminary TSD.
---------------------------------------------------------------------------
\18\ ANSI/NSF 12-2012 is available for purchase online at http://www.techstreet.com/nsf.
---------------------------------------------------------------------------
In response to the preliminary analysis, DOE received feedback from
several interested parties regarding ice maker coverage within MREFs.
As such, the MREF Working Group discussed the issue of whether ice
makers should be considered MREFs for coverage under EPCA. The MREF
Working Group
[[Page 75209]]
decided that ice makers are fundamentally different from the other
product categories considered to be MREFs, as evidenced by DOE
proposing a separate test procedure for ice makers in the December 2014
Test Procedure NOPR. The Working Group also noted that ice makers are
currently covered as commercial equipment, and that there is no clear
means to differentiate between consumer and commercial ice makers.
(ASRAC Public Meeting Transcript, No. 44 at pp. 143-145, No. 45 at pp.
134-145; No. 92 at pp. 39-51). Accordingly, the Working Group
recommended that DOE not maintain coverage of ice makers under MREFs.
(ASRAC Public Meeting Transcript, No. 92 at p. 138) See Term Sheet #1.
Consistent with the MREF Working Group's recommendation, the March
2016 SNOPD proposed excluding ice makers from coverage as MREFs. 81 FR
at 11456. DOE did not receive comments opposing this approach in
response to the March 2016 SNOPD, and, therefore, excluded ice makers
from coverage as MREFs in the July 2016 Final Coverage Determination.
81 FR at 46773. Accordingly, DOE has not analyzed or adopted standards
for ice makers as part of this direct final rule.
d. Non-Compressor Refrigerators
EPCA specifies that refrigerators, refrigerator-freezers, and
freezers with compressor and condenser units as integral parts of the
cabinet assembly (i.e., products that utilize vapor-compression
refrigeration technology) are covered consumer products. (42 U.S.C.
6292(a)(1)(B)) In the preliminary analysis, DOE stated that it had
identified products that use thermoelectric and/or absorption
technology that were sold as refrigerators but was unaware of any
products using these technologies sold as refrigerator-freezers or
freezers. For the preliminary analysis, DOE considered a non-compressor
refrigerator as a cabinet that has a source of refrigeration that does
not include a compressor and condenser unit, requires electric energy
input only, and is capable of maintaining compartment temperatures
above 32 [deg]F (0 [deg]C) and below 39 [deg]F (3.9 [deg]C) as
determined in a 72 [deg]F ambient temperature. See chapter 3 of the
preliminary TSD.
DOE tested six non-compressor refrigerator models in support of the
preliminary analysis. In that testing, DOE determined that none of the
six models were able to maintain compartment temperatures in the
specified refrigerator range when tested in a 90 [deg]F ambient
temperature consistent with the current DOE test procedure for
refrigerators and the approach recommended by the Working Group. See
chapter 5 of the preliminary TSD.
The MREF Working Group discussed whether non-compressor
refrigerators should be considered MREFs. As discussed in the March
2016 SNOPD, the Working Group recommended that the compartment
temperature ranges included in definitions be determined during product
operation in a 90 [deg]F ambient temperature. 81 FR at 11458-11460.
Based on this suggested definition, the Working Group members stated
that they were unaware of any products that would be considered non-
compressor refrigerators available on the market, and recommended that
DOE not establish a definition for this product category. (ASRAC Public
Meeting Transcript, No. 45 at pp. 49-52; No. 91 at pp. 157-158) See
Term Sheet #1.
In examining the merits of creating a separate product category and
definition for non-compressor refrigerators, DOE conducted additional
literature reviews and manufacturer interviews. DOE, however, did not
find any non-compressor (thermoelectric or absorption) products
available on the market that would be capable of maintaining
compartment temperatures in the range necessary for a refrigerator as
specified in 10 CFR 430.2 when tested in a 90 [deg]F ambient
temperature consistent with the current refrigerator test procedure and
the approach ultimately recommended by the Working Group. Accordingly,
in light of the Working Group's recommendation, DOE did not establish a
separate product category for non-compressor refrigerators under MREFs,
a discussed in the July 2016 Final Coverage Determination. See 81 FR at
46775-46776. DOE notes that products previously analyzed as non-
compressor refrigerators would be covered as coolers under the MREF
definitions established in the July 2016 Final Coverage Determination.
2. Product Classes
a. Coolers
In the preliminary analysis, DOE proposed a single product class
for all coolers (at the time referred to as ``cooled cabinets''). DOE
was aware of both vapor-compression and non-compressor coolers
available on the market; however, DOE did not analyze these products in
separate product classes because it did not identify any unique
consumer utility associated with the different refrigeration systems.
See chapter 3 of the preliminary TSD.
The MREF Working Group discussed the topic of product classes when
considering recommended standards for MREFs. For coolers, the Working
Group agreed with DOE's preliminary analysis determination that there
is no unique consumer utility associated with either thermoelectric or
vapor-compression refrigeration systems. (ASRAC Public Meeting
Transcript, No. 45 at pp. 13-14, 162) Working Group members also
compared coolers to refrigerators, refrigerator-freezers, and freezers,
and considered similar characteristics for differentiating product
classes. Working Group members noted that compact and built-in coolers
each provide unique consumer utility and have different energy use
characteristics compared to full-size or freestanding coolers,
respectively. (ASRAC Public Meeting Transcript, No. 44 at pp. 155-157;
No. 45 at pp. 160-166) Accordingly, the Working Group recommended that
DOE establish definitions and energy conservation standards for four
cooler product classes: Built-in compact, built-in, freestanding
compact, and freestanding. See Term Sheets #1 and #2.
DOE sought additional information related to the consideration of
non-compressor products in the December 2015 NODA. 80 FR 77589. DOE did
not receive any information indicating that the approach used by the
MREF Working Group was inappropriate.
Based on the recommendations of the MREF Working Group, DOE
proposed definitions for each of the cooler product classes in the
March 2016 SNOPD, and subsequently codified the definitions in 10 CFR
430.2 in the July 2016 Final Coverage Determination. 81 FR at 11459; 81
FR at 46775-46776. The standards adopted in this direct final rule are
based on these four cooler product classes discussed above.
b. Combination Cooler Refrigeration Products
In the preliminary analysis, DOE proposed that combination cooler
refrigeration products (at the time referred to as ``hybrid
refrigeration products'') would be subject to the same product class
structure as currently in place for refrigerators, refrigerator-
freezers, and freezers. See generally, 10 CFR 430.32(a) (detailing the
different classes applicable to refrigerators, refrigerator-freezers,
and freezers). Under this approach, the applicable product class would
be determined based on the total product volume, the compartment
temperature ranges for the non-cooler compartments, and any relevant
product features (e.g., configuration, defrost type, ice making,
[[Page 75210]]
etc.). See chapter 3 of the preliminary TSD.
The MREF Working Group discussed the topic of product classes when
considering recommended standards for MREFs. Similar to coolers, the
Working Group discussed how combination cooler refrigeration products
are similar to refrigerators, refrigerator-freezers, and freezers. The
Working Group considered whether the product class structure DOE
proposed in the preliminary analysis would be appropriate. However, the
Working Group indicated that because only certain of the previously
considered product classes were available on the market or likely to
become available on the market, DOE should only conduct analysis and
consider potential standards for these product classes. Accordingly,
the Working Group recommended that DOE establish eight product classes
for combination cooler refrigeration products. These eight product
classes represent the combination cooler refrigeration products that
are either currently available on the market or very similar to
products currently available (i.e., the associated freestanding
equivalent to a built-in product). Although combination cooler
refrigeration products are not currently available in each of the eight
product classes, the MREF Working Group included the additional product
classes as a means to prevent circumvention. For example, if DOE
established only built-in product classes, a manufacturer could readily
modify a product to be freestanding to avoid having to meet the MREF
standards. Accordingly, the Working Group recommended product classes
for both built-in and freestanding configurations for each product type
currently available. (ASRAC Public Meeting Transcript, No. 103 at pp.
55-67, 72-86, 104-109) See Term Sheets #1 and #2.
Based on the recommendations of the MREF Working Group, in this
direct final rule, DOE is establishing eight product classes for
combination cooler refrigeration products. DOE has determined that each
product class offers a unique consumer utility and has different energy
use characteristics, warranting separate product classes. Table I.2 of
this direct final rule includes a description of the eight product
classes. More detailed descriptions of each of the product classes can
be found in chapter 3 of the direct final rule TSD.
3. Technology Options
In the preliminary analysis, DOE identified multiple technology
options that may be used to improve MREF efficiencies. The preliminary
analysis technology options are listed in Table IV.1 and described in
chapter 3 of the preliminary TSD.
Table IV.1--Preliminary Analysis Technology Options
------------------------------------------------------------------------
Technology options
------------------------------------------------------------------------
Compressor........................ Improved compressor efficiency.
Variable-speed compressor.
Linear compressor.
Evaporator........................ Increased surface area.
Enhanced heat exchanger.
Forced-convection evaporator.
Condenser......................... Increased surface area.
Enhanced heat exchanger.
Forced-convection condenser.
Fan and Fan Motor................. Higher-efficiency fan motors.
Higher-efficiency fan blades.
Insulation........................ Improved resistivity of insulation.
Increased insulation thickness.
Vacuum-insulated panels (``VIPs'').
Gas-filled panels.
Gasket............................ Improved gaskets.
Double-door gaskets.
Improved door face frame.
Doors............................. Improved resistivity of glass door.
Solid door.
Expansion Valve................... Improved: Thermostatic expansion
valves (``TXV'') or electronic
expansion valves (``EEV'').
Cycling Losses.................... Fluid control or solenoid valve.
Defrost........................... Off-cycle defrost.
Reduced energy.
Adaptive defrost.
Hot-gas bypass.
Controls.......................... Electronic temperature control.
Alternative Refrigeration System.. Conversion to alternative
refrigeration system.
Alternative Heat Transfer......... Heat pipe.
Other............................. Component location.
------------------------------------------------------------------------
After receiving feedback from interested parties, conducting
manufacturer interviews, and participating in the MREF Working Group
discussions, DOE did not identify any additional technology options
beyond those considered in the preliminary analysis. In this direct
final rule, DOE considered the same list of technology options as
presented in Table IV.1.
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
[[Page 75211]]
technology in commercial products could not be achieved on the scale
necessary to serve the relevant market at the time of the projected
compliance date of the standard, then that technology will not be
considered further.
3. Impacts on product utility or product availability. If it is
determined that a technology would have significant adverse impact on
the utility of the product to significant subgroups of consumers or
would result in the unavailability of any covered product type with
performance characteristics (including reliability), features, sizes,
capacities, and volumes that are substantially the same as products
generally available in the United States at the time, it will not be
considered further.
4. Adverse impacts on health or safety. If it is determined that a
technology would have significant adverse impacts on health or safety,
it will not be considered further.
10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b).
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.
1. Screened-Out Technologies
In the preliminary analysis, DOE assessed the feasibility of each
of the technologies listed in Table IV.1. Several of these technology
options were found not to meet the four required screening criteria and
were therefore screened out from further consideration in DOE's
analysis. Table IV.2 lists the technology options DOE screened out for
the preliminary analysis. More details on why these technology options
were screened out can be found in chapter 4 of the preliminary TSD.
Table IV.2--Preliminary Analysis Screened Out Technology Options
------------------------------------------------------------------------
Technology Reason for screening out
------------------------------------------------------------------------
Linear Compressors................ Lack of information on commercially-
available compressors, uncertainty
on whether they would be readily
incorporated on a widespread basis.
Increased Evaporator and Condenser No physical room to increase the
Surface Area. face area or add tubes, would
impact product utility by requiring
larger cabinets.
Improved Evaporator Heat Exchange. Most fin enhancements would increase
frost accumulation, decreasing
product utility.
Improved Condenser Heat Exchange.. Maintenance concerns requiring more
frequent cleaning of heat-
exchanger, impacting product
utility.
Forced-Convection Condensers...... Already in use by baseline products,
hence eliminated from consideration
in subsequent analyses.
Higher-Efficiency Fan Blades...... Likely already in use in baseline
products, lack of information to
provide credible calculation of
savings and costs.
Improved Resistivity of Insulation Lack of information on available
Panels. options, not technologically
feasible based on available
information.
Gas-Filled Panels................. Not commercially-available, not
practicable to manufacture on the
scale necessary for the market.
Solid Doors (for coolers, and Would affect consumer utility (i.e.,
cooler compartments). availability of glass-door units).
Improved Gaskets.................. Already in use by nearly all MREF
products.
Improved Expansion Valves......... Automatic valves or EEV's are
typically oversized for these
products, not practicable to
manufacture on the scale necessary
for the market.
Fluid-Control Valves.............. Potential decrease in product
reliability, negatively impacting
consumer utility.
Off-Cycle Defrost, Reduced Energy Already in use by nearly all MREF
for Automatic Defrost, Adaptive products.
Defrost, and Hot-Gas Bypass
Defrost.
Electronic Temperature Control.... Lack of data on costs and savings.
Conversion to Thermoelectric or Unlikely to result in energy
Absorption Refrigeration Systems. savings.
Component Location (internal Already in use by nearly all MREF
arrangement of components). products.
------------------------------------------------------------------------
For this direct final rule analysis, DOE has maintained one
technology option for consideration in the engineering analysis that
was screened out in the preliminary analysis. DOE is no longer
screening out improved evaporator and condenser heat exchange. DOE
received feedback during confidential manufacturer interviews that
there may be opportunities to optimize evaporator and condenser designs
for more effective heat transfer. For this direct final rule, DOE has
continued to screen out the remaining technology options listed in
Table IV.2.
2. Remaining Technologies
Through a review of each technology, DOE concludes that all of the
other identified technology options listed in section IV.A.3 of this
document meet all four screening criteria to be examined further as
design options in the direct final rule engineering analysis. In
summary, and as explained further in this section, DOE did not screen
out the following technology options shown in Table IV.3.
Table IV.3--Direct Final Rule Remaining Design Options
------------------------------------------------------------------------
Design option
-------------------------------------------------------------------------
Improved compressor efficiency.
Variable-speed compressors.
Improved evaporator and condenser heat exchange.
Higher-efficiency fan motors.
Increased insulation thickness.
Vacuum-insulated panels.
Improved glass door resistivity.
Conversion to vapor-compression.
Heat pipes.
------------------------------------------------------------------------
DOE determined that these technology options are technologically
[[Page 75212]]
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also found
that all of the remaining technology options meet the other screening
criteria (i.e., are practicable to manufacture, install, and service
and do not result in adverse impacts on consumer utility, product
availability, health, or safety). For additional details, see chapter 4
of the direct final rule TSD.
C. Engineering Analysis
In the engineering analysis, DOE establishes the relationship
between the manufacturer production cost (``MPC'') and improved
efficiency of MREFs. 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 product to model
different levels of efficiency. The efficiency-level approach uses
estimates of costs and efficiencies of products available on the market
at distinct efficiency levels to develop the cost-efficiency
relationship. The reverse-engineering approach involves testing
products for efficiency and determining cost from a detailed bill of
materials (``BOM'') derived from reverse-engineering representative
products. The efficiency ranges from that of the least-efficient MREFs
sold today to the max-tech efficiency level. At each efficiency level
examined, DOE determines the MPC; this relationship is referred to as a
cost-efficiency curve.
1. Coolers
a. Methodology
In the preliminary analysis, DOE adopted a combined efficiency-
level/design-option/reverse-engineering approach to develop cost-
efficiency curves for coolers. DOE first established efficiency levels
by defining annual energy use as a percent of the California Energy
Commission (``CEC'')-equivalent energy use. This is the maximum
allowable energy use of the CEC energy standards for wine chillers with
automatic defrost, adjusted to account for the fact that the CEC test
procedure uses a different usage factor than DOE considered in its
analysis. DOE based its analysis on the potential efficiency
improvements associated with groups of design options. See chapter 5 of
the preliminary TSD.
DOE then developed manufacturing cost models based on its reverse-
engineering of various MREF products. These reverse-engineering efforts
yielded additional information that helped support DOE's calculation of
the incremental costs associated with efficiency improvements. To
develop the analytically derived cost-efficiency curves, DOE collected
information from various sources on the manufacturing costs and energy
use reductions associated with each of the considered design options.
DOE reviewed product literature, conducted testing and reverse-
engineering of current products, and interviewed component and product
manufacturers. DOE modeled energy use reductions associated with design
options using the Efficient Refrigerator Analysis program developed for
the 2011 residential refrigeration products rulemaking and modified for
this MREF standards rulemaking analysis. The incremental cost estimates
combined with test data and energy modeling results led to the cost-
efficiency curves for coolers developed for the preliminary analysis.
See chapter 5 of the preliminary TSD.
DOE did not receive any feedback on the overall methodology used
for the coolers preliminary engineering analysis. In this direct final
rule, DOE conducted the engineering analysis using the same approach as
the preliminary analysis. However, DOE has updated its analysis to
reflect the changes to the scope of coverage and product classes as
discussed in sections IV.A.1 and IV.A.2 of this document. DOE also
incorporated feedback from manufacturers obtained during additional
interviews and information from MREF Working Group members during the
Working Group discussions. Additional information on the methodology
used for this direct final rule engineering analysis is available in
chapter 5 of the direct final rule TSD.
b. Efficiency Levels
As described in section IV.C.1.a of this document, for the
preliminary analysis, DOE considered efficiency levels defined by their
performance with respect to the CEC-equivalent baseline level. DOE
considered the CEC-equivalent standard level to be the baseline point
of comparison for coolers; however, DOE observed that certain coolers
performed worse than the CEC-equivalent standard level. From DOE's test
sample, the worst-performing unit was a non-compressor cooler that
tested at 267 percent of the CEC-equivalent standard. DOE used this
level as the baseline in its preliminary engineering analysis. The
best-performing unit in DOE's test sample was a vapor-compression
cooler that tested at 48 percent of the CEC-equivalent standard. DOE
estimates that this level represented the maximum efficiency available
on the market. In the preliminary analysis, DOE considered efficiency
levels beyond the maximum available by using energy modeling. The
energy model for the maximum technologically feasible (max-tech) level
was based on incorporating all applicable design options for coolers.
That energy modeling resulted in an efficiency level at 32 percent of
the CEC-equivalent standard level. DOE analyzed efficiency levels at
10-percent intervals between the CEC-equivalent and max-tech levels,
and at somewhat larger intervals between the baseline and CEC-
equivalent levels.
Table IV.4 lists the efficiency levels considered for coolers in
the preliminary analysis. Chapter 5 of the preliminary TSD provides
additional information on the development of the preliminary analysis
efficiency levels.
Table IV.4--Preliminary Analysis Cooler Efficiency Levels
------------------------------------------------------------------------
Percent of CEC-
equivalent
Efficiency level energy
consumption
------------------------------------------------------------------------
Baseline.............................................. 267
1..................................................... 200
2..................................................... 160
3..................................................... 130
4 (CEC-Equivalent).................................... 100
5..................................................... 90
6..................................................... 80
7..................................................... 70
8..................................................... 60
9..................................................... 50
10.................................................... 40
11 (Max-Tech)......................................... 32
------------------------------------------------------------------------
For this direct final rule, DOE primarily relied on the same test
data and modeling data as used in the preliminary analysis to evaluate
efficiency levels. However, because DOE is establishing four separate
product classes for coolers, DOE used this information to determine
appropriate efficiency levels for each product class.
The test data from the preliminary analysis apply to both the
freestanding and freestanding compact product classes. Accordingly, DOE
analyzed the same efficiency levels for these product classes as
considered in the preliminary analysis. However, DOE also tested one
additional freestanding unit with an energy consumption at
approximately 300 percent of the CEC-equivalent level. DOE therefore
revised the
[[Page 75213]]
corresponding baseline efficiency level in this direct final rule to
account for the higher energy consumption of this newly tested unit.
Table IV.5--Direct Final Rule Efficiency Levels--Freestanding and
Freestanding Compact Coolers
------------------------------------------------------------------------
Percent of CEC-
equivalent
Efficiency level energy
consumption
------------------------------------------------------------------------
Baseline.............................................. 300
1..................................................... 250
2..................................................... 200
3..................................................... 150
4 (CEC-Equivalent).................................... 100
5..................................................... 90
6..................................................... 80
7..................................................... 70
8..................................................... 60
9..................................................... 50
10.................................................... 40
11 (Max-Tech)......................................... 32
------------------------------------------------------------------------
For the built-in product classes, DOE reviewed available market
information and sought information on product availability from
manufacturers during interviews and during the MREF Working Group
discussions. DOE determined that all built-in coolers use vapor-
compression refrigeration systems, and that there are no built-in
coolers available at efficiencies lower than the CEC-equivalent level.
So, for built-in coolers and built-in compact coolers, DOE established
Efficiency Level 4 (100 percent of the CEC-equivalent) as the baseline
efficiency level.
DOE also received feedback from MREF Working Group members
indicating that built-in coolers use more energy than similarly
constructed freestanding coolers, consistent with the higher maximum
allowable annual energy use standards for built-in refrigerator,
refrigerator-freezer, and freezer product classes as compared to their
corresponding freestanding counterparts. The MREF Working Group
recommended that DOE consider a similar energy adder for built-in
coolers in its analysis. (ASRAC Public Meeting Transcript, No. 44 at
pp. 155-157; No. 87 at pp. 74-77) DOE compared the built-in
refrigerator, refrigerator-freezer, and freezer product classes to
their equivalent freestanding counterparts, and determined that built-
in products similar to coolers typically have approximately 10-percent
higher energy use than freestanding products. See chapter 5 of the
direct final rule TSD for the comparison of built-in and freestanding
performance. DOE applied this 10-percent adder to its analysis for
built-in coolers. DOE maintained intermediate efficiency levels at 10-
percent CEC-equivalent intervals between the baseline and max-tech
efficiency levels, so the built-in adder is only apparent at the max-
tech efficiency level (i.e., 32 percent of CEC-equivalent for
freestanding plus a 10-percent energy use adder equals 35 percent of
CEC-equivalent).
Table IV.6--Table Direct Final Rule Efficiency Levels--Built-in and
Built-in Compact Coolers
------------------------------------------------------------------------
Percent of CEC-
equivalent
Efficiency level energy
consumption
------------------------------------------------------------------------
4 (CEC-Equivalent).................................... 100
5..................................................... 90
6..................................................... 80
7..................................................... 70
8..................................................... 60
9..................................................... 50
10.................................................... 40
11 (Max-Tech)......................................... 35
------------------------------------------------------------------------
Additional details regarding the selection of efficiency levels for
coolers are available in chapter 5 of the direct final rule TSD.
c. Manufacturer Production Costs
In the preliminary analysis, DOE developed cost-efficiency curves
for coolers with total refrigerated volumes of 2 ft\3\ and 6 ft\3\. DOE
focused its analysis on these product volumes because it determined
they were most representative of products available on the market. The
2-ft\3\ product represents the smaller units that would typically sit
on a countertop, while the 6-ft\3\ volume represents products designed
to be installed underneath the counter.
For 2-ft\3\ coolers, DOE developed a cost-efficiency curve using
data from two reverse-engineered 2-ft\3\ coolers and additional scaled
data from reverse-engineered 6-ft\3\ coolers to estimate costs at
higher efficiencies. DOE used its cost model to estimate the MPCs of
modeled units incorporating design options not included in the reverse-
engineered units. For 2-ft\3\ coolers, the cost-efficiency curve
represents starting with a non-compressor cooler at the baseline
efficiency level and converting to vapor-compression to reach the
higher efficiency levels.
DOE followed a similar approach for developing a cost-efficiency
curve for 6-ft\3\ coolers in the preliminary analysis. DOE reverse-
engineered three 6-ft\3\ coolers at the CEC-equivalent efficiency
level, a mid-efficiency level, and the maximum available efficiency
level. DOE used its cost model to estimate the MPCs of modeled units
incorporating design options not observed in the reverse-engineered
units. For 6-ft\3\ products, DOE was not aware of any non-compressor
products available at the time of the preliminary analysis.
Accordingly, DOE based the 6-ft\3\ analysis only on vapor-compression
coolers, with a baseline efficiency at the CEC-equivalent level.
Table IV.7 presents the cost-efficiency curves developed for 2-
ft\3\ and 6-ft\3\ coolers in the preliminary analysis. Chapter 5 of the
preliminary TSD provides additional discussion regarding the
development of the preliminary cost-efficiency curves.
Table IV.7--Preliminary Analysis Cooler Cost-Efficiency Curves
[2013$]
------------------------------------------------------------------------
Incremental MPC
Efficiency level (percent of CEC- -------------------------------
equivalent energy consumption) 6-ft\3\ 2-ft\3\
------------------------------------------------------------------------
Baseline (267) .............. ..............
1 (200)................................. .............. $21
2 (160)................................. .............. 34
3 (130)................................. .............. 44
4 (100--CEC-Equivalent)................. .............. 54
5 (90).................................. $12 57
6 (80).................................. 21 72
7 (70).................................. 33 88
8 (60).................................. 47 100
9 (50).................................. 62 112
[[Page 75214]]
10 (40)................................. 135 170
11 (32--Max-Tech)....................... 205 225
------------------------------------------------------------------------
DOE used the preliminary engineering analysis as the basis for the
MPCs in this direct final rule engineering analysis. The primary
updates made to the preliminary analysis MPCs reflected the
incorporation of the four cooler product classes and updated market
information.
Similar to the preliminary engineering analysis, DOE analyzed
products at representative volumes in each of the four cooler product
classes for this direct final rule. DOE did not reverse-engineer
products at each of these volumes. To develop MPCs for those products,
DOE used its cost model and scaled certain components to reflect the
changes that would be necessary with different cabinet sizes. DOE also
relied on market information to verify cost information and product
specifications. Table IV.8 shows the representative product volumes DOE
considered for this direct final rule engineering analysis.
Table IV.8--Representative Cooler Volumes
------------------------------------------------------------------------
Product class Representative volumes
------------------------------------------------------------------------
Freestanding.............................. 8-ft\3\, 12-ft\3\, 16-ft\3\
Built-in.................................. 8-ft\3\, 12-ft\3\, 16-ft\3\
Freestanding Compact...................... 2-ft\3\, 4-ft\3\, 6-ft\3\
Compact Built-in.......................... 6-ft\3\
------------------------------------------------------------------------
After reviewing updated market information, DOE is now aware of
products with volumes greater than 2 ft\3\ that use non-compressor
refrigeration systems. In particular, DOE identified non-compressor
coolers with volumes up to 12 ft\3\ available on the market. DOE
observed non-compressor products for only the two freestanding product
classes, so for these product classes, DOE analyzed the changes and
costs associated with moving from a baseline non-compressor product
(i.e., 300 percent of the CEC-equivalent standard) to the max-tech
level. For the built-in product classes, which include only vapor-
compression products, DOE analyzed the changes necessary to move from
Efficiency Level 4 (the CEC-equivalent standard) to the max-tech.
For this direct final rule, DOE expects that manufacturers would
rely on the same design changes as considered in the preliminary
analysis to reach higher efficiency levels. DOE presented the design
option changes associated with higher efficiencies to manufacturers
during interviews conducted under non-disclosure agreements and to the
MREF Working Group. Feedback from the manufacturers and Working Group
members generally supported the design option changes and their
corresponding efficiency increases.\19\
---------------------------------------------------------------------------
\19\ See document numbers 54, 58, and 75 in docket ID EERE-2011-
BT-STD-0043 on http://www.regulations.gov for engineering materials
presented to the MREF Working Group.
---------------------------------------------------------------------------
DOE used the preliminary analysis as the basis for the costs
associated with these design changes; however, DOE updated its cost
estimates based on feedback from manufacturer interviews and from the
MREF Working Group. This updated information included feedback on
specific component pricing and on the order in which manufacturers
would apply the different design options.
In addition to the revised analysis, DOE also updated its cost
estimates to 2015$, the most recent year for which full-year cost data
was available at the time of the direct final rule analysis. Based on
these updates to the preliminary analysis, DOE developed cost-
efficiency curves presented in Table IV.9 for each of the analyzed
volumes for the cooler product classes established in this direct final
rule. Chapter 5 of the direct final rule TSD includes additional
information on the engineering analysis.
Table IV.9--Direct Final Rule Cooler Cost-Efficiency Curves
[2015$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Compact (<7.75 ft\3\) Full-size (>=7.75 ft\3\)
-------------------------------------------------------------------------------------------------------------
Efficiency level Freestanding Built-in Freestanding Built-in
-------------------------------------------------------------------------------------------------------------
2-ft\3\ 4-ft\3\ 6-ft\3\ 6-ft\3\ 8-ft\3\ 12-ft\3\ 16-ft\3\ 8-ft\3\ 12-ft\3\ 16-ft\3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.................................. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
1......................................... 0 16 14 0 27 36 0 0 0 0
2......................................... 0 33 28 0 53 71 0 0 0 0
3......................................... 0 49 42 0 80 107 0 0 0 0
4......................................... 54 65 56 0 106 143 0 0 0 0
5......................................... 57 73 64 7 118 160 22 8 10 11
6......................................... 65 82 73 18 129 175 41 22 29 34
7......................................... 76 95 88 31 149 204 74 38 51 58
8......................................... 89 108 102 46 163 219 91 53 66 73
9......................................... 102 120 113 51 173 227 98 57 68 75
10........................................ 147 192 198 155 235 302 181 175 236 265
11........................................ 237 282 288 223 378 500 403 259 337 376
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 75215]]
2. Combination Cooler Refrigeration Products
a. Methodology
In the preliminary analysis, DOE observed that combination coolers
were very similar in design to refrigerators, refrigerator-freezers,
and freezers. Because of these similarities, DOE did not conduct a full
engineering analysis for these products. Instead, DOE considered
whether it would be appropriate to apply the standards currently in
place for refrigerators, refrigerator-freezers, and freezers to
combination cooler refrigeration products. To do this, DOE modeled the
heat loads for various combination product configurations at two
representative product volumes (6 ft\3\ and 12 ft\3\) incorporating
different combinations of design options. From the modeling results,
DOE concluded that all of the product configurations would be capable
of meeting the existing standard for the corresponding product class
for all-refrigerators with automatic defrost. Although DOE determined
that combination cooler refrigeration products would be able to reach
that efficiency level by incorporating certain design options, DOE did
not estimate the incremental MPCs associated with improving performance
to that level. See chapter 5 of the preliminary TSD.
During the MREF Working Group discussions, Working Group members
recommended that DOE conduct the full analysis, including establishing
product classes, efficiency levels, and incremental MPC estimates for
these products.\20\
---------------------------------------------------------------------------
\20\ See docket transcript documents EERE-2011-BT-STD-0043-0090
and EERE-2011-BT-STD-0043-0103 for the discussions of the
combination cooler refrigeration products analysis.
---------------------------------------------------------------------------
For this direct final rule engineering analysis, DOE conducted the
full engineering analysis as recommended by the MREF Working Group. DOE
used an approach based on modeling different product configurations and
design options to estimate performance. This approach was similar to
what DOE used in the preliminary engineering analysis. DOE conducted
its engineering analysis on three of the eight product classes of
combination cooler refrigeration products, as discussed in section
IV.A.2 of this document, and on the typical product configurations
(i.e., compartment volumes and door types) available on the market. DOE
did not test or reverse-engineer any combination cooler refrigeration
products, so it relied on modeling to determine baseline performance
and incremental efficiency improvements. DOE modeled the typical
product configurations observed in products available on the market,
and incorporated design options to improve the refrigeration system
efficiency and reduce the thermal load on the unit. DOE concluded that
combination cooler refrigeration products would rely on the same design
options to improve efficiency as for coolers. Accordingly, DOE applied
similar cost estimates to each design option. DOE used its cost model
to scale the design option cost estimates, as necessary, based on the
different product configurations for combination cooler refrigeration
products. A more detailed description of the methodology used in this
direct final rule engineering analysis is available in chapter 5 of the
direct final rule TSD.
b. Efficiency Levels
For the preliminary engineering analysis, DOE did not specifically
analyze different efficiency levels for combination cooler
refrigeration products. DOE instead modeled sets of design options
corresponding to the baseline and higher efficiencies to determine
whether these products would be capable of meeting the existing energy
conservation standards for refrigerators, refrigerator-freezers, and
freezers.
In this direct final rule, DOE is establishing eight product
classes for combination cooler refrigeration products, representing the
product types either currently available on the market or likely to be
available in the future. For the purposes of the engineering analysis,
DOE analyzed only the product classes with current product offerings
(C-3A, C-9, and C-13A). DOE applied this analysis to the remaining
similar product classes in the downstream analyses. Based on market
data, DOE identified a representative total refrigerated volume and
configuration for each of these three analyzed product classes, as
described in Table IV.10. For all three product classes, DOE observed
that the cooler compartment typically had a glass door, while the fresh
food or freezer compartment had a solid door.
Table IV.10--Representative Combination Cooler Refrigeration Product Configurations
----------------------------------------------------------------------------------------------------------------
Fresh food or
Cooler freezer Total
Product class compartment compartment refrigerated
volume (ft\3\) volume (ft\3\) volume (ft\3\)
----------------------------------------------------------------------------------------------------------------
C-3A............................................................ 6 6 12
C-9............................................................. 6 6 12
C-13A........................................................... 1.2 3.6 4.8
----------------------------------------------------------------------------------------------------------------
DOE then used its modeling tool (discussed in detail in chapter 5
of the direct final rule TSD) to evaluate the thermal load on a typical
baseline unit (i.e., thinnest insulation and baseline glass for the
cooler compartment). DOE assumed that a baseline refrigeration system
would be equivalent to the baseline refrigeration system for a
corresponding refrigerator, refrigerator-freezer, or freezer. With the
estimated thermal load and refrigeration system efficiency, DOE
calculated the associated energy performance for the baseline
combination cooler refrigeration products.
For performance at higher efficiency levels, DOE modeled the
thermal load impacts of increased insulation thickness and improved
glass door resistivity. These design changes would reduce the total
thermal load for the refrigeration system to offset. At the higher
efficiency levels DOE also considered improved refrigeration system
efficiencies through higher-efficiency compressors and optimized heat
exchangers, similar to the design options analyzed for coolers. DOE
estimated max-tech performance by combining the lowest modeled thermal
load with the highest-efficiency refrigeration system. DOE considered
intermediate efficiency levels at even increments between the baseline
and max-tech. For each product class, DOE
[[Page 75216]]
analyzed an intermediate efficiency level corresponding to the
equivalent level of the refrigerator, refrigerator-freezer, and freezer
energy conservation standards that apply to those manufacturers who
have received permission to use a test procedure waiver, which provides
a usage factor that compensates for the less frequent door openings for
these products.
Based on the updated product class structure and DOE's modeling
analysis, DOE analyzed the efficiency levels as shown in Table IV.11.
The values corresponding to each efficiency level reflect the modeled
energy use relative to the existing standards for the corresponding
refrigerator, refrigerator-freezer, or freezer product classes, where
100 percent represents the current standard level for products tested
according to the existing test procedure waivers. Chapter 5 of the
direct final rule TSD provides more information on the development of
combination cooler refrigeration product efficiency levels.
Table IV.11--Direct Final Rule Combination Cooler Refrigeration Product Efficiency Levels
----------------------------------------------------------------------------------------------------------------
Percent of DOE refrigerator standard
equivalent
Efficiency level -----------------------------------------------
C-3A C-9 C-13A
----------------------------------------------------------------------------------------------------------------
Baseline........................................................ 136 145 171
1............................................................... 128 128 149
2............................................................... 100 106 128
3............................................................... 85 100 100
4............................................................... 77 85 85
5............................................................... 68 77 77
6............................................................... 60 68 68
7 (Max-tech).................................................... 46 58 60
----------------------------------------------------------------------------------------------------------------
c. Manufacturer Production Costs
As discussed in section IV.C.2.a of this document, DOE did not
estimate the increases in MPC associated with improving combination
cooler refrigeration product efficiencies in the preliminary analysis.
For this direct final rule, DOE extended the engineering analysis to
include the development of combination cooler refrigeration product
cost-efficiency curves.
Because combination cooler refrigeration products are similar to
coolers and refrigerators, DOE used data from the reverse-engineering
of coolers and refrigerators to inform the cost estimates associated
with design options. DOE also considered information from confidential
manufacturer interviews to determine which design options would be
appropriate for combination cooler refrigeration products and to gather
feedback on cost estimates. DOE used its cost model to scale certain
design options to the three typical volumes identified for each of the
analyzed product classes, as described in section IV.C.2.b of this
document. DOE presented its initial updates to the engineering analysis
to the MREF Working Group \21\ and made additional revisions based on
feedback from Working Group members. (ASRAC Public Meeting Transcript,
No. 90 at pp. 128-135)
---------------------------------------------------------------------------
\21\ See document numbers 78, 79, and 99 in docket ID EERE-2011-
BT-STD-0043 on http://www.regulations.gov for engineering materials
presented to the MREF Working Group.
---------------------------------------------------------------------------
To develop the cost-efficiency curves, DOE determined that
manufacturers would likely make incremental improvements to both the
thermal load and the refrigeration system when moving from baseline to
max-tech. Table IV.12 presents the incremental MPCs, in 2015$,
associated with these improvements for the three product classes
considered in this engineering analysis. Chapter 5 of the direct final
rule TSD includes additional information regarding the cost-efficiency
curves.
Table IV.12--Direct Final Rule Combination Cooler Refrigeration Product Cost-Efficiency Curves
----------------------------------------------------------------------------------------------------------------
Incremental MPC
Efficiency level -----------------------------------------------
C-3A C-9 C-13A
----------------------------------------------------------------------------------------------------------------
Baseline........................................................ $0 $0 $0
1............................................................... 6 15 6
2............................................................... 28 45 15
3............................................................... 42 47 35
4............................................................... 44 50 52
5............................................................... 65 60 100
6............................................................... 116 132 155
7 (Max-tech).................................................... 256 264 207
----------------------------------------------------------------------------------------------------------------
D. Markups Analysis
The markups analysis develops appropriate markups (e.g.,
manufacturer markups, retailer markups, wholesaler markups, contractor
markups) in the distribution chain and sales taxes to convert the MPC
estimates derived in the engineering analysis to consumer prices, which
are then used in the LCC and PBP analysis and in the manufacturer
impact analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin.
For MREFs, the main distribution chain goes from manufacturers to
appliance retailers, and then to
[[Page 75217]]
consumers. DOE included only this distribution channel during the
preliminary analysis. Based on feedback from manufacturers, and the
MREF Working Group, DOE understands a small fraction of freestanding
coolers and combination cooler refrigeration products, and all built-in
coolers and combination cooler refrigeration products, go through
another distribution channel, in which manufacturers sell the products
to wholesalers, who in turn sell the products to retailers and then to
consumers. (ASRAC Public Meeting, No. 85 at pp. 142-145)
The manufacturer markup converts MPC to manufacturer selling price
(``MSP''). DOE developed an average manufacturer markup by examining
the annual Securities and Exchange Commission (``SEC'') 10-K reports
filed by publicly-traded manufacturers engaged in producing MREFs.
For retailers and wholesalers, 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 used the 2012
Annual Retail Trade Survey \22\ and 2012 Annual Wholesale Trade Report
\23\ from the U.S. Census Bureau to estimate average baseline and
incremental markups for retailers and wholesalers, respectively.
---------------------------------------------------------------------------
\22\ U.S. Census Bureau, 2012 Annual Retail Trade Survey (2012)
(Available at: http://www.census.gov/retail/index.html) (Last
Accessed November 12, 2015).
\23\ U.S. Census Bureau, 2012 Annual Wholesale Trade Report
(2012), (Available at: http://www.census.gov/wholesale/index.html)
(Last Accessed April 23, 2015).
---------------------------------------------------------------------------
Chapter 6 of the direct final rule TSD provides details on DOE's
development of markups for MREFs.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of MREFs at different efficiencies in representative
U.S. households, and to assess the energy savings potential of
increased MREF efficiency. The energy use analysis estimates the range
of energy use of MREFs in the field (i.e., as they are actually used by
consumers). The energy use analysis provides the basis for other
analyses DOE performs, particularly assessments of the energy savings
and the savings in consumer operating costs that could result from the
adoption of new standards.
DOE determined a range of annual energy use of MREFs as a function
of unit volume. DOE developed a sample of households that use MREFs
from surveys of MREF owners.\24\ For each sample household, DOE
randomly assigned a product volume from the volumes analyzed in the
engineering analysis. For each volume and considered efficiency level,
DOE derived the energy consumption as measured by the DOE test
procedure in appendix A.
---------------------------------------------------------------------------
\24\ J.B. Greenblatt et al. U.S. Residential Miscellaneous
Refrigeration Products: Results from Amazon Mechanical Turk Surveys.
2014. Lawrence Berkeley National Laboratory: Berkeley, CA. Report
No. LBNL-6537E. See also S.M. Donovan, S.J. Young and J.B.
Greenblatt. Ice-Making in the U.S.: Results from an Amazon
Mechanical Turk Survey. 2015. Lawrence Berkeley National Laboratory:
Berkeley, CA. Report No. LBNL-183899.
---------------------------------------------------------------------------
DOE developed distributions of product volumes for each product
class based on the MREF models listed in DOE's Compliance Certification
Management System (``CCMS'') database,\25\ the CEC database,\26\ the
Natural Resources Canada (``NRCan'') database,\27\ as well as
manufacturer and retailer Web sites.
---------------------------------------------------------------------------
\25\ For more information see: www.regulations.doe.gov/certification-data/CCMS-77803762689.html.
\26\ Available at: https://cacertappliances.energy.ca.gov.
\27\ Available at: http://oee.nrcan.gc.ca/pml-lmp/index.cfm?action=app.search-recherche&appliance=REFRIGERATORS.
---------------------------------------------------------------------------
Chapter 7 of the direct final rule TSD provides details on DOE's
energy use analysis for MREFs.
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
MREFs. 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 (MPC, manufacturer markups, distribution chain
markups, sales tax, and installation costs) plus operating costs
(expenses for energy use, maintenance, and repair). To compute the
operating costs, DOE discounts future operating costs to the time of
purchase and sums them over the lifetime of the product.
The PBP (payback period) is the estimated amount of time
(in years) it takes consumers to recover the increased purchase cost
(including installation) of a more-efficient product through lower
operating costs. DOE calculates the PBP by dividing the change in
purchase cost at higher efficiency levels by the change in annual
operating cost for the year that amended or new standards are assumed
to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of MREFs in the absence of new energy
conservation standards. In contrast, the PBP for a given efficiency
level is measured relative to the lowest efficiency level in the no-
new-standards distribution.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units. As stated previously, DOE developed household samples
from the results of a study on MREFs using online surveys. For each
sample household, DOE determined the energy consumption for the MREFs
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 MREFs.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetimes, discount rates, and
sales taxes, with probabilities attached to each value, to account for
their uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP, which
incorporates Crystal Ball\TM\ (a commercially-available software
program), relies on a Monte Carlo simulation to incorporate uncertainty
and variability into the analysis. The Monte Carlo simulations randomly
sample input values from the probability distributions and MREF user
samples. The model calculated the LCC and PBP for products at each
efficiency level for 10,000 housing units 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. In its analysis, DOE used two different
[[Page 75218]]
compliance dates. For the consensus-recommended TSLs, the analysis is
based on a 2019 compliance date, as recommended by the MREF Working
Group. The analysis for all other TSLs is based on a 2021 compliance
date consistent with EPCA, which provides that newly-established
standards shall not apply to products manufactured within five years
after the publication of the final rule. In other words, DOE followed
the prescriptions of EPCA for all TSLs that were not recommended by the
MREF Working Group. The two different compliance dates are indicated in
the relevant sections of the results and discussed in section III.B of
this document.
Table IV.13 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the direct final rule TSD and its appendices.
Table IV.13--Summary of Inputs 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.
Installation Costs................ Did not include because no change
with efficiency level.
Annual Energy Use................. Annual weighted-average values are a
function of energy use at each TSL
and distribution of efficiencies
observed on the market.
Energy Prices..................... Based on Edison Electric Institute
(``EEI'') Typical Bills and Average
Rates reports for summer and winter
2014.
Energy Price Trends............... Based on AEO 2015 price forecasts.
Repair and Maintenance Costs...... Did not include because no change
with efficiency level.
Product Lifetime.................. Based on MREF Working Group feedback
and values previously determined
for refrigerators and freezers.
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................... TSLs recommended by the MREF Working
Group: 2019; Other TSLs: 2021.
------------------------------------------------------------------------
* Collectively, the references for the data sources mentioned in this
table are either provided in the sections following the table or in
chapter 8 of the direct final rule 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.
Historical price data specific to MREFs are not available. Hence,
DOE used a constant price assumption as the default product price trend
to project the prices of MREFs sold in each year in the forecast
period.
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE included
installation cost as part of the LCC analysis during the preliminary
analysis, but the cost did not vary with efficiency levels. As part of
the MREF Working Group discussions, stakeholders confirmed that
installation cost for MREFs does not vary between efficiency levels.
(ASRAC Public Meeting, No. 85 at pp. 155-157) As a result, DOE did not
include installation cost as part of the analysis for this direct final
rule.
3. Annual Energy Consumption
For each sampled household, DOE determined the energy consumption
for MREFs at different efficiency levels using the approach described
in section IV.E of this document.
4. Energy Prices
For the LCC and PBP analysis, DOE used average electricity prices
(for baseline products) and marginal prices (for higher-efficiency
products) which vary by region. DOE estimated these prices using data
published with the EEI Typical Bills and Average Rates reports for
summer and winter 2014.\28\ The 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.
---------------------------------------------------------------------------
\28\ 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.
---------------------------------------------------------------------------
DOE defined the average price as the ratio of the total bill to the
total electricity consumption. 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.
Regional 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 or large State 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).\29\ 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. Appropriate prices
were assigned to each sample household depending on its location.
---------------------------------------------------------------------------
\29\ U.S. Department of Energy, Energy Information
Administration. Form EIA-861 Annual Electric Power Industry
Database. www.eia.doe.gov/cneaf/electricity/page/eia861.html.
---------------------------------------------------------------------------
To estimate future prices, DOE used the projected annual changes in
average residential 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. DOE included
maintenance and repair costs as part of the LCC analysis during the
preliminary analysis, but the costs did not vary with efficiency
levels. As part of the MREF Working Group discussions, stakeholders
confirmed that maintenance and repair costs for MREFs
[[Page 75219]]
do not vary between efficiency levels. (ASRAC Public Meeting, No. 85 at
p. 171) As a result, DOE did not include maintenance and repair costs
as part of the analysis for this direct final rule.
6. Product Lifetime
DOE is aware of only limited available data to be used in the
modeling and analysis of MREF lifetimes. In the preliminary analysis,
DOE estimated the average product lifetime for coolers based on survey
data.\30\ However, several MREF Working Group members indicated that
the estimated lifetime for coolers was too short and that these
products operate using the same refrigeration technology as currently
covered refrigerators and refrigerator-freezers for which the projected
lifetime is much longer. (ASRAC Public Meeting, No. 85 at pp. 164-170)
Therefore, as part of the MREF Working Group deliberations, DOE applied
the lifetime of related refrigeration products to all MREFs in this
direct final rule.
---------------------------------------------------------------------------
\30\ J.B. Greenblatt et al. U.S. Residential Miscellaneous
Refrigeration Products: Results from Amazon Mechanical Turk Surveys.
2014. Lawrence Berkeley National Laboratory: Berkeley, CA. Report
No. LBNL-6537E.
---------------------------------------------------------------------------
For all full-size MREF product classes, DOE applied the lifetime
distribution used for full-size refrigerators in the 2011
refrigerators, refrigerator-freezers, and freezers final rule, with an
average lifetime of 17.4 years. 76 FR 57516 (September 15, 2011). For
all compact MREF product classes, DOE scaled the lifetime distribution
used for compact freezers in the 2011 refrigerators, refrigerator-
freezers, and freezers final rule to match the estimated 10-year
average lifetime provided by the Association of Home Appliance
Manufacturers (``AHAM'') and manufacturer feedback. (ASRAC Public
Meeting, No. 85 at p. 160; ASRAC Public Meeting, No. 87 at pp. 93-94,
175-176) This resulted in an average lifetime of 10.3 years for compact
MREF product classes. See chapter 8 of the direct final rule TSD.
7. Discount Rates
In calculating the LCC, DOE applies discount rates appropriate to
households to estimate the present value of future operating costs. DOE
estimated a distribution of residential discount rates for MREFs based
on consumer financing costs and opportunity cost of funds related to
appliance energy cost savings and maintenance costs.
To establish residential discount rates for the LCC analysis, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
energy cost savings. It estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's Survey of Consumer Finances \31\
(``SCF'') for 1995, 1998, 2001, 2004, 2007, and 2010. Using the SCF and
other sources, DOE developed a distribution of rates for each type of
debt and asset by income group to represent the rates that may apply in
the year in which 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 5.1
percent. See chapter 8 of the direct final rule TSD for further details
on the development of consumer discount rates.
---------------------------------------------------------------------------
\31\ The Federal Reserve Board, SCF 1989, 1992, 1995, 1998,
2001, 2004, 2007, 2010. http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
---------------------------------------------------------------------------
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).
DOE estimated the current distribution of product efficiencies
using product owner surveys; \32\ information from AHAM (AHAM, No.
106), and the databases maintained by DOE (CCMS),\33\ the CEC,\34\ and
NRCan; \35\ and information from manufacturer and retailer Web sites
and manufacturer feedback. The approach is described in chapter 8 of
the direct final rule TSD. DOE projected that the current distribution
of product efficiencies would remain constant in future years in the
absence of standards. Table IV.14 and Table IV.15 show the efficiency
distributions that DOE used.
---------------------------------------------------------------------------
\32\ J.B. Greenblatt et al. U.S. Residential Miscellaneous
Refrigeration Products: Results from Amazon Mechanical Turk Surveys.
2014. Lawrence Berkeley National Laboratory: Berkeley, CA. Report
No. LBNL-6537E. See also S.M. Donovan, S.J. Young and J.B.
Greenblatt. Ice-Making in the U.S.: Results from an Amazon
Mechanical Turk Survey. 2015. Lawrence Berkeley National Laboratory:
Berkeley, CA. Report No. LBNL-183899.
\33\ For more information see: www.regulations.doe.gov/certification-data/CCMS-77803762689.html.
\34\ Available at: https://cacertappliances.energy.ca.gov.
\35\ Available at: http://oee.nrcan.gc.ca/pml-lmp/index.cfm?action=app.search-recherche&appliance=REFRIGERATORS.
Table IV.14--Percentage of Coolers at Each Efficiency Level in the No-New-Standards Case
----------------------------------------------------------------------------------------------------------------
Product class
---------------------------------------------------------------
Efficiency level Freestanding Built-in
compact compact Freestanding Built-in
----------------------------------------------------------------------------------------------------------------
EL0............................................. 10 0 3 0
EL1............................................. 14 0 0 0
EL2............................................. 24 0 1 0
EL3............................................. 25 0 7 0
EL4............................................. 9 17 28 47
EL5............................................. 6 50 25 20
EL6............................................. 7 17 23 27
EL7............................................. 3 17 11 7
EL8............................................. 2 0 1 0
EL9............................................. 0 0 0 0
EL10............................................ 0 0 0 0
EL11............................................ 1 0 0 0
----------------------------------------------------------------------------------------------------------------
[[Page 75220]]
Table IV.15--Percentage of Combination Cooler Refrigeration Products at Each Efficiency Level in the No-New-Standards Case
--------------------------------------------------------------------------------------------------------------------------------------------------------
Product class
Efficiency level -----------------------------------------------------------------------------------------------
C-3A C-3A-BI C-9 C-9-BI C-13A C-13A-BI
--------------------------------------------------------------------------------------------------------------------------------------------------------
EL0..................................................... 0 0 0 0 0 0
EL1..................................................... 0 0 0 0 0 0
EL2..................................................... 100 100 0 0 25 0
EL3..................................................... 0 0 100 100 75 100
EL4..................................................... 0 0 0 0 0 0
EL5..................................................... 0 0 0 0 0 0
EL6..................................................... 0 0 0 0 0 0
EL7..................................................... 0 0 0 0 0 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 needed.
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.\36\ The shipments
model takes an accounting approach, tracking market shares of each
product class and 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.
---------------------------------------------------------------------------
\36\ DOE used data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------
To estimate cooler shipments, DOE first estimated total stock based
on estimates of market saturation and stock from manufacturer feedback
and surveys on product ownership.\37\ DOE then estimated annual
shipments by dividing the estimated stock by the average product
lifetime. DOE verified that the estimated shipments agreed with
estimates from AHAM. (AHAM, No. 106) DOE estimated that shipments would
increase in line with the projected increase in the housing stock from
the AEO 2015 \38\ estimates in order to project shipments forward to
2050. DOE allocated shipments to each product class using the
distribution of available models on the market and feedback from
manufacturers, the MREF Working Group, and AHAM. (See, e.g., AHAM, No.
106)
---------------------------------------------------------------------------
\37\ J.B. Greenblatt et al. U.S. Residential Miscellaneous
Refrigeration Products: Results from Amazon Mechanical Turk Surveys.
2014. Lawrence Berkeley National Laboratory: Berkeley, CA. Report
No. LBNL-6537E. See also S.M. Donovan, S.J. Young and J.B.
Greenblatt. Ice-Making in the U.S.: Results from an Amazon
Mechanical Turk Survey. 2015. Lawrence Berkeley National Laboratory:
Berkeley, CA. Report No. LBNL 183899.
\38\ U.S. Department of Energy-Energy Information
Administration. Annual Energy Outlook 2015 with projections to 2040.
April 2015. Washington, DC. DOE/EIA-0383 (2015). Available for
download at: http://www.eia.gov/forecasts/aeo/.
---------------------------------------------------------------------------
For combination cooler refrigeration products, DOE used
manufacturer feedback from confidential interviews to estimate the
number of units shipped in 2014. DOE estimated that shipments would
increase in line with the increase in housing stock in the United
States in order to project shipments forward to 2050. DOE used the
distribution of available models to allocate shipments to each product
class.
MREFs are a discretionary product and sales would be expected to be
sensitive to the product price. To estimate the effect of new standards
on MREF shipments, which are expected to result in higher prices, DOE
applied relative price elasticity in the shipments model. This approach
gives some weight to the operating cost savings from higher-efficiency
products. In general, price elasticity reflects the expectation that
demand will decrease when prices increase. The price elasticity value
is derived from data on refrigerators, clothes washers, and
dishwashers.\39\ 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 the elasticity
declines over time. DOE estimated shipments in each standards case
using the relative price elasticity along with the change in the
product price and operating costs between a standards case and the no-
new-standards case.
---------------------------------------------------------------------------
\39\ Dale, L. and S.K. Fujita, An Analysis of the Price
Elasticity of Demand of Household Appliances. 2008. Lawrence
Berkeley National Laboratory: Berkeley, CA. Report No. LBNL-326E.
---------------------------------------------------------------------------
For details on the shipments analysis, see chapter 9 of the direct
final rule TSD.
H. National Impact Analysis
The NIA assesses the national energy savings (i.e., NES) and the
national net present value (i.e., NPV) of total consumer costs and
savings that would be expected to result from new or amended standards
at specific efficiency levels.\40\ (``Consumer'' in this context refers
to consumers of the product being regulated.) DOE calculates the NES
and NPV based on projections of annual product shipments, along with
the annual energy consumption and total
[[Page 75221]]
installed cost data from the energy use and LCC analyses. For most of
the TSLs considered in this direct final rule, DOE forecasted the
energy savings, operating cost savings, product costs, and NPV of
consumer benefits over the lifetime of MREFs sold from 2021-2050. For
the TSLs that represent the MREF Working Group recommendations, DOE
accounted for the lifetime impacts of MREFs sold from 2019-2048.
---------------------------------------------------------------------------
\40\ The NIA accounts for impacts in the 50 states and U.S.
territories.
---------------------------------------------------------------------------
DOE evaluates the impacts of new and 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 or amended energy conservation
standards. For this projection, DOE considers historical trends in
efficiency and various forces that are likely to affect the mix of
efficiencies over time. DOE compares the no-new-standards case with
projections characterizing the market for each product class if DOE
adopted new or amended standards at specific energy efficiency levels
(i.e., the TSLs or standards cases) for that class. For the standards
cases, DOE considers how a given standard would likely affect the
market shares of products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses typical values
(as opposed to probability distributions) as inputs.
Table IV.16 summarizes the inputs and methods DOE used for the NIA
analysis for this direct final rule. Discussion of these inputs and
methods follows the table. See chapter 10 of the direct final rule TSD
for further details.
Table IV.16--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments............................ Annual shipments from shipments
model.
Compliance Date of Standard.......... TSLs recommended by the MREF
Working Group: 2019; Other TSLs:
2021.
Efficiency Trends.................... Constant.
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
constant future product prices.
Annual Energy Cost per Unit.......... Annual weighted-average values as
a function of the annual energy
consumption per unit and energy
prices.
Energy Prices........................ AEO 2015 forecasts (to 2040) and
extrapolation through 2050.
Energy Site-to-Primary and FFC A time-series conversion factor
Conversion. based on AEO 2015.
Discount Rate........................ Three and seven percent.
Present Year......................... 2016.
------------------------------------------------------------------------
1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. As described in section IV.F.8 of this document, DOE developed
an energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes. Because there are no data on trends in
efficiency for MREFs, DOE assumed that these efficiency distributions
will remain constant throughout the analysis period.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the shipment-weighted efficiency for the year that standards
are assumed to become effective (2019 for TSLs from the MREF Working
Group recommendations and 2021 for other TSLs). In this scenario, the
market share of products in the no-new-standards case that do not meet
the standard under consideration would ``roll up'' to meet the new
standard level, and the market share of products above the standard
would remain unchanged.
2. National Energy Savings
The national energy savings 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 amended 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 marginal conversion factors
derived from AEO 2015. Cumulative energy savings are the sum of the NES
for each year over the timeframe of the analysis.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use full-fuel-cycle (``FFC'') measures
of energy use and greenhouse gas and other emissions in the national
impact analyses and emissions analyses included in future energy
conservation standards rulemakings. 76 FR 51281 (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 direct final rule TSD.
---------------------------------------------------------------------------
\41\ For more information on NEMS, refer to U.S. Energy
Information Administration Web site (Available at: http://www.eia.gov/forecasts/aeo/assumptions/).
---------------------------------------------------------------------------
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 operating costs; and (3) a discount factor to calculate
the present value of costs and savings. DOE calculates net savings
[[Page 75222]]
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 document, DOE assumed a
constant MREF price trend to forecast prices for each product class at
each considered efficiency level throughout the analysis period.
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 MREFs. In
addition to the default constant price trend, DOE considered two
product price sensitivity cases: (1) A high price decline case based on
the Producer Price Index (``PPI'') for household refrigerator and home
freezer manufacturing from 1991 to 2014; \42\ and (2) a low price
decline case based on the same PPI series from 1976 to 1990. The
derivation of these price trends and the results of these sensitivity
cases are described in appendix 10C of the direct final rule TSD.
---------------------------------------------------------------------------
\42\ Household refrigerator and home freezer manufacturing PPI
series ID: PCU 335222335222 (Available at: http://www.bls.gov/ppi/).
---------------------------------------------------------------------------
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of electricity. To estimate energy prices in future
years, DOE multiplied the average regional energy prices by the
forecast of annual national-average residential energy price changes in
the Reference case from AEO 2015, which has an end year of 2040. To
estimate price trends after 2040, DOE used the average annual rate of
change in prices from 2025 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 direct final
rule TSD.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
direct final rule, 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.\43\ 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.
---------------------------------------------------------------------------
\43\ 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, such as low-income and senior households. DOE
evaluates impacts on subgroups of consumers by analyzing the LCC
impacts and PBP for those particular consumers from alternative
standard levels. For this final rule, DOE analyzed the impacts of the
considered standard levels on two subgroups: (1) Low-income households
and (2) senior-only households. The analysis used subsets of the full
household sample composed of households that meet the criteria for the
considered subgroups. DOE used the LCC and PBP spreadsheet model to
estimate the impacts of the considered efficiency levels on these
subgroups. Chapter 11 in the final rule TSD describes the consumer
subgroup analysis.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the potential financial impacts of
energy conservation standards on manufacturers of MREFs 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 energy conservation standards might affect
manufacturing employment, capacity, and competition, as well as how
standards 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 Government
Regulatory Impact Model (i.e., 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 more-
stringent energy conservation standards on a given industry by
comparing changes in INPV and domestic manufacturing employment between
a no-new-standards case and the various TSLs. 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 direct final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the MREF manufacturing industry
based on the market and technology assessment, preliminary manufacturer
interviews, and publicly-available information. This included a top-
down analysis of MREF 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 used public
sources of information to further calibrate its initial
characterization of MREFs, including company SEC 10-K filings,
corporate annual reports, the U.S. Census
[[Page 75223]]
Bureau's Economic Census,\44\ and Hoover's reports.\45\
---------------------------------------------------------------------------
\44\ U.S. Census Bureau, Annual Survey of Manufactures: General
Statistics: Statistics for Industry Groups and Industries (Available
at: http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ASM_2011_31GS101&prodType=table).
\45\ Hoovers Inc., Company Profiles, Various Companies
(Available at: http://www.hoovers.com). Last Accessed December 15,
2015.
---------------------------------------------------------------------------
In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of new energy conservation standards.
The GRIM uses several factors to determine a series of annual cash
flows starting with the announcement of the standard and extending over
a 30-year period following the compliance 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 conducted structured, detailed
interviews with manufacturers of MREFs 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,
industry competitiveness, and subgroup impacts. Before the interviews,
DOE distributed an interview guide to interviewees. The interview
guides are available in appendix 12A of the direct final rule TSD. See
section IV.J.3 of this document for a description of the key issues
raised by manufacturers during the interviews.
In Phase 3 of the MIA, 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 two MREF manufacturer subgroups for which average cost
assumptions may not hold: Small businesses and domestic LVMs.
Small Businesses
Manufacturers of MREFs have primary North American Industry
Classification System (``NAICS'') codes of 335222, ``Household
Refrigerator and Home Freezer Manufacturing'' and 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and
Industrial Refrigeration Equipment Manufacturing.'' Based on the size
standards published by the Small Business Administration (``SBA''), to
be categorized as a small business manufacturer of MREFs under NAICS
codes 335222 or 333415, a MREF manufacturer and its affiliates may
employ a maximum of 1,250 employees or less.\46\ The employee threshold
includes all employees in a business' parent company and any other
subsidiaries. Using this classification in conjunction with a search of
industry databases and the SBA member directory, DOE identified one
manufacturer and one importer that qualify as small businesses.
---------------------------------------------------------------------------
\46\ The size standards are codified at 13 CFR part 121. The
standards are listed by North American Industry Classification
System (NAICS) code and industry description and are available at
https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------
Low-Volume Manufacturers
In addition to the small, domestic businesses described above, DOE
identified three domestic manufacturers of niche MREF products that
have much lower revenues than their diversified competitors. Although
these manufacturers do not qualify as small businesses under the SBA
definition, they are concentrated in the production of residential
refrigeration products and, in some cases, commercial refrigeration
equipment. DOE subsequently assigned these manufacturers to an LVM
subgroup to evaluate any disproportionate impacts of new standards for
MREFs on these manufacturers.
The MREF manufacturer subgroup analysis is discussed in greater
detail in chapter 12 of the direct final rule TSD and in sections V.B.2
and VI.B of this document.
In addition, in Phase 3 of the MIA, DOE used feedback obtained from
manufacturer interviews to assess the impacts of new standards on
direct employment and manufacturing capacity within the MREF industry,
and on the cumulative regulatory burdens felt by MREF manufacturers.
2. Government Regulatory Impact Model
DOE uses the GRIM to quantify the changes in cash flow due to new
standards that result in a higher or lower industry value. The GRIM
analysis uses a standard annual, discounted cash-flow methodology that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from new energy conservation standards. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2016 (the base year of the analysis) and continuing to
2048 (the end of the analysis period for TSLs with a 3-year compliance
period) or 2050 (the end of the analysis period for TSLs with a 5-year
compliance period).\47\ DOE calculated INPVs by summing the stream of
annual discounted cash flows during this period. For MREF
manufacturers, DOE used a real discount rate of 7.7 percent, which was
derived from industry financials and feedback received during
manufacturer interviews.
---------------------------------------------------------------------------
\47\ As described in section III.B of this document, the MREF
Working Group recommended a 3-year compliance period for the
standards recommended in Term Sheet #2. DOE analyzed these
recommended standards (TSL 2 for coolers and TSL 1 for combination
cooler refrigeration products) using a 3-year compliance period. DOE
analyzed all other TSLs in this direct final rule (representing
standards not recommended by the MREF Working Group) using a 5-year
compliance period consistent with the EPCA provisions for newly-
established standards.
---------------------------------------------------------------------------
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. The difference in INPV between the no-new-standards
case and a standards case represents the financial impact of the new
energy conversation standards on manufacturers. DOE collected this
information on the critical GRIM inputs from a number of sources,
including publicly-available data, interviews with manufacturers, and
MREF Working Group meetings, including information gathered from
manufacturers by a third-party consultant on behalf of AHAM.\48\ The
GRIM results are shown in section V.B.2 of this document. Additional
details about the GRIM, the discount rate, and other financial
parameters can be found in chapter 12 of the direct final rule TSD.
---------------------------------------------------------------------------
\48\ Information presented during the MREF Working Group meeting
which was a source of information for the MIA is available on http://regulations.gov under document ID EERE-2011-BT-STD-0043-0104.
---------------------------------------------------------------------------
[[Page 75224]]
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
Manufacturing higher-efficiency products is typically more costly
than manufacturing baseline products due to the use of more complex
components, which are typically more expensive than baseline
components. The changes in the MPC of the analyzed products can affect
the revenues, gross margins, and cash flow of the industry, making
these product cost data key GRIM inputs for DOE's analysis.
In the MIA, DOE used the MPCs for each considered efficiency level
calculated in the engineering analysis, as described in section IV.C of
this document and further detailed in chapter 5 of the direct final
rule TSD. In addition, DOE used information from its teardown analysis,
described in chapter 5 of the direct final rule TSD, to disaggregate
the MPCs into material, labor, and overhead costs. To calculate the
MPCs for products above the baseline, DOE added the incremental
material, labor, and overhead costs from the engineering cost-
efficiency curves to the baseline MPCs. These cost breakdowns were
validated and revised based on manufacturer comments received during
interviews and the MREF Working Group discussions.
Shipments Forecasts
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of these values by product
class and efficiency level. Changes in sales volumes and efficiency mix
over time can significantly affect manufacturer finances. For the MREF
analysis, the GRIM used the shipments analysis to estimate shipments
either from 2016 (the base year of the analysis) and continuing to 2048
(the end of the analysis period for TSLs with a 3-year compliance
period) or 2050 (the end of the analysis period for TSLs with a 5-year
compliance period). See chapter 9 of the direct final rule TSD for
additional details.
Conversion Costs
A new energy conservation standard would cause manufacturers to
incur one-time conversion costs to bring their production facilities
and product designs into compliance. DOE evaluated the level of
conversion-related expenditures that would be needed to comply with
each considered efficiency level in each product class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
Product conversion costs and (2) capital conversion costs. Product
conversion costs are one-time investments in R&D, testing, marketing,
and other non-capitalized costs necessary to make product designs
comply with the new energy conservation standard. Capital conversion
costs are one-time investments in property, plant, and equipment
necessary to adapt or change existing production facilities such that
products with new, compliant designs can be fabricated and assembled.
DOE used manufacturer interviews to gather data needed to evaluate
the level of capital conversion expenditures manufacturers would likely
incur to comply with new energy conservation standards at each
efficiency level for MREFs. DOE also obtained information relating to
capital conversion costs from manufacturers during the MREF Working
Group meetings, including information gathered from manufacturers by a
third-party consultant on behalf of AHAM.\49\ DOE supplemented
manufacturer comments with estimates of capital expenditure
requirements derived from the engineering analysis.
---------------------------------------------------------------------------
\49\ The information presented during the MREF Working Group
meeting is available on http://regulations.gov under document ID
EERE-2011-BT-STD-0043-0104 at p. 6.
---------------------------------------------------------------------------
DOE assessed the product conversion costs at each considered
efficiency level by integrating data from quantitative and qualitative
sources. DOE considered market-share-weighted feedback regarding the
potential cost of each efficiency level from multiple manufacturers
during confidential interviews and during the MREF Working Group
meetings \50\ to estimate product conversion costs, and validated those
numbers against engineering estimates of redesign efforts. In general,
DOE assumes that all conversion-related investments occur between the
year of publication of the final rule and the year by which
manufacturers must comply with the new standard. The conversion cost
figures used in the GRIM can be found in section V.B.2.a of this
document. For additional information on the estimated product and
capital conversion costs, see chapter 12 of the direct final rule TSD.
---------------------------------------------------------------------------
\50\ Id.
---------------------------------------------------------------------------
b. Government Regulatory Impact Model Scenarios
Manufacturer Markup Scenarios
To calculate the MSPs in the GRIM, DOE applied manufacturer markups
to the MPCs estimated in the engineering analysis for each product
class and efficiency level. Modifying these manufacturer markups in the
standards case yields different sets of manufacturer impacts. For the
MIA, DOE modeled two standards-case manufacturer 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
percentage markup scenario; and (2) a preservation of per-unit
operating profit markup scenario. These scenarios lead to different
manufacturer markup values that, when applied to the inputted MPCs,
result in varying revenue and cash flow impacts.
Under the preservation of gross margin percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within a product class. As production costs increase
with efficiency, this scenario implies that the absolute dollar markup
will increase as well. Based on publicly-available financial
information for manufacturers of MREFs as well as comments from
manufacturer interviews, DOE estimated the average manufacturer markups
by product class as shown in Table IV.17.
Table IV.17--Baseline Manufacturer Markups
------------------------------------------------------------------------
Product class Markup
------------------------------------------------------------------------
Built-In Compact Coolers..................................... 1.41
Freestanding Compact Coolers................................. 1.25
Built-In Coolers............................................. 1.41
Freestanding Coolers......................................... 1.41
C-3A/C-3A-BI................................................. 1.41
C-9/C-9-BI................................................... 1.41
C-13A/C-13A-BI............................................... 1.41
------------------------------------------------------------------------
This markup scenario assumes that manufacturers would be able to
maintain their gross margin percentage markup as production costs
increase in response to a new energy conservation standard.
Manufacturers stated that this scenario is optimistic and represents a
high bound to industry profitability.
In the preservation of operating profit scenario, manufacturer
markups are set so that operating profit one year after the compliance
date of the new energy conservation standard is the same as in the no-
new-standards case. Under this scenario, as the costs of production
increase under a standards case, manufacturers are generally required
to reduce their markups to a level that maintains no-new-standards case
operating profit. The implicit assumption behind this markup
[[Page 75225]]
scenario is that the industry can only maintain its operating profit in
absolute dollars after compliance with the new standard is required.
Therefore, operating margin in percentage terms is reduced between the
no-new-standards case and standards case. DOE adjusted (i.e., lowered)
the manufacturer markups in the GRIM at each TSL to yield approximately
the same earnings before interest and taxes in the standards case as in
the no-new-standards case. This markup scenario represents a low bound
to industry profitability under a new energy conservation standard.
3. Manufacturer Interviews
To inform the MIA, DOE interviewed several manufacturers with an
estimated total cooler market share of approximately 25 percent and an
estimated total combination cooler refrigeration products market share
of 60 to 70 percent. (The remaining manufacturers in the market consist
of overseas companies or those who were contacted but declined to
participate.) The information gathered during these interviews enabled
DOE to tailor the GRIM to reflect the unique financial characteristics
of the MREF industry. These confidential interviews provided
information that DOE used to evaluate the impacts of new energy
conservation standards on manufacturer cash flows, manufacturing
capacity, and employment levels.
During the interviews, DOE asked manufacturers to describe the
major issues they anticipate to result from new energy conservation
standards for MREFs. The following sections describe the most
significant issues identified by manufacturers.
Cumulative Regulatory Burden
During confidential interviews, multiple manufacturers expressed
concerns related to the impact of cumulative regulatory burdens on the
MREF industry if DOE finalizes new energy conservation standards for
MREFs. Because most manufacturers produce other residential products
and commercial equipment, they already face regulations by DOE, the
Environmental Protection Agency (``EPA''), the European Union, and
Canada, as well as third-party industry certifications and standards.
Complying with various overlapping regulatory and environmental
standards puts a strain on manufacturers' resources and profitability.
Additionally, smaller, domestic manufacturers of high-end MREFs
expressed concern that they have significantly less human and capital
resources to devote to regulatory compliance than larger, more
diversified manufacturers. This has a direct impact on the amount of
resources these companies are able to devote to product innovation, and
thus MREF manufacturers expect that energy conservation standards would
negatively impact their competitive position in the MREF industry.
Manufacturer Subgroup Impacts
Multiple manufacturers expressed concerns regarding the impact of
new energy conservations standards for MREFs on smaller, domestic
manufacturers (referred to as small businesses and LVMs in this direct
final rule). These manufacturers stated that smaller, domestic
manufacturers must devote a much larger percentage of their engineering
resources to regulatory compliance than do the larger, multi-national
companies selling MREFs in the United States. These manufacturers also
noted that the smaller, domestic manufacturers have substantially fewer
overall shipments than larger, diversified manufacturers, and MREFs
make up a much larger portion of the smaller, domestic companies'
sales. Finally, manufacturers commented that smaller, domestic
manufacturers produce high-end, niche products. Accordingly,
manufacturers stated that, depending on the stringency of new energy
conservation standards for MREFs, the availability of these products
could be threatened if these manufacturers are forced to drop certain
product lines.
K. Emissions Analysis
The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO2, NOX, SO2, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH4 and
N2O, as well as the reductions to emissions of all species
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion. The associated emissions are referred
to as upstream emissions.
The analysis of power sector emissions uses marginal emissions
factors that were derived from data in AEO 2015, as described in
section IV.K of this document. The methodology is described in chapters
13 and 15 of the direct final rule TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA, GHG
Emissions Factors Hub.\51\ The FFC upstream emissions are estimated
based on the methodology described in chapter 15 of the direct final
rule 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.
---------------------------------------------------------------------------
\51\ 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 megawatt-hour (MWh) or million Btu 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' global warming potential
(GWP) over a 100-year time horizon. Based on the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change,\52\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------
\52\ Intergovernmental Panel on Climate Change. Anthropogenic
and Natural Radiative Forcing. In Climate Change 2013: The Physical
Science Basis. Contribution of Working Group I to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change.
Chapter 8. 2013. Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor,
S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex, and P.M.
Midgley, Editors. Cambridge University Press: Cambridge, United
Kingdom and New York, NY, USA.
---------------------------------------------------------------------------
The AEO incorporates the projected impacts of existing air quality
regulations on emissions. AEO 2015 generally represents current
legislation and environmental regulations, including recent government
actions, for which implementing regulations were available as of
October 31, 2014. DOE's estimation of impacts accounts for the presence
of the emissions control programs discussed in the following
paragraphs.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States and the
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2
emissions from 28 eastern States and DC were also limited under the
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR
created an allowance-based trading program that operates along with the
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court
of Appeals for
[[Page 75226]]
the District of Columbia Circuit, but it remained in effect.\53\ In
2011, EPA issued a replacement for CAIR, the Cross-State Air Pollution
Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the
D.C. Circuit issued a decision to vacate CSAPR,\54\ 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.\55\ On October 23, 2014, the D.C. Circuit lifted the stay of
CSAPR.\56\ Pursuant to this action, CSAPR went into effect (and CAIR
ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------
\53\ 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).
\54\ 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).
\55\ 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.
\56\ 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.\57\ Therefore, DOE believes that energy conservation standards
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------
\57\ DOE notes that the Supreme Court recently remanded EPA's
2012 rule regarding national emission standards for hazardous air
pollutants from certain electric utility steam generating units. See
Michigan v. EPA (Case No. 14-46, 2015). DOE has tentatively
determined that the remand of the MATS rule does not change the
assumptions regarding the impact of energy efficiency standards on
SO2 emissions. Further, while the remand of the MATS rule
may have an impact on the overall amount of mercury emitted by power
plants, it does not change the impact of the energy efficiency
standards on mercury emissions. DOE will continue to monitor
developments related to this case and respond to them as
appropriate.
---------------------------------------------------------------------------
CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia.\58\ 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 direct final rule for these States.
---------------------------------------------------------------------------
\58\ CSAPR also applies to NOX and it would supersede
the regulation of NOX under CAIR. As stated previously,
the current analysis assumes that CAIR, not CSAPR, is the regulation
in force. The difference between CAIR and CSAPR with regard to DOE's
analysis of NOX emissions is slight.
---------------------------------------------------------------------------
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, DOE's energy conservation
standards would likely reduce Hg emissions. DOE estimated mercury
emissions reduction using emissions factors based on AEO 2015, which
incorporates the MATS.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this 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 direct final rule.
For this direct final rule, DOE relied on a set of values for the
social cost of carbon (SCC) that was developed by a Federal interagency
process. The basis for these values is summarized in the next section,
and a more detailed description of the methodologies used is provided
as an appendix to chapter 14 of the direct final rule TSD.
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
[[Page 75227]]
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 \59\ 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.
---------------------------------------------------------------------------
\59\ 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.
It is important to emphasize that the interagency process is
committed to updating these estimates as the science and economic
understanding of climate change and its impacts on society improves
over time. In the meantime, the interagency group will continue to
explore the issues raised by this analysis and consider public comments
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing carbon dioxide emissions. To ensure consistency in how
benefits are evaluated across Federal agencies, the Administration
sought to develop a transparent and defensible method, specifically
designed for the rulemaking process, to quantify avoided climate change
damages from reduced CO2 emissions. The interagency group
did not undertake any original analysis. Instead, it combined SCC
estimates from the existing literature to use as interim values until a
more comprehensive analysis could be conducted. The outcome of the
preliminary assessment by the interagency group was a set of five
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33,
$19, $10, and $5 per metric ton of CO2. These interim values
represented the first sustained interagency effort within the U.S.
government to develop an SCC for use in regulatory analysis. The
results of this preliminary effort were presented in several proposed
and final rules.
c. Current Approach and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to generate improved SCC estimates.
Specially, the group considered public comments and further explored
the technical literature in relevant fields. The interagency group
relied on three integrated assessment models commonly used to estimate
the SCC: The FUND, DICE, and PAGE models. These models are frequently
cited in the peer-reviewed literature and were used in the last
assessment of the Intergovernmental Panel on Climate Change (IPCC).
Each model was given equal weight in the SCC values that were
developed.
Each model takes a slightly different approach to model how changes
in emissions result in changes in economic damages. A key objective of
the interagency process was to enable a consistent exploration of the
three models, while respecting the different approaches to quantifying
damages taken by the key modelers in the field. An extensive review of
the literature was conducted to select three sets of input parameters
for these models: Climate sensitivity, socio-economic and emissions
trajectories, and discount rates. A probability distribution for
climate sensitivity was specified as an input into all three models. In
addition, the interagency group used a range of scenarios for the
socio-economic parameters and a range of values for the discount rate.
All other model features were left unchanged, relying on the model
developers' best estimates and judgments.
In 2010, the interagency group selected four sets of SCC values for
use in regulatory analyses. Three sets of values are based on the
average SCC from the three integrated assessment models, at discount
rates of 2.5, 3, and 5 percent. The fourth set, which represents the
95th percentile SCC estimate across all three models at a 3-percent
discount rate, was included to represent higher-than-expected impacts
from climate change further out in the tails of the SCC distribution.
The values grow in real terms over time. Additionally, the interagency
group determined that a range of values from 7 percent to 23 percent
should be used to adjust the global SCC to calculate domestic
effects,\60\ although preference is given to consideration of the
global benefits of reducing CO2 emissions. Table IV.18
presents the values in the 2010 interagency group report,\61\ which is
reproduced in appendix 14A of the direct final rule TSD.
---------------------------------------------------------------------------
\60\ 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.
\61\ 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).
[[Page 75228]]
Table IV.18--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
-----------------------------------------------------------------
Year 5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010.......................................... 4.7 21.4 35.1 64.9
2015.......................................... 5.7 23.8 38.4 72.8
2020.......................................... 6.8 26.3 41.7 80.7
2025.......................................... 8.2 29.6 45.9 90.4
2030.......................................... 9.7 32.8 50.0 100.0
2035.......................................... 11.2 36.0 54.2 109.7
2040.......................................... 12.7 39.2 58.4 119.3
2045.......................................... 14.2 42.1 61.7 127.8
2050.......................................... 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
The SCC values used for this direct final 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).\62\ Table IV.19 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 estimates between 2010 and 2050 is reported in
appendix 14B of the direct final rule 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.
---------------------------------------------------------------------------
\62\ 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.19--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
-----------------------------------------------------------------
Year 5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010.......................................... 10 31 50 86
2015.......................................... 11 36 56 105
2020.......................................... 12 42 62 123
2025.......................................... 14 46 68 138
2030.......................................... 16 50 73 152
2035.......................................... 18 55 78 168
2040.......................................... 21 60 84 183
2045.......................................... 23 64 89 197
2050.......................................... 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable because they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The National Research
Council report mentioned previously points out that there is tension
between the goal of producing quantified estimates of the economic
damages from an incremental ton of carbon and the limits of existing
efforts to model these effects. There are a number of analytical
challenges that are being addressed by the research community,
including research programs housed in many of the Federal agencies
participating in the interagency process to estimate the SCC. The
interagency group intends to periodically review and reconsider those
estimates to reflect increasing knowledge of the science and economics
of climate impacts, as well as improvements in modeling.\63\
---------------------------------------------------------------------------
\63\ 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. It
also stated its intention to seek independent expert advice on
opportunities to improve the estimates, including many of the
approaches suggested by commenters.
---------------------------------------------------------------------------
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report (revised July 2015), adjusted to 2015$ using
the implicit price deflator for gross domestic product (GDP) from the
Bureau of Economic Analysis. For each of the four sets of SCC cases
specified, the values for emissions in 2015 were $12.4, $40.6, $63.2,
and $118 per metric ton avoided (values expressed in 2015$). DOE
derived values after 2050 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
[[Page 75229]]
SCC value for that year in each of the four cases. To calculate a
present value of the stream of monetary values, DOE discounted the
values in each of the four cases using the specific discount rate that
had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
As noted previously, DOE has estimated how the considered energy
conservation standards would reduce site NOX emissions
nationwide and decrease power sector NOX emissions in those
22 States not affected by the CAIR.
DOE estimated the monetized value of NOX emissions
reductions from electricity generation using benefit per ton estimates
from the ``Regulatory Impact Analysis for the Clean Power Plan Final
Rule,'' published in August 2015 by EPA's Office of Air Quality
Planning and Standards.\64\ The report includes high and low values for
NOX (as PM2.5) for 2020, 2025, and 2030 using
discount rates of 3 percent and 7 percent; these values are presented
in chapter 14 of the direct final rule TSD. DOE primarily relied on the
low estimates to be conservative.\65\ DOE assigned values for 2021-2024
and 2026-2029 using, respectively, the values for 2020 and 2025. DOE
assigned values after 2030 using the value for 2030. DOE developed
values specific to the end-use category for MREFs using a method
described in appendix 14C of the direct final rule TSD.
---------------------------------------------------------------------------
\64\ Available at www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis. See Tables 4A-3, 4A-4, and
4A-5 in the report. The U.S. Supreme Court has stayed the rule
implementing the Clean Power Plan until the current litigation
against it concludes. Chamber of Commerce, et al. v. EPA, et al.,
Order in Pending Case, 577 U.S. ___ (2016). However, the benefit-
per-ton estimates established in the Regulatory Impact Analysis for
the Clean Power Plan are based on scientific studies that remain
valid irrespective of the legal status of the Clean Power Plan.
\65\ For the monetized NOX benefits associated with
PM2.5, the related benefits are primarily based on an
estimate of premature mortality derived from the ACS study (Krewski
et al. 2009), which is the lower of the two EPA central tendencies.
Using the lower value is more conservative when making the policy
decision concerning whether a particular standard level is
economically justified. If the benefit-per-ton estimates were based
on the Six Cities study (Lepuele et al. 2012), the values would be
nearly two-and-a-half times larger. (See chapter 14 of the final
rule TSD for further description of the studies mentioned above.)
---------------------------------------------------------------------------
DOE multiplied the emissions reduction (in tons) in each year by
the associated $/ton values, and then discounted each series using
discount rates of 3 percent and 7 percent as appropriate.
DOE is evaluating appropriate monetization of avoided
SO2 and Hg emissions in energy conservation standards
rulemakings. DOE has not included monetization of those emissions in
the current analysis.
M. Utility Impact Analysis
The utility impact analysis estimates several effects on the
electric power 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 direct final rule 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 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 supplies by the utility industry; (3)
increased consumer spending on new products to which the new standards
apply; and (4) the effects of those three factors throughout the
economy.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sector
employment statistics developed by the Labor Department's Bureau of
Labor Statistics (``BLS'').\66\ 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.\67\ 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.
---------------------------------------------------------------------------
\66\ 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].
\67\ 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 direct final rule using an input/output model
of the U.S. economy called Impact of Sector Energy Technologies version
3.1.1 (``ImSET'').\68\ 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
[[Page 75230]]
sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\68\ 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 direct final rule TSD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for MREFs.
It addresses the TSLs examined by DOE, the projected impacts of each of
these levels if adopted as energy conservation standards for MREFs, and
the standards levels that DOE is adopting in this direct final rule.
Additional details regarding DOE's analyses are contained in the direct
final rule TSD supporting this notice.
A. Trial Standard Levels
DOE analyzed the benefits and burdens of four TSLs for coolers and
four TSLs for combination cooler refrigeration products. 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 direct final rule TSD.
Table V.1 presents the TSLs and the corresponding efficiency levels
for coolers. TSL 4 represents the max-tech efficiency levels for all
product classes. TSL 3 consists of the efficiency levels with maximum
consumer NPV at 7-percent discount rate. TSL 2 corresponds to the
standard levels recommended by the MREF Working Group. TSL 1 represents
the current CEC energy efficiency standard for wine chillers.
Table V.1--Efficiency Levels Within Each Trial Standard Level for Coolers
----------------------------------------------------------------------------------------------------------------
Trial standard levels
Product class ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Freestanding Compact Coolers.................... 4 7 9 11
Built-in Compact Coolers........................ 4 7 9 11
Freestanding Coolers............................ 4 7 9 11
Built-in Coolers................................ 4 7 9 11
----------------------------------------------------------------------------------------------------------------
Table V.2 presents the TSLs and the corresponding efficiency levels
for combination cooler refrigeration products. TSL 4 represents the
max-tech efficiency levels for all product classes. TSL 3 represents a
mid-point between TSL 2 and TSL 4. TSL 2 consists of the efficiency
levels with maximum consumer NPV at 7-percent discount rate. TSL 1
corresponds to the standard levels recommended by the MREF Working
Group.
Table V.2--Efficiency Levels Within Each Trial Standard Level for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Trial standard levels
Product class ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
C-3A............................................ 2 4 5 7
C-3A-BI......................................... 2 4 5 7
C-9 *........................................... 3 5 6 7
C-9-BI *........................................ 3 5 6 7
C-13A........................................... 3 4 6 7
C-13A-BI........................................ 3 4 6 7
----------------------------------------------------------------------------------------------------------------
* Results for C-9 and C-9-BI are also applicable to C-9I and C-9I-BI.
In its analysis of the benefits and burdens of each TSL, DOE used
two different compliance dates. For the consensus-recommended TSLs, the
analysis is based on a 2019 compliance date as recommended by the MREF
Working Group. For all other TSLs the analysis is based on a 2021
compliance date consistent with EPCA, which provides that newly-
established standards shall not apply to products manufactured within
five years after the publication of the final rule. In other words, DOE
followed the prescriptions of EPCA for all TSLs that were not
recommended by the MREF Working Group. The two different compliance
dates are indicated in the relevant sections of the results and
discussed in section III.B of this document.
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on MREF consumers by looking at
the effects that potential new standards at each TSL would have on the
LCC and PBP. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products affect consumers in two
ways: (1) Purchase prices increase and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e., product price plus installation costs), and
operating costs (i.e., annual energy use, energy prices, energy price
trends, repair costs, and maintenance costs). The LCC calculation also
uses product lifetime and a discount rate. Chapter 8 of the direct
final rule TSD provides detailed information on the LCC and PBP
analyses.
[[Page 75231]]
Table V.3 through Table V.22 show the LCC and PBP results for the
TSL efficiency levels considered for each product class. In the first
of each pair of tables, the simple payback is measured relative to the
baseline product. 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 document). The average
savings reflect the fact that some consumers purchase products with
higher efficiency in the no-new-standards case, and the savings refer
only to the other consumers who are affected by a standard at a given
TSL. Consumers for whom the LCC increases at a given TSL experience a
net cost.
Table V.3--Average LCC and PBP Results by Efficiency Level for Freestanding Compact Coolers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 4 400 40 325 726 1.1 10.3
2................................... 7 438 26 220 658 1.4 10.3
3................................... 9 478 19 158 636 1.6 10.3
4................................... 11 702 12 98 800 3.5 10.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
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
lowest efficiency level in the no-new-standards case efficiency distribution.
Table V.4--Average LCC Savings Relative to the No-New-Standards Case for Freestanding Compact Coolers
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 4 279 6
2......................................................... 7 265 9
3......................................................... 9 288 12
4......................................................... 11 123 51
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers.
Table V.5--Average LCC and PBP Results by Efficiency Level for Built-in Compact Coolers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 4 832 45 370 1202 n.a. 10.3
2................................... 7 894 30 250 1144 4.6 10.3
3................................... 9 934 22 180 1114 4.4 10.3
4................................... 11 1281 15 123 1404 14.8 10.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.6--Average LCC Savings Relative to the No-New-Standards Case for Built-in Compact Coolers
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 4 n.a. 0
2......................................................... 7 28 29
3......................................................... 9 60 27
4......................................................... 11 (230) 93
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
[[Page 75232]]
Table V.7--Average LCC and PBP Results by Efficiency Level for Freestanding Coolers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 4 1303 58 728 2032 1.0 17.4
2................................... 7 1418 38 497 1915 1.8 17.4
3................................... 9 1460 28 359 1819 1.8 17.4
4................................... 11 1955 17 226 2180 4.8 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
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
lowest efficiency level in the no-new-standards case efficiency distribution.
Table V.8--Average LCC Savings Relative to the No-New-Standards Case for Freestanding Coolers
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 4 648 0
2......................................................... 7 153 22
3......................................................... 9 240 9
4......................................................... 11 (121) 78
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers.
Table V.9--Average LCC and PBP Results by Efficiency Level for Built-in Coolers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 4 1679 58 728 2407 n.a. 17.4
2................................... 7 1785 38 497 2281 6.1 17.4
3................................... 9 1819 28 359 2178 4.7 17.4
4................................... 11 2372 19 248 2619 17.7 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.10--Average LCC Savings Relative to the No-New-Standards Case for Built-in Coolers
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 4 n.a. 0
2......................................................... 7 77 22
3......................................................... 9 187 7
4......................................................... 11 (254) 86
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Table V.11--Average LCC and PBP Results by Efficiency Level for C-3A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 2 5839 28 360 6199 n.a. 17.4
[[Page 75233]]
2................................... 4 5868 22 278 6146 4.1 17.4
3................................... 5 5904 20 247 6152 6.8 17.4
4................................... 7 6246 13 168 6413 25.3 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.12--Average LCC Savings Relative to the No-New-Standards Case for C-3A
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 2 n.a. 0
2......................................................... 4 58 4
3......................................................... 5 53 26
4......................................................... 7 (209) 92
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when an efficiency level is already met or exceeded in the MREF market.
Table V.13--Average LCC and PBP Results by Efficiency Level for C-3A-BI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 2 8594 32 406 9000 n.a. 17.4
2................................... 4 8627 25 314 8941 4.1 17.4
3................................... 5 8668 22 279 8947 6.8 17.4
4................................... 7 9055 15 189 9243 25.4 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.14--Average LCC Savings Relative to the No-New-Standards Case for C-3A-BI
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 2 n.a. 0
2......................................................... 4 66 4
3......................................................... 5 59 26
4......................................................... 7 (237) 92
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when an efficiency level is already met or exceeded in the MREF market.
Table V.15--Average LCC and PBP Results by Efficiency Level for C-9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 3 4373 36 465 4837 n.a. 17.4
[[Page 75234]]
2................................... 5 4396 29 359 4755 2.6 17.4
3................................... 6 4523 26 319 4841 12.1 17.4
4................................... 7 4757 22 269 5026 23.3 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.16--Average LCC Savings Relative to the No-New-Standards Case for C-9
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 3 n.a. 0
2......................................................... 5 89 0
3......................................................... 6 3 62
4......................................................... 7 (182) 90
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when an efficiency level is already met or exceeded in the MREF market.
Table V.17--Average LCC and PBP Results by Efficiency Level for C-9-BI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 3 6438 41 530 6968 n.a. 17.4
2................................... 5 6464 33 410 6874 2.6 17.4
3................................... 6 6608 29 364 6972 12.0 17.4
4................................... 7 6874 25 307 7181 23.2 17.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.18--Average LCC Savings Relative to the No-New-Standards Case for C-9-BI
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 3 n.a. 0
2......................................................... 5 102 0
3......................................................... 6 4 63
4......................................................... 7 (205) 90
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when an efficiency level is already met or exceeded in the MREF market.
Table V.19--Average LCC and PBP Results by Efficiency Level for C-13A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 3 2062 30 248 2310 4.3 10.3
[[Page 75235]]
2................................... 4 2092 26 214 2306 5.0 10.3
3................................... 6 2275 21 170 2446 13.3 10.3
4................................... 7 2368 18 149 2517 16.0 10.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
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
lowest efficiency level in the no-new-standards case efficiency distribution.
Table V.20--Average LCC Savings Relative to the No-New-Standards Case for C-13A
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 3 32 6
2......................................................... 4 17 44
3......................................................... 6 (123) 94
4......................................................... 7 (194) 96
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers.
Table V.21--Average LCC and PBP Results by Efficiency Level for C-13A-BI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------------------------- Simple payback ** Average lifetime
TSL * EL First year's Lifetime (years) (years)
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................... 3 3019 33 273 3292 n.a. 10.3
2................................... 4 3054 29 235 3289 6.5 10.3
3................................... 6 3261 23 187 3448 21.6 10.3
4................................... 7 3366 20 164 3530 24.6 10.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the results are forecasted over the lifetime of
products sold in 2021.
** The PBP is measured relative to the lowest efficiency level in the no-new-standards case efficiency distribution. Calculation of PBP is not
applicable (n.a.) when the efficiency level is already met or exceeded in the MREF market.
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level.
Table V.22--Average LCC Savings Relative to the No-New-Standards Case for C-13A-BI
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL * EL savings ** experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 3 n.a. 0
2......................................................... 4 8 49
3......................................................... 6 (151) 97
4......................................................... 7 (232) 98
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold in 2019. For the other TSLs, the
results are forecasted over the lifetime of products sold in 2021.
** The savings represent the average LCC savings for affected consumers. Calculation of savings is not
applicable (n.a.) when an efficiency level is already met or exceeded in the MREF market.
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on low-income households and senior-only households.
DOE is not presenting the consumer subgroup results in this final rule,
because the household sample sizes for the above subgroups were not
large enough to yield meaningful results. For information purposes,
chapter 11 of the final rule TSD presents the LCC and PBP results for
the subgroups.
c. Rebuttable Presumption Payback
As discussed in section III.H.2 of this document, 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
[[Page 75236]]
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 procedures for MREFs.
Table V.23 presents the rebuttable-presumption payback periods for
the considered TSLs. While DOE examined the rebuttable-presumption
criterion, it considered whether the standard levels evaluated for this
rule 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), which 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.23--Rebuttable-Presumption Payback Period (in Years) for MREFs
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Coolers
----------------------------------------------------------------------------------------------------------------
Freestanding Compact Coolers.................... 1.1 1.4 1.6 3.5
Built-in Compact Coolers........................ n.a. * 4.6 4.4 14.8
Freestanding Coolers............................ 1.0 1.8 1.8 4.8
Built-in Coolers................................ n.a. 6.1 4.7 17.7
----------------------------------------------------------------------------------------------------------------
Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
C-3A............................................ n.a. 4.1 6.8 25.3
C-3A-BI......................................... n.a. 4.1 6.8 25.4
C-9............................................. n.a. 2.6 12.1 23.3
C-9-BI.......................................... n.a. 2.6 12.0 23.2
C-13A........................................... 4.3 5.0 13.3 16.0
C-13A-BI........................................ n.a. 6.5 21.6 24.6
----------------------------------------------------------------------------------------------------------------
* Calculation of PBP is not applicable (n.a.) if the efficiency level is already met or exceeded in the MREF
market.
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of new energy
conservation standards on manufacturers of MREFs. The section below
describes the expected impacts on manufacturers at each TSL. Chapter 12
of the direct final rule 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 manufacturers of MREFs, as well as the conversion costs that DOE
estimates manufacturers would incur for each product class at each TSL.
To evaluate the range of cash flow impacts on MREF manufacturers, DOE
modeled two different markup scenarios using different assumptions that
correspond to the range of anticipated market responses to potential
new energy conservation standards: (1) The preservation of gross margin
percentage, and (2) the preservation of per-unit operating profit. Each
of these scenarios is discussed below.
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 uniform ``gross margin percentage'' markup is
applied across all potential efficiency levels. In this scenario, DOE
assumed that a manufacturer's absolute dollar markup would increase as
production costs increase in the standards case. During confidential
interviews, manufacturers 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 be able to earn
the same operating margin in absolute dollars per-unit in the standards
case as in the no-new-standards case. In this scenario, while
manufacturers make the necessary investments required to convert their
facilities to produce new standards-compliant products, operating
profit does not change in absolute dollars per unit and decreases as a
percentage of revenue.
Each of the modeled scenarios results in a unique set of cash flows
and corresponding industry values at each TSL. In the following
discussion, the INPV results refer to the difference in industry value
between the no-new-standards case and each standards case that results
from the sum of discounted cash flows from the base year 2016 through
2048 (the end of the analysis period for TSLs with a 3-year compliance
period, as recommended by the MREF Working Group) or 2050 (the end of
the analysis period for TSLs with a 5-year compliance period).\69\ To
provide perspective on the short-run cash flow impact, DOE includes in
the discussion of the results below a comparison on free cash flow
between the no-new-standards case and the standards case at each TSL in
the year before new standards would take effect. This figure provides
an understanding of the magnitude of the required conversion costs
relative to the cash flow generated by the industry in the no-new-
standards case.
---------------------------------------------------------------------------
\69\ As described in section III.B of this document, the MREF
Working Group recommended a 3-year compliance period for the
standards recommended in Term Sheet #2. DOE analyzed these
recommended standards (TSL 2 for coolers and TSL 1 for combination
cooler refrigeration products) using a 3-year compliance period. DOE
analyzed all other TSLs in this direct final rule (representing
standards not recommended by the MREF Working Group) using a 5-year
compliance period consistent with the EPCA provisions for newly-
established standards.
---------------------------------------------------------------------------
DOE modeled separate INPV impacts for the cooler and combination
cooler refrigeration product industries. Table V.24 and Table V.25
display the potential INPV impacts on the cooler industry under the
preservation of gross margin markup scenario and preservation of
operating profit markup
[[Page 75237]]
scenarios, respectively. Table V.26 and Table V.27 contain estimated
INPV impacts for the combination cooler refrigeration product industry
under the preservation of gross margin markup scenario and preservation
of operating profit markup scenarios, respectively.
Table V.24--Manufacturer Impact Analysis for Coolers--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units No-new-standards case ---------------------------------------------------------------
1 2 ** 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................... 2015$ M............. 263.3.................... 264.0 253.3 226.5 283.8
Change in INPV......................... 2015$ M............. ......................... 0.7 (10.0) (36.8) 20.5
%................... ......................... 0.3 (3.8) (14.0) 7.8
Product Conversion Costs............... 2015$ M............. ......................... 12.1 54.8 74.6 84.1
Capital Conversion Costs............... 2015$ M............. ......................... 13.7 19.7 63.8 105.0
Total Conversion Costs................. 2015$ M............. ......................... 25.8 74.6 138.4 189.1
Free Cash Flow in 2020 (2018 for TSL 2) 2015$ M............. 16.7 (16.3 for TSL 2).... 7.1 (8.3) (35.2) (57.9)
Free Cash Flow change from no-new- %................... ......................... (57.7) (151.0) (310.0) (446.0)
standards case in 2020.
(2018 for TSL 2).......................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
** TSL recommended by the MREF Working Group with 2019 compliance date (i.e. a 3-year compliance period); all other TSLs have a modeled compliance date
of 2021 (i.e. a 5-year compliance period).
Table V.25 Manufacturer Impact Analysis for Coolers--Preservation of Operating Profit Markup Scenario*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units No-new-standards case ---------------------------------------------------------------
1 2 ** 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................... 2015$ M............. 263.3.................... 244.3 208.5 168.4 110.5
Change in INPV......................... 2015$ M............. ......................... (19.0) (54.8) (94.8) (152.8)
%................... ......................... (7.2) (20.8) (36.0) (58.0)
Product Conversion Costs............... 2015$ M............. ......................... 12.1 54.8 74.6 84.1
Capital Conversion Costs............... 2015$ M............. ......................... 13.7 19.7 63.8 105.0
Total Conversion Costs................. 2015$ M............. ......................... 25.8 74.6 138.4 189.1
Free Cash Flow in 2020 (2018 for TSL 2) 2015$ M............. 16.7 (16.3 for TSL 2).... 7.1 (8.3) (35.2) (57.9)
Free Cash Flow change from no-new- %................... ......................... (57.7) (151.0) (310.0) (446.0)
standards case in 2020 (2018 for TSL
2).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
** TSL recommended by the MREF Working Group with 2019 compliance date (i.e. a 3-year compliance period); all other TSLs have a modeled compliance date
of 2021 (i.e. a 5-year compliance period).
At TSL 1, DOE estimates impacts on INPV of cooler manufacturers to
range from $244.3 million to $264.0 million, or a change in INPV of -
7.2 percent to 0.3 percent under the preservation of per-unit operating
profit markup scenario and preservation of gross margin percentage
markup scenario, respectively. At TSL 1, industry free cash flow is
expected to decrease by approximately 57.7 percent to $7.1 million,
compared to the no-new-standards case value of $16.7 million in 2020,
the year prior to the 2021 compliance year.
An estimated 71 percent of cooler industry shipments are below the
efficiency level corresponding to TSL 1 (EL 4, the CEC-equivalent level
for all cooler product classes). DOE estimated that compliance with TSL
1 will require a total industry investment of $25.8 million. Implicit
in this estimate is that DOE expects approximately two-thirds of cooler
models using non-vapor-compression refrigeration systems will switch to
vapor-compression refrigeration systems to reach TSL 1. Industry
conversion costs are related to the integration of heat pipes for a
portion of the non-vapor-compression coolers remaining on the market,
increased production capacity for vapor-compression coolers, and
testing and marketing costs associated with all cooler models.
At TSL 2, the TSL recommended by the MREF Working Group, DOE
estimates INPV for cooler manufacturers to range from $208.5 million to
$253.3 million, or a change in INPV of -20.8 percent to -3.8 percent.
At this standard level, industry free cash flow is estimated to
decrease by as much as 151.0 percent to -$8.3 million, compared to the
no-new-standards case value of $16.3 million in 2018, the year prior to
the 2019 compliance year.
An estimated 95 percent of cooler industry shipments are below the
efficiency level corresponding to TSL 2
[[Page 75238]]
(EL 7 for all cooler product classes). DOE estimated that compliance
with TSL 2 will require a total industry investment of $74.6 million.
DOE assumed that, at this level, the majority of cooler models using
non-vapor-compression refrigeration systems will not be able to reach
TSL 2, and the corresponding share of the market will switch to coolers
using vapor-compression refrigeration systems. Major sources of
industry conversion costs include the integration of heat pipes and
insulation changes for a portion of the non-vapor-compression coolers
remaining on the market, increased production capacity for vapor-
compression coolers, and testing and marketing costs associated with
all cooler models.
At TSL 3, DOE estimates impacts on INPV for cooler manufacturers to
range from $168.4 million to $226.5 million, or a change in INPV of -
36.0 percent to -14.0 percent. At this standard level, industry free
cash flow is estimated to decrease by as much as 310.0 percent to -
$35.2 million, compared to the no-new-standards case value of $16.7
million in 2020.
An estimated 99 percent of cooler industry shipments are below the
efficiency level corresponding to TSL 3 (EL 9 for all cooler product
classes). DOE estimated that compliance with TSL 3 will require a total
industry investment of $138.4 million. Again, implicit in this estimate
is that the majority of cooler models using non-vapor-compression
refrigeration systems will not be able to reach TSL 3, and the
corresponding share of the market will switch to coolers using vapor-
compression refrigeration systems. Industry conversion costs are
related to the integration of heat pipes and insulation changes for all
non-vapor-compression coolers remaining on the market. For vapor-
compression coolers, industry conversion costs are related to improved
glass, increases in insulation thickness, the integration of forced-
convection evaporators, more efficient compressors, and increased
production capacity for vapor-compression coolers. Finally, all cooler
models would incur testing and marketing costs.
At TSL 4, DOE estimates impacts on INPV for cooler manufacturers to
range from $110.5 million to $283.8 million, or a change in INPV of -
58.0 percent to 7.8 percent. At TSL 4, industry free cash flow is
estimated to decrease by as much as 446.0 percent to -$57.9 million,
compared to the no-new-standards case value of $16.7 million in 2020.
Similar to TSL 3, an estimated 99 percent of cooler industry
shipments are below the efficiency level corresponding to TSL 4 (EL 11
for all cooler product classes). DOE estimated that compliance with TSL
4 will require a total industry investment of $189.1 million. At TSL 4,
DOE assumed that none of the cooler models using non-vapor-compression
refrigeration systems will be able to reach TSL 4, and the
corresponding share of the market will switch to coolers using vapor-
compression refrigeration systems. For vapor-compression coolers, in
addition to the design changes associated with reaching TSL 3, industry
conversion costs are related to improved heat exchangers, the
integration of VIPs and triple-pane glass, and switching to brushless
direct current (DC) condenser fan motors and variable-speed
compressors.
Table V.26--Manufacturer Impact Analysis for Combination Cooler Refrigeration Products--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units No-new-standards case ---------------------------------------------------------------
1 ** 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................... 2015$ M............. 108.2.................... 107.6 107.5 117.7 128.5
Change in INPV......................... 2015$ M............. ......................... (0.5) (0.6) 9.6 20.3
%................... ......................... (0.5) (0.6) 8.9 18.8
Product Conversion Costs............... 2015$ M............. ......................... 0.5 3.1 4.3 4.6
Capital Conversion Costs............... 2015$ M............. ......................... 0.5 3.7 5.2 6.7
Total Conversion Costs................. 2015$ M............. ......................... 1.0 6.8 9.5 11.3
Free Cash Flow in 2020 (2018 for TSL 1) 2015$ M............. 6.9 (6.7 for TSL 1)...... 6.3 4.3 3.3 2.6
Free Cash Flow change from no-new- %................... ......................... (5.7) (36.9) (51.9) (62.9)
standards case in 2020 (2018 for TSL
1).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
** TSL recommended by the MREF Working Group with 2019 compliance date (i.e. a 3-year compliance period); all other TSLs have a modeled compliance date
of 2021 (i.e. a 5-year compliance period).
Table V.27--Manufacturer Impact Analysis for Combination Cooler Refrigeration Products--Preservation of Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units No-new-standards case ---------------------------------------------------------------
1 * 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................... 2015$ M............. 108.2.................... 107.4 103.7 101.6 100.1
Change in INPV......................... 2015$ M............. ......................... (0.8) (4.4) (6.5) (8.1)
%................... ......................... (0.7) (4.1) (6.0) (7.5)
Product Conversion Costs............... 2015$ M............. ......................... 0.5 3.1 4.3 4.6
Capital Conversion Costs............... 2015$ M............. ......................... 0.5 3.7 5.2 6.7
Total Conversion Costs................. 2015$ M............. ......................... 1.0 6.8 9.5 11.3
[[Page 75239]]
Free Cash Flow in 2020 (2018 for TSL 1) 2015$ M............. 6.9 (6.7 for TSL 1)...... 6.3 4.3 3.3 2.6
Free Cash Flow change from no-new- %................... ......................... (5.7) (36.9) (51.9) (62.9)
standards case in 2020 (2018 for TSL
1).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
** TSL recommended by the MREF Working Group with 2019 compliance date (i.e. a 3-year compliance period); all other TSLs have a modeled compliance date
of 2021 (i.e. a 5-year compliance period).
TSL 1, the MREF Working Group recommended level, corresponds to EL
2 for combination cooler refrigeration product classes C-3A and C-3A-
BI, and EL 3 for product classes C-9, C-9-BI, C-13A and C-13A-BI. At
TSL 1, DOE estimates INPV for combination cooler refrigeration product
manufacturers to range from $107.4 million to $107.6 million, or a
change in INPV of -0.7 percent to -0.5 percent, relative to the no-new-
standards case. At this TSL, industry free cash flow is estimated to
decrease by as much as 5.7 percent to $6.3 million, compared to the no-
new-standards case value of $6.7 million in 2018, the year before the
2019 compliance year.
An estimated 11 percent of combination cooler refrigeration product
industry shipments are below the efficiency levels corresponding to TSL
1. Products with efficiencies below those corresponding to TSL 1 are
concentrated in product class C-13A. At TSL 1, DOE estimated that
manufacturers of C-13A combination cooler refrigeration products will
incur conversion costs of $1.0 million in order to comply with the 2019
standard. The design changes associated with this conversion cost
estimate include increased compressor efficiency and increased
insulation thickness.
At TSL 2, DOE estimates INPV for combination cooler refrigeration
product manufacturers to range from $103.7 million to $107.5 million,
or a change in INPV of -4.1 percent to -0.6 percent. At this TSL,
industry free cash flow is estimated to decrease by as much as 36.9
percent to $4.3 million, compared to the no-new-standards case value of
$6.9 million in 2020.
In contrast to TSL 1, an estimated 100 percent of combination
cooler refrigeration product industry shipments are below the
efficiency levels corresponding to TSL 2 (EL 4 for product classes C-
3A, C-3A-BI, C-13A and C-13A-BI; EL 5 for product classes C-9 and C-9-
BI). DOE estimated that compliance with TSL 2 will require a total
industry investment of $6.8 million by 2021. The design changes
associated with this conversion cost estimate include increased
compressor efficiency, changes to insulation thickness, and the
incorporation of VIPs.
At TSL 3, DOE estimates INPV for combination cooler refrigeration
product manufacturers to range from $101.6 million to $117.7 million,
or a change in INPV of -6.0 percent to 8.9 percent. At this TSL,
industry free cash flow is estimated to decrease by as much as 51.9
percent to $3.3 million, compared to the no-new-standards case value of
$6.9 million in 2020.
An estimated 100 percent of combination cooler refrigeration
product industry shipments are below the efficiency levels
corresponding to TSL 3 (EL 5 for product classes C-3A, C-3A-BI; EL 6
for product classes C-13A, C-13A-BI, C-9, and C-9-BI). DOE estimated
that compliance with TSL 3 will require a total industry investment of
$9.5 million by 2021. Again, the design changes associated with this
conversion cost estimate relate increased compressor efficiency,
changes to insulation thickness, and the incorporation of VIPs.
Incorporation of high efficiency glass would also be required for some
product classes at TSL 3.
At TSL 4, DOE estimates INPV for combination cooler refrigeration
product manufacturers to range from $100.1 million to $128.5 million,
or a change in INPV of -7.5 percent to 18.8 percent. At this TSL,
industry free cash flow is estimated to decrease by as much as 62.9
percent to $2.6 million, compared to the no-new-standards case value of
$6.9 million in 2020.
An estimated 100 percent of combination cooler refrigeration
product industry shipments are below the efficiency levels
corresponding to TSL 4 (EL 7 for all combination cooler product
classes). DOE estimated that compliance with TSL 4 will require a total
industry investment of $11.3 million by 2021. Again, the design changes
associated with this conversion cost estimate relate increased
compressor efficiency, changes to insulation thickness, and the
incorporation of VIPs. Incorporation of high-efficiency glass would
also be required for all product classes at TSL 4.
b. Impacts on Direct Employment
To quantitatively asses the impacts of energy conservation
standards on direct employment in the MREF industry, DOE used the GRIM
to estimate the domestic labor expenditures and number of employees in
the no-new-standards case and at each TSL from 2016 through either 2048
or 2050, the end of the analysis period depending on the TSL. DOE used
statistical data from the U.S. Census Bureau's 2011 Annual Survey of
Manufactures (``ASM''),\70\ 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. Labor expenditures related to manufacturing of the product are
a function of the labor intensity of the product, the sales volume, and
an assumption that wages remain fixed in real terms over time. The
total labor expenditures in each year are calculated by multiplying the
MPCs by the labor percentage of MPCs.
---------------------------------------------------------------------------
\70\ ``Annual Survey of Manufactures (ASM),'' U.S. Census Bureau
(2011) (Available at: http://www.census.gov/manufacturing/asm/).
---------------------------------------------------------------------------
The total labor expenditures in the GRIM were then converted to
domestic production employment levels by dividing production labor
expenditures by the annual payment per production worker (production
worker hours multiplied by the labor rate found in the U.S. Census
Bureau's 2011 ASM). DOE estimates that approximately 8 percent of
coolers and 43 percent of
[[Page 75240]]
combination cooler refrigeration products sold in the United States are
manufactured domestically. The estimates of production workers in this
section include line-supervisors who are directly involved in
fabricating and assembling a product within the manufacturing facility.
Workers performing services that are closely associated with production
operations, such as materials handling tasks using forklifts, are also
included as production labor.
DOE's estimates only account for production workers who manufacture
the specific products covered by this rulemaking. 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. Finally, this analysis also does not factor in the
dependence by some manufacturers on production volumes to make their
operations viable.
In the GRIM, DOE used the labor content of each product and
manufacturing production costs from the engineering analysis to
estimate the annual labor expenditures in the MREF 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. The employment
impacts shown in Table V.28 represent the range of potential production
employment impacts in the cooler industry that could result in the
compliance year of new energy conservation standards and Table V.29
represents the range of potential production employment impacts in the
combination cooler refrigeration product industry that could result in
the compliance year of new energy conservation standards.
The upper end of the results in the tables represents the maximum
increase in the number of production workers after the implementation
of new energy conservation standards and assumes that manufacturers
would continue to produce the same covered products within the United
States. This corresponds to the direct employment impacts calculated in
the GRIM. In general, more efficient products are more complex and more
labor intensive to manufacture. Per-unit labor requirements and
production time requirements increase with a higher energy conservation
standard. As a result, if shipments remain relatively steady, the model
forecasts job growth at the upper bound of direct employment impacts.
The lower bound assumes that as the standard increases,
manufacturers choose to retire sub-standard product lines (or to move
production of sub-standard product lines abroad) rather than invest in
domestic manufacturing facility conversions and product redesigns. In
this scenario, there is a loss of employment because manufacturers
consolidate and operate fewer domestic production lines. To estimate
this lower bound, DOE assumed that the percentage loss in employment
relative to the no-new-standards case would be equal to the percentage
of non-compliant, domestically-produced platforms relative to all
domestically-produced platforms. Because this represents a worst-case
scenario for employment, there is no consideration given to the fact
that there may be employment growth in higher-efficiency product lines.
DOE estimates that in the absence of new energy conservation
standards, there would be 168 and 173 domestic production workers in
the cooler industry in 2019 and 2021, respectively, and 130 and 134
domestic production workers in the combination cooler refrigeration
product industry in 2019 and 2021, respectively.
Table V.28--Potential Changes in the Number of Industry Production Worker Employment for Coolers in Compliance Year *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level **
--------------------------------------------------------------------------------------------------------------------
No-new-standards case 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic Production 173 (168 for TSL 2)... 145 to 194............ 66 to 207............ 20 to 232............ 12 to 307
Workers in Compliance Year.
Potential Changes in Domestic ...................... (28) to 21............ (102) to 39.......... (153) to 59.......... (161) to 134
Production Workers in Compliance
Year.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The standards compliance year is 2019 for TSL 2, as recommended by the MREF Working Group; all other TSLs have a modeled compliance year of 2021.
** Numbers in parentheses represent negative values.
Table V.29--Potential Changes in the Number of Industry Production Worker Employment for Combination Cooler Refrigeration Products in Compliance Year *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level **
--------------------------------------------------------------------------------------------------------------------
No-new-standards case 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic Production 134 (130 for TSL 1)... 130 to 130............ 0 to 141............. 0 to 160............. 0 to 180
Workers in Compliance Year.
Potential Changes in Domestic ...................... 0 to 0................ (134) to 7........... (134) to 26.......... (134) to 46
Production Workers in Compliance
Year.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The standards compliance year is 2019 for TSL 1, as recommended by the MREF Working Group; all other TSLs have a modeled compliance year of 2021.
** Numbers in parentheses represent negative values.
[[Page 75241]]
Direct production employment impacts are also detailed in chapter
12 of the direct final rule TSD.
DOE notes that the direct employment impacts discussed here are
independent of the indirect employment impacts to the broader U.S.
economy, which are documented in chapter 16 of the direct final rule
TSD.
c. Impacts on Manufacturing Capacity
Based on feedback from domestic MREF manufacturers during
confidential interviews and MREF Working Group meetings, DOE does not
expect significant impacts on domestic manufacturing capacity for the
industry as a whole to result from the standards for MREFs adopted in
this direct final rule. However, at more stringent standard levels than
those adopted in this direct final rule, disproportionate impacts
experienced by domestic manufacturers could lead these manufacturers to
abandon certain niche production lines.
Additionally, although DOE does not believe the standards adopted
in this direct final rule will lead to a decrease in manufacturing
capacity for the MREF industry as a whole, DOE recognizes that
standards will likely lead to decreased manufacturing capacity for
cooler products using non-vapor-compression cooling technologies.
d. Impacts on Subgroups of Manufacturers
Small manufacturers, niche equipment manufacturers, and
manufacturers exhibiting a cost structure substantially different from
the industry average could be disproportionately affected by new energy
conservation standards for MREFs. Using average cost assumptions
developed for an industry cash-flow estimate is adequate to assess
differential impacts among manufacturer subgroups. For the MREF
industry, DOE identified and evaluated the impact of new energy
conservation standards on two subgroups: Small businesses and domestic
LVMs.
Small Businesses
The SBA defines a ``small business'' as having 1,250 employees or
less for both NAICS 335222 (``Household Refrigeration and Home Freezer
Manufacturing'') and NAICS 333415 (``Air-Conditioning and Warm Air
Heating Equipment and Commercial and Industrial Refrigeration Equipment
Manufacturing''). Based on the SBA employee threshold of 1,250
employees, DOE identified two entities involved in the sale of MREF
products in the United States that qualify as small businesses. One of
these businesses is a manufacturer of MREF products. The other small
business imports and rebrands MREFs for sale in the United States. For
a discussion of the potential impacts on the small manufacturer
subgroup, see section VI.B of this document and chapter 12 of the TSD.
Domestic, Low-Volume Manufacturers
In addition to the small businesses discussed previously, DOE
identified three domestic LVMs of MREFs that could be
disproportionately affected by a DOE energy conservation standard for
MREFs. Unlike the larger, diversified manufacturers selling MREFs in
the United States, these businesses are highly concentrated in specific
market segments (refrigeration) and/or earn a greater proportion of
their sales from products covered by this rulemaking. Additionally,
although the LVMs do not qualify as small businesses according to the
SBA criteria discussed above (i.e., employee count exceeds 1,250),
these manufacturers are significantly smaller in terms of annual
revenues than the larger, diversified manufacturers selling MREFs in
the United States. Table V.30 lists the range of the product offerings
and annual sales figures for the LVMs. Table V.31 contains the range of
annual sales figures for some of the large, diversified manufacturers
selling MREFs in the U.S. market. Table V.31 also contains the range of
segment concentration for these larger manufacturers.
Table V.30--LVM 2014 Revenues and Product Offerings
------------------------------------------------------------------------
Annual
Manufacturer type revenues (2015$ Product offering
M) *
------------------------------------------------------------------------
LVMs........................... 216-1,600 ** High-end, built-in or
fully integrated
residential
refrigeration
products
(undercounter and
standard), commercial
refrigeration
equipment, and
cooking products.
------------------------------------------------------------------------
* Annual sales values are from Hoovers: http://www.hoovers.com/.
** This range reflects parent company revenues, where an LVM is owned by
another company.
Table V.31--2014 Revenues and Segment Concentration for Large MREF Manufacturers
----------------------------------------------------------------------------------------------------------------
Concentration in
Annual revenues (2015$ segment containing
Manufacturer type M) * residential
refrigeration products
----------------------------------------------------------------------------------------------------------------
Larger, Diversified Manufacturers........................... 11,400-150,000 5%-76%
----------------------------------------------------------------------------------------------------------------
* Annual sales values are from Hoovers: http://www.hoovers.com./
Based on manufacturer feedback, DOE believes that the three LVMs,
along with the small domestic manufacturer identified by DOE, are four
of only five manufacturers producing MREFs domestically. In contrast,
the entities with the greatest estimated overall market share in the
U.S. MREF market rebrand coolers and combination cooler refrigeration
products sourced from foreign original equipment manufacturers
(``OEMs'').
DOE has estimated that two of the LVMs and the small MREF
manufacturer account for approximately 50 percent of built-in cooler
basic models (both compact and full-size) that are currently available
in the U.S. market. DOE estimates that the standard adopted in this
direct final rule (70 percent of the CEC-Equivalent) will require the
LVMs to update over 70 percent of their cooler models (overall, and for
built-in coolers only).\71\
---------------------------------------------------------------------------
\71\ This estimate is based on the LVM models for which energy
use values are available.
---------------------------------------------------------------------------
Additionally, two of the LVMs are the only manufacturers producing
combination cooler refrigeration products domestically. Combined, these
[[Page 75242]]
two LVMs account for 40 percent of combination cooler refrigeration
product basic models that are currently available in the United States.
One of these LVMs is the only company to manufacture a combination
cooler refrigeration product classified as C-3A-BI. The other LVM
produces a C-13A-BI combination cooler refrigeration product. Both
products have rated energy consumptions at the standard level
established in this direct final rule. Accordingly, both manufacturers
would incur product and capital conversion expenses to reach standard
efficiency levels beyond those adopted in this direct final rule for
combination cooler refrigeration products.
Generally, manufacturers indicated during confidential interviews
that the MREF products produced by the domestic LVMs are niche products
and are more expensive to produce (and, therefore, have higher selling
prices) than the majority of the MREFs sold in the United States. The
LVMs generally utilize a two-tier distribution system for MREFs, unlike
large-scale manufacturers that sell directly to large-volume retail
outlets. (ASRAC Public Meeting, No. 85 at p. 144) Accordingly, the cost
and markup structure of these two types of manufacturers are
significantly different.
Manufacturers also expressed during confidential interviews that
LVMs (along with the small manufacturer) typically pay higher prices
for components because of lower purchasing volumes, while their large
competitors likely receive volume purchasing discounts. Despite the
fact that the MREF industry as a whole is a relatively low-volume
industry, larger manufacturers, with a significantly larger proportion
of their total sales derived from the sale of other products (non-MREF
products), are able to purchase components in high quantities due to
the similarities between MREFs and the other higher-volume products
they sell (e.g., refrigerators and freezers). Alternatively, these
larger manufacturers may produce their own components in-house.
LVMs may also be disproportionately affected by product and capital
conversion costs. Product redesign, testing, and certification costs
tend to be fixed per basic model and do not scale with sales volume.
Both large manufacturers and LVMs must make investments in R&D to
redesign their products, but LVMs lack the sales volumes to
sufficiently recoup these upfront investments without substantially
marking up their products' selling prices. Furthermore, the LVMs and
major re-branders both offer similar numbers of MREF basic models. Up-
front capital investments in new manufacturing for each platform
redesign and any depreciated manufacturing capital would be spread
across a lower volume of shipments for LVMs.
To this end, feedback from LVMs received during confidential
interviews suggested that new energy conservation standards for MREFs
could result in such a significant increase in their costs (both per-
unit and upfront costs) that selling prices would increase beyond what
consumers are willing to pay. This could cause the LVMs to discontinue
certain model lines that, in turn, would negatively impact customer
choice, competition, and domestic employment within the MREF industry.
Finally, the LVMs considered in this analysis have fewer resources
to devote to the cumulative regulations impacting the appliance
industry. According to manufacturer feedback received during
confidential interviews, the LVMs will be particularly challenged in
meeting amended energy conservation standards for commercial
refrigeration equipment (with an estimated compliance date of 2017) and
for residential refrigerators and freezers (with an estimated
compliance date of 2020), in addition to the EPA Significant New
Alternatives Policy Program (SNAP) program restrictions relating to
foam blowing agents and any future restrictions relating to acceptable
refrigerants for use in consumer refrigeration products. Table V.32
lists the impending DOE energy conservation standards that may have a
significant impact on the MREF LVMs, the corresponding expected
industry conversion costs (where available), and the LVM U.S. market
share for the products being regulated.
Table V.32--Other Federal Energy Conservation Standards Affecting MREF LVMs
----------------------------------------------------------------------------------------------------------------
Expected Expected total
Regulation effective industry LVM U.S. market share
date(s) investment
----------------------------------------------------------------------------------------------------------------
Commercial Refrigeration Equipment............ 2017 $184 M \72\ 41% of commercial refrigerator
(2012$) market.\73\
Refrigerators and Freezers.................... 2020 TBD 75% of built-in undercounter
refrigerator market; 5% of
compact refrigerator
market.\74\
----------------------------------------------------------------------------------------------------------------
In summary, DOE recognizes that, depending on the TSL selected, new
energy conservation standards may have disproportionate impacts on the
LVMs relative to the larger, diversified competitors, and that this
could impact domestic MREF production as well as the availability of
certain MREF product types. In this industry, larger manufacturers may
have a competitive advantage compared to the LVMs due to overall
production volumes and the ability to procure components at a lower
cost (either by purchasing component parts at a discount or producing
components in-house).
---------------------------------------------------------------------------
\72\ Estimated industry conversion expenses were published in
the TSD for the March 2014 commercial refrigeration energy
conservation standards final rule. 79 FR 17725 (March 28, 2014).
\73\ 2008 market share estimates were published in the TSD for
the March 2014 commercial refrigeration equipment energy
conservation standards final rule. 79 FR 17725 (March 28, 2014).
Estimates are from Appliance Magazine, which does not provide a
precise definition of what a commercial refrigerator is. It is
therefore unclear what specific types of equipment that data
covers--whether it is equipment that is self-contained or remote
condensing, or equipment with doors or without doors.
\74\ 2007 market share estimates were published in the TSD for
the September 2011 residential refrigerators, refrigerator-freezers,
and freezers energy conservation standards final rule. 76 FR 57516
(Sept. 15, 2011).
---------------------------------------------------------------------------
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at 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. A standard level is not economically
justified if it contributes to an unacceptable cumulative regulatory
burden. While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several existing or impending
regulations may have serious consequences for some manufacturers,
groups of manufacturers,
[[Page 75243]]
or an entire industry. Multiple regulations affecting the same
manufacturer can strain profits and lead companies to abandon product
lines or markets with lower expected future returns than competing
products. For these reasons, DOE conducts an analysis of cumulative
regulatory burden as part of its rulemakings pertaining to appliance
efficiency.
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.
DOE estimates that there are approximately 48 entities selling MREFs in
the United States. Only approximately 16 of these entities are OEMs of
MREF products. In addition to new energy conservation standards for
MREFs, DOE identified a number of requirements that MREF manufacturers
will face for products they manufacture approximately 3 years prior to
and 3 years after the estimated compliance date of these new standards.
The following section addresses key concerns that manufacturers raised
during interviews regarding cumulative regulatory burden.
Table V.33--Other Federal Energy Conservation Standards Affecting MREF Manufacturers
----------------------------------------------------------------------------------------------------------------
Number of MREF Industry Industry
Federal energy conservation Number of manufacturers Approx. conversion conversion
standard manufacturers * from this rule standards year costs costs/ revenue
** (millions $) *** (%)
----------------------------------------------------------------------------------------------------------------
Microwave Ovens 78 FR 36316 12 2 2016 43.1 (2011$) <1
(June 17, 2013).............
Commercial Refrigeration 54 3 2017 184 (2012$) 2.0
Equipment 79 FR 17725 (March
28, 2014)...................
Commercial Clothes Washers 79 6 1 2018 10.2 (2013$) 2.2
FR 74492 (December 15, 2014)
Residential Clothes Washers 16 3 2018 418.5 (2010$) 4.8
77 FR 32308 (May 31, 2012).. [dagger]
Residential Dehumidifiers 81 24 1 2019 52.5 (2014$) 4.5
FR 38338 (June 13, 2016)....
Residential Kitchen Ranges 20 5 2019 109.9 (2014$) 1.1
and Ovens [dagger][dagger]
80 FR 33030 (June 10, 2015).
Residential Boilers 81 FR 27 1 2021 2.48 (2014$) <1
2320 (January 15, 2016).....
----------------------------------------------------------------------------------------------------------------
* This column presents the total number of manufacturers identified in the energy conservation standard rule
contributing to cumulative regulatory burden.
** This column presents the number of manufacturers producing MREFs that are also listed as manufacturers in the
listed energy conservation standard contributing to cumulative regulatory burden.
*** This column presents conversion costs as a percentage of cumulative revenue for the industry during the
conversion period. The conversion period is the timeframe over which manufacturers must make conversion costs
investments and lasts from the announcement year of the final rule to the standards year of the final rule.
This period typically ranges from 3 to 5 years, depending on the energy conservation standard.
[dagger] Energy conservation standards for residential clothes washers (77 FR 32308) are tiered, with standards
years of 2015 and 2018. The conversion costs presented are for both the 2015 and 2018 standards.
[dagger][dagger] The final rule for this energy conservation standard has not been published. The compliance
date and analysis of conversion costs have not been finalized at this time. Values in this row are estimates
for the standard level proposed in the NOPR.
In addition to Federal energy conservation standards, DOE
identified other Federal-level and state-level regulatory burdens and
third-party standard programs that would affect MREF manufacturers. For
more details, see chapter 12 of the direct final rule TSD.
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 regulations. In particular,
DOE will assess whether looking at rules where any portion of the
compliance period potentially overlaps with the compliance period for
the subject rulemaking would yield a more accurate reflection of
cumulative regulatory burdens.
3. National Impact Analysis
a. Significance of Energy Savings
To estimate the energy savings attributable to potential standards
for MREFs, DOE compared the energy consumption of those products 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 (2019-2048 for the TSLs that represent
the MREF Working Group recommendations and 2021-2050 for other TSLs).
Table V.34 and Table V.35 present DOE's projections of the national
energy savings for each TSL considered for coolers and combination
cooler refrigeration products, respectively. The savings were
calculated using the approach described in section IV.H of this
document.
Table V.34--Cumulative National Energy Savings for Coolers
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Quads
---------------------------------------------------------------
Primary energy.................................. 1.08 1.44 1.76 1.93
[[Page 75244]]
FFC energy...................................... 1.13 1.51 1.84 2.02
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
Table V.35--Cumulative National Energy Savings for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Quads
---------------------------------------------------------------
Primary energy.................................. 0.000802 0.00705 0.0117 0.0153
FFC energy...................................... 0.000838 0.00737 0.0123 0.0160
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
OMB Circular A-4 \75\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis using nine, rather than 30, years
of product shipments. The choice of a 9-year period is a proxy for the
timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\76\ The review timeframe established in EPCA is generally
not synchronized with the product lifetime, product manufacturing
cycles, or other factors specific to MREFs. 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 for coolers and combination cooler refrigeration products based
on a 9-year analytical period are presented in Table V.36 and Table
V.37 respectively.
---------------------------------------------------------------------------
\75\ U.S. Office of Management and Budget, ``Circular A-4:
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
\76\ 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.36--Cumulative National Energy Savings for Coolers; Nine Years of Shipments
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Quads
---------------------------------------------------------------
Primary energy.................................. 0.294 0.389 0.479 0.513
FFC energy...................................... 0.307 0.407 0.500 0.537
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2027. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2029.
Table V.37--Cumulative National Energy Savings for Combination Cooler Refrigeration Products; Nine Years of
Shipments
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Quads
---------------------------------------------------------------
Primary energy.................................. 0.000216 0.00191 0.00317 0.00414
FFC energy...................................... 0.000226 0.00200 0.00331 0.00432
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2027. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2029.
[[Page 75245]]
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 MREFs. In
accordance with OMB's guidelines on regulatory analysis,\77\ DOE
calculated NPV using both a 7-percent and a 3-percent real discount
rate. Table V.38 and Table V.39 show the consumer NPV results with
impacts counted over the lifetime of products purchased in the relevant
analysis period for each TSL.
---------------------------------------------------------------------------
\77\ 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.38--Cumulative Net Present Value of Consumer Benefits for Coolers
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
3 percent....................................... 8.34 11.02 12.19 6.83
7 percent....................................... 3.41 4.78 4.81 1.81
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
Table V.39--Cumulative Net Present Value of Consumer Benefits for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
3 percent....................................... 0.00447 0.0347 (0.0575) (0.142)
7 percent....................................... 0.00172 0.0110 (0.0422) (0.0904)
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.40 and Table V.41. 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.40--Cumulative Net Present Value of Consumer Benefits for Coolers; Nine Years of Shipments
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
3 percent....................................... 2.73 3.60 3.97 2.02
7 percent....................................... 1.48 2.06 2.07 0.68
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2027. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2029.
Table V.41--Cumulative Net Present Value of Consumer Benefits for Combination Cooler Refrigeration Products;
Nine Years of Shipments
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
3 percent....................................... 0.00142 0.0110 -0.0218 -0.0516
7 percent....................................... 0.000719 0.00456 -0.0199 -0.0420
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2027. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2029.
The above results reflect the use of a constant default trend to
estimate the change in price for MREFs over the analysis period (see
section IV.H.3 of this document). DOE also conducted a sensitivity
analysis that considered one scenario with low price decline and one
scenario with high price decline. The results of these alternative
cases are
[[Page 75246]]
presented in appendix 10C of the direct final rule TSD.
c. Indirect Impacts on Employment
DOE expects energy conservation standards for MREFs 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. DOE used an input/output model of the U.S. economy to
estimate indirect employment impacts of the TSLs that DOE considered in
this rulemaking. DOE understands that there are uncertainties involved
in projecting employment impacts, especially changes in the later years
of the analysis. Therefore, DOE generated results within five years of
the compliance date, where these uncertainties are reduced.
The results suggest that the adopted 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 direct final rule TSD presents detailed
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
As discussed in section IV.A.2.a of this document and chapter 3 of
the direct final rule TSD, DOE has concluded that the standards adopted
in this direct final rule would not reduce the utility or performance
of the MREFs under consideration in this rulemaking. Manufacturers of
these products currently offer units that meet or exceed the adopted
standards.
5. Impact of Any Lessening of Competition
As discussed in section III.H.1.e of this document, the Attorney
General of the United States (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 an analysis of the nature and extent of the
impact. DOE published a proposed rule containing energy conservation
standards identical to those set forth in this direct final rule and
transmitted a copy of this direct final rule and the accompanying TSD
to the Attorney General, requesting that DOJ provide its determination
on this issue. DOE will consider DOJ's comments on the rule in
determining whether to proceed with the direct final rule. DOE will
also publish and respond to DOJ's comments in the Federal Register in a
separate document.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Reduced electricity
demand due to energy conservation standards is also likely to reduce
the cost of maintaining the reliability of the electricity system,
particularly during peak-load periods. As a measure of this reduced
demand, chapter 15 in the direct final rule 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 MREFs is
expected to yield environmental benefits in the form of reduced
emissions of air pollutants and greenhouse gases. Table V.42 and Table
V.43 provide DOE's estimate of cumulative emissions reductions expected
to result from the TSLs considered in this rulemaking. The tables
include both power sector emissions and upstream emissions. The
emissions were calculated using the multipliers discussed in section
IV.K of this document. DOE reports annual emissions reductions for each
TSL in chapter 13 of the direct final rule TSD. The energy conservation
standards being adopted by this direct final rule are economically
justified under EPCA with regard to the added benefits achieved through
reduced emissions of air pollutants and greenhouse gases.
Table V.42--Cumulative Emissions Reduction for Coolers
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 64.3 87.0 104.7 114.9
SO2 (thousand tons)............................. 38.7 53.1 63.0 69.1
NOX (thousand tons)............................. 70.7 95.1 115.1 126.3
Hg (tons)....................................... 0.1 0.2 0.2 0.3
CH4 (thousand tons)............................. 5.6 7.6 9.0 9.9
N2O (thousand tons)............................. 0.8 1.1 1.3 1.4
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 3.6 4.8 5.9 6.4
SO2 (thousand tons)............................. 0.7 0.9 1.1 1.2
NOX (thousand tons)............................. 51.7 68.7 84.2 92.5
Hg (tons)....................................... 0.0 0.0 0.0 0.0
CH4 (thousand tons)............................. 285.6 379.5 465.3 510.9
N2O (thousand tons)............................. 0.0 0.0 0.1 0.1
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 67.9 91.8 110.6 121.3
SO2 (thousand tons)............................. 39.4 54.0 64.1 70.3
NOX (thousand tons)............................. 122.4 163.9 199.4 218.8
Hg (tons)....................................... 0.1 0.2 0.2 0.3
CH4 (thousand tons)............................. 291.1 387.1 474.3 520.9
CH4 (thousand tons CO2eq) **.................... 8151.8 10839.3 13281.4 14583.8
[[Page 75247]]
N2O (thousand tons)............................. 0.8 1.1 1.3 1.5
N2O (thousand tons CO2eq) **.................... 217.0 296.9 353.4 387.2
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
Table V.43--Cumulative Emissions Reduction for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Trial standard level *
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.0483 0.4173 0.6941 0.9075
SO2 (thousand tons)............................. 0.0295 0.2501 0.4163 0.5440
NOX (thousand tons)............................. 0.0528 0.4595 0.7640 0.9991
Hg (tons)....................................... 0.0001 0.0009 0.0015 0.0020
CH4 (thousand tons)............................. 0.0042 0.0359 0.0597 0.0781
N2O (thousand tons)............................. 0.0006 0.0051 0.0085 0.0110
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.0027 0.0235 0.0391 0.0512
SO2 (thousand tons)............................. 0.0005 0.0043 0.0072 0.0095
NOX (thousand tons)............................. 0.0382 0.3377 0.5610 0.7341
Hg (tons)....................................... 0.000001 0.000009 0.000016 0.000021
CH4 (thousand tons)............................. 0.2107 1.8657 3.0996 4.0559
N2O (thousand tons)............................. 0.00002 0.0002 0.0004 0.0005
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.051 0.441 0.733 0.959
SO2 (thousand tons)............................. 0.030 0.254 0.423 0.553
NOX (thousand tons)............................. 0.091 0.797 1.325 1.733
Hg (tons)....................................... 0.0001 0.001 0.002 0.002
CH4 (thousand tons)............................. 0.215 1.902 3.159 4.134
CH4 (thousand tons CO2eq) **.................... 6.02 53.24 88.46 115.75
N2O (thousand tons)............................. 0.001 0.005 0.009 0.012
N2O (thousand tons CO2eq) **.................... 0.165 1.403 2.335 3.052
----------------------------------------------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
As part of the analysis for this 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 MREFs. As discussed in section IV.L of this document, for
CO2, DOE used the most recent values for the SCC developed
by an interagency process. The four sets of SCC values for
CO2 emissions reductions in 2015 resulting from that process
(expressed in 2015$) are represented by $12.4/metric ton (the average
value from a distribution that uses a 5-percent discount rate), $40.6/
metric ton (the average value from a distribution that uses a 3-percent
discount rate), $63.2/metric ton (the average value from a distribution
that uses a 2.5-percent discount rate), and $118/metric ton (the 95th-
percentile value from a distribution that uses a 3-percent discount
rate). The values for later years are higher due to increasing damages
(public health, economic and environmental) as the projected magnitude
of climate change increases.
Table V.44 and Table V.45 present the global value of
CO2 emissions reductions at each TSL. For each of the four
cases, DOE calculated a present value of the stream of annual values
using the same discount rate as was used in the studies upon which the
dollar-per-ton values are based. DOE calculated domestic values as a
range from 7 percent to 23 percent of the global values; these results
are presented in chapter 14 of the direct final rule TSD.
[[Page 75248]]
Table V.44--Estimates of Global Present Value of CO2 Emissions Reduction for Coolers
----------------------------------------------------------------------------------------------------------------
SCC Case *
-----------------------------------------------------------------------
Million 2015$
TSL ** -----------------------------------------------------------------------
3% discount
5% discount 3% discount 2.5% discount rate, 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 453 2073 3292 6321
2....................................... 644 2886 4561 8787
3....................................... 737 3373 5358 10285
4....................................... 805 3691 5865 11255
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 25 115 183 351
2....................................... 35 157 249 480
3....................................... 41 187 298 572
4....................................... 44 205 327 627
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 478 2189 3476 6673
2....................................... 679 3044 4810 9266
3....................................... 777 3561 5656 10856
4....................................... 849 3897 6192 11882
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2, and $118
per metric ton (2015$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
Table V.45--Estimates of Global Present Value of CO2 Emissions Reduction for Combination Cooler Refrigeration
Products
----------------------------------------------------------------------------------------------------------------
SCC Case *
-----------------------------------------------------------------------
Million 2015$
TSL ** -----------------------------------------------------------------------
3% discount
5% discount 3% discount 2.5% discount rate, 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 0.36 1.60 2.54 4.89
2....................................... 2.84 13.15 20.95 40.08
3....................................... 4.75 21.96 34.97 66.95
4....................................... 6.18 28.64 45.63 87.31
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 0.02 0.09 0.14 0.27
2....................................... 0.16 0.74 1.17 2.24
3....................................... 0.26 1.23 1.96 3.74
4....................................... 0.34 1.60 2.55 4.88
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1....................................... 0.38 1.69 2.67 5.15
2....................................... 2.99 13.88 22.13 42.32
3....................................... 5.01 23.19 36.93 70.69
4....................................... 6.53 30.24 48.18 92.19
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2, and $118
per metric ton (2015$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
world economy continues to evolve rapidly. Thus, any value placed on
reduced CO2 emissions in this rulemaking is subject to
change. DOE, together with other Federal agencies, will continue to
review various methodologies for estimating the monetary value of
reductions in CO2 and other GHG emissions. This ongoing
review will consider the comments on
[[Page 75249]]
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 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 MREFs. The dollar-
per-ton value that DOE used is discussed in section IV.L of this
document. Table V.46 and Table V.47 present the cumulative present
values for NOX emissions for each TSL, for coolers and
combination cooler refrigeration products respectively, calculated
using 7-percent and 3-percent discount rates.
Table V.46--Estimates of Present Value of NOX Emissions Reduction for
Coolers
------------------------------------------------------------------------
Million 2015$
-------------------------------
TSL * 3% discount 7% discount
rate rate
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1....................................... 133.86 54.53
2....................................... 191.46 84.35
3....................................... 217.63 88.51
4....................................... 237.63 96.02
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1....................................... 95.75 38.02
2....................................... 134.60 57.52
3....................................... 155.70 61.73
4....................................... 170.25 67.08
------------------------------------------------------------------------
Total FFC Emissions
------------------------------------------------------------------------
1....................................... 229.60 92.55
2....................................... 326.06 141.86
3....................................... 373.33 150.23
4....................................... 407.87 163.10
------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products
sold from 2019-2048. For the other TSLs, the results are forecasted
over the lifetime of products sold from 2021-2050.
Table V.47--Estimates of Present Value of NOX Emissions Reduction for
Combination Cooler Refrigeration Products
------------------------------------------------------------------------
Million 2015$
-------------------------------
TSL * 3% discount 7% discount
rate rate
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1....................................... 0.11 0.05
2....................................... 0.84 0.33
3....................................... 1.40 0.55
4....................................... 1.82 0.72
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1....................................... 0.07 0.03
2....................................... 0.60 0.23
3....................................... 1.01 0.39
4....................................... 1.31 0.50
------------------------------------------------------------------------
Total FFC Emissions
------------------------------------------------------------------------
1....................................... 0.18 0.08
2....................................... 1.44 0.56
3....................................... 2.40 0.94
4....................................... 3.13 1.22
------------------------------------------------------------------------
* For TSL 1, the results are forecasted over the lifetime of products
sold from 2019-2048. For the other TSLs, the results are forecasted
over the lifetime of products sold from 2021-2050.
[[Page 75250]]
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)) In
developing the direct final rule, DOE has considered the submission of
the jointly-submitted Term Sheet #2 from the MREF Working Group and
approved by ASRAC. In DOE's view, Term Sheet #2 sets forth a statement
by interested persons that are fairly representative of relevant points
of view (including representatives of manufacturers of covered
equipment, States, and efficiency advocates) and contains
recommendations with respect to energy conservation standards that are
in accordance with 42 U.S.C. 6295(o), as required by EPCA's direct
final rule provision. See 42 U.S.C. 6295(p)(4). DOE has encouraged the
submission of agreements such as the one developed and submitted by the
MREF Working Group as a way to bring diverse stakeholders together, to
develop an independent and probative analysis useful in DOE standard
setting, and to expedite the rulemaking process. DOE also believes that
standard levels recommended in Term Sheet #2 may increase the
likelihood for regulatory compliance, while decreasing the risk of
litigation.
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.48 and Table V.49 present the NPV value that results 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 for coolers and combination cooler
refrigeration products, 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.48--Net Present Value of Consumer Savings Combined with Present Value of Monetized Benefits from CO2 and
NOX Emissions Reductions for Coolers
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
Consumer NPV at 3% discount rate added with:
---------------------------------------------------------------
TSL * SCC Case $12.4/ SCC Case $40.6/ SCC Case $63.2/ SCC Case $118/
metric ton and metric ton and metric ton and metric ton and
3% NOX Value 3% NOX Value 3% NOX Value 3% NOX Value
----------------------------------------------------------------------------------------------------------------
1............................................... 9.0 10.8 12.0 15.2
2............................................... 12.0 14.4 16.2 20.6
3............................................... 13.3 16.1 18.2 23.4
4............................................... 8.1 11.1 13.4 19.1
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
TSL * Consumer NPV at 7% discount rate added with:
---------------------------------------------------------------
SCC Case $12.4/ SCC Case $40.6/ SCC Case $63.2/ SCC Case $118/
metric ton and metric ton and metric ton and metric ton and
7% NOX Value 7% NOX Value 7% NOX Value 7% NOX Value
----------------------------------------------------------------------------------------------------------------
1............................................... 4.0 5.7 7.0 10.2
2............................................... 5.6 8.0 9.7 14.2
3............................................... 5.7 8.5 10.6 15.8
4............................................... 2.8 5.9 8.2 13.9
----------------------------------------------------------------------------------------------------------------
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
Table V.49--Net Present Value of Consumer Savings Combined with Present Value of Monetized Benefits from CO2 and
NOX Emissions Reductions for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
Consumer NPV at 3% discount rate added with:
---------------------------------------------------------------
TSL * SCC Case $12.4/ SCC Case $40.6/ SCC Case $63.2/ SCC Case $118/
metric ton and metric ton and metric ton and metric ton and
3% NOX Value 3% NOX Value 3% NOX Value 3% NOX Value
----------------------------------------------------------------------------------------------------------------
1............................................... 0.005 0.006 0.007 0.010
2............................................... 0.039 0.050 0.058 0.078
3............................................... (0.050) (0.032) (0.018) 0.016
4............................................... (0.132) (0.108) (0.090) (0.046)
----------------------------------------------------------------------------------------------------------------
[[Page 75251]]
Table V.49--Net Present Value of Consumer Savings Combined with Present Value of Monetized Benefits from CO2 and
NOX Emissions Reductions for Combination Cooler Refrigeration Products--Continued
----------------------------------------------------------------------------------------------------------------
Billion 2015$
---------------------------------------------------------------
Consumer NPV at 7% discount rate added with:
---------------------------------------------------------------
TSL * SCC Case $12.4/ SCC Case $40.6/ SCC Case $63.2/ SCC Case $118/
metric ton and metric ton and metric ton and metric ton and
7% NOX Value 7% NOX Value 7% NOX Value 7% NOX Value
----------------------------------------------------------------------------------------------------------------
1............................................... 0.002 0.003 0.004 0.007
2............................................... 0.015 0.025 0.034 0.054
3............................................... (0.036) (0.018) (0.004) 0.029
4............................................... (0.083) (0.059) (0.041) 0.003
----------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs,
the results are forecasted over the lifetime of products sold from 2021-2050.
In considering the above results, two issues are relevant. First,
the national operating cost savings are domestic U.S. monetary savings
that occur as a result of market transactions, while the value of
CO2 reductions is based on a global value. Second, the
assessments of operating cost savings and the SCC are performed with
different methods that use different time frames for analysis. The
national operating cost savings is measured for the lifetime of
products shipped in the applicable analysis period. Because
CO2 emissions have a very long residence time in the
atmosphere,\78\ the SCC values in future years reflect future climate-
related impacts that continue beyond 2100.
---------------------------------------------------------------------------
\78\ 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,' '' 110 J.
Geophys. Res. D14105 (2005).
---------------------------------------------------------------------------
9. Conclusion
When considering standards, the new or amended energy conservation
standards that DOE adopts for any type (or class) of covered product
must be designed to achieve the maximum improvement in energy
efficiency that the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining
whether a standard is economically justified, the Secretary must
determine whether the benefits of the standard exceed its burdens by,
to the greatest extent practicable, considering the seven statutory
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)). The new or
amended standard must also result in significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B))
For this direct final rule, DOE considered the impacts of new
standards for MREFs at each TSL, beginning with the maximum
technologically feasible level, to determine whether that level was
economically justified. Where the max-tech level was not justified, DOE
then considered the next most efficient level and undertook the same
evaluation until it reached the highest efficiency level that is both
technologically feasible and economically justified and saves a
significant amount of energy.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, tables in this section present a summary of the results of
DOE's quantitative analysis for each TSL. In addition to the
quantitative results presented in the tables, DOE also considers other
burdens and benefits that affect economic justification.
DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy
savings in the absence of government intervention. Much of this
literature attempts to explain why consumers appear to undervalue
energy efficiency improvements. There is evidence that consumers
undervalue future energy savings as a result of: (1) A lack of
information; (2) a lack of sufficient salience of the long-term or
aggregate benefits; (3) a lack of sufficient savings to warrant
delaying or altering purchases; (4) excessive focus on the short term,
in the form of inconsistent weighting of future energy cost savings
relative to available returns on other investments; (5) computational
or other difficulties associated with the evaluation of relevant
tradeoffs; and (6) a divergence in incentives (for example, between
renters and owners, or builders and purchasers). Having less than
perfect foresight and a high degree of uncertainty about the future,
consumers may trade off these types of investments at a higher than
expected rate between current consumption and uncertain future energy
cost savings.
In DOE's current regulatory analysis, potential changes in the
benefits and costs of a regulation due to changes in consumer purchase
decisions are included in two ways. First, if consumers forego the
purchase of a product in the standards case, this decreases sales for
product manufacturers, and the impact on manufacturers attributed to
lost revenue is included in the MIA. Second, DOE accounts for energy
savings attributable only to products actually used by consumers in the
standards case; if a regulatory option decreases the number of products
purchased by consumers, this decreases the potential energy savings
from an energy conservation standard. DOE provides estimates of
shipments and changes in the volume of product purchases in chapter 9
of the direct final rule TSD. 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.\79\
---------------------------------------------------------------------------
\79\ P.C. Reiss and M.W. White, Household Electricity Demand,
Revisited, Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------
While DOE is not prepared at present to provide a fuller
quantifiable framework for estimating the benefits and costs of changes
in consumer purchase decisions due to an energy conservation standard,
DOE is committed to developing a framework that can support empirical
quantitative tools for improved assessment of the consumer welfare
impacts of appliance standards. DOE has posted a paper that discusses
the issue of consumer welfare impacts of appliance energy conservation
standards, and potential enhancements to the methodology by
[[Page 75252]]
which these impacts are defined and estimated in the regulatory
process.\80\ 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.
---------------------------------------------------------------------------
\80\ Alan Sanstad, Notes on the Economics of Household Energy
Consumption and Technology Choice. Lawrence Berkeley National
Laboratory (2010) (Available online at: http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf).
---------------------------------------------------------------------------
a. Benefits and Burdens of TSLs Considered for Coolers
Table V.50 and Table V.51 summarize the quantitative impacts
estimated for each TSL for coolers. The national impacts are measured
over the lifetime of coolers purchased in the 30-year period that
begins in the anticipated year of compliance with new standards (2019-
2048 for TSL 2, and 2021-2050 for the other TSLs). The energy savings,
emissions reductions, and value of emissions reductions refer to full-
fuel-cycle results. The efficiency levels contained in each TSL are
described in section V.A of this document.
Table V.50--Summary of Analytical Results for Coolers: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Quads.............................. 1.13........................ 1.51....................... 1.84....................... 2.02.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Costs and Benefits (2015$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................... 8.34........................ 11.02...................... 12.19...................... 6.83.
7% discount rate................... 3.41........................ 4.78....................... 4.81....................... 1.81.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......... 67.91....................... 91.76...................... 110.61..................... 121.30.
SO2 (thousand tons)................ 39.38....................... 54.04...................... 64.13...................... 70.26.
NOX (thousand tons)................ 122.38...................... 163.86..................... 199.36..................... 218.79.
Hg (tons).......................... 0.15........................ 0.20....................... 0.24....................... 0.26.
CH4 (thousand tons)................ 291.14...................... 387.12..................... 474.33..................... 520.85.
CH4 (thousand tons CO2eq) **....... 8151.79..................... 10839.31................... 13281.37................... 14583.83.
N2O (thousand tons)................ 0.82........................ 1.12....................... 1.33....................... 1.46.
N2O (thousand tons CO2eq) **....... 217.02...................... 296.92..................... 353.41..................... 387.24.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2015$ billion) [dagger]....... 0.478 to 6.673.............. 0.679 to 9.266............. 0.777 to 10.856............ 0.849 to 11.882.
NOX--3% discount rate (2015$ 229.6 to 523.5.............. 326.1 to 743.4............. 373.3 to 851.2............. 407.9 to 929.9.
million).
NOX--7% discount rate (2015$ 92.5 to 208.7............... 141.9 to 319.9............. 150.2 to 338.7............. 163.1 to 367.8.
million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs, the results are forecasted over the
lifetime of products sold from 2021-2050.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
[dagger] Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Table V.51--Summary of Analytical Results for Coolers: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2015$ million) (No- 244.3 to 264.0.............. 208.5 to 253.3............. 168.4 to 226.5............. 110.5 to 283.8.
new-standards case INPV = 263.3).
Industry NPV (% change)............ -7.2 to 0.3................. -20.8 to -3.8.............. -36.0 to -14.0............. -58.0 to 7.8.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Freestanding Compact Coolers....... 279......................... 265........................ 288........................ 123.
Built-in Compact Coolers........... n.a. **..................... 28......................... 60......................... (230).
Freestanding Coolers............... 648......................... 153........................ 240........................ (121).
Built-in Coolers................... n.a......................... 77......................... 187........................ (254).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Freestanding Compact Coolers....... 1.1......................... 1.4........................ 1.6........................ 3.5.
Built-in Compact Coolers........... n.a......................... 4.6........................ 4.4........................ 14.8.
Freestanding Coolers............... 1.0......................... 1.8........................ 1.8........................ 4.8.
Built-in Coolers................... n.a......................... 6.1........................ 4.7........................ 17.7.
--------------------------------------------------------------------------------------------------------------------------------------------------------
% of Consumers that Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Freestanding Compact Coolers....... 6........................... 9.......................... 12......................... 51.
Built-in Compact Coolers........... 0........................... 29......................... 27......................... 93.
[[Page 75253]]
Freestanding Coolers............... 0........................... 22......................... 9.......................... 78.
Built-in Coolers................... 0........................... 22......................... 7.......................... 86.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* For TSL 2, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs, the results are forecasted over the
lifetime of products sold from 2021-2050.
** Calculation of savings and PBP is not applicable (n.a.) for an efficiency level that is already met or exceeded in the MREF market.
DOE first considered TSL 4, which represents the max-tech
efficiency levels. TSL 4 would save 2.02 quads of energy, an amount DOE
considers significant. Under TSL 4, the NPV of consumer benefit would
be $1.81 billion using a discount rate of 7 percent, and $6.83 billion
using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 4 are 121.3 Mt of
CO2, 70.3 thousand tons of SO2, 218.8 thousand
tons of NOX, 0.26 ton of Hg, 520.9 thousand tons of
CH4, and 1.5 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 4
ranges from $849 million to $11,882 million.
At TSL 4, the average LCC savings range from -$254 to $123. The
simple payback period ranges from 3.5 years to 17.7 years. The fraction
of consumers experiencing a net LCC cost ranges from 51 percent to 93
percent.
At TSL 4, the projected change in INPV ranges from a decrease of
$152.8 million to an increase of $20.5 million, which correspond to a
decrease of 58.0 percent to an increase of 7.8 percent, respectively.
Manufacturer feedback during confidential interviews indicated that all
cooler segments are highly price sensitive, and therefore the lower
bound of INPV impacts is more likely to occur. Additionally, at TSL 4,
disproportionate impacts on the LVMs may be severe. This could have a
direct impact on domestic manufacturing capacity and production
employment in the cooler industry.
The Secretary concludes that at TSL 4 for coolers, 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 concluded that TSL 4 is not economically justified.
DOE then considered TSL 3, which would save an estimated 1.84 quads
of energy, an amount DOE considers significant. Under TSL 3, the NPV of
consumer benefit would be $4.81 billion using a discount rate of 7
percent, and $12.19 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 3 are 110.6 Mt of
CO2, 64.1 thousand tons of SO2, 199.4 thousand
tons of NOX, 0.24 tons of Hg, 474.3 thousand tons of
CH4, and 1.33 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 3
ranges from $777 million to $10,856 million.
At TSL 3, the average LCC savings range from $60 to $288. The
simple payback period ranges from 1.6 years to 4.7 years. The fraction
of consumers experiencing a net LCC cost ranges from 7 percent to 27
percent.
At TSL 3, the projected change in INPV ranges from a decrease of
$94.8 million to a decrease of $36.8 million, which correspond to
decreases of 36.0 percent and 14.0 percent, respectively. Manufacturer
feedback from confidential interviews indicated that all cooler
segments are highly price sensitive, and therefore the lower bound of
INPV impacts is more likely to occur. Again, at TSL 3, disproportionate
impacts on the LVMs may be severe. This could have a direct impact on
domestic manufacturing capacity and production employment in the cooler
industry.
The Secretary concludes that at TSL 3 for coolers, 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 impacts on manufacturers, including the conversion
costs and profit margin impacts that could result in a large reduction
in INPV. Consequently, the Secretary has concluded that TSL 3 is not
economically justified.
DOE then considered TSL 2, which reflects the standard levels
recommended by the MREF Working Group. TSL 2 would save an estimated
1.51 quads of energy, an amount DOE considers significant. Under TSL 2,
the NPV of consumer benefit would be $4.78 billion using a discount
rate of 7 percent, and $11.02 billion using a discount rate of 3
percent.
The cumulative emissions reductions at TSL 2 are 91.8 Mt of
CO2, 54.0 thousand tons of SO2, 163.9 thousand
tons of NOX, 0.20 tons of Hg, 387.1 thousand tons of
CH4, and 1.12 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 2
ranges from $679 million to $9,266 million.
At TSL 2, the average LCC savings range from $28 to $265. The
simple payback period ranges from 1.4 years to 6.1 years. The fraction
of consumers experiencing a net LCC cost ranges from 9 percent to 29
percent.
At TSL 2, the projected change in INPV ranges from a decrease of
$54.8 million to a decrease of $10.0 million, which represent decreases
of 20.8 percent and 3.8 percent, respectively. Feedback from the LVMs
indicated that TSL 2 would not impede their ability to maintain their
current MREF product offerings.
After considering the analysis and weighing the benefits and
burdens, DOE has determined that the recommended standards for coolers
are in accordance with 42 U.S.C. 6295(o). Specifically, the Secretary
has determined 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 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.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule that establishes new energy conservation
standards for coolers at TSL 2. The new energy conservation standards
for coolers, which are expressed as maximum annual energy use, in kWh/
yr, as a
[[Page 75254]]
function of AV, in ft\3\, are shown in Table V.52.
Table V.52--New Energy Conservation Standards for Coolers
------------------------------------------------------------------------
Product class Maximum allowable AEU (kWh/yr)
------------------------------------------------------------------------
Built-in Compact...................... 7.88AV [dagger] + 155.8
Built-in..............................
Freestanding Compact..................
Freestanding..........................
------------------------------------------------------------------------
[dagger] AV = Adjusted volume, in ft\3\, as calculated according to
title 10 CFR part 430, subpart B, appendix A.
b. Benefits and Burdens of TSLs Considered for Combination Cooler
Refrigeration Products
Table V.53 and Table V.54 summarize the quantitative impacts
estimated for each TSL for combination cooler refrigeration products.
The national impacts are measured over the lifetime of products
purchased in the 30-year period that begins in the anticipated year of
compliance with new standards (2019-2048 for TSL 1, and 2021-2050 for
the other TSLs). The energy savings, emissions reductions, and value of
emissions reductions refer to FFC results. The efficiency levels
contained in each TSL are described in section V.A of this document.
Table V.53--Summary of Analytical Results for Combination Cooler Refrigeration Product TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Quads.............................. 0.00084..................... 0.007...................... 0.012...................... 0.016.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Costs and Benefits (2015$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................... 0.0045...................... 0.035...................... (0.06)..................... (0.14).
7% discount rate................... 0.0017...................... 0.011...................... (0.04)..................... (0.09).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......... 0.05........................ 0.44....................... 0.73....................... 0.96.
SO2 (thousand tons)................ 0.03........................ 0.25....................... 0.42....................... 0.55.
NOX (thousand tons)................ 0.09........................ 0.80....................... 1.32....................... 1.73.
Hg (tons).......................... 0.00........................ 0.00....................... 0.00....................... 0.00.
CH4 (thousand tons)................ 0.21........................ 1.90....................... 3.16....................... 4.13.
CH4 (thousand tons CO2eq) **....... 6.02........................ 53.24...................... 88.46...................... 115.75.
N2O (thousand tons)................ 0.00........................ 0.01....................... 0.01....................... 0.01.
N2O (thousand tons CO2eq) **....... 0.16........................ 1.40....................... 2.34....................... 3.05.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2015$ billion) [dagger]....... 0.000 to 0.005.............. 0.003 to 0.042............. 0.005 to 0.071............. 0.007 to 0.092.
NOX--3% discount rate (2015$ 0.2 to 0.4.................. 1.4 to 3.3................. 2.4 to 5.5................. 3.1 to 7.1.
million).
NOX--7% discount rate (2015$ 0.1 to 0.2.................. 0.6 to 1.3................. 0.9 to 2.1................. 1.2 to 2.7.
million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs, the results are forecasted over the
lifetime of products sold from 2021-2050.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
[dagger] Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Table V.54--Summary of Analytical Results for Combination Cooler Refrigeration Product TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2015$ million) (No- 107.4 to 107.6.............. 103.7 to 107.5............. 101.6 to 117.7............. 100.1 to 128.5.
new-standards case INPV = 108.2).
Industry NPV (% change)............ -0.7 to -0.5................ -4.1 to -0.6............... -6.0 to 8.9................ -7.5 to 18.8.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
C-3A............................... n.a. **..................... 58......................... 53......................... (209).
C-3A-BI............................ n.a......................... 66......................... 59......................... (237).
[[Page 75255]]
C-9................................ n.a......................... 89......................... 3.......................... (182).
C-9-BI............................. n.a......................... 102........................ 4.......................... (205).
C-13A.............................. 32.......................... 17......................... (123)...................... (194).
C-13A-BI........................... n.a......................... 8.......................... (151)...................... (232).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
C-3A............................... n.a......................... 4.1........................ 6.8........................ 25.3.
C-3A-BI............................ n.a......................... 4.1........................ 6.8........................ 25.4.
C-9................................ n.a......................... 2.6........................ 12.1....................... 23.3.
C-9-BI............................. n.a......................... 2.6........................ 12.0....................... 23.2.
C-13A.............................. 4.3......................... 5.0........................ 13.3....................... 16.0.
C-13A-BI........................... n.a......................... 6.5........................ 21.6....................... 24.6.
--------------------------------------------------------------------------------------------------------------------------------------------------------
% of Consumers that Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
C-3A............................... 0........................... 4.......................... 26......................... 92.
C-3A-BI............................ 0........................... 4.......................... 26......................... 92.
C-9................................ 0........................... 0.......................... 62......................... 90.
C-9-BI............................. 0........................... 0.......................... 63......................... 90.
C-13A.............................. 6........................... 44......................... 94......................... 96.
C-13A-BI........................... 0........................... 49......................... 97......................... 98.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* For TSL 1, the results are forecasted over the lifetime of products sold from 2019-2048. For the other TSLs, the results are forecasted over the
lifetime of products sold from 2021-2050.
** Calculation of savings and PBP is not applicable (n.a.) for an efficiency level that is already met or exceeded in the MREF market.
DOE first considered TSL 4, which represents the max-tech
efficiency levels. TSL 4 would save 0.016 quads of energy, an amount
DOE considers significant. Under TSL 4, the NPV of consumer benefit
would be -$0.09 billion using a discount rate of 7 percent, and -$0.14
billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 4 are 0.96 Mt of
CO2, 0.55 thousand tons of SO2, 1.73 thousand
tons of NOX, 0.0 ton of Hg, 4.13 thousand tons of
CH4, and 0.01 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 4
ranges from $7 million to $92 million.
At TSL 4, the average LCC savings range from -$237 to -$182. The
simple payback period ranges from 16.0 years to 25.4 years. The
fraction of consumers experiencing a net LCC cost ranges from 90
percent to 98 percent.
At TSL 4, the projected change in INPV ranges from a decrease of
$8.1 million to an increase of $20.3 million, which correspond to a
decrease of 7.5 percent to an increase of 18.8 percent, respectively.
Similar to coolers, manufacturer feedback from confidential interviews
indicated that combination cooler refrigeration products are highly
price sensitive, and therefore the lower bound of INPV impacts is more
likely to occur. Additionally, in the context of new standards for
coolers and other cumulative regulatory burdens, at TSL 4,
disproportionate impacts on domestic LVMs of combination cooler
refrigeration products may be severe. This could have a direct impact
on the availability of certain niche combination cooler refrigeration
products, as well as on competition, domestic manufacturing capacity,
and production employment related to the combination cooler
refrigeration product industry.
The Secretary concludes that at TSL 4 for combination cooler
refrigeration products, the benefits of energy savings, emission
reductions, and the estimated monetary value of the emissions
reductions would be outweighed by the negative NPV of consumer
benefits, the economic burden on some consumers, and the
disproportionate impacts on the LVMs, which could directly impact the
availability of certain niche combination cooler products.
Consequently, the Secretary has concluded that TSL 4 is not
economically justified.
DOE then considered TSL 3, which would save an estimated 0.012
quads of energy, an amount DOE considers significant. Under TSL 3, the
NPV of consumer benefit would be -$0.04 billion using a discount rate
of 7 percent, and -$0.06 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 3 are 0.73 Mt of
CO2, 0.42 thousand tons of SO2, 1.32 thousand
tons of NOX, 0.00 tons of Hg, 3.16 thousand tons of
CH4, and 0.01 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 3
ranges from $5 million to $71 million.
At TSL 3, the average LCC savings range from -$151 to $59. The
simple payback period ranges from 6.8 years to 21.6 years. The fraction
of consumers experiencing a net LCC cost ranges from 26 percent to 97
percent.
At TSL 3, the projected change in INPV ranges from a decrease of
$6.5 million to an increase of $9.6 million, which represent a decrease
of 6.0 percent and an increase of 8.9 percent, respectively. Again,
manufacturers indicated that combination cooler refrigeration products
are highly price sensitive, and therefore the lower bound of INPV
impacts is more likely to occur. In the context of new standards for
coolers and other cumulative regulatory burdens, at TSL 3,
disproportionate impacts on domestic LVMs of combination cooler
refrigeration products may be severe. This could have a direct impact
on the availability of certain niche combination cooler refrigeration
products, as well as on competition, domestic manufacturing capacity
and production employment related to the combination cooler
refrigeration product industry.
The Secretary concludes that at TSL 3 for combination cooler
refrigeration products, the benefits of energy savings, emission
reductions, and the estimated monetary value of the emissions
[[Page 75256]]
reductions would be outweighed by the negative NPV of consumer benefits
and disproportionate impacts on the LVMs, which could directly impact
the availability of certain niche combination cooler products.
Consequently, the Secretary has concluded that TSL 3 is not
economically justified.
DOE then considered TSL 2, which reflects the efficiency levels
with maximum consumer NPV at seven percent discount rate. TSL 2 would
save an estimated 0.007 quads of energy, an amount DOE considers
significant. Under TSL 2, the NPV of consumer benefit would be $0.011
billion using a discount rate of 7 percent, and $0.035 billion using a
discount rate of 3 percent.
The cumulative emissions reductions at TSL 2 are 0.44 Mt of
CO2, 0.25 thousand tons of SO2, 0.8 thousand tons
of NOX, 0.00 tons of Hg, 1.90 thousand tons of
CH4, and 0.013 thousand tons of N2O. The
estimated monetary value of the CO2 emissions reduction at
TSL 2 ranges from $3 million to $42 million.
At TSL 2, the average LCC savings range from $8 to $102. The simple
payback period ranges from 2.6 years to 6.5 years. The fraction of
consumers experiencing a net LCC cost ranges from zero percent to 49
percent.
At TSL 2, the projected change in INPV ranges from a decrease of
$4.4 million to a decrease of $0.6 million, which represent decreases
of 4.1 percent and 0.6 percent, respectively. Again, in the context of
new standards for coolers and other cumulative regulatory burdens, at
TSL 2, disproportionate impacts on domestic LVMs may be severe. This
could have a direct impact on the availability of certain niche
combination cooler refrigeration products, as well as on competition,
domestic manufacturing capacity and production employment related to
the combination cooler refrigeration product industry.
The Secretary concludes that at TSL 2 for combination cooler
refrigeration products, the benefits of energy savings, positive NPV of
consumer benefits, emission reductions, and the estimated monetary
value of the emissions reductions would again be outweighed by the
disproportionate impacts on the domestic LVMs, which could directly
impact the availability of certain niche combination cooler products.
Consequently, the Secretary has concluded that TSL 2 is not
economically justified.
DOE then considered TSL 1, which reflects the standard levels
recommended by the MREF Working Group. TSL 1 would save an estimated
0.00084 quads of energy, an amount DOE considers significant. Under TSL
1, the NPV of consumer benefit would be $0.0017 billion using a
discount rate of 7 percent, and $0.0045 billion using a discount rate
of 3 percent.
The cumulative emissions reductions at TSL 1 are 0.05 Mt of
CO2, 0.03 thousand tons of SO2, 0.09 thousand
tons of NOX, 0.00 tons of Hg, 0.21 thousand tons of
CH4, and 0.00 thousand tons of N2O. The estimated
monetary value of the CO2 emissions reduction at TSL 1
ranges from $0 million to $5 million.
At TSL 1, the combination cooler refrigeration products currently
available on the market already meet or exceed the corresponding
efficiency levels in all product classes except for C-13A. As a result,
for five of the product classes, no consumers experience a net cost,
and the LCC savings and simple payback period are not applicable. For
product class C-13A, the average LCC savings is $32, the simple payback
period is 4.3 years, and the fraction of consumers experiencing a net
LCC cost is 6 percent.
At TSL 1, the projected change in INPV ranges from a decrease of
$0.8 million to a decrease of $0.5 million, which represent decreases
of 0.7 percent and 0.5 percent, respectively. DOE estimated that all
combination cooler refrigeration products manufactured domestically by
LVMs currently meet the standard levels corresponding to TSL 1.
Therefore, at TSL 1, DOE believes that domestic manufacturers will
continue to offer the same combination cooler refrigeration products as
those they currently offer.
After considering the analysis and weighing the benefits and
burdens, DOE has determined that the recommended standards for
combination cooler refrigeration products are in accordance with 42
U.S.C. 6295(o). Specifically, the Secretary has determined 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 concluded that TSL 1 would offer the
maximum improvement in efficiency that is technologically feasible and
economically justified, and would result in the significant
conservation of energy.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule that establishes new energy conservation
standards for combination cooler refrigeration products at TSL 1. The
new energy conservation standards for combination cooler refrigeration
products, which are expressed as maximum annual energy use, in kWh/yr,
as a function of AV, in ft \3\, are shown in Table V.55.
Table V.55--New Energy Conservation Standards for Combination Cooler Refrigeration Products
----------------------------------------------------------------------------------------------------------------
Product class description Product class designation Maximum allowable AEU (kWh/yr)
----------------------------------------------------------------------------------------------------------------
Cooler with all-refrigerator--automatic C-3A............................ 4.57AV [dagger] + 130.4
defrost.
Built-in cooler with all-refrigerator-- C-3A-BI......................... 5.19AV + 147.8
automatic defrost.
Cooler with upright freezers with C-9............................. 5.58AV + 147.7
automatic defrost without an automatic
icemaker.
Built-in cooler with upright freezer with C-9-BI.......................... 6.38AV + 168.8
automatic defrost without an automatic
icemaker.
Cooler with upright freezer with C-9I............................ 5.58AV + 231.7
automatic defrost with an automatic
icemaker.
Built-in cooler with upright freezer with C-9I-BI......................... 6.38AV + 252.8
automatic defrost with an automatic
icemaker.
Compact cooler with all-refrigerator-- C-13A........................... 5.93AV + 193.7
automatic defrost.
Built-in compact cooler with all- C-13A-BI........................ 6.52AV + 213.1
refrigerator--automatic defrost.
----------------------------------------------------------------------------------------------------------------
[dagger] AV = Adjusted volume, in ft \3\, as calculated according to title 10 CFR part 430, subpart B, appendix
A.
[[Page 75257]]
c. Summary of Annualized Benefits and Costs of the Adopted Standards
The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The annualized net benefit is
the sum of: (1) The annualized national economic value (expressed in
2015$) of the benefits from operating products that meet the adopted
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.\81\
---------------------------------------------------------------------------
\81\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2016, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(2020, 2030, etc.), and then discounted the present value from each
year to 2016. The calculation uses discount rates of 3 and 7 percent
for all costs and benefits except for the value of CO2
reductions, for which DOE used case-specific discount rates. 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.56 shows the annualized values for MREFs under TSL 2 for
coolers and TSL 1 for combination cooler refrigeration products,
expressed in 2015$. The results under the primary estimate are as
follows. Using a 7-percent discount rate for benefits and costs other
than CO2 reduction, (for which DOE used a 3-percent discount
rate along with the SCC series that has a value of $40.6/t in
2015),\82\ the estimated cost of the standards in this rule is $153
million per year in increased equipment costs, while the estimated
annual benefits are $593 million in reduced equipment operating costs,
$165 million in CO2 reductions, and $13.1 million in reduced
NOX emissions. In this case, the net benefit amounts to $619
million per year.
---------------------------------------------------------------------------
\82\ 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 of this document).
---------------------------------------------------------------------------
Using a 3-percent discount rate for all benefits and costs and the
SCC series has a value of $40.6/t in 2015, the estimated cost of the
standards is $157 million per year in increased equipment costs, while
the estimated annual benefits are $754 million in reduced operating
costs, $165 million in CO2 reductions, and $17.1 million in
reduced NOX emissions. In this case, the net benefit amounts
to $779 million per year.
Table V.56--Annualized Benefits and Costs of New Standards for MREFs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2015$/year
Discount rate (%) -----------------------------------------------------------------------------------
Primary estimate Low net benefits estimate High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7............................... 593....................... 545....................... 649.
3............................... 754....................... 686....................... 839.
CO2 Reduction (using mean SCC at 5............................... 49........................ 46........................ 53.
5% discount rate) **.
CO2 Reduction (using mean SCC at 3............................... 165....................... 155....................... 179.
3% discount rate) **.
CO2 Reduction (using mean SCC at 2.5............................. 242....................... 227....................... 263.
2.5% discount rate) **.
CO2 Reduction (using 95th 3............................... 502....................... 471....................... 546.
percentile SCC at 3% discount
rate) **.
NOX Reduction Value [dagger]...... 7............................... 13.1...................... 12.4...................... 31.6.
3............................... 17.7...................... 16.6...................... 43.6.
---------------------------------------------------------------------------------------------------------------------
Total Benefits 7% plus CO2 range............... 655 to 1,108.............. 603 to 1,028.............. 733 to 1,226.
[dagger][dagger].
7............................... 771....................... 712....................... 860.
3% plus CO2 range............... 820 to 1,273.............. 748 to 1,173.............. 935 to 1,428.
3............................... 937....................... 857....................... 1,062.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs 7............................... 153....................... 145....................... 118.
[dagger][dagger][dagger]. 3............................... 157....................... 148....................... 116.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]........ 7% plus CO2 range............... 503 to 956................ 459 to 884................ 615 to 1,108.
7............................... 619....................... 568....................... 742.
3% plus CO2 range............... 663 to 1,116.............. 601 to 1,026.............. 819 to 1,312.
3............................... 779....................... 709....................... 946.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with MREFs shipped in 2019-2048. These results include benefits to consumers which
accrue after 2048 from the MREFs purchased from 2019-2048. The incremental installed costs include incremental equipment cost as well as installation
costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High Benefits Estimates
utilize projections of energy prices and housing starts from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case,
respectively. In addition, incremental product costs reflect a constant price trend in the Primary Estimate and 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.F of this document. Note
that the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5%, 3%, and 2.5%
discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC values
are emission year specific. See section IV.L.1 of this document for more details.
[[Page 75258]]
[dagger] DOE estimated the monetized value of NOX emissions reductions associated with electricity savings using benefit per ton estimates from the
``Regulatory Impact Analysis for the Clean Power Plan Final Rule,'' published in August 2015 by EPA's Office of Air Quality Planning and Standards.
(Available at www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L of this document for further
discussion. For the Primary Estimate and Low Net Benefits Estimate, DOE used a national benefit-per-ton estimate for NOX emitted from the Electric
Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For DOE's High Net Benefits
Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2011), which are nearly two-and-a-half times larger than
those from the ACS study.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are presented using only the average SCC with 3-percent discount rate. In the rows labeled
``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values
are added to the full range of CO2 values.
[dagger][dagger][dagger] The value of consumer incremental product costs is lower in the low net benefits estimate than it is in the primary estimate
because both estimates use the same price trend and there are fewer shipments in the low net benefits estimate. The value of consumer incremental
product costs is lower in the high net benefits scenario than it is in the primary case because the high net benefits scenario uses a highly declining
price trend that more than offsets the increase in shipments due to higher economic growth.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify
the problem that it intends to address, including, where applicable,
the failures of private markets or public institutions that warrant new
agency action, as well as to assess the significance of that problem.
The problems that the adopted standards for MREFs 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, which is likely to result in the least costly equipment being
purchased rather than more efficient alternatives that would benefit
the users of that equipment.
(3) There are external benefits resulting from improved energy
efficiency of MREFs that are not captured by the users of such
equipment. These benefits include externalities related to public
health, environmental protection and national energy security that are
not reflected in energy prices, such as reduced emissions of air
pollutants and greenhouse gases that impact human health and global
warming. DOE attempts to qualify 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.
In addition, the Administrator of OIRA has determined that the
proposed regulatory action is an ``economically'' significant
regulatory action under section (3)(f)(1) of Executive Order 12866.
Accordingly, pursuant to section 6(a)(3)(C) of the Order, DOE has
provided to OIRA an assessment, including the underlying analysis, of
benefits and costs anticipated from the regulatory action, together
with, to the extent feasible, a quantification of those costs; and an
assessment, including the underlying analysis, of costs and benefits of
potentially effective and reasonably feasible alternatives to the
planned regulation, and an explanation of why the planned regulatory
action is preferable to the identified potential alternatives. These
assessments can be found in the technical support document for this
rulemaking.
DOE has also reviewed this regulation pursuant to Executive Order
13563, issued on January 18, 2011. 76 FR 3281 (January 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 direct final
rule 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 and a
final regulatory flexibility analysis (``FRFA'') for any such rule that
an agency adopts as a final rule, unless the agency certifies that the
rule, if promulgated, will not have a significant economic impact on a
substantial number of small entities. A regulatory flexibility analysis
examines the impact of the rule on small entities
[[Page 75259]]
and considers alternative ways of reducing negative effects. As
required by Executive Order 13272, ``Proper Consideration of Small
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE
published procedures and policies on February 19, 2003, to ensure that
the potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of the General
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE
reviewed this direct final rule and corresponding NOPR (published
elsewhere in this Federal Register) pursuant to the Regulatory
Flexibility Act and the procedures and policies discussed above. DOE
has concluded that this rule would not have a significant impact on a
substantial number of small entities. The factual basis for this
certification is set forth below. DOE will consider any comments on the
certification or economic impacts of the rule in determining whether to
adopt the standards contained in this direct final rule.
For manufacturers of MREFs, the SBA has set a size threshold, which
defines those entities classified as ``small businesses'' for the
purposes of the statute. Manufacturers of MREFs have primary NAICS
codes of 335222, ``Household Refrigerator and Home Freezer
Manufacturing'' and 333415, ``Air-Conditioning and Warm Air Heating
Equipment and Commercial and Industrial Refrigeration Equipment
Manufacturing.'' The SBA sets a threshold of 1,250 employees or less
for an entity to be considered as a small business for both NAICS
335222 and NAICS 333415.
DOE conducted a market survey using available public information to
identify potential small manufacturers. DOE first attempted to identify
all potential MREF manufacturers by researching the CEC \83\ and NRCan
\84\ product databases, individual company Web sites, market research
tools (e.g., Hoovers reports \85\), and information from the 2011
energy conservation standards rulemaking for residential refrigerators,
refrigerator-freezers, and freezers. DOE also asked stakeholders and
industry representatives during manufacturer interviews and at DOE
public meetings if they were aware of any other small manufacturers.
DOE reviewed publicly-available data and contacted select companies, as
necessary, to determine whether they met the SBA's definition of a
small business manufacturer of covered MREFs. DOE screened out
companies that do not offer products covered by this rulemaking, do not
meet the definition of a ``small business,'' or are foreign-owned.
---------------------------------------------------------------------------
\83\ CEC. California Energy Commission Appliance Database. Last
Accessed December 14, 2015. https://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx.
\84\ NRCan. Natural Resources Canada EnerGuide. Last Accessed
August 6, 2015. http://oee.nrcan.gc.ca/pml-lmp/index.cfm?action=app.search-recherche&appliance=REFRIGERATORS.
\85\ Hoovers. www.hoovers.com/.
---------------------------------------------------------------------------
The MREF industry in the United States is primarily an import
industry. DOE estimated that less than 8 percent of coolers sold in the
United States are produced domestically. The percentage of domestic
production of the niche combination cooler refrigeration products is
much larger (approximately 40 percent), although total shipments for
the combination cooler refrigeration products segment equal only
approximately 2 percent of cooler shipments in the United States. DOE
estimates that there are approximately 48 entities involved in the sale
and/or manufacture of MREFs sold in the U.S. market. Based on
manufacturer interview feedback and publicly-available information, DOE
determined that 46 of these entities either exceed the size thresholds
defined by SBA or are completely foreign-owned and operated. DOE
determined that the remaining two companies meet the SBA's definition
of a ``small business.''
One of the two small, domestic businesses selling MREFs in the
United States, accounting for an estimated 1 percent of MREF shipments,
does not manufacture any of the MREFs covered by this rulemaking but
instead outsources the manufacture of them to foreign OEMs. Because
this business does not manufacture MREFs, DOE believes that this
company would incur no fixed capital costs related to new energy
conservation standards for MREFs. However, this entity may incur costs
related to testing, certification, and marketing in order to comply
with the standards adopted in this direct final rule. As discussed in
section VII.B of the July 2016 Final Coverage Determination, DOE
assumes that existing cooler models that are being sold in the United
States have already been tested according to test methods similar to
those established in the July 2016 Final Coverage Determination and
would require only an adjustment of the calculated energy use. Using
the costs of adjusting calculated energy use outlined in section VII.B
of the July 2016 Final Coverage Determination, as well as an estimate
of $50,000 for updates to product literature and marketing materials as
a result of new MREF standards, DOE conservatively estimates that the
small importer may incur approximately $63,000 in product conversion
costs in order to maintain its current MREF product offering. 81 FR at
46786-46787. DOE assumes these upfront costs will be spread over a 3-
year period leading up to the compliance year. Accordingly, on an
annual basis, the estimated upfront product conversion costs equate to
less than 0.1 percent of this entity's annual revenues.
The second small, domestic business identified by DOE manufactures
compact coolers. Based on DOE's research, this manufacturer accounts
for less than 1 percent of MREF market share in the United States. The
models produced and sold by this manufacturer correspond with an
estimated four unique platforms with associated efficiencies at or just
below (less efficient than) the standard efficiency levels for coolers
adopted in this direct final rule. DOE expects that this manufacturer
will likely be able to comply with the standards adopted in this direct
final rule by making component changes within its existing products
(i.e., a more efficient compressor, improved glass, or targeted
integration of VIPs). DOE, therefore, determined that this manufacturer
would likely not incur fixed capital costs. DOE estimated that this
small manufacturer may incur approximately $900,000 in upfront product
conversion costs (related to research and development, testing,
certification and marketing) in order to maintain its current product
offering. DOE assumes these upfront costs will be spread over a 3-year
period leading up to the compliance year. Accordingly, on an annual
basis, the estimated upfront product conversion costs equate to roughly
8 percent of this manufacturer's annual revenues from its U.S. sales of
MREFs. Overall annual sales figures for this manufacturer are not
publicly-available. However, this manufacturer's product line also
includes commercial bar and beverage equipment.
As discussed above, although the small manufacturer and small
importer will incur some costs related to compliance with new MREF
standards, the costs to these entities represent a small portion of
their annual revenues. For this reason, DOE certifies that the
standards for MREFs set forth in this direct final 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
[[Page 75260]]
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 MREFs are a covered product under EPCA. 81
FR 46768 (July 18, 2016). Because MREFs are a covered product,
manufacturers would need to certify to DOE that their products comply
with any applicable energy conservation standards. In certifying
compliance, manufacturers must test their products according to the DOE
test procedures for MREFs, 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 MREFs. See generally 10 CFR part 429.
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 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 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 direct final
rule. DOE's CX determination for this direct final 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
direct final rule and has 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
direct final rule. States can petition DOE for exemption from such
preemption to the extent, and based on criteria, set forth in EPCA. (42
U.S.C. 6297) Therefore, no further action is required by Executive
Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' imposes on Federal agencies the general duty
to adhere to the following requirements: (1) Eliminate drafting errors
and ambiguity; (2) write regulations to minimize litigation; (3)
provide a clear legal standard for affected conduct rather than a
general standard; and (4) promote simplification and burden reduction.
61 FR 4729 (February 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 direct final rule meets the
relevant standards of Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a 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 ``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.
DOE reviewed this rule and determined that it does not contain a
Federal intergovernmental mandate, nor is it expected to require
expenditures of $100 million or more in any one year by the private
sector. As a result, no further assessment or analysis is required
under UMRA.
[[Page 75261]]
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 direct final rule will not have any impact on the autonomy or
integrity of the family as an institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
I. Review Under Executive Order 12630
Pursuant to Executive Order 12630, ``Governmental Actions and
Interference with Constitutionally Protected Property Rights'' 53 FR
8859 (March 18, 1988), DOE has determined that this direct final rule
will 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 direct final rule 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 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 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 concluded that this regulatory action, which sets forth new
energy conservation standards for MREFs, is not a significant energy
action because the standards are not likely to have a significant
adverse effect on the supply, distribution, or use of energy, nor has
it been designated as such by the Administrator at OIRA. Accordingly,
DOE has not prepared a Statement of Energy Effects on this direct final
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, issued its Final Information Quality
Bulletin for Peer Review (the Bulletin). 70 FR 2664 (January 14, 2005).
The Bulletin establishes that certain scientific information shall be
peer reviewed by qualified specialists before it is disseminated by the
Federal Government, including influential scientific information
related to agency regulatory actions. The purpose of the bulletin is to
enhance the quality and credibility of the Government's scientific
information. Under the Bulletin, the energy conservation standards
rulemaking analyses are ``influential scientific information,'' which
the Bulletin defines as ``scientific information the agency reasonably
can determine will have, or does have, a clear and substantial impact
on important public policies or private sector decisions.'' Id at FR
2667.
In response to OMB's Bulletin, DOE conducted formal in-progress
peer reviews of the energy conservation standards development process
and analyses and has prepared a Peer Review Report pertaining to the
energy conservation standards rulemaking analyses. Generation of this
report involved a rigorous, formal, and documented evaluation using
objective criteria and qualified and independent reviewers to make a
judgment as to the technical/scientific/business merit, the actual or
anticipated results, and the productivity and management effectiveness
of programs and/or projects. The ``Energy Conservation Standards
Rulemaking Peer Review Report'' dated February 2007 has been
disseminated and is available at the following Web site:
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the direct final rule is a
``major rule'' as defined by 5 U.S.C. 804(2).
VII. Public Participation
DOE will accept comments, data, and information regarding this rule
until the date provided in the DATES section at the beginning of this
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 rule.
DOE welcomes comments on any aspect of the analysis as described in
this direct final rule. DOE is also interested in receiving comments
and views of interested parties concerning the following issues:
1. Whether the standards outlined in this rulemaking would result
in any lessening of utility for MREFs, including whether certain
features would be eliminated from these products. See sections
III.H.1.d and IV.2 of this rule.
2. The incremental manufacturer production costs DOE estimated at
each efficiency level. See section IV.C of this rule.
3. DOE's method to estimate MREF shipments under the no-new-
standards case and under potential energy conservation standards
levels. See section IV.G of this rule.
4. The assumption that installation, maintenance, and repair costs
do not vary for MREFs at higher efficiency levels. See section IV.F of
this rule.
5. The manufacturer conversion costs (both product and capital)
used in DOE's analysis. See section V.B.2.d this rule.
6. The cumulative regulatory burden to MREF manufacturers
associated with the standards in this direct final rule and on the
approach DOE used in evaluating cumulative regulatory burden, including
the timeframes and regulatory dates evaluated. See section V.B.2.e of
this 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
[[Page 75262]]
difficulties, DOE will use this information to contact you. If DOE
cannot read your comment due to technical difficulties and cannot
contact you for clarification, DOE may not be able to consider your
comment.
However, your contact information will be publicly viewable if you
include it in the comment itself or in any documents attached to your
comment. Any information that you do not want to be publicly viewable
should not be included in your comment, nor in any document attached to
your comment. Otherwise, persons viewing comments will see only first
and last names, organization names, correspondence containing comments,
and any documents submitted with the comments.
Do not submit to www.regulations.gov information for which
disclosure is restricted by statute, such as trade secrets and
commercial or financial information (hereinafter referred to as
Confidential Business Information (CBI)). Comments submitted through
www.regulations.gov cannot be claimed as CBI. Comments received through
the Web site will waive any CBI claims for the information submitted.
For information on submitting CBI, see the Confidential Business
Information section below.
DOE processes submissions made through www.regulations.gov before
posting. Normally, comments will be posted within a few days of being
submitted. However, if large volumes of comments are being processed
simultaneously, your comment may not be viewable for up to several
weeks. Please keep the comment tracking number that www.regulations.gov
provides after you have successfully uploaded your comment.
Submitting comments via email, hand delivery/courier, or mail.
Comments and documents submitted via email, hand delivery/courier, or
mail also will be posted to www.regulations.gov. If you do not want
your personal contact information to be publicly viewable, do not
include it in your comment or any accompanying documents. Instead,
provide your contact information in a cover letter. Include your first
and last names, email address, telephone number, and optional mailing
address. The cover letter will not be publicly viewable as long as it
does not include any comments.
Include contact information each time you submit comments, data,
documents, and other information to DOE. If you submit via mail or hand
delivery/courier, please provide all items on a CD, if feasible, in
which case it is not necessary to submit printed copies. No
telefacsimiles (faxes) will be accepted.
Comments, data, and other information submitted to DOE
electronically should be provided in PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file format. Provide documents that
are not secured, that are written in English, and that are free of any
defects or viruses. Documents should not contain special characters or
any form of encryption and, if possible, they should carry the
electronic signature of the author.
Campaign form letters. Please submit campaign form letters by the
originating organization in batches of between 50 to 500 form letters
per PDF or as one form letter with a list of supporters' names compiled
into one or more PDFs. This reduces comment processing and posting
time.
Confidential Business Information. Pursuant to 10 CFR 1004.11, any
person submitting information that he or she believes to be
confidential and exempt by law from public disclosure should submit via
email, postal mail, or hand delivery/courier two well-marked copies:
One copy of the document marked ``confidential'' including all the
information believed to be confidential, and one copy of the document
marked ``non-confidential'' with the information believed to be
confidential deleted. Submit these documents via email or on a CD, if
feasible. DOE will make its own determination about the confidential
status of the information and treat it according to its determination.
Factors of interest to DOE when evaluating requests to treat
submitted information as confidential include: (1) A description of the
items; (2) whether and why such items are customarily treated as
confidential within the industry; (3) whether the information is
generally known by or available from other sources; (4) whether the
information has previously been made available to others without
obligation concerning its confidentiality; (5) an explanation of the
competitive injury to the submitting person that would result from
public disclosure; (6) when such information might lose its
confidential character due to the passage of time; and (7) why
disclosure of the information would be contrary to the public interest.
It is DOE's policy that all comments may be included in the public
docket, without change and as received, including any personal
information provided in the comments (except information deemed to be
exempt from public disclosure).
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this direct
final rule.
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
Small businesses.
Issued in Washington, DC, on October 4, 2016.
David J. Friedman,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
For the reasons set forth in the preamble, DOE amends part 430 of
chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, as set forth below:
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
1. The authority citation for part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
2. Amend Sec. 430.32 by adding paragraph (aa) to read as follows:
Sec. 430.32 Energy and water conservation standards and their
compliance dates.
* * * * *
(aa) Miscellaneous refrigeration products. The energy standards as
determined by the equations of the following table(s) shall be rounded
off to the nearest kWh per year. If the equation calculation is halfway
between the nearest two kWh per year values, the standard shall be
rounded up to the higher of these values.
(1) Coolers manufactured starting on October 28, 2019 shall have
Annual Energy Use (AEU) no more than:
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
1. Built-in compact.................... 7.88AV + 155.8
2. Built-in
3. Freestanding compact
4. Freestanding
------------------------------------------------------------------------
AV = Total adjusted volume, expressed in ft\3\, as calculated according
to appendix A of subpart B of this part.
(2) Combination cooler refrigeration products manufactured starting
on October 28, 2019 shall have Annual Energy Use (AEU) no more than:
[[Page 75263]]
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
C-3A. Cooler with all-refrigerator-- 4.57AV + 130.4
automatic defrost.
C-3A-BI. Built-in cooler with all- 5.19AV + 147.8
refrigerator--automatic defrost.
C-9. Cooler with upright freezers with 5.58AV + 147.7
automatic defrost without an automatic
icemaker.
C-9-BI. Built-in cooler with upright 6.38AV + 168.8
freezer with automatic defrost without
an automatic icemaker.
C-9I. Cooler with upright freezer with 5.58AV + 231.7
automatic defrost with an automatic
icemaker.
C-9I-BI. Built-in cooler with upright 6.38AV + 252.8
freezer with automatic defrost with an
automatic icemaker.
C-13A. Compact cooler with all- 5.93AV + 193.7
refrigerator--automatic defrost.
C-13A-BI. Built-in compact cooler with 6.52AV + 213.1
all-refrigerator--automatic defrost.
------------------------------------------------------------------------
AV = Total adjusted volume, expressed in ft\3\, as calculated according
to appendix A of subpart B of this part.
[FR Doc. 2016-24759 Filed 10-27-16; 8:45 am]
BILLING CODE 6450-01-P