[Federal Register Volume 85, Number 7 (Friday, January 10, 2020)]
[Rules and Regulations]
[Pages 1378-1447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26350]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
10 CFR Parts 429 and 430
[Docket Number EERE-2013-BT-STD-0033]
RIN 1904-AD02
Energy Conservation Program: Energy Conservation Standards for
Portable Air Conditioners
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA or the
Act), as amended, prescribes energy conservation standards for various
consumer products and certain commercial and industrial equipment. In
addition to specifying a list of covered consumer products and
commercial equipment, EPCA contains provisions that enable the
Secretary of Energy to classify additional types of consumer products
as covered products. On April 18, 2016, the U.S. Department of Energy
(DOE or the Department) published a final coverage determination to
classify portable air conditioners (ACs) as covered consumer products
under the applicable provisions in EPCA. In this final rule, DOE
establishes new energy conservation standards for portable ACs. DOE has
determined that the energy conservation standards for these products
would result in significant conservation of energy, and are
technologically feasible and economically justified.
DATES: The effective date of this rule is March 10, 2020. Compliance
with the standards established for portable ACs in this final rule is
required on and after January 10, 2025.
ADDRESSES: The docket for this rulemaking, 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, not all documents listed in
the index may be publicly available, such as information that is exempt
from public disclosure.
The docket web page can be found at https://www.regulations.gov/docket?D=EERE-2013-BT-STD-0033. The docket web page contains simple
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact the
Appliance and Equipment Standards Program staff at (202) 586-6636 or by
email: [email protected].
FOR FURTHER INFORMATION CONTACT:
Mr. Bryan Berringer, 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) 586-0371. Email: [email protected].
Ms. Sarah Butler, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
[[Page 1379]]
Telephone: (202) 586-1777. Email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
III. General Discussion
A. Product Classes and Scope of Coverage
B. Test Procedure
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
F. Other Issues
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Definition and Scope of Coverage
2. Product Classes
a. Preliminary Analysis and Notice of Proposed Rulemaking (NOPR)
Proposals
b. Comments and Responses
3. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Additional Comments
3. Remaining Technologies
C. Engineering Analysis
1. Efficiency Levels
a. Baseline Efficiency Levels
b. Higher Energy Efficiency Levels
2. Manufacturer Production Cost Estimates
D. Markups Analysis
E. Energy Use Analysis
1. Consumer Samples
2. Cooling Mode Hours and Sensitivity Analyses
3. Fan-only Mode and Standby Mode Hours
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. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model (GRIM) and Key Inputs
a. Manufacturer Production Costs
b. Shipment Projections
c. Product and Capital Conversion Costs
d. Markup Scenarios
3. Discussion of Comments
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 Methane and Nitrous Oxide
3. Social Cost of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels (TSLs)
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Portable AC
Standards
2. 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. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
Title III, Part B \1\ of the Energy Policy and Conservation Act of
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as
codified), established the Energy Conservation Program for Consumer
Products Other Than Automobiles.\2\ In addition to specifying a list of
covered residential products and commercial equipment, EPCA contains
provisions that enable the Secretary of Energy to classify additional
types of consumer products as covered products. (42 U.S.C. 6292(a)(20))
In a final determination of coverage published in the Federal Register
on April 18, 2016 (the ``April 2016 Final Coverage Determination''),
DOE classified portable ACs as covered consumer products under EPCA. 81
FR 22514.
---------------------------------------------------------------------------
\1\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Efficiency Improvement Act of 2015,
Public Law 114-11 (Apr. 30, 2015).
---------------------------------------------------------------------------
Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in significant conservation of energy.
(42 U.S.C. 6295(o)(3)(B))
In accordance with these and other statutory provisions discussed
in this document, DOE is adopting energy conservation standards for
portable ACs. The standards, which correspond to trial standard level
(TSL) 2 (described in section V.A of this document), are minimum
allowable combined energy efficiency ratio (CEER) standards, which are
expressed in British thermal units (Btu) per watt-hour (Wh), and are
shown in Table I.1. These standards apply to all single-duct portable
ACs and dual-duct portable ACs that are manufactured in, or imported
into, the United States starting on January 10, 2025.
[[Page 1380]]
[GRAPHIC] [TIFF OMITTED] TR10JA20.021
A. Benefits and Costs to Consumers
Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted standards on consumers of portable ACs, as measured by the
average life-cycle cost (LCC) savings and the simple payback period
(PBP).\3\ The average LCC savings are positive and the PBP is less than
the average lifetime of portable ACs, which is estimated to be
approximately 10 years (see section IV.F.6 of this document).
---------------------------------------------------------------------------
\3\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of standards (see section IV.F
of this document). The simple PBP, which is designed to compare
specific ELs, is measured relative to the baseline product (see
section IV.C of this document).
Table I.2--Impacts of New Energy Conservation Standards on Consumers of
Portable Air Conditioners
------------------------------------------------------------------------
Average LCC Simple payback
Product class savings (2015$) period (years)
------------------------------------------------------------------------
Single-duct and dual-duct portable 125 2.6
air conditioners.................
------------------------------------------------------------------------
DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document. DOE also performed three
sensitivity analyses on its primary assertion that portable air
conditioners are used and operated in a similar manner to room air
conditioners to further analyze the effects of the benefits and cost to
consumers from these products. In one sensitivity analysis, DOE found
that reducing operating hours by 50 percent, resulted in an estimate of
one-third of the energy cost savings relative to the primary estimate.
In this low-usage case, the average LCC savings for all consumers under
the adopted standards would be $35 (compared with $125 in the primary
estimate), and 42 percent of consumers would be impacted negatively
(compared with 27 percent in the primary estimate). The simple payback
period would be 5.1 years (compared with 2.6 years in the primary
estimate). Further details are presented in section IV.E, V.B.1, and
appendix 8F and appendix 10E of the final rule TSD.
B. Impact on Manufacturers
The industry net present value (INPV) is the sum of the discounted
cash flows to the industry from the base year through the end of the
analysis period (2017-2051). Using a real discount rate of 6.6 percent,
DOE estimates that the INPV for manufacturers of portable ACs in the
case without new standards is $738.5 million in 2015$. Under the
adopted standards, DOE expects the change in INPV to range from -34.3
percent to -28.8 percent, which is approximately -$253.4 million to -
$212.4 million. In order to bring products into compliance with new
standards, DOE expects the industry to incur total conversion costs of
$320.9 million.
DOE's analysis of the impacts of the adopted standards on
manufacturers is described in section IV.J and section V.B.2 of this
document.
C. National Benefits and Costs \4\
---------------------------------------------------------------------------
\4\ All monetary values in this document are expressed in 2015
dollars and, where appropriate, are discounted to 2015 unless
explicitly stated otherwise.
---------------------------------------------------------------------------
DOE's analyses indicate that the adopted energy conservation
standards for portable ACs would save a significant amount of energy.
Relative to the case without new standards the lifetime energy savings
for portable ACs purchased in the 30-year period that begins in the
anticipated year of compliance with the new standards (2022-2051),
amount to 0.49 quadrillion Btu, or quads.\5\ This represents a savings
of 6.4 percent relative to the energy use of these products in the case
without new standards (referred to as the ``no-new-standards case'').
---------------------------------------------------------------------------
\5\ The quantity refers to full-fuel-cycle (FFC) energy savings.
FFC energy savings includes the energy consumed in extracting,
processing, and transporting primary fuels (i.e., coal, natural gas,
petroleum fuels), and, thus, presents a more complete picture of the
impacts of energy efficiency standards. For more information on the
FFC metric, see section IV.H.1 of this document.
---------------------------------------------------------------------------
The cumulative net present value (NPV) of total consumer benefits
of the standards for portable ACs ranges from $1.25 billion (at a 7-
percent discount rate) to $3.06 billion (at a 3-percent discount rate).
This NPV expresses the estimated total value of future operating-cost
savings minus the estimated increased product costs for portable ACs
purchased in 2022-2051.
[[Page 1381]]
In addition, the new standards for portable ACs are projected to
yield significant environmental benefits. DOE estimates that the
standards will result in cumulative emission reductions (over the same
period as for energy savings) of 25.6 million metric tons (Mt) \6\ of
carbon dioxide (CO2), 16.4 thousand tons of sulfur dioxide
(SO2), 32.2 tons of nitrogen oxides (NOX), 124.8
thousand tons of methane (CH4), 0.4 thousand tons of nitrous
oxide (N2O), and 0.06 tons of mercury (Hg).\7\ The estimated
reduction in CO2 emissions through 2030 amounts to 4.0 Mt,
which is equivalent to the emissions resulting from the annual
electricity use of more than 0.42 million homes.
---------------------------------------------------------------------------
\6\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons.
\7\ DOE calculated emissions reductions relative to the no-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2016 (AEO 2016). AEO 2016 represents current legislation and
environmental regulations for which implementing regulations were
available as of the end of February 2016.
---------------------------------------------------------------------------
The value of the CO2 reductions is calculated using a
range of values per metric ton (t) of CO2 (otherwise known
as the ``social cost of carbon'', or SC-CO2) developed by a
Federal interagency working group.\8\ The derivation of the SC-
CO2 values is discussed in section IV.L.1 of this document.
Using discount rates appropriate for each set of SC-CO2
values, DOE estimates the present value of the CO2 emissions
reduction is between $0.2 billion and $2.5 billion, with a value of 0.8
billion using the central SC-CO2 case represented by $40.6/
metric ton (t) in 2015.
---------------------------------------------------------------------------
\8\ U.S. 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. https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
---------------------------------------------------------------------------
DOE also calculated the value of the reduction in emissions of the
non-CO2 greenhouse gases (GHGs), CH4 and
N2O, using values for the social cost of methane (SC-
CH4) and the social cost of nitrous oxide (SC-
N2O) recently developed by the interagency working group.\9\
See section IV.L.2 for description of the methodology and the values
used for DOE's analysis. The estimated present value of the
CH4 emissions reduction is between $0.04 billion and $0.3
billion, with a value of $0.1 billion using the central SC-
CH4 case, and the estimated present value of the
N2O emissions reduction is between $0.001 billion and $0.011
billion, with a value of $0.004 billion using the central SC-
N2O case.
---------------------------------------------------------------------------
\9\ U.S. Government--Interagency Working Group on Social Cost of
Greenhouse Gases. Addendum to Technical Support Document on Social
Cost of Carbon for Regulatory Impact Analysis under Executive Order
12866: Application of the Methodology to Estimate the Social Cost of
Methane and the Social Cost of Nitrous Oxide. August 2016. https://www.whitehouse.gov/sites/default/files/omb/inforeg/august_2016_sc_ch4_sc_n2o_addendum_final_8_26_16.pdf.
---------------------------------------------------------------------------
DOE also estimates that the present value of the NOX
emissions reduction to be $0.02 billion using a 7-percent discount
rate, and $0.06 billion using a 3-percent discount rate.\10\ DOE is
still investigating appropriate valuation of the reduction in other
emissions, and therefore did not include any such values in the
analysis for this final rule.
---------------------------------------------------------------------------
\10\ 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
Environmental Protection Agency's (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 American Cancer Society (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.
---------------------------------------------------------------------------
Table I.3 summarizes the economic benefits and costs expected to
result from the adopted standards for portable ACs.
Table I.3--Selected Categories of Economic Benefits and Costs of New
Energy Conservation Standards for Portable Air Conditioners *
[TSL 2]
------------------------------------------------------------------------
Present value Discount rate
Category (billion 2015$) percent
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings..... 1.8 7
4.1 3
GHG Reduction (using avg. social 0.2 5
costs at 5% discount rate) **.
GHG Reduction (using avg. social 1.0 3
costs at 3% discount rate) **.
GHG Reduction (using avg. social 1.5 2.5
costs at 2.5% discount rate) **.
GHG Reduction (using 95th percentile 2.9 3
social costs at 3% discount rate)
**.
NOX Reduction [dagger] 0.02 7
0.06 3
Total Benefits [Dagger]............. 2.8 7
5.1 3
------------------------------------------------------------------------
Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs 0.5 7
1.0 3
------------------------------------------------------------------------
Total Net Benefits
------------------------------------------------------------------------
Including GHG and NOX Reduction 7
Monetized Value [Dagger]...........
[[Page 1382]]
4.1 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with portable
ACs shipped in 2022-2051. These results include benefits to consumers
which accrue after 2051 from the products shipped in 2022-2051. The
incremental installed costs include incremental equipment cost as well
as installation costs. The costs account for the incremental variable
and fixed costs incurred by manufacturers due to the proposed
standards, some of which may be incurred in preparation for the rule.
The GHG reduction benefits are global benefits due to actions that
occur domestically.
** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-
N2O values for use in regulatory analyses. Three sets of values are
based on the average social costs from the integrated assessment
models, at discount rates of 5 percent, 3 percent, and 2.5 percent.
The fourth set, which represents the 95th percentile of the SC-CO2
distribution calculated using a 3-percent discount rate, is included
to represent higher-than-expected impacts from climate change further
out in the tails of the social cost distributions. The social cost
values are emission year 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 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] Total Benefits for both the 3-percent and 7-percent cases are
presented using the average social costs with 3-percent discount rate.
The benefits and costs of the adopted standards, for portable ACs
sold in 2022-2051, can also be expressed in terms of annualized values.
The monetary values for the total annualized net benefits are (1) the
reduced consumer 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.\11\
---------------------------------------------------------------------------
\11\ 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
(e.g., 2020 or 2030), 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, as shown in Table I.3. Using the present value, DOE then
calculated the fixed annual payment over a 30-year period, starting
in the compliance year, that yields the same present value.
---------------------------------------------------------------------------
The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products and are measured for the lifetime of portable ACs
shipped in 2022-2051. The benefits associated with reduced
CO2 emissions achieved as a result of the adopted standards
are also calculated based on the lifetime of portable ACs shipped in
2022-2051. Because CO2 emissions have a very long residence
time in the atmosphere, the SC-CO2 values for CO2
emissions in future years reflect impacts that continue through 2300.
The CO2 reduction is a benefit that accrues globally.
Estimates of annualized benefits and costs of the adopted standards
are shown in Table I.4. The results under the primary estimate are as
follows. Using a 7-percent discount rate for benefits and costs other
than GHG reduction (for which DOE used average social costs with a 3-
percent discount rate,\12\ the estimated cost of the standards in this
rule is $61 million per year in increased equipment costs, while the
estimated annual benefits are $202.7 million in reduced equipment
operating costs, $56.7 million in GHG reductions, and $2.6 million in
reduced NOX emissions. In this case, the net benefit amounts
to $201 million per year. Using a 3-percent discount rate for all
benefits and costs, the estimated cost of the standards is $59 million
per year in increased equipment costs, while the estimated annual
benefits are $240.0 million in reduced operating costs, $56.7 million
in GHG reductions, and $3.3 million in reduced NOX
emissions. In this case, the net benefit amounts to $241 million per
year.
---------------------------------------------------------------------------
\12\ DOE used average social costs with a 3-percent discount
rate. These values are considered as the ``central'' estimates by
the interagency group.
Table I.4--Selected Categories of Annualized Benefits and Costs of New Standards (TSL 2) for Portable ACs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low-net- benefits High-net- benefits
Discount rate (percent) Primary estimate estimate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.... 7.................................... 202.7................... 99.1.................... 214.4.
3.................................... 240.0................... 116.3................... 256.1.
CO2 Reduction (using avg. social 5.................................... 18.4.................... 8.8..................... 19.9.
costs at 5% discount rate) **.
CO2 Reduction (using avg. social 3.................................... 56.7.................... 27.0.................... 61.4.
costs at 3% discount rate) **.
CO2 Reduction (using avg. social 2.5.................................. 81.1.................... 38.6.................... 87.9.
costs at 2.5% discount rate) **.
CO2 Reduction (using 95th 3.................................... 169.9................... 80.9.................... 184.1.
percentile SC-CO2 at 3% discount
rate) **.
NOX Reduction [dagger]............. 7.................................... 2.6..................... 1.2..................... 6.2.
3.................................... 3.3..................... 1.6..................... 8.1.
Total Benefits [Dagger]............ 7 plus CO2 range..................... 224 to 375.............. 213 to 354.............. 240 to 405.
[[Page 1383]]
7.................................... 262..................... 249..................... 282.
3 plus CO2 range..................... 262 to 413.............. 248 to 389.............. 284 to 448.
3.................................... 300..................... 283..................... 326.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs. 7.................................... 61.0.................... 60.8.................... 55.6.
3.................................... 59.0.................... 58.9.................... 53.3.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [Dagger]..................... 7 plus CO2 range..................... 163 to 314.............. 48 to 120............... 185 to 349.
7.................................... 201..................... 67...................... 226.
3 plus CO2 range..................... 203 to 354.............. 68 to 140............... 231 to 395.
3.................................... 241..................... 86...................... 272.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with portable ACs shipped in 2022-2051. These results include benefits to consumers
which accrue after 2051 from the portable ACs purchased from 2022-2051. The incremental installed costs include incremental equipment cost as well as
installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Net Benefits, and High Net
Benefits Estimates utilize projections of energy price trends from the AEO 2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth
case, respectively. In addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low
Benefits Estimate, and a high decline rate in the High Benefits Estimate. The Low Benefits Estimate reflects a 50-percent reduction in the operating
hours relative to the reference case operating hours. The methods used to derive projected price trends are explained in section IV.F of this
document. The benefits and costs are based on equipment efficiency distributions as described in sections IV.F.8 and IV.H.1. Purchases of higher
efficiency equipment are a result of many different factors unique to each consumer including past purchases, expected usage, and others. For each
consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the no-new-standards case may correlate
positively with higher energy prices. To the extent that this occurs, it would be expected to result in some lowering of the consumer operating cost
savings from those calculated in this rule. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-N2O values for use in regulatory analyses. Three sets of values are based on the
average social costs from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. The fourth set, which
represents the 95th percentile of the social cost distributions calculated using a 3-percent discount rate, is included to represent higher-than-
expected impacts from climate change further out in the tails of the social cost distributions The SC-CO2 values are emission year specific. See
section IV.L.1 of this document for more details.
[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 for further discussion. For the
Primary Estimate and Low Net Benefits Estimate, DOE used national benefit-per-ton estimates for NOX emitted from the Electric Generating Unit sector
based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For the High Net Benefits Estimate, the benefit-per-ton
estimates were based on the Six Cities study (Lepuele et al. 2011); these are nearly two-and-a-half times larger than those from the ACS study.
[Dagger] Total Benefits for both the 3-percent and 7-percent cases are presented using the average social costs with 3-percent discount rate. In the
rows labeled ``7% plus GHG range'' and ``3% plus GHG range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and
those values are added to the full range of social cost values.
DOE's analysis of the national impacts 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 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 (loss of INPV and LCC increases for some users of
these products). DOE has concluded that the standards in this final
rule represent the maximum improvement in energy efficiency that is
technologically feasible and economically justified, and would result
in significant conservation of energy.
II. Introduction
The following section briefly discusses the statutory authority
underlying this final rule, as well as some of the relevant historical
background related to the establishment of standards for portable ACs.
A. Authority
Title III, Part B of the EPCA, Public Law 94-163 (codified as 42
U.S.C. 6291-6309) established the Energy Conservation Program for
Consumer Products Other Than Automobiles, a program covering most major
household appliances (collectively referred to as ``covered
products''). EPCA authorizes the Secretary of Energy to classify
additional types of consumer products not otherwise specified in Part A
as covered products. For a type of consumer product to be classified as
a covered product, the Secretary must determine that:
(1) Classifying the product as a covered product is necessary for
the purposes of EPCA; and
(2) The average annual per-household energy use by products of such
type is likely to exceed 100 kilowatt-hours (kWh) per year. (42 U.S.C.
6292(b)(1))
Under the authority established in EPCA, DOE published the April
2016 Final Coverage Determination that established portable ACs as a
covered product because such a classification is necessary or
appropriate to carry out the purposes of EPCA, and the average U.S.
household energy use for portable ACs is likely to exceed 100 kWh per
year. 81 FR 22514 (Apr. 18, 2016).
EPCA, as amended, grants DOE authority to prescribe an energy
[[Page 1384]]
conservation standard for any type (or class) of covered products of a
type specified in 42 U.S.C. 6292(a)(19) \13\ if the requirements of 42
U.S.C. 6295(o) and (p) are met and the Secretary determines that--
---------------------------------------------------------------------------
\13\ In amending EPCA, Congress added metal halide lamp fixtures
as a covered product at 42 U.S.C. 6292(a)(19) and redesignated the
existing listing for (19) (i.e., any other type of consumer product
which the Secretary classifies as a covered product under subsection
(b) of this section) as (20). However, the corresponding reference
in 42 U.S.C. 6295(l)(1) was not updated. DOE has determined this to
be a drafting error and is giving the provision its intended effect
as if such error had not occurred.
---------------------------------------------------------------------------
(1) the average per household energy use within the United States
by products of such type (or class) exceeded 150 kilowatt-hours (kWh)
(or its Btu equivalent) for any 12-month period ending before such
determination;
(2) the aggregate household energy use within the United States by
products of such type (of class) exceeded 4,200,000,000 kWh (or its Btu
equivalent) for any such 12-month period;
(3) substantial improvement in the energy efficiency of products of
such type (or class) is technologically feasible; and
(4) the application of a labeling rule under 42 U.S.C. 6294 to such
type (or class) is not likely to be sufficient to induce manufacturers
to produce, and consumers and other persons to purchase, covered
products of such type (or class) which achieve the maximum energy
efficiency which is technologically feasible and economically
justified. (42 U.S.C. 6295(l)(1))
DOE has determined that portable ACs meet the four criteria
outlined in 42 U.S.C. 6295(l)(1) for prescribing energy conservation
standards for newly covered products. Specifically, DOE has determined
that for a 12-month period ending before such determination, the
average per household energy use within the U.S. by portable ACs
exceeded 150 kWh (see chapter 7 of this final rule technical support
document (TSD)). DOE has also determined that the aggregate household
energy use within the United States by portable ACs exceeded
4,200,000,000 kWh (or its Btu equivalent) for such a 12-month period
(see chapter 10 of this final rule TSD). Further, DOE has determined
that substantial improvement in the energy efficiency of portable ACs
is technologically feasible (see section IV.C of this document and
chapter 5 of the final rule TSD), and has determined that the
application of a labeling rule under 42 U.S.C. 6294 to portable ACs is
not likely to be sufficient to induce manufacturers to produce, and
consumers and other persons to purchase, portable ACs that achieve the
maximum energy efficiency which is technologically feasible and
economically justified (see chapter 17 of this final rule TSD).
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)) 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
procedures for portable ACs were established in a final rule published
on June 1, 2016 (81 FR 35241; hereinafter the ``June 2016 TP Final
Rule''), and appear at title 10 of the Code of Federal Regulations
(CFR) part 430, subpart B, appendix CC (hereinafter ``appendix CC'')
and 10 CFR 430.23(dd).
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including portable ACs. Any new
or amended standard for a covered product must be designed to achieve
the maximum improvement in energy efficiency that the Secretary of
Energy determines 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)(B)) Moreover, DOE may not
prescribe a standard (1) for certain products, including portable ACs,
if no test procedure has been established for the product, or (2) if
DOE determines by rule that the standard is not technologically
feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In
deciding whether a proposed standard is economically justified, DOE
must determine whether the benefits of the standard exceed its burdens.
(42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after
receiving comments on the proposed standard, and by considering, to the
greatest extent practicable, the following seven statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (Secretary) considers
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified if the Secretary finds that
the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA, as codified, states that the Secretary may not prescribe an
amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the U.S. 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 U.S. (42 U.S.C. 6295(o)(4))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of products that has the same function or intended use if DOE
[[Page 1385]]
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)).
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140,
any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedures for portable ACs
address standby mode and off mode energy use, as do the new standards
adopted in this final rule.
B. Background
DOE has not previously conducted an energy conservation standards
rulemaking for portable ACs. Consequently, there are currently no
Federal energy conservation standards for portable ACs.
On February 27, 2015, DOE published a notice of public meeting and
notice of availability of a preliminary TSD for portable AC energy
conservation standards (hereinafter the ``February 2015 Preliminary
Analysis''). In the preliminary analysis, DOE conducted in-depth
technical analyses in the following areas: (1) Engineering, (2) markups
to determine product price, (3) energy use, (4) LCC and PBP, and (5)
national impacts. 80 FR 10628. The preliminary TSD that presented the
methodology and results of each of these analyses is available at
http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0033-
0007.
DOE also conducted, and discussed in the preliminary TSD, several
other analyses that supported the major analyses or were expanded upon
in the later stages of the standards rulemaking. These analyses
included: (1) The market and technology assessment; (2) the screening
analysis, which contributes to the engineering analysis; and (3) the
shipments analysis,\14\ which contributes to the LCC and PBP analysis
and national impact analysis (NIA). In addition to these analyses, DOE
began preliminary work on the manufacturer impact analysis (MIA) and
identified the methods to be used for the consumer subgroup analysis,
the emissions analysis, the employment impact analysis, the regulatory
impact analysis, and the utility impact analysis. 80 FR 10628 (Feb. 27,
2015).
---------------------------------------------------------------------------
\14\ Industry data track shipments from manufacturers into the
distribution chain. Data on national unit retail sales are lacking,
but are presumed to be close to shipments under normal
circumstances.
---------------------------------------------------------------------------
DOE held a public meeting on March 18, 2015, to discuss the
analyses and solicit comments from interested parties regarding the
preliminary analysis it conducted. The meeting covered the analytical
framework, models, and tools that DOE uses to evaluate potential
standards; the results of preliminary analyses performed by DOE for
this product; the potential energy conservation standard levels derived
from these analyses that DOE could consider for this product; and any
other issues relevant to the development of energy conservation
standards for portable ACs.
Interested parties commented at the public meeting and submitted
written comments regarding the following major issues: Rulemaking
schedule with respect to establishing the test procedure, covered
product configurations, product classes and impacts on consumer
utility, technology options, efficiency levels (ELs), incremental
costs, data sources, and cumulative regulatory burden.
Comments received in response to the February 2015 Preliminary
Analysis helped DOE identify and resolve issues related to the
preliminary analysis. After reviewing these comments, DOE gathered
additional information, held further discussions with manufacturers,
and completed and revised the various analyses described in the
preliminary analysis.
On June 13, 2016, DOE published an energy conservation standards
(ECS) notice of proposed rulemaking (hereinafter the ``June 2016 ECS
NOPR'') and notice of public meeting. 81 FR 38397. The June 2016 ECS
NOPR and accompanying TSD presented the results of DOE's updated
analyses and proposed new standards for portable ACs. On July 20, 2016,
DOE held a standards public meeting to discuss the issues detailed in
the June 2016 ECS NOPR (hereinafter the ``July 2016 STD Public
Meeting''). Interested parties, listed in Table II.1, commented on the
various aspects of the proposed rule and submitted written comments.
Table II.1--Interested Parties Providing Comments on the June 2016 ECS NOPR for Portable ACs
----------------------------------------------------------------------------------------------------------------
Name Acronym Commenter type *
----------------------------------------------------------------------------------------------------------------
Appliance Standards Awareness Project. ASAP....................................... EA
ASAP, Natural Resources Defense The Joint Commenters....................... EA
Council, Alliance to Save Energy,
American Council for an Energy-
Efficient Economy, Consumers Union,
Northwest Energy Efficiency Alliance,
and Northwest Power and Conservation
Council.
Association of Home Appliance AHAM....................................... TA
Manufacturers.
De' Longhi Appliances s.r.l........... De' Longhi................................. M
GE Appliances, a Haier Company........ GE......................................... M
GREE Electrical Appliance............. GREE....................................... M
Industrial Energy Consumers of America IECA....................................... TA
[[Page 1386]]
Tom[aacute]s Carbonell, Environmental The Joint Advocates........................ EA
Defense Fund (EDF); Rachel Cleetus,
Union of Concerned Scientists; Jayni
Hein **; Peter H. Howard **; Benjamin
Longstreth, NRDC; Richard L. Revesz
**; Jason A. Schwartz **; Peter
Zalzal, EDF.
Intertek Testing Services............. Intertek................................... TL
JMATEK--Honeywell Authorized Licensee. JMATEK..................................... M
LG Electronics........................ LG......................................... M
National Association of Manufacturers. NAM........................................ TA
Natural Resources Defense Council..... NRDC....................................... EA
Pacific Gas and Electric Company, California IOUs............................ U
Southern California Gas Company, San
Diego Gas and Electric, and Southern
California Edison (the California
Investor-Owned Utilities).
People's Republic of China............ China...................................... GA
Temp-Air.............................. Temp-Air................................... M
U.S. Chamber of Commerce, American The Associations........................... TA
Chemistry Council, American Forest &
Paper Association, American Fuel &
Petrochemical Manufacturers, American
Petroleum Institute, Brick Industry
Association, Council of Industrial
Boiler Owners, National Association
of Manufacturers, National Mining
Association, National Oilseed
Processors Association.
----------------------------------------------------------------------------------------------------------------
* EA: Efficiency Advocate; GA: Government Agency; M: Manufacturer; RO: Research Organization; TA: Trade
Association; TL: Third-party Test Laboratory; U: Utility.
** Institute for Policy Integrity, NYU School of Law; listed for identification purposes only and does not
purport to present New York University School of Law's views, if any.
Following the July 2016 STD Public Meeting, DOE gathered additional
information and incorporated feedback from comments received in
response to the June 2016 ECS NOPR. Based on this information, DOE
revised the analyses presented in the June 2016 ECS NOPR for this final
rule. The results of these analyses are detailed in the final rule TSD,
available in the docket for this rulemaking.
III. General Discussion
DOE developed this final rule after considering verbal and written
comments, data, and information from interested parties that represent
a variety of interests. The following discussion addresses issues
raised by these commenters.
A. Product Classes and Scope of Coverage
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used or by capacity or other performance-related features that justify
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility of the feature to the consumer and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q))
In the February 2015 Preliminary Analysis, DOE did not consider
energy conservation standards for portable ACs other than single-duct
or dual-duct portable ACs, as the test procedure proposed at that time
did not include provisions for testing other portable ACs. Furthermore,
DOE did not separate portable ACs into multiple product classes for the
February 2015 Preliminary Analysis following a determination that there
is no unique utility associated with single-duct or dual-duct portable
ACs.
The test procedure established in the June 2016 TP Final Rule
maintained provisions for testing only single-duct and dual-duct
portable AC configurations and therefore, in the June 2016 ECS NOPR
that was published following the June 2016 TP Final Rule, DOE proposed
standards for a single product class of single-duct and dual-duct
portable AC configurations. In this final rule, DOE is establishing
standards for one product class for all single-duct and dual-duct
portable ACs. Comments received relating to the scope of coverage and
product classes are discussed in section IV.A of this document.
B. 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.
With respect to the process of establishing test procedures and
standards for a given product, DOE notes that it generally follows the
approach laid out in its guidance found in 10 CFR part 430, subpart C,
appendix A (Procedures, Interpretations and Policies for Consideration
of New or Revised Energy Conservation Standards for Consumer Products).
Pursuant to that guidance, DOE endeavors to issue final test procedure
rules for a given covered product in advance of the publication of a
NOPR proposing energy conservation standards for that covered product.
On May 9, 2014, DOE initiated a test procedure rulemaking for
portable ACs by publishing a notice of data availability (hereinafter
the ``May 2014 TP NODA'') to request feedback on potential testing
options. In the May 2014 TP NODA, DOE discussed various industry test
procedures and presented results from its investigative testing that
evaluated existing methodologies and alternate approaches that could be
incorporated in a future DOE test procedure, should DOE determine that
portable ACs are covered products. 79 FR 26639.
On February 25, 2015, DOE published a NOPR (hereinafter the
``February 2015 TP NOPR'') in which it proposed to establish test
procedures for single-duct and dual-duct portable ACs. The proposed
test procedures were based upon industry methods to determine energy
consumption in active modes, off-cycle mode, standby modes, and off
mode, with certain modifications to ensure the test procedures are
repeatable and representative. 80 FR 10211.
On November 27, 2015, DOE published a supplemental notice of
proposed rulemaking (SNOPR) (hereinafter the ``November 2015 TP
SNOPR''), in which it proposed revisions to the test procedure proposed
in the February 2015 TP NOPR to
[[Page 1387]]
improve repeatability, reduce test burden, and ensure the test
procedure is representative of typical consumer usage. 80 FR 74020.
On June 1, 2016, following publication of the April 2016 Final
Coverage Determination, DOE published the June 2016 TP Final Rule that
established test procedures for portable ACs at appendix CC and 10 CFR
430.23(dd). 81 FR 35241. The energy conservation standards established
in this final rule are expressed in terms of CEER, in Btu per Wh, based
on the seasonally adjusted cooling capacity (SACC), in Btu per hour, as
determined in accordance with the DOE test procedure for portable ACs
at appendix CC.
In response to the June 2016 ECS NOPR, DOE received comments from
interested parties regarding DOE's portable AC test procedures and the
associated impacts on the analysis for new standards. The following
sections discuss the relevant test procedure comments.
Laboratory Testing Capability
DOE received several comments regarding the timing of the
publication of the June 2016 TP Final Rule and manufacturers'
opportunity to use the final test procedure in evaluating design
options and the proposed standards level from the June 2016 ECS NOPR.
GE, AHAM, JMATEK, and China claimed that neither manufacturers nor
third-party laboratories have the equipment or expertise to conduct
tests according to appendix CC. GE and China commented that
laboratories would require additional time and investment to upgrade
their test chambers to measure the infiltration air and to fully
understand the repeatability and reproducibility of the new test
procedure. AHAM stated that, with sufficient time, it expected to
identify laboratories that could test enough portable AC models to
provide additional test data for DOE's analysis. JMATEK asserted that
additional time would be necessary to test its full product line. (GE,
Public Meeting Transcript, No. 39 at pp. 17, 64, 129-130; AHAM, Public
Meeting Transcript, No. 39 at pp. 14-15, 64; AHAM, No. 43 at p. 3;
China, No. 34 at p. 3; JMATEK, No. 40 at p. 2) \15\ \16\ Intertek
stated that it had tested a portable AC according to the test
procedures in appendix CC and was able to achieve all required test
conditions. (Intertek, No. 37 at p. 1)
---------------------------------------------------------------------------
\15\ A notation in the form ``GE, Public Meeting Transcript, No.
39 at pp. 17, 64, 129-130'' identifies an oral comment that DOE
received on July 20, 2016 during the NOPR public meeting, and was
recorded in the public meeting transcript in the docket for this
standards rulemaking (Docket No. EERE-2013-BT-STD-0033). This
particular notation refers to a comment (1) made by GE during the
public meeting; (2) recorded in document number 39, which is the
public meeting transcript that is filed in the docket of this test
procedure rulemaking; and (3) which appears on pages 17, 64, and 129
through 130 of document number 39.
\16\ A notation in the form ``AHAM, No. 43 at p. 3'' identifies
a written comment: (1) Made by the Association of Home Appliance
Manufacturers; (2) recorded in document number 43 that is filed in
the docket of this standards rulemaking (Docket No. EERE-2013-BT-
STD-0033) and available for review at www.regulations.gov; and (3)
which appears on page 3 of document number 43.
---------------------------------------------------------------------------
In a memo published on August 19, 2016, and titled, ``Memo_AHAM
Request for Info on PACs_2016-08-19'' (hereinafter the ``DOE response
memo''),\17\ DOE stated that it was aware of at least one third-party
laboratory capable of testing according to appendix CC. In response to
that memo, AHAM commented that a single laboratory cannot do all of the
testing necessary for manufacturers to understand the potential impact
of the proposed standard within the time allotted, and accordingly, its
members have been unable to conduct a sufficient amount of testing to
meaningfully participate in this standards rulemaking. (AHAM, No. 43 at
p. 3)
---------------------------------------------------------------------------
\17\ DOE's response memo can be found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0038.
---------------------------------------------------------------------------
As discussed in section III.F of this document, several interested
parties requested that DOE extend the June 2016 ECS NOPR comment period
to provide manufacturers and test laboratories additional time to gain
expertise with the test procedures in appendix CC and collect and
analyze performance data to help support the standards rulemaking. To
address those comments, on August 8, 2016, DOE published a notice to
extend the original comment period for the June 2016 ECS NOPR by 45
days. DOE stated that this extension would allow additional time for
AHAM and its members and other interested parties to test existing
models to the test procedure; examine the data, information, and
analysis presented in the STD NOPR TSD; gather any additional data and
information to address the proposed standards; and submit comments to
DOE. 81 FR 53961. As discussed further in section IV.C of this final
rule, DOE believes that the comment period extension addressed the
concerns presented by commenters as this timeline allowed AHAM and its
members to conduct testing and provide data for 22 portable AC models,
which DOE has incorporated into its analysis.
C. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially available products or in working prototypes to be
technologically feasible. 10 CFR part 430, subpart C, appendix A,
section 4(a)(4)(i).
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; and (3) adverse impacts on
health or safety. 10 CFR part 430, subpart C, appendix A, section
4(a)(4)(ii)-(iv) Additionally, it is DOE policy not to include in its
analysis any proprietary technology that is a unique pathway to
achieving a certain efficiency level. Section IV.B of this final rule
discusses the results of the screening analysis for portable ACs,
particularly the designs DOE considered, those it screened out, and
those that are the basis for the standards considered in this
rulemaking. For further details on the screening analysis for this
rulemaking, see chapter 4 of the final rule TSD.
2. Maximum Technologically Feasible Levels
When DOE adopts a new or amended standard for a type or class of
covered product, it must determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the
engineering analysis, DOE determined the maximum technologically
feasible (``max-tech'') improvements in energy efficiency for portable
ACs, using the design parameters for the most efficient products
available on the market or in working prototypes. The max-tech levels
that DOE determined for this rulemaking are described in section
[[Page 1388]]
IV.C.1.b of this document and in chapter 5 of the final rule TSD.
D. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to portable ACs purchased in the 30-year period that begins in the
year of compliance with the standards (2022-2051).\18\ 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.
---------------------------------------------------------------------------
\18\ 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 national energy
savings (NES) from potential standards for portable ACs. The NIA
spreadsheet model (described in section IV.H of this document)
calculates energy savings in terms of site energy, which is the energy
directly consumed by products at the locations where they are used. For
electricity, DOE reports NES in terms of primary energy savings, which
is the savings in the energy that is used to generate and transmit the
site electricity. For natural gas, the primary energy savings are
considered to be equal to the site energy savings. DOE also calculates
NES 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.\19\ 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 final rule.
---------------------------------------------------------------------------
\19\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------
2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B)) Although the term ``significant'' is
not defined in the 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 are 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.
E. Economic Justification
1. Specific Criteria
As noted above, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of potential standards on manufacturers,
DOE conducts a MIA, as discussed in section IV.J of this document. DOE
first uses an annual cash-flow approach to determine the quantitative
impacts. This step includes both a short-term assessment--based on the
cost and capital requirements during the period between when a
regulation is issued and when entities must comply with the
regulation--and a long-term assessment over a 30-year period. The
industry-wide impacts analyzed include (1) INPV, which values the
industry on the basis of expected future cash flows; (2) cash flows by
year; (3) changes in revenue and income; and (4) other measures of
impact, as appropriate. Second, DOE analyzes and reports the impacts on
different types of manufacturers, including impacts on small
manufacturers. Third, DOE considers the impact of standards on domestic
manufacturer employment and manufacturing capacity, as well as the
potential for standards to result in plant closures and loss of capital
investment. Finally, DOE takes into account cumulative impacts of
various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and PBP associated with new or amended standards. These
measures are discussed further in the following section. For consumers
in the aggregate, DOE also calculates the national NPV of the economic
impacts applicable to a particular rulemaking. DOE also evaluates the
LCC impacts of potential standards on identifiable subgroups of
consumers that may be affected disproportionately by a national
standard.
b. Savings in Operating Costs Compared To Increase in Price
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating 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
or amended 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 or amended standards. 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
[[Page 1389]]
standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section
III.D.1 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 document 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 standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It
also directs the Attorney General to determine the impact, if any, of
any lessening of competition likely to result from a standard and to
transmit such determination to the Secretary within 60 days of the
publication of a proposed rule, together with an analysis of the nature
and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the
Department of Justice (DOJ) in making such a determination, DOE
transmitted copies of its proposed rule and the NOPR TSD to the
Attorney General for review, with a request that the DOJ provide its
determination on this issue. In its assessment letter responding to
DOE, DOJ concluded that the proposed energy conservation standards for
portable ACs are unlikely to have a significant adverse impact on
competition. DOE is publishing the Attorney General's assessment at the
end of this final rule.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new or amended standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the
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.M of this
document.
The adopted standards also are likely to result in environmental
benefits in the form of reduced emissions of air pollutants and GHGs
associated with energy production and use. DOE conducts an emissions
analysis to estimate how potential standards may affect these
emissions, as discussed in section IV.K of this document; the emissions
impacts are reported in section V.B.6 of this final rule. 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 an energy conservation standard is
economically justified, DOE may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent interested parties submit any relevant information regarding
economic justification that does not fit into the other categories
described above, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effect potential new or
amended 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 document.
F. Other Issues
In response to the June 2016 ECS NOPR, DOE received additional
comments from interested parties regarding general issues, discussed in
the following section.
Establishment of New Standards
AHAM, De' Longhi, GE, Temp-Air, ASAP, and the California IOUs
supported DOE's efforts to establish a test procedure and initial
energy conservation standards for portable ACs. GE expects that, with
the DOE test procedure and standards in place, consumers will be better
able to select an appropriately sized portable AC for their cooling
needs. ASAP similarly believes that a portable AC test procedure and
energy conservation standards would help consumers compare the actual
performance of portable ACs and reduce energy consumption, particularly
because this is a growing product category and portable ACs use
approximately twice as much energy as room ACs. The California IOUs
claimed that consumers may use portable ACs as replacements for room
ACs and dehumidifiers, and therefore encouraged DOE to set standards
that have similar levels of stringency to those products. (AHAM, Public
Meeting Transcript, No. 39 at p. 12; AHAM, No. 43 at p. 1; De' Longhi,
No. 41 at p. 1; GE, Public Meeting Transcript, No. 39 at pp. 16-17;
Temp-Air, No. 45 at p. 1; ASAP, Public Meeting Transcript, No. 39 at p.
10; California IOUs, No. 42 at p. 1)
In this final rule, DOE is establishing energy conservation
standards for portable ACs that, pursuant to EPCA (42 U.S.C.
6295(o)(2)(A)), are determined to achieve the maximum improvement in
energy efficiency that is technologically feasible and economically
justified.
NOPR Comment Period and Test Procedure Timing
GE expressed concern about the NOPR proposals due to the lack of
time manufacturers and third-party laboratories have had to understand
the test procedure. (Public Meeting Transcript, No. 39 at pp. 16-18)
AHAM noted that DOE developed the portable AC test procedure in
parallel with the standards analysis, which, according to AHAM,
minimized manufacturers' ability to participate in the rulemaking. AHAM
suggested that manufacturers need at least 6 months between the date of
publication of the test procedure and the close of the June 2016 ECS
NOPR comment period to gain expertise with the test procedure and
collect a sufficient sample of test results to assess
[[Page 1390]]
the proposed standards. AHAM asserted that its portable AC test
standard, which is referenced by the DOE test procedure with certain
adjustments, is not currently used industry-wide by all manufacturers
and third-party test laboratories. With sufficient time, AHAM stated
that it expects to collect and aggregate manufacturer-provided data
under the DOE test procedure to supplement or support DOE's analysis.
AHAM noted that in its opinion, the analysis must be based on such data
rather than assumptions. (AHAM, Public Meeting Transcript, No. 39 at
pp. 13-14, 16, 26-27)
In response to AHAM's request for a comment period extension, on
August 15, 2016, DOE extended the comment period for the June 2016 ECS
NOPR by 45 days from the original comment deadline of August 12, 2016,
to September 26, 2016. 81 FR 53961.
Following the comment period extension, AHAM submitted additional
comments expressing concern with DOE's approach to proceed with a
standards analysis and development in the absence of a final test
procedure. AHAM noted that 42 U.S.C. 6295(r) requires that a new
standard must include test procedures prescribed in accordance with 42
U.S.C. 6293, and AHAM stated that it believes this requirement is not
effective if a test procedure is not finalized with sufficient time
prior to a proposed or final standards rule, limiting the involvement
and ability for manufacturers and interested parties to evaluate the
standards. In the case of the June 2016 ECS NOPR analysis, AHAM
asserted that manufacturers, efficiency advocates, and interested
parties have had little experience with the test procedure and have
been unable to use it to assess the standards analysis, and in
particular the estimated impacts on consumers and manufacturers. AHAM
suggested that DOE should not issue a new portable AC standard without
determining if it is justified and how consumers, especially those with
low and fixed incomes, may be impacted via increased product cost and
loss of functionality, features, and choice. (AHAM, No. 43 at pp. 2,
30)
AHAM commented that no standard can pass the substantial evidence
test if it is not based on a final test procedure, if one is required,
and noted that such test procedure must have been based on a full and
useful opportunity for the public to comment on the procedure and its
impact on proposed standard levels. AHAM additionally noted that
Section 7 of the Process Improvement Rule (10 CFR part 430, subpart C,
appendix A) states that DOE will attempt to identify any necessary
modifications to establish test procedures when ``initiating the
standards development process.'' Further, AHAM stated that section 7(b)
states that ``needed modifications to test procedures will be
identified in consultation with experts and interested parties early in
the screening stage of the standards development process,'' and section
7(c) states that ``final, modified test procedures will be issued prior
to the NOPR on proposed standards.'' AHAM commented that the same
principles apply to new test procedures and the Process Improvement
Rule indicates that it also applies to development of new standards.
(AHAM, No. 43 at p. 2)
In response, DOE notes that AHAM and several other interested
parties, including, manufacturers, efficiency advocates, utilities, and
manufacturer organizations, have participated in every stage of the
portable AC standards rulemaking, providing valuable feedback to DOE.
As discussed earlier in this section, DOE extended the comment period
for the June 2016 ECS NOPR by 45 days from the original comment
deadline. With this additional time, AHAM's members were able to test
22 portable ACs according to the test procedures in appendix CC. AHAM
provided the test data to DOE, performed a similar analysis to
determine appropriate efficiency levels, and recommended a new
standards level. Therefore, DOE believes that AHAM has had sufficient
time to evaluate the June 2016 ECS NOPR proposal. DOE appreciates
AHAM's feedback and has incorporated their information into this final
rule analysis.
In addition to its standard LCC analysis, DOE did consider how the
standards would affect certain groups of consumers, including senior-
only households, low-income households, and small business.
Presentation of the approach to the consumer sub-groups development can
be found in section IV.I of this document and LCC results can be found
in section V.B.1.b of this final rule.
China suggested an additional year for manufacturers to comply with
any portable AC standards. (China, No. 34 at p. 3)
EPCA requires that newly-established standards shall not apply to
products manufactured within five years after the publication of the
final rule. (42 U.S.C. 6295(l)(2)) In accordance with this requirement,
compliance with the energy conservation standards established in this
final rule will be required 5 years after the date of publication of
this standards final rule in the Federal Register. This 5-year period
is intended to provide manufacturers ample time to assess their product
designs and implement any necessary modifications to meet the new
standards.
Certification and Enforcement Requirements
The Joint Commenters supported DOE's proposal that portable AC
certification reports include CEER and SACC, duct configuration,
presence of a heating function, and primary condensate removal feature,
noting that these proposed certification reporting requirements will
provide useful information both to the public and to DOE for use in a
future rulemaking. (Joint Commenters, No. 44 at p. 6) AHAM opposed
reporting of the presence of a heating function in the certification
reports because the test procedure in appendix CC does not test the
heating function and the heating function is not relevant to compliance
with DOE's proposed standard. (AHAM, No. 43 at p. 30) DOE is including
the reporting requirement for presence of a heating function in this
final rule because the information will aid DOE in collecting and
analyzing product characteristics in support of future rulemakings, and
does not believe that including this reporting requirement represents a
substantive burden to manufacturers in preparing certification reports.
JMATEK requested clarification regarding the acceptable tolerance
of cooling capacity and efficiency and heating mode measurements,
specifically the SACC and CEER tolerances, and detailed information
regarding calculating heating mode performance. (JMATEK, No. 40 at p.
2) The certification requirements proposed in the NOPR only require
reporting the presence of heating mode and do not require reporting
heating mode performance. The provisions in 10 CFR 429.62(a) specify
the sampling plan to be used to demonstrate compliance with the
portable AC standards, including 10 CFR 429.62(a)(3) and 10 CFR
429.62(a)(4) which provide the rounding requirements for SACC and CEER,
respectively. Appendix CC contains test equipment and measurement
requirements.
China asked, under the proposed enforcement provision in 10 CFR
429.134(n), whether the certified SACC is valid only if the average
measured SACC is within 5 percent of the certified SACC is an upper or
lower limit, or both. (China, No. 34 at p. 4) The provision refers to
the absolute value of the difference between the measured
[[Page 1391]]
SACC and certified SACC, and that difference must be less than 5
percent for the certified SACC to be used to demonstrate compliance;
otherwise, the measured value would be used to determine compliance
with the standard.
AHAM agreed with DOE's proposed enforcement approach but noted that
a 5-percent tolerance might not be enough given the inexperience with
the new test procedure. AHAM suggested that DOE should work to
understand the variation in that test with regard to determining
cooling capacity before deciding on a threshold. (AHAM, No. 43 at p.
30) The 5-percent tolerance on cooling capacity for enforcement is
consistent with the tolerance used for packaged terminal air
conditioners (PTACs) and packaged terminal heat pumps (PTHPs). Because
cooling mode testing for PTACs and PTHPs utilize the same air enthalpy
method that is the basis for the cooling mode testing in appendix CC,
DOE determined that a similar cooling capacity tolerance for
enforcement is appropriate for portable ACs, and thus establishes 5-
percent tolerance limit in this final rule.
Dual Coverage
The California IOUs urged DOE to require portable ACs with
dehumidification mode to meet the Federal standards for dehumidifiers,
and that DOE should include the presence of dehumidification mode in
the certification reporting requirements. They noted that the majority
of portable ACs currently available for purchase from major retailers
are equipped with a dehumidification mode, and the advertised moisture
removal capacities for these units are comparable to those of
residential dehumidifiers. The California IOUs also noted that certain
retailer websites allow consumers to sort and filter listings for
portable AC units by moisture removal capacity, and therefore posited
that consumer purchasing decisions are likely influenced by the
dehumidification capacity. The California IOUs further suggested that
consumers may opt for a portable AC unit instead of purchasing a
separate dehumidifier, or may use their existing portable AC as a
dehumidifier. The California IOUs stated that DOE opted to exclude
dehumidification mode from the portable AC test procedure because it
determined dehumidification mode operating hours are insignificant,
based on the assessment of a metered study, even though the study
included only 19 sites from two states and participants were informed
of the test purpose and scope prior to the study. Therefore, the
California IOUs suggested that the study did not accurately estimate
the consumer propensity for using dehumidification mode, as it did not
capture consumers purchasing, or repurposing, a portable AC with the
intent of also using it as a dehumidifier. The California IOUs
suggested that if portable ACs are not covered under the Federal
standards for dehumidifiers, DOE should require that portable ACs with
dehumidification mode also meet the Federal energy conservation
standards for dehumidifiers when operating in that mode and require
that manufacturers indicate the presence of dehumidification mode as a
certification requirement, similar to the same requirement for heating
mode. According to the California IOUs, this additional requirement
would mandate that moisture removal performed by portable ACs is tested
and labeled in accordance with DOE requirements for residential
dehumidifiers, and as a result, consumers would be better-informed when
making purchasing decisions. The California IOUs stated that this would
ensure that standards for residential dehumidifiers are not
circumvented by multi-functional units such as portable ACs.
(California IOUs, No. 42 at p. 2)
Dehumidification naturally occurs as a result of the refrigeration-
based air-cooling process. However, air conditioning products are
typically optimized to remove sensible heat, while dehumidifiers are
optimized to remove latent heat, so they would achieve different
operating efficiencies when dehumidifying. Additionally, the definition
for dehumidifier in 10 CFR 430.2 specifically excludes air conditioning
products (portable ACs, room ACs, and packaged terminal ACs) to avoid
ambiguity as to what would be classified as a dehumidifier. Therefore,
portable ACs would not be subject to energy conservation standards for
dehumidifiers. Furthermore, requiring portables ACs to be tested,
labeled, and certified for performance in dehumidification mode
according to the same requirements as for residential dehumidifiers
would be de facto establishing coverage of the product as both a
portable AC and a dehumidifier, and such multiple classification is not
allowable under the definition of ``covered product'' established in
EPCA. (42 U.S.C. 6291(2))
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to portable ACs. Separate subsections address
each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards 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 tool
that provides shipments projections and calculates NES and NPV 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 website for this rulemaking: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/76. Additionally, DOE used output from the latest version of the
Energy Information Administration's (EIA)'s Annual Energy Outlook (AEO)
for the emissions and utility impact analyses.
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include: (1) A determination of the
scope of the rulemaking and product classes, (2) manufacturers and
industry structure, (3) existing efficiency programs, (4) shipments
information, (5) market and industry trends, and (6) technologies or
design options that could improve the energy efficiency of portable
ACs. The key findings of DOE's market assessment are summarized below.
See chapter 3 of the final rule TSD for further discussion of the
market and technology assessment.
1. Definition and Scope of Coverage
DOE conducted the February 2015 Preliminary Analysis based on the
portable AC definition proposed in the February 2015 TP NOPR, which
stated that a portable AC is an encased assembly, other than a
``packaged terminal air conditioner,'' ``room air conditioner,'' or
``dehumidifier,'' that is designed as a portable unit to deliver
cooled, conditioned air to an enclosed space. A portable AC is powered
by
[[Page 1392]]
single-phase power and may rest on the floor or elevated surface. It
includes a source of refrigeration and may include additional means for
air circulation and heating. 80 FR 10212, 10215 (Feb. 25, 2015).
In the April 2016 Final Coverage Determination, DOE codified this
definition at 10 CFR 430.2, with minor editorial revisions that did not
modify the intent or scope of the definition:
A portable encased assembly, other than a ``packaged terminal air
conditioner,'' ``room air conditioner,'' or ``dehumidifier,'' that
delivers cooled, conditioned air to an enclosed space, and is powered
by single-phase electric current. It includes a source of refrigeration
and may include additional means for air circulation and heating. 81 FR
22514 (April 18, 2016).
NAM requested clarification regarding what is considered a spot
cooler and what products are covered under the energy conservation
standards proposed in the June 2016 ECS NOPR. NAM stated that there are
approximately five small business manufacturers in the U.S. that
produce ``portable commercial ACs,'' which they consider to be niche
products manufactured on a case-by-case basis. NAM suggested that these
small business manufacturers are unsure if the test procedure is
applicable to their products, as 90 to 95 percent of them operate on
single-phase power, and are unsure as well if their products would be
covered under the proposed energy conservation standards. Temp-Air
commented that their products are intended for temporary applications
and the usage environment for their products is different than those
products currently under consideration. Temp-Air stated that its
portable AC market share is less than 0.1 percent of DOE's annual
projected portable AC shipments volume. Therefore, Temp-Air urged DOE
to revise and clarify its portable AC definition to exclude single-
phase models destined for commercial industrial applications. NAM and
Temp-Air commented that classifying these products as covered products
obliges small business manufacturers to expend a significant amount of
their research and development (R&D) budgets to save a limited amount
of overall energy due to the low shipments volume. NAM and Temp-Air
claimed that if the small business manufacturers' products are expected
to meet the proposed conservation standards, these manufacturers will
be unable to take on the additional costs and will close. (NAM, Public
Meeting Transcript, No. 39 at pp. 19-20, 110; Temp-Air, No. 45 at p. 1)
During the July 2016 STD Public Meeting, DOE clarified that in the
April 2016 Final Coverage Determination, DOE established a definition
of all portable ACs that are considered to be covered products that
could be subject to test procedures or standards. Under EPCA, a
``consumer product'' is any article of a type that consumes, or is
designed to consume, energy and which, to any significant extent, is
distributed in commerce for personal use or consumption by individuals.
(42 U.S.C. 6291(1)) EPCA further specifies that the definition of a
consumer product applies without regard to whether the product is in
fact distributed in commerce for personal use or consumption by an
individual. (42 U.S.C. 6291(1)(B)) DOE's definition of ``portable air
conditioner'' excludes units that could normally not be used in a
residential setting by including only those portable ACs that are
powered by single-phase electric current. Thus, any product with
single-phase power that otherwise meets the definition of a portable AC
is a covered product, regardless of the manufacturer-intended
application or installation location.
However, DOE also clarified in the July 2016 STD Public Meeting
that not every product that meets the definition of portable AC may be
subject to DOE's test procedures and standards. As DOE explained, only
those products that meet the definition of single-duct or dual-duct
portable AC, as established in the June 2016 TP Final Rule, would be
subject to the appendix CC test procedure and the standards proposed in
the June 2016 ECS NOPR. DOE maintains this approach in this final rule,
and establishes energy conservation standards only for products that
meet the definition of single-duct or dual-duct portable AC as codified
10 CFR 430.2
2. Product Classes
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used or by capacity or other performance-related features that justify
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility to the consumer of the feature and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q))
Portable ACs recently became a covered product when DOE issued the
April 2016 Final Coverage Determination on April 18, 2016, and
therefore do not have existing energy conservation standards or product
class divisions. 81 FR 22514.
a. Preliminary Analysis and Notice of Proposed Rulemaking (NOPR)
Proposals
Following an evaluation of the portable AC market in preparation of
the February 2015 Preliminary Analysis, DOE determined that there are
three types of duct configurations that affect product performance:
Single-duct, dual-duct, and spot cooler. DOE noted in the February 2015
Preliminary Analysis that the DOE test procedure proposed in the
February 2015 TP NOPR did not include measures of spot cooler
performance, and, therefore, as discussed previously, DOE did not
consider standards for spot coolers. See chapter 3 of the preliminary
TSD for more information.
DOE further evaluated if there was any consumer utility associated
with the single-duct and dual-duct configurations under consideration.
As detailed in chapter 3 of the preliminary TSD, DOE investigated
installation locations and noise levels, and found that duct
configuration had no impact on either of these key consumer utility
variables. Therefore, DOE determined in the February 2015 Preliminary
Analysis that a single product class is appropriate for portable ACs.
In the June 2016 ECS NOPR, DOE proposed to maintain the February
2015 Preliminary Analysis approach, in which only single-duct and dual-
duct portable ACs would be considered for potential standards as one
product class. For portable ACs that can be optionally configured in
both single-duct and dual-duct configurations, DOE further proposed
that operation in both duct configurations be certified under any
future portable AC energy conservation standards. In the June 2016 TP
Final Rule, DOE subsequently required that if a product is able to
operate as both a single-duct and dual-duct portable AC as distributed
in commerce by the manufacturer, it must be tested and rated for both
duct configurations. 81 FR 35241, 35247 (June 1, 2016).
b. Comments and Responses
ASAP, the Joint Commenters, and the California IOUs supported a
single product class for portable ACs and agreed with DOE's conclusion
that there is no consumer utility associated with duct configuration.
The California IOUs further stated that although aesthetics is an
important consumer utility, product images from several major online
retailers (e.g., Best Buy, Home Depot, and Sears) typically do not
display the ducts and therefore, duct configuration is likely not a
major consideration for consumers when assessing the aesthetics of a
portable AC unit. (ASAP, Public Meeting Transcript, No. 39 at p.
[[Page 1393]]
37; Joint Commenters, No. 44 at p. 4-5; California IOUs, No. 42 at p.
1)
AHAM opposed a single product class for portable ACs and instead
proposed that DOE define separate product classes for single-duct and
dual-duct portable ACs. AHAM argued that dual-duct units are not as
portable as single-duct units, primarily due to having two hoses
instead of one. AHAM also noted that one hose is typically longer with
a greater pressure drop, so a larger diameter hose is needed. (AHAM,
Public Meeting Transcript, No. 39 at p. 36; AHAM, No. 43 at p. 9)
AHAM further asserted that a recent AHAM consumer survey showed
that size and weight of a unit are important considerations for
consumers, and that nearly seven of ten portable AC owners indicated
that duct configuration was a key purchase factor. AHAM concluded from
this survey that duct configuration does offer a unique consumer
utility and therefore is a basis for separate product classes. (AHAM,
No. 43 at p. 9)
In addition to the consumer utility factors of installation
locations and product noise, which DOE previously determined did not
depend on duct configuration, DOE considered other factors raised by
AHAM that could justify separate product classes for portable ACs based
on duct configuration. For all units in its test sample, DOE observed
that the ducts are similarly constructed from plastic in a collapsible
design, and typically weigh approximately 1 pound, as compared to
overall product weights ranging from 45 to 86 pounds. DOE also notes
that all dual-duct units in its test sample had the same size and
length ducts for the condenser inlet and exhaust ducts. DOE does not
expect the minimal weight increase associated with a second duct to
have a significant impact on consumer utility in terms of portability.
Further, DOE has observed no consistent efficiency improvement
associated with either single-duct or dual-duct portable ACs.
Accordingly, duct configuration would not justify different standards.
Therefore, DOE maintains the approach used in the February 2015
Preliminary Analysis and June 2016 ECS NOPR and establishes a single
product class for portable ACs in this final rule.
3. Technology Options
In the preliminary market and technology assessment, DOE identified
16 technology options in four different categories that would be
expected to improve the efficiency of portable ACs, as measured by the
DOE test procedure, shown in Table IV.1:
Table IV.1--Technology Options for Portable Air Conditioners--February
2015 Preliminary Analysis
------------------------------------------------------------------------
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
1. Increased frontal coil area.
2. Increased depth of coil (add tube rows).
3. Increased fin density.
4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
5. Improved fin design.
6. Improved tube design.
7. Spray condensate onto condenser coil.
8. Microchannel heat exchangers.
Component Improvements:
9. Improved compressor efficiency.
10. Improved blower/fan efficiency.
11. Low-standby-power electronic controls.
12. Ducting insulation.
13. Improved duct connections.
14. Case insulation.
Part-Load Technology Improvements:
15. Variable-speed compressors.
16. Thermostatic or electronic expansion valves.
------------------------------------------------------------------------
In the June 2016 ECS NOPR, DOE noted that propane refrigerant is
widely used for portable ACs manufactured and sold internationally, and
that R-32 is being introduced in some markets outside the U.S. for
portable and room ACs, albeit primarily because it is has a low global
warming potential (GWP). Based on this product availability and
discussions with manufacturers, DOE included alternative refrigerants
as a potential technology option in the technology assessment.
DOE also noted in the June 2016 ECS NOPR that a potential means of
improving portable AC efficiencies, air flow optimization, was not
included as a technology option in the February 2015 Preliminary
Analysis. DOE did, however, consider optimized air flow in the
engineering analysis in the February 2015 Preliminary Analysis, and
therefore further assessed optimized air flow as a technology option in
the June 2016 ECS NOPR.
Therefore, in addition to the technology options considered in the
February 2015 Preliminary Analysis, DOE considered alternative
refrigerants and air flow optimization in the June 2016 ECS NOPR, as
shown in Table IV.2.
Table IV.2--Technology Options for Portable Air Conditioners--June 2016
ECS NOPR Analysis
------------------------------------------------------------------------
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
1. Increased frontal coil area.
2. Increased depth of coil (add tube rows).
3. Increased fin density.
4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
5. Improved fin design.
6. Improved tube design.
7. Spray condensate onto condenser coil.
8. Microchannel heat exchangers.
Component Improvements:
9. Improved compressor efficiency.
10. Improved blower/fan efficiency.
11. Low-standby-power electronic controls.
12. Ducting insulation.
13. Improved duct connections.
14. Case insulation.
Part-Load Technology Improvements:
15. Variable-speed compressors.
16. Thermostatic or electronic expansion valves.
Alternative Refrigerants:
17. Propane and R-32.
Reduced Infiltration Air:
18. Air flow optimization.
------------------------------------------------------------------------
After identifying all potential technology options for improving
the efficiency of portable ACs, DOE performed a screening analysis (see
section IV.B of this final rule and chapter 4 of the final rule TSD) to
determine which technologies merited further consideration in the
engineering analysis.
B. Screening Analysis
DOE uses the following four screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in working prototypes will not
be considered further.
(2) Practicability to manufacture, install, and service. If it is
determined that mass production and reliable installation and servicing
of a technology in commercial products could not be achieved on the
scale necessary to serve the relevant market at the time of the
projected compliance date of the standard, then that technology will
not be considered further.
(3) Impacts on product utility or product availability. If it is
determined that a technology would have significant adverse impact on
the utility of the product to significant subgroups of consumers or
would result in the unavailability of any covered product type with
performance characteristics (including reliability), features, sizes,
capacities, and volumes that are substantially the same as products
generally available in the U.S. at the time, it will not be considered
further.
[[Page 1394]]
(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 subsequent sections include comments from interested
parties pertinent to the screening criteria and whether DOE determined
that a technology option should be excluded (``screened out'') based on
the screening criteria.
1. Screened-Out Technologies
Alternative Refrigerants
The Significant New Alternatives Policy (SNAP) final rule,
published by the U.S. EPA on April 10, 2015 (hereinafter the ``SNAP
rule''), limits the maximum allowable charge of alternative
refrigerants in portable ACs to 300 grams for R-290 (propane), 2.45
kilograms for R-32, and 330 grams for R-441A. The SNAP rule limits were
consistent with those included for portable room ACs in Underwriter's
Laboratories (UL) Standard 484, ``Standard for Room Air Conditioners''
(UL 484), eighth edition. However, the most recent version of UL 484,
the ninth edition, reduces the allowable amount of flammable
refrigerant (e.g., propane and R-441A) to less than 40 percent of the
SNAP limits. Manufacturers informed DOE that the new UL charge limits
for propane and other flammable refrigerants in portable ACs are not
sufficient for providing the necessary minimum cooling capacity, and
therefore it would not be feasible to manufacture a portable AC with
propane or R-441A for the U.S. market while complying with the UL
safety standard. DOE reviewed propane refrigerant charges for portable
ACs available internationally and found a typical charge of 300 grams.
DOE also investigated other similar AC products that utilize propane
refrigerant and found that the minimum charge for capacities in a range
expected for portable ACs was 265 grams, which is still greater than
the maximum allowable propane charge for portable ACs in the ninth
edition of UL 484. Therefore, although portable ACs are currently
available internationally with charge quantities of propane acceptable
under the SNAP rule, manufacturers are unable to sell those products in
the U.S. market while complying with the ninth edition of UL 484.
Accordingly, in the June 2016 ECS NOPR DOE screened out propane and
other flammable refrigerants as a design option for portable ACs as
they would not be practicable to manufacture while meeting all relevant
safety standards.
AHAM agreed with DOE's determination that although portable ACs are
currently available internationally with amounts of flammable
refrigerants, such as propane, manufacturers are unable to sell those
products in the U.S. market while complying with the ninth edition of
UL 484. (AHAM, No. 43 at p. 14)
The California IOUs disagreed with DOE's decision to screen out
alternative refrigerants as a technology option, because the most
common refrigerant for portable air conditioners (R-410A) will likely
be prohibited in California and Europe in favor of more efficient
alternatives by the 2021 effective date, and the analysis in the June
2016 ECS NOPR did not consider the likely state of the industry in
2021. The California IOUs also suggested that DOE consider the 2016
strategy proposal by the California Air Resources Board (CARB) that is
likely to push the industry towards more efficient refrigerants, such
as R-32 and R-290. The California IOUs noted that this climate
pollutant reduction strategy proposes to limit the 100-year GWP of
refrigerants in portable ACs to 750, and would also be effective in
2021. The proposal effectively prohibits the sale of portable ACs that
use the R-410A refrigerant in California. The authors of the proposal
note that AC refrigerants are likely to meet this requirement due to a
fluorinated GHG regulation by the European Union (EU) and a White House
Council on Environmental Quality pledge of $5 billion over the next 10
years in research of low-GWP refrigerants for refrigerators and air
conditioning equipment. The California IOUs noted that while the 2016
CARB strategy is still in the proposal stage, the EU regulation will
take effect in 2020, and Article 11 of this regulation prohibits
placing on the market any ``movable room air-conditioning equipment''
that contains hydrofluorocarbon (HFC) refrigerants with GWP of 150 or
more. The regulation would likely prohibit both R-410A and R-32. The
California IOUs stated that, in response, manufacturers such as De'
Longhi and GREE have begun producing portable ACs using R-290, which is
claimed to be 10 percent more efficient than its R-410A counterpart.
(California IOUs, No. 42 at p. 3)
The Joint Commenters stated that although DOE screened out propane
due to the refrigerant charge limitations of the UL safety standards,
UL certification has failed to become an industry standard for portable
ACs, and TopTenReviews' list of the 10 best portable ACs of 2016
includes four units that are not UL-certified. (Joint Commenters, No.
44 at p. 3)
DOE believes that UL certification is a key consumer protection
program that ensures the operational safety of portable ACs.
Manufacturers implementing propane in their portable ACs would not be
able to receive UL certification for their products, which may result
in significant adverse safety impacts. Accordingly, DOE continued to
screen propane (R-290) from further consideration in this final rule
analysis.
In the June 2016 ECS NOPR, DOE noted that certain room ACs
commercially available on the U.S. market utilize the mildly flammable
R-32, but it was not aware of any portable ACs available in the U.S.
market or on other markets that incorporate R-32. Because this
technology has not been incorporated in commercial products or in
working prototypes for portable ACs, DOE screened out R-32 refrigerant
as a technology option.
In response to the June 2016 ECS NOPR, AHAM agreed with DOE's
proposal to screen out R-32 refrigerant because the UL standard, which
is based on the elevation of the installed product and did not
specifically assess use of R-32 in portable ACs that sit on the floor.
AHAM and GE noted that the UL standard does not preclude, but also does
not consider, the high pressure refrigeration system inside the room.
Instead, it considers a compressor outside the room. Therefore, even if
the UL safety standard currently does not preclude use of R-32 in
portable ACs based on charge limits, these commenters urged DOE to
further consider any safety concerns that might arise from a compressor
and refrigeration system inside the room. AHAM also commented that
efficiency gains associated with R-32 are currently unknown, and due to
higher static pressure, the portable AC refrigeration system would need
to be redesigned for the use of this refrigerant. (AHAM, No. 43 at pp.
13-14; GE, Public Meeting Transcript, No. 39 at pp. 45-46)
In response to the June 2016 ECS NOPR, other commenters generally
stated that R-32 is a viable alternative refrigerant for portable ACs
that would improve efficiency. ASAP and LG noted that the R-32 charge
limit in UL 484 (approximately 1 kilogram) would not preclude use of R-
32 in portable ACs, and ASAP stated that one manufacturer claims a 10-
percent reduction in energy
[[Page 1395]]
use with R-32 as compared to R-410A for other similar products such as
PTACs. ASAP, NRDC, and the Joint Commenters disagreed with DOE's
decision to screen out R-32 as a viable technology option and urged DOE
to include it in the final rule engineering analysis due to the
expected increase in efficiency as compared to R-410A. The Joint
Commenters stated that manufacturers claim a 10-percent reduction in
energy use using R-32 in PTACs and that Oak Ridge National Laboratory
(ORNL) found that R-32 demonstrates a 1 to 6-percent higher coefficient
of performance across a range of test conditions compared to R-410A in
mini-split ACs engineered for R-410A. The Joint Commenters further
claimed, albeit without further supporting information, that portable
ACs designed for R-32 should be capable of outperforming R-410A by an
even higher margin. The California IOUs recommended that DOE consider
certain non-U.S. models already utilizing the R-32 refrigerant,
claiming that these models would meet both CARB and UL requirements.
The California IOUs suggested that DOE test these models when
determining the maximum observed efficiency level used for TSL 3. ASAP,
NRDC, and the Joint Commenters further stated that, regardless of DOE's
approach in the final rule, manufacturers would have the option of
using R-32 as a way to improve portable AC efficiency and achieve the
proposed energy conservation standards. (ASAP, Public Meeting
Transcript, No. 39 at pp. 11-12, 42-43; LG, Public Meeting Transcript,
No. 39 at p. 45; NRDC, Public Meeting Transcript, No. 39 at p. 43;
Joint Commenters, No. 44 at pp. 3-4; California IOUs, No. 42 at p. 3)
To evaluate the commenters' estimates of the reduction in energy
use and increase in efficiency for R-32 as compared to R-410A and to
identify any other performance impacts, DOE further investigated
changes in performance associated with switching to R-32. As discussed
in chapter 3 of the final rule TSD, DOE reviewed multiple studies and
experiments conducted on other air conditioning products which
suggested performance improvements when switching to R-32 ranging from
2 to 5 percent for cooling capacity and 1 to 4 percent for efficiency,
depending upon the test conditions. DOE notes that the models
referenced by the California IOUs are not sold in the U.S., and
therefore were not included in this rulemaking analysis.
Nonetheless, because R-32 is a viable refrigerant based on the UL
safety requirements and because the information provided by interested
parties and described in various studies consistently indicate
performance improvements through the use of this refrigerant, in this
final rule DOE maintained R-32 as a potential design option for
improving portable AC efficiency.
Duct Insulation
In the February 2015 Preliminary Analysis, DOE identified duct
insulation as a potential means for improving portable AC efficiency,
as less heat from the condenser air would be transferred through the
duct wall and would instead be transferred out of the conditioned
space. During interviews, manufacturers indicated that they have
considered insulated ducts to improve performance but have not
identified any insulated ducts that are collapsible for packaging and
shipping. No portable AC in DOE's teardown sample for the engineering
analysis included insulated ducts. In the absence of a collapsible
design, such an insulated duct would need to be packaged for shipment
in its fully expanded configuration, significantly increasing the
package size. Because of this significantly increased packaging size
for non-collapsible insulated ducts and unavailability on the market of
collapsible designs, DOE determined that insulated ducts are not
technologically feasible, are impractical to manufacture and install,
and would impact consumer utility. Therefore, DOE screened out
insulated ducts as a design option for portable ACs in the February
2015 Preliminary Analysis and in the June 2016 ECS NOPR.
AHAM agreed with DOE's assessment of duct insulation, because
incorporating such a design option would significantly increase
shipping costs and weight of the product, and could also cause it to be
more difficult for consumers to install and eventually store the
product in the off season. (AHAM, No. 43 at p. 12)
2. Additional Comments
AHAM noted that DOE modeled and considered only four of the sixteen
retained design options in the engineering analysis and provided
reasons for not modeling seven other design options that were retained
from the screening analysis. AHAM argued that the retention of these
seven design options is not justified if they are not used in the
engineering analysis for the various reasons provided in the June 2016
ECS NOPR and STD NOPR TSD. AHAM proposed that DOE remove the design
options that were not considered in the June 2016 ECS NOPR engineering
analysis. (AHAM, No. 43 at pp. 9-10)
In the market and technology assessment, DOE identifies all
technology options that may increase portable AC efficiency. The
screening analysis eliminates certain technology options from further
consideration based on the four criteria outlined at 10 CFR part 430,
subpart C, appendix A, 4(a)(4) and 5(b). Any technology options meeting
the four criteria are considered in the engineering analysis. However,
DOE does not necessarily incorporate all of the retained technologies
in developing the cost-efficiency relationship. Any technology options
meeting the screening criteria but not included as a means to improve
efficiency in the engineering analysis are discussed further in section
IV.C of this document.
Increased Heat-Transfer Surface Area
In the June 2016 ECS NOPR, DOE considered increased heat exchanger
area as a technology option that passed the screening analysis and was
implemented in the engineering analysis as a design approach for
reaching higher efficiency levels. DOE considered up to a 20-percent
heat exchanger area increase and determined that the associated
increase in weight and case size would not significantly impact
consumer utility.
The Joint Commenters agreed with DOE's conclusion that all
available data suggest that heat exchanger areas can be increased by 20
percent and represents a significant improvement to the analysis to
better capture the full range of potential efficiency improvements.
(Joint Commenters, No. 44 at p. 5)
AHAM disagreed with DOE's assertion that ability to move, install,
or store the product would not be impacted if the case dimensions were
to change to accommodate a 20 percent larger heat exchanger. AHAM
argued that an increased heat exchanger size would increase the overall
case size and increase weight, thereby impacting consumer utility by
making the product more difficult to move from room to room and,
particularly, up and down stairs. AHAM therefore urged DOE to remove
increased heat exchanger area from the design approaches to reach
higher efficiency levels and screen out this technology option. AHAM
also commented that, although DOE did not indicate how much weight an
increased heat exchanger might add to a product, AHAM determined from
data gathered by its members that a heat exchanger area increase
associated with a 4,000 Btu/h capacity increase would correlate to an
average product weight increase of 16.6 pounds. AHAM further suggested
that current portable ACs are already
[[Page 1396]]
pushing the limits of a ``single lift'' product, and further increases
in the size and weight could push the product from being a ``single
lift'' to a ``dual lift'' product, which would impact portability. AHAM
concluded that because consumers will likely not accept increased size
and/or weight, DOE should screen out increased heat exchanger area as a
technology option and should not use it as a design option in its
analysis of higher efficiency levels. (AHAM, Public Meeting Transcript,
No. 39 at pp. 44-45, 72; AHAM, No. 43 at p. 17)
As discussed in chapter 5 of the final rule TSD, DOE does not
expect that the increase in heat exchanger size, and the resulting
increases in case size and weight, would impact product portability. In
addition to noting that all portable ACs equipped with wheels, which
assist in changing locations on the same floor, DOE found the typical
unit weight increase would be limited to about 6 percent, or less than
5 pounds, at the maximum heat exchanger size increase of 20 percent,
which did not result in any units in DOE's test sample requiring
additional lifting assistance compared to what would already be
required with the currently reported unit weight. Additional detail can
be found in chapter 5 of the final rule TSD. DOE also notes that the
heat exchanger size increases do not necessarily affect the depth of
the product case, typically a portable AC's smallest dimension, and
would not preclude any units with this technology option from fitting
through doorways, hallways, or stairwells.
For these reasons, DOE retained the technology option of a 20-
percent heat exchanger area increase in the final rule screening
analysis.
Air Flow Optimization
As discussed in section IV.A.3 of this document, in the June 2016
ECS NOPR DOE noted that a potential means of improving portable AC
efficiencies, air flow optimization, was not included as a technology
option in the February 2015 Preliminary Analysis. DOE did, however,
consider optimized air flow in the engineering analysis in the February
2015 Preliminary Analysis, and therefore further assessed optimized air
flow and included it as a technology option in the June 2016 ECS NOPR.
AHAM requested that DOE define ``optimized airflow'' and
demonstrate a specific efficiency improvement that corresponds to it;
otherwise, AHAM asserted, this design option is too uncertain and
should be screened out. AHAM suggested that if optimized airflow means
reducing the flow over the condenser, that approach would be a safety
concern for single-duct units, as the condenser must to be cooled for
safe operation of the unit. (AHAM, No. 43 at p. 14)
Chapter 3 of the NOPR TSD explains that optimized airflow refers to
the reduction of infiltration air. Further, the optimized airflow
technology option satisfies all four of the screening criteria, and it
was therefore further considered in the final rule engineering
analysis. However, as discussed in section IV.C of this document, DOE
has determined that manufacturers would likely not rely on optimized
airflow to improve portable AC efficiency because of the limited impact
on performance under the test procedures in appendix CC.
3. Remaining Technologies
Through a review of each technology, DOE concludes that all of the
other identified technologies listed in section IV.A.3 of this document
met all four screening criteria to be examined further as design
options in DOE's final rule analysis. In summary, DOE did not screen
out the following technology options, as shown in Table IV.3:
Table IV.3--Remaining Design Options for Portable Air Conditioners
------------------------------------------------------------------------
-------------------------------------------------------------------------
Increased Heat-Transfer Surface Area:
1. Increased frontal coil area.
2. Increased depth of coil (add tube rows).
3. Increased fin density.
4. Add subcooler to condenser coil.
Increased Heat-Transfer Coefficients:
5. Improved fin design.
6. Improved tube design.
7. Spray condensate onto condenser coil.
8. Microchannel heat exchangers.
Component Improvements:
9. Improved compressor efficiency.
10. Improved blower/fan efficiency.
11. Low-standby-power electronic controls.
12. Improved duct connections.
13. Case insulation.
Part-Load Technology Improvements:
14. Variable-speed compressors.
15. Thermostatic or electronic expansion valves.
Reduced Infiltration Air:
16. Air flow optimization.
Alternative Refrigerants:
17. R-32.
------------------------------------------------------------------------
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., 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 final rule TSD.
C. Engineering Analysis
In the engineering analysis, DOE establishes the relationship
between the manufacturer production cost (MPC) and improved portable AC
efficiency. This relationship serves as the basis for cost-benefit
calculations for individual consumers, manufacturers, and the Nation.
DOE typically structures the engineering analysis using one of three
approaches: (1) Design option, (2) efficiency level, or (3) reverse
engineering (or cost assessment). The design-option approach involves
adding the estimated cost and associated efficiency of various
efficiency-improving design changes to the baseline 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
portable AC sold today (i.e., the baseline) to the maximum
technologically feasible efficiency level. At each efficiency level
examined, DOE determines the MPC; this relationship is referred to as a
cost-efficiency curve.
In the preliminary engineering analysis, DOE used a hybrid approach
of the design-option and reverse-engineering approaches described
above. This approach involved physically disassembling commercially
available products, reviewing publicly available cost information, and
modeling equipment cost. From this information, DOE estimated the MPCs
for a range of products available at that time on the market. DOE then
considered the steps manufacturers would likely take to improve product
efficiencies. In its analysis, DOE determined that manufacturers would
likely rely on certain design options to reach higher efficiencies.
From this information, DOE estimated the cost and efficiency impacts of
incorporating specific design options at each efficiency level.
In the June 2016 ECS NOPR, DOE followed the same general approach
as for the preliminary engineering analysis, but modified the analysis
based on the test procedure for portable ACs in appendix CC, comments
from interested parties, and the most current available information.
[[Page 1397]]
For this final rule, DOE largely maintained the approach from the
NOPR, with slight modifications to incorporate feedback from interested
parties and further refinements to the engineering analysis. This
section provides more detail on the development of efficiency levels
and determination of MPCs in the final rule engineering analysis.
1. Efficiency Levels
a. Baseline Efficiency Levels
A baseline unit typically just meets current energy conservation
standards and provides basic consumer utility. Because there are no
existing energy conservation standards for portable ACs, DOE observed
whether units tested with lower efficiencies incorporated similar
design options or features, and considered these features when defining
a baseline configuration. To determine energy savings that will result
from a new energy conservation standard, DOE compares energy use at
each of the higher efficiency levels to the energy consumption of the
baseline unit. Similarly, to determine the changes in price to the
consumer that will result from an energy conservation standard, DOE
compares the price of a unit at each higher efficiency level to the
price of a unit at the baseline.
DOE noted in chapter 5 of the preliminary analysis TSD that the air
flow pattern through a portable AC has a significant effect on measured
cooling capacity and energy efficiency ratio, as determined according
to test method proposed in the February 2015 Test Procedure NOPR (the
current proposal at the time of the preliminary analysis). For units
that draw air from the conditioned space over the condenser and then
exhaust it outside of the conditioned space, an equivalent amount of
infiltration air must enter the conditioned space due to the net
negative pressure differential that is created between the conditioned
and unconditioned spaces. Because the test conditions proposed in the
February 2015 Test Procedure NOPR specify that infiltration air would
be at a higher temperature than the conditioned air, the infiltration
air offsets a portion of the cooling provided by the portable AC. The
greater the amount of infiltration air, the lower the overall cooling
capacity will be. Based on the measured condenser exhaust air flow
rates and the corresponding calculated magnitudes of the infiltration
air heating effect, DOE determined in the February 2015 Preliminary
Analysis that single-duct units (i.e., units that draw all of the
condenser intake air from within the conditioned space and exhaust to
the unconditioned space via a duct) would represent the baseline
efficiency level for portable ACs.
After the February 2015 Preliminary Analysis, DOE established the
portable AC test procedure in appendix CC, which incorporates two
cooling mode test conditions and weighting factors to determine overall
performance. Because the additional test condition is at a lower
outdoor temperature and has a significantly larger weighting factor
than the original test condition, the impact of infiltration air on
overall performance is greatly reduced. Therefore, the approach of
considering a baseline unit to be a single-duct portable AC with
typical system components was no longer valid. DOE instead pursued an
alternate analysis approach in the June 2016 ECS NOPR, which utilized
the results from all units in DOE's test sample, including 24 portable
ACs (one test sample was tested in both a single-duct and dual-duct
configuration) covering a range of configurations, product capacities,
and efficiency as tested according the DOE test procedure in appendix
CC.
DOE developed a relationship between cooling mode power and SACC,
which is a measure of cooling capacity that weights the performance at
each of the cooling mode test conditions in appendix CC, using a best
fit power curve. DOE then used this relationship to develop an equation
to determine nominal CEER for a given SACC based on the results of
DOE's testing according to the test procedure in appendix CC, shown
below.
[GRAPHIC] [TIFF OMITTED] TR10JA20.010
In the June 2016 ECS NOPR, DOE then assessed the relative
efficiency of each unit in the test sample by comparing the measured
CEER from testing to the nominal CEER as defined by the equation above
(DOE will refer to this ratio of actual CEER to nominal CEER as the
performance ratio (PR) for a given unit). DOE proposed to define
baseline performance as a PR of 0.72, which is based on the minimum PR
observed for units in the test sample. Additional details on the
baseline units are in chapter 5 of the NOPR TSD.
AHAM objected to the methodology used to determine the baseline
level proposed in the June 2016 ECS NOPR, stating that the limited data
sample was not representative of the minimum performance of products on
the market and that it would have been able to provide test data on a
wide range of products if the test procedure had been finalized
earlier. Nonetheless, AHAM stated that the combined DOE and newly
developed AHAM data set suggests that DOE's proposed baseline level is
reasonable. (AHAM, No. 43 at pp. 4, 14)
During the July 2016 STD Public Meeting and in a subsequent request
for data and information submitted to DOE on July 21, 2016,\20\ AHAM
requested the R value and R squared value for the regression curve used
to develop the nominal CEER equation in the June 2016 ECS NOPR. (AHAM,
Public Meeting Transcript, No. 39 at p. 72) AHAM additionally submitted
a supplemental request for data and information on July 27, 2016, in
which it requested the raw tested and modeled data used to perform the
CEER and SACC calculations for all 24 units in DOE's test sample.\21\
DOE provided the R value (0.7420) and R squared value (0.6424) in the
DOE response memo, which was accompanied by files containing the
requested data for all of DOE's test units. Although AHAM further
sought to obtain model numbers for units in the test sample to
ascertain how representative DOE's 24 test units were of the U.S.
market, DOE identified test units only by sample number in order to
maintain confidentiality of the results. (AHAM, No. 43 at pp. 4, 14)
---------------------------------------------------------------------------
\20\ AHAM's July 21, 2016 request for data and information can
be found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0029.
\21\ AHAM's July 27, 2016 supplemental request for data and
information can be found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0030.
---------------------------------------------------------------------------
AHAM also expressed concern that DOE did not appear to have run a
complete test using the final test procedure and instead relied on a
significant amount of modeled data. (AHAM, No. 43 at p. 4) As discussed
in the June 2016 ECS NOPR and during the July 2016 STD Public Meeting,
all
[[Page 1398]]
product capacities and efficiencies considered for the June 2016 ECS
NOPR analysis were consistent with the appendix CC test procedures.
Additionally, modeling was not required to determine the performance of
the 18 single-duct portable ACs in DOE's test sample. DOE modeled the
performance of the seven dual-duct portable ACs at the lower
temperature test condition required in appendix CC.
After the June 2016 ECS NOPR analysis, AHAM compiled additional
test data from its members for 22 portable ACs whose results are listed
in Table IV.4. (AHAM, No. 43 at pp. 3, 5-6)
Table IV.4--AHAM Member Test Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tested CEER Cooling power
Unit Configuration (Btu/Wh) SACC (Btu/h) (W) PR
--------------------------------------------------------------------------------------------------------------------------------------------------------
A............................................... Single-Duct....................... 5.81 6507.57 807.75 0.91
E............................................... Single-Duct....................... 5.88 6950.00 846.00 0.90
J............................................... Single-Duct....................... 6.82 8242.83 861.75 0.98
D............................................... Single-Duct....................... 4.75 4033.24 579.71 0.90
H............................................... Single-Duct....................... 4.46 4737.80 740.13 0.79
S............................................... Single-Duct....................... 6.27 7692.11 854.25 0.92
G............................................... Single-Duct....................... 6.47 8152.20 879.26 0.93
C............................................... Single-Duct....................... 5.00 5159.80 636.00 0.86
K............................................... Single-Duct....................... 5.20 6702.80 790.50 0.81
N............................................... Single-Duct....................... 5.50 8334.20 958.50 0.78
P............................................... Single-Duct....................... 6.50 9393.00 971.25 0.88
B............................................... Single-Duct....................... 6.78 6687.50 990.00 1.05
L............................................... Single-Duct....................... 5.48 3411.44 581.10 1.11
F............................................... Single-Duct....................... 5.97 4474.20 988.90 1.09
M............................................... Single-Duct....................... 5.46 6836.43 1206.00 0.84
R............................................... Single-Duct....................... 5.01 7031.25 1238.00 0.76
Q............................................... Single-Duct....................... 4.79 6371.60 1281.00 0.76
O............................................... Single-Duct....................... 5.21 5362.36 914.00 0.88
T............................................... Single-Duct....................... 5.63 5324.20 869.00 0.96
W............................................... Single-Duct....................... 6.35 7012.40 1031.00 0.97
Z............................................... Single-Duct....................... 6.17 8190.80 1253.00 0.89
U............................................... Single-Duct....................... 6.28 8854.60 1312.00 0.87
--------------------------------------------------------------------------------------------------------------------------------------------------------
AHAM analyzed the combined sample set of its and DOE's data,
totaling 47 units, to determine the best-fit power regression, a new
nominal CEER equation (shown below), and the relative efficiency of
each unit in the combined test sample by comparing the measured CEER
from testing to the new nominal CEER. AHAM confirmed DOE's conclusion
in the June 2016 ECS NOPR that efficiency would typically increase with
capacity, but estimated different coefficients in the nominal CEER
equation. (AHAM, No. 43 at pp. 3, 5-6)
[GRAPHIC] [TIFF OMITTED] TR10JA20.011
In conducting this final rule engineering analysis, DOE included
the data supplied by AHAM and also reassessed its own test data and
performance modeling. DOE corrected minor errors in its test data and
more accurately represented the modeled performance of dual-duct units
operating at the lower 83 [deg]F test condition. For those units where
the user manual clearly states that the fan operates continuously
during off-cycle mode, DOE included the off-cycle mode power in this
final rule analysis.
For the final rule, DOE updated the relationship between cooling
mode power and SACC and the subsequent nominal CEER equation to reflect
the revised set of test and modeled data. The resulting updated nominal
CEER equation is shown below.
[GRAPHIC] [TIFF OMITTED] TR10JA20.012
DOE reassessed the PRs for each unit and found the baseline value
to be 0.67, which is the minimum PR observed in the combined test
sample. Although this baseline PR value is lower than the value of 0.72
presented in the June 2016 ECS NOPR, applying the new value to the
updated nominal CEER curve results in a baseline efficiency level curve
for this final rule that closely matches the baseline efficiency level
analyzed in the June 2016 ECS NOPR. Additional details on the baseline
units efficiency level are included in chapter 5 of the final rule TSD.
b. Higher Energy Efficiency Levels
DOE develops incremental efficiency levels based on the design
options manufacturers would likely use to improve portable AC
efficiency. While certain technology options identified in Table IV.1
of this final rule and discussed in chapter 3 of the final rule TSD
meet all the screening criteria and may produce energy savings in
certain real-world situations, DOE did not further consider each of
them in the engineering analysis because specific efficiency gains were
either not clearly
[[Page 1399]]
defined or the DOE test procedure would not capture those potential
improvements. Such technology options that were not considered are: (1)
Adding a subcooler or condenser coil, (2) increasing the heat transfer
coefficients, (3) improving duct connections, (4) improving case
insulation, (5) implementing part-load technologies, and (6)
substituting R-32 for the commonly used R-410A refrigerant. Further
discussion of these technology options and the reasons why DOE
tentatively concluded that they would be unlikely to be implemented to
improve efficiency can be found in chapter 5 of the final rule TSD.
i. June 2016 Standards NOPR Proposal
In the February 2015 Preliminary Analysis, DOE conducted its
engineering analysis, including defining efficiency levels, assuming
that manufacturers would rely on airflow optimization to improve
portable AC efficiencies. However, for the June 2016 ECS NOPR analysis,
DOE updated the efficiency levels to reflect performance based on
appendix CC, which was different from the proposed test procedure that
was the basis of the February 2015 Preliminary Analysis. Appendix CC
includes a second cooling mode outdoor test condition for dual-duct
units and infiltration air conditions for both single-duct and dual-
duct units. The CEER metric for both single-duct and dual-duct units
includes a weighted-average measure of performance at the two cooling
mode test conditions, along with measures of energy use in standby and
off modes. Appendix CC does not include provisions proposed in the
February 2015 TP NOPR for measuring case heat transfer.
As discussed in the February 2015 Preliminary Analysis, although
the initial test procedure proposal included a CEER metric that
combined energy use in cooling mode, heating mode, and various low-
power modes, the preliminary analysis was conducted using cooling mode
energy efficiency ratio (EERcm) as the basis for energy
conservation standards because cooling is the primary function for
portable ACs, and DOE expected that manufacturers would likely focus on
improving efficiency in this mode to achieve higher CEERs. Because
appendix CC does not include a heating mode test and includes a second
cooling mode test condition, the CEER metric as codified combines the
performance at both cooling mode test conditions with energy use in the
low-power modes. Accordingly, DOE utilized CEER as the basis for its
proposed portable AC energy conservation standards in the June 2016 ECS
NOPR. DOE also based the June 2016 ECS NOPR analysis on the SACC
measured in appendix CC, a weighted average of the adjusted cooling
capacities at the two cooling mode test conditions.
The two cooling mode test conditions in appendix CC are weighted
based on the percentage of annual hours for each test condition, on
average, for geographical locations that correspond to expected
portable AC ownership. The majority (80 percent) of the total hours
were estimated to relate to the lower of the two outdoor temperatures,
83 degrees Fahrenheit ([deg]F) dry-bulb. Because at this lower outdoor
temperature, there is only a 3 [deg]F dry-bulb temperature differential
and subsequent 0.38 Btu per pounds of dry air enthalpy differential
between the indoor and outdoor air, the potential impact of
infiltration air heating effects on the overall CEER metric is
substantially reduced. For this reason, DOE found no significant
relationship between duct configuration or air flow optimization and
improved efficiency, and therefore alternatively considered component
efficiency improvements as the primary means to increase CEER in the
June 2016 ECS NOPR engineering analysis. Accordingly, in the June 2016
ECS NOPR, DOE defined its efficiency levels, other than the max-tech,
based on the performance observed in its test sample, independent of
duct configuration or level of air flow optimization.
As discussed previously in section IV.C.1.a, in the June 2016 ECS
NOPR, DOE characterized and compared performance among all portable ACs
in its test sample and determined a relationship between SACC and a
general representation of expected CEER. DOE then assessed individual
unit performance relative to this nominal CEER relationship and
identified a baseline efficiency level at PR = 0.72, with PR defined as
the ratio of actual CEER to nominal CEER.
For Efficiency Level 2 (EL 2), DOE determined the PR that
corresponded to the maximum available efficiency across a full range of
capacities (1.14), and then selected an intermediate Efficiency Level 1
(EL 1) based on a PR between the baseline and EL 2 (0.94). For
Efficiency Level 3 (EL 3), DOE identified the PR for the single highest
efficiency unit observed in its test sample (1.31).
Due to the variations in performance among units in DOE's test
sample, DOE conducted additional performance modeling to augment its
test data when estimating efficiency and manufacturing costs at each
efficiency level. DOE numerically modeled component improvements for
each of the 21 out of 24 test units for which detailed component
information were available to estimate potential efficiency
improvements to existing product configurations. The component
improvements were performed in three steps for each unit.
The first incremental improvement for each unit included a 10-
percent increase in heat exchanger frontal area and raising the
compressor energy efficiency ratio (EER) to 10.5 Btu/Wh, the maximum
compressor efficiency identified at the time of the February 2015
Preliminary Analysis.
The second incremental component efficiency improvement step for
each unit included a 15-percent increase in heat exchanger frontal area
from the original test unit and an improvement in compressor efficiency
to an EER of 11.1 Btu/Wh, which DOE identified as the maximum
efficiency for currently available single-speed R-410A rotary
compressors of the type typically found in portable ACs and other
similar products. As with the 10-percent heat exchanger area increase,
DOE expected that a chassis size and weight increase would be necessary
to fit a 15-percent increased heat exchanger, but concluded that
portability and consumer utility would not be significantly impacted.
DOE included all available design options in the third efficiency
improvement step for each unit, including a 20-percent increase in heat
exchanger frontal area from the original test unit, more efficient
electronically commutated motor (ECM) blower motor(s), and a variable-
speed compressor with an EER of 13.7 Btu/Wh. DOE concluded that a 20-
percent increase in heat exchanger size was the maximum allowable
increase for consumer utility and portability to be retained, as
discussed in section IV.B.2 of this document. DOE also improved standby
controls efficiency in this final step, adjusting the standby power for
each test unit to the minimum observed standby power of 0.46 watts (W)
in its test sample. With these design options modeled for units in its
test sample, DOE found that the single, theoretical maximum-achievable
efficiency among all modeled units corresponded to a PR of 1.75, which
DOE defined as Efficiency Level 4 (EL 4).
Table IV.5 summarizes the specific improvements DOE considered when
modeling the performance of higher efficiency design options applied to
each test unit in the June 2016 ECS NOPR. Depending on the unit, these
design options could be associated with
[[Page 1400]]
different efficiency levels above the baseline.
Table IV.5--Component Improvements Summary--June 2016 ECS NOPR
----------------------------------------------------------------------------------------------------------------
Standby
Heat exchanger area (% increase) Compressor EER (Btu/Wh) Blower motor (type) (watts)
----------------------------------------------------------------------------------------------------------------
10%................................. 10.5 (single-speed)......... (\1\)....................... ..............
15%................................. 11.1 (single-speed)......... ............................ ..............
20%................................. 13.7 (variable-speed)....... ECM (variable-speed)........ 0.46
----------------------------------------------------------------------------------------------------------------
\1\ No blower motor or standby power changes were applied to the first two incremental steps.
In the June 2016 ECS NOPR, DOE analyzed efficiency levels according
to the original nominal CEER equation previously discussed and the PR
values listed in Table IV.6:
[GRAPHIC] [TIFF OMITTED] TR10JA20.013
Table IV.6--Portable Air Conditioner Efficiency Levels and Performance
Ratios--June 2016 ECS NOPR
------------------------------------------------------------------------
Efficiency level Performance
Efficiency level description ratio (PR)
------------------------------------------------------------------------
Baseline....................... Minimum Observed....... 0.72
EL 1........................... Intermediate Level..... 0.94
EL 2........................... Maximum Available for 1.14
All Capacities.
EL 3........................... Maximum Observed....... 1.31
EL 4........................... Max-Tech (Maximum of 1.75
Modeled Component
Improvements).
------------------------------------------------------------------------
Figure IV.1 plots each efficiency level curve for SACCs from 50 to
10,000 Btu/h, based on the June 2016 ECS NOPR nominal CEER curve scaled
by the PR assigned to each efficiency level.
[[Page 1401]]
[GRAPHIC] [TIFF OMITTED] TR10JA20.014
Additional details on the selection of efficiency levels in the
June 2016 ECS NOPR may be found in chapter 5 of the NOPR TSD.
ii. June 2016 Standards NOPR Comments and Responses
Variable Speed Compressors
ASAP and the Joint Commenters agreed with DOE's consideration of
variable-speed compressors in the STD NOPR analysis and agreed that
they can improve both part-load and full-load efficiency. (ASAP, Public
Meeting Transcript, No. 39 at pp. 72; Joint Commenters, No. 44 at p. 5)
The California IOUs supported the inclusion of variable-speed
compressors as a technology option and, although DOE was unable to
identify any portable AC models that utilize variable-speed
compressors, they suggested that DOE consider models, such as the
Climax VS12. (California IOUs, No. 42 at p. 2)
AHAM noted that the test procedure proposed at the time of the June
2016 ECS NOPR would not capture any efficiency gains associated with
implementing a variable-speed compressor for single-duct units, as
there is no part-load requirement for single-duct portable ACs and the
test is conducted at one temperature. AHAM therefore suggested that DOE
not consider variable-speed compressors for single-duct portable ACs in
the engineering analysis. AHAM suggested that the burden and costs of
implementing a variable-speed compressor for portable ACs would
outweigh the efficiency gains and it would also lead to larger and
heavier enclosures (20-percent larger chassis). AHAM also stated that
manufacturers would need to use inverter controls that are costly and
would also require an electronic expansion valve to modulate
refrigerant flow differently as compared to a single-speed compressor,
both of which are costly design options. (AHAM, No. 43 at p. 13)
DOE included variable-speed compressors as a design option in the
June 2016 ECS NOPR because of their high efficiency during continuous
operation, and not for their part-load capability. As discussed in
chapter 5 of the June 2016 ECS NOPR TSD, DOE modeled each test unit
with a variable-speed compressor with an EER of 13.7 Btu/Wh,
representative of the maximum available compressor efficiency for the
capacity range appropriate for portable ACs. This EER is consistent
with the EER of the compressor used in the Climax VS12 unit identified
by the California IOUs. DOE's estimates for efficiency improvements in
the June 2016 ECS NOPR were based on the maximum operational efficiency
and did not consider part-load efficiency gains. Therefore, DOE's
consideration of variable-speed compressors is appropriate for both
single-duct and dual-duct portable ACs in this final rule analysis. In
addition, DOE's analysis accounted for the higher costs when
incorporating variable-speed compressors, including their more costly
controls. DOE also modeled larger case sizes that would accommodate
larger heat exchangers, and the larger case sizes would also
accommodate variable-speed compressors and their associated components.
Improved Compressor Efficiency and Availability
AHAM agreed with DOE's assessment of inertia and scroll
compressors, stating that implementing these compressors would
significantly affect portability and consumer utility of the product.
AHAM noted that a portable AC is used entirely inside a home with no
portion
[[Page 1402]]
of the portable AC located outside, and therefore, noise and vibration
may be a concern for a more efficient compressor that would be noisier,
larger, and more costly to implement. (AHAM, No. 43 at p. 11)
Consistent with the June 2016 ECS NOPR analysis, DOE did not
consider inertia or scroll compressors in developing the final rule
efficiency analysis.
AHAM commented that determining the sizes of compressors available
in the future for portable ACs may be difficult considering that
manufacturers may begin developing compressors for alternative
refrigerants. AHAM therefore suggested that DOE determine the future
availability of current compressors through discussions with compressor
manufacturers. AHAM agreed with DOE's assessment that moving to EL 3 or
EL 4 would force manufacturers to remove certain portable AC cooling
capacities from the market due to compressor availability being driven
by room ACs. (AHAM, No. 43 at pp. 11, 17)
The Joint Commenters suggested that DOE's concerns regarding the
availability of high-efficiency compressors to meet higher efficiency
levels are unwarranted. They noted that because portable ACs are a
newly covered product, the lead time between the publication of the
final rule and the compliance date will be 5 years, and therefore,
manufacturers and component suppliers, including compressor
manufacturers, will have 5 years to develop new products and
components. The Joint Commenters further noted that the markets for
both room ACs and dehumidifiers will likely drive increased production
of high-efficiency compressors, especially because the next room AC
standard is scheduled to take effect no later than 2022 and DOE is
funding a project conducted by ORNL in partnership with GE to develop a
13 EER room AC. The Joint Commenters also noted that dehumidifiers use
similar components as portable ACs and a new ENERGY STAR specification
for dehumidifiers that will take effect later this year is likely to
drive increased compressor efficiencies. The Joint Commenters asserted
that available compressor efficiencies typically increase over time, as
seen in the recent room AC rulemaking, and it is therefore reasonable
to expect that the available efficiencies of both single-speed and
variable-speed compressors will increase in the years before a portable
AC standard takes effect. The Joint Commenters concluded that the long
lead time before the portable AC standard would take effect, along with
multiple market drivers, would ensure adequate availability of high-
efficiency compressors to meet higher efficiency levels. (Joint
Commenters, No. 44 at pp. 1-3)
DOE conducts its analyses based on currently available information.
Accordingly, DOE has analyzed compressor efficiencies for compressors
currently available to manufacturers. While the highest efficiency
single-speed and variable-speed compressors are available in the
appropriate capacity range for portable ACs, the number of models and
different capacities available may not be sufficient to cover the
entire range of portable AC capacities a manufacturer would include in
its product line. The 5-year period prior to compliance with the
standards established in this final rule may allow compressor
manufacturers sufficient time to develop components and products for a
range of efficiencies. However, as stated in the June 2016 ECS NOPR,
compressor availability for portable ACs is largely driven by the room
AC market. Compressors optimized for room AC operation are not
necessarily optimal for portable ACs. Therefore, DOE maintains its
concerns regarding availability of the highest efficiency single-speed
and variable-speed compressors for portable ACs, and took these
concerns into account when establishing the standards in this final
rule.
Case Insulation
In chapter 5 of the June 2016 ECS NOPR TSD, DOE concluded that
adding insulation to the product case would result in little or no
improvement compared to existing product cases. Because heat transfer
through the case has a minimal impact on overall cooling capacity, the
test procedure adopted in appendix CC does not include a measurement of
case heat transfer.
AHAM proposed that because DOE is not aware of any portable ACs
that use additional case insulation, it should be removed as a
technology option due to the lack of data. AHAM observed that DOE did
not include a measure of case heat transfer in the CEER metric in
appendix CC because DOE concluded it was insignificant, and therefore
any energy savings would not be captured by the test procedure and
would have no impact on the standards analysis. (AHAM, No. 43 at p. 12)
DOE identified case insulation as a technology option because it
may improve the efficiency of portable ACs when operated in the field,
albeit by a small amount. This technology option satisfies all four of
the screening analysis criteria, and was therefore retained in the
screening analysis and considered in the engineering analysis. However,
case insulation was not considered as a means manufacturers would
likely use to improve efficiency in the June 2016 ECS NOPR engineering
analysis due to its insignificant impact on capacity. DOE adopts that
same approach in this final rule.
Improved Duct Connections and Airflow Optimization
In chapter 5 of the June 2016 ECS NOPR TSD, DOE noted that no units
in the test sample provided additional sealing in the duct connections.
DOE, therefore, lacked information regarding leakage rates and
potential savings associated with reducing condenser air leakage to the
room, and did not further consider the improvements associated with
improved duct connections in the June 2016 ECS NOPR.
The Joint Commenters noted that while DOE was unable to incorporate
improved duct connections as a technology option in the June 2016 ECS
NOPR engineering analysis due to lack of data, manufacturers may be
able to improve duct connections as a way to improve efficiency. (Joint
Commenters, No. 44 at p. 4)
AHAM commented that it has no information regarding the heat
impacts of air leakage at the duct connections and, based on DOE's own
assessment and lack of data, proposed that DOE remove this as a design
option. (AHAM, No. 43 at p. 12)
DOE notes that although duct connections were not ultimately
implemented to reach higher efficiency levels in the June 2016 ECS NOPR
engineering analysis, this technology option satisfies all four of the
screening analysis criteria and was therefore retained in the screening
analysis and considered in the engineering analysis. DOE adopts that
same approach in this final rule.
Improved Standby Controls
In chapter 5 of the June 2016 ECS NOPR TSD, DOE discussed improved
standby efficiency as a component improvement in the engineering
analysis.
AHAM asserted that there is no substantial gain from improving
standby power of electronic controls in terms of improving efficiency
and therefore proposed that DOE remove it as a technology option as
there will be an insignificant impact when compared to overall portable
AC energy consumption. (AHAM, No. 43 at p. 11)
DOE observes that improved standby power would positively impact
CEER, and the impact would be measurable,
[[Page 1403]]
albeit small, under appendix CC. Because appendix CC can quantify the
effect of improved standby power and because DOE observed this design
option in use in its test sample, DOE considered it in the June 2016
ECS NOPR engineering analysis and in this final rule. Further, DOE
notes that EPCA requires that DOE address standby mode and off mode
energy use in its energy conservation standards. (42 U.S.C.
6295(gg)(3))
Microchannel Heat Exchangers
In the chapter 5 of the June 2016 ECS NOPR TSD, DOE concluded that
because portable ACs already include many design options to improve
heat transfer in the evaporator and condenser, and because it lacked
information on the potential efficiency gains with microchannel heat
exchangers, microchannel heat exchangers were not considered in the
engineering analysis as a design option to reach increased portable AC
efficiencies. DOE expected that manufacturers would most likely rely on
increased heat exchanger cross sectional areas to improve heat transfer
and increase efficiencies.
AHAM agreed with DOE and further stated that microchannel heat
exchangers do not work well for portable ACs because they are more
suitable for the condenser rather than the evaporator due to the
difficulty in draining condensing water. AHAM also commented that,
because portable ACs spray condensed water onto the condenser to
increase the heat exchange, poor draining capability will also affect
the condenser. AHAM also asserted that microchannel heat exchangers are
complicated, extremely expensive to implement, and easily retain more
dirt in the unit, decreasing cooling performance at a much faster rate.
(AHAM, No. 43 at pp. 10-11)
ASAP and the Joint Commenters noted that the NOPR engineering
analysis did not consider potential efficiency gains from microchannel
heat exchangers, which may be utilized by manufacturers to meet the
portable AC energy conservation standards. The Joint Commenters
referenced research performed in 2006 that found microchannel
condensers can result in a 6- to 10-percent increase in refrigeration
system efficiency, and additional research for mobile air conditioning
that indicated that microchannel heat exchangers can increase
efficiency by 8 percent. (ASAP, Public Meeting Transcript, No. 39 at
pp. 67-68; Joint Commenters, No. 44 at p. 4)
DOE agrees that microchannel heat exchangers are associated with
efficiency improvements, but also agrees with AHAM regarding the
complexity of incorporating these heat exchangers into portable ACs.
Due to the issues in implementing microchannel heat exchangers and the
lack of information regarding their use in portable ACs, DOE maintains
the June 2016 ECS NOPR approach for this final rule analysis, in which
DOE does not consider this design option in the engineering analysis
because it expects that manufacturers would instead rely on increasing
heat exchanger cross-sectional areas to increase heat transfer.
Market Distribution
AHAM analyzed the data in the combined sample of portable ACs and
concluded that a greater percentage of test units fell short of the
proposed efficiency level (TSL 2) than DOE estimated for its own test
sample in the June 2016 ECS NOPR. AHAM determined that 17 percent of
units in the combined dataset would meet TSL 2, suggesting that 83
percent of the units would require a redesign. Therefore, AHAM proposed
that DOE adopt a median PR of 0.90 based on the combined AHAM and DOE
data. AHAM stated that a PR of 0.90 would better reflect the current
status of units on the market and also would require more reasonable
redesigns for manufacturers, especially for a new standard. AHAM noted
that its proposed level is between DOE's June 2016 ECS NOPR TSL 1 and
TSL 2, and according to AHAM would require a 50-percent redesign of the
tested units. (AHAM, No. 43 at pp. 7-8)
As discussed in chapter 5 of the June 2016 ECS NOPR TSD, DOE
assessed the number of units that would require a complete product
redesign, as opposed to less costly and impactful component
improvements, and found that 46 percent of units in the test sample
would require a significant product redesign at TSL 2 (see table 5.5.4
in the STD NOPR TSD). Also, DOE's energy conservations standards are
not determined solely based on the number of units that would require
updates to meet the new levels, but rather the range of criteria
discussed in section II.A of this document. These considerations are
discussed at length in the June 2016 ECS NOPR and TSD and are
reassessed and addressed in this final rule.
As discussed in the following section, DOE considered the combined
DOE and AHAM dataset to update its engineering analysis in this final
rule.
iii. Final Rule Analysis
For this final rule, DOE maintained the engineering analysis
approach utilized in the June 2016 ECS NOPR, with additional
modifications and improvements based primarily on comments and data
received in response to the June 2016 ECS NOPR. As discussed in in
section IV.C.1.a, DOE updated the test data and improved the
performance modeling in this final rule and subsequently updated the
relationship for nominal CEER based on measured SACC as follows:
[GRAPHIC] [TIFF OMITTED] TR10JA20.015
DOE also identified a baseline efficiency level with a PR of 0.67
for this final rule, based on the updated test unit performance.
DOE subsequently adjusted its efficiency levels based on the
updated unit performance data utilized in this final rule. For EL 2,
DOE determined the PR that corresponded to the maximum available
efficiency across a full range of capacities (1.04), and then selected
an intermediate efficiency level for EL 1 based on a PR between the
baseline and EL 2 (0.85). For EL 3, DOE identified the PR for the
single highest efficiency unit observed in its test sample (1.18).
In this final rule, DOE relied on the same numerically modeled
component improvements for each of the 21 out of 24 test units
considered in the June 2016 ECS NOPR. DOE also modeled component
improvements for an additional 2 units for which DOE identified
detailed component information. The component improvements were
performed in three steps for each unit, similar to the improvements
conducted for the June 2016 ECS NOPR engineering analysis. For this
final rule, DOE utilized the same component efficiency improvements
outlined in Table IV.5, maintaining the same maximum single-speed and
variable speed compressor efficiencies (11.1 Btu/Wh and 13.7 Btu/Wh,
respectively), the same maximum
[[Page 1404]]
percent heat exchanger frontal area increases (20 percent), the switch
from a permanent split capacitor (PSC) motor to an ECM for the blower,
and a minimum standby power of 0.46 W.
With these design options modeled for units in its test sample, DOE
found that the single, theoretical maximum-achievable efficiency among
all modeled units corresponded to a PR of 1.62, which DOE defined as EL
4.
DOE emphasizes that the changes listed in Table IV.5 do not
uniquely correlate with efficiency levels beyond the baseline. Baseline
through EL 3 are defined by the range of test data, while EL 4 is
defined by the maximum theoretical PR after modeling all design options
listed in Table IV.5.
In this final rule, DOE analyzed efficiency levels based on test
samples and modeled performance according to the following equation and
the PR values listed in Table IV.7:
[GRAPHIC] [TIFF OMITTED] TR10JA20.016
Table IV.7--Portable Air Conditioner Efficiency Levels and Performance
Ratios--Final Rule Analysis
------------------------------------------------------------------------
Efficiency level Performance
Efficiency level description ratio (PR)
------------------------------------------------------------------------
Baseline....................... Minimum Observed....... 0.67
EL 1........................... Intermediate Level..... 0.85
EL 2........................... Maximum Available for 1.04
All Capacities.
EL 3........................... Maximum Observed....... 1.18
EL 4........................... Max-Tech (Maximum of 1.62
Modeled Component
Improvements).
------------------------------------------------------------------------
Figure IV.2 plots each efficiency level curve for SACCs from 50 to
10,000 Btu/h, based on the nominal CEER curve scaled by the PR assigned
to each efficiency level.
[GRAPHIC] [TIFF OMITTED] TR10JA20.017
Additional details on the selection of efficiency levels may be
found in chapter 5 of the final rule TSD.
2. Manufacturer Production Cost Estimates
In the February 2015 Preliminary Analysis, DOE developed
incremental MPC estimates based on the optimized airflow approach to
improving efficiencies. For the June 2016 ECS NOPR analysis, DOE
developed new incremental MPC estimates based on the changes to the
efficiency levels detailed in section IV.C.1 of the June 2016 ECS NOPR,
and also based on feedback from interested parties and on information
[[Page 1405]]
gathered in additional manufacturer interviews. When assigning costs to
efficiency levels in the June 2016 ECS NOPR analysis, DOE considered
all units that performed between two efficiency levels as
representative of the lower of the two efficiency levels. DOE
determined an average baseline MPC based on the units in DOE's test
sample with a CEER below EL 1 (PR = 0.94). Six units in the test sample
with a market-representative range of capacities tested below EL 1. The
average MPC of these six units reflected the baseline MPC for the
overall portable AC market.
DOE subsequently determined the costs for all other torn-down and
modeled units, and determined the average costs associated with each
incremental component efficiency improvement when moving between
efficiency levels. In addition to the costs associated with the
improved components themselves, DOE also considered the increased costs
associated with other related product changes, such as increasing case
sizes to accommodate larger heat exchangers.
Although DOE's test and modeled data resulted in a range of PRs
from 0.72 to 1.75, DOE noted in the June 2016 ECS NOPR that not all
units in its test sample were capable of reaching higher PRs with the
identified design option changes. For example, the modeled max-tech PR
represented a unit in the test sample that had a high PR as a starting
point (near EL 3). Modeling increased heat exchanger sizes and a more
efficient compressor in that unit resulted in a higher modeled PR than
could be achieved theoretically by applying the same design options to
baseline units. For the units that started at lower PRs, DOE expected
that manufacturers would have to undertake a complete product redesign
and optimization to reach higher PRs, rather than just applying the
identified design options. As a result, manufacturers of these units
would incur higher MPCs to reach the higher efficiency levels and also
significant conversion costs associated with updating their product
lines. These conversion costs are discussed further in chapter 12 of
the June 2016 ECS NOPR TSD.
In the June 2016 ECS NOPR, DOE found that only three units in the
teardown sample would be capable of reaching EL 3 without significant
product redesign (i.e., the one unit that tested at EL 3 and two units
that could theoretically achieve EL 3 with the highest efficiency
single-speed compressors and increasing the heat exchanger area no more
than 20 percent). At EL 4 (max-tech), DOE determined all products would
require significant product redesigns, as reaching the maximum modeled
efficiency would require a 20-percent increase in heat exchanger area
and the most efficient variable-speed compressor. DOE noted that
manufacturers would likely undertake a product redesign when switching
from a single-speed to a variable-speed compressor. Additionally, as
discussed in section IV.C.1.b of this document, the ability of a
product to reach EL 3 or EL 4 would be dependent on the availability of
the most efficient components. However, compressor availability for
portable ACs is largely driven by the room AC industry, so the most
efficient single-speed and variable-speed compressors may not be
available over the entire range of capacities necessary for all
portable AC product capacities. As a result, DOE determined that moving
to EL 3 or EL 4 may necessitate manufacturers to remove certain
portable AC cooling capacities from the market.
For the June 2016 ECS NOPR, DOE calculated all MPCs in 2014 dollars
(2014$), the most recent year for which full-year data was available at
the time of the analysis. Table IV.8 presents the MPC estimates DOE
developed for the June 2016 ECS NOPR.
Table IV.8--Portable Air Conditioner Incremental Manufacturer Production
Costs (2014$)--June 2016 ECS NOPR
------------------------------------------------------------------------
Incremental
Efficiency level MPC (2014$)
------------------------------------------------------------------------
Baseline................................................ ..............
EL1..................................................... $29.78
EL2..................................................... 45.13
EL3..................................................... 60.35
EL4..................................................... 108.99
------------------------------------------------------------------------
Additional details on the development of the incremental cost
estimates for the June 2016 ECS NOPR analysis may be found in chapter 5
of the June 2016 ECS NOPR TSD.
During the July 2016 STD Public Meeting, AHAM stated it would work
to gather and provide to DOE product cost information. (AHAM, Public
Meeting Transcript, No. 39 at p. 75-76) GE commented that it was unable
to provide accurate cost feedback due to concerns regarding conducting
the test procedure and testing units of all duct configurations. (GE,
Public Meeting Transcript, No. 39 at p. 18)
AHAM subsequently stated that it and its members were unable to
verify the manufacturer product cost estimates in the June 2016 ECS
NOPR because all portable ACs are produced overseas, and the new test
procedures will require reductions in reported capacities of existing
products. AHAM suggested that manufacturers have not yet fully explored
the design requirements to reach the various ELs and therefore urged
DOE to reassess its engineering and costing analysis to incorporate the
effects of both capacity changes and modifications necessary to meet
the ELs. AHAM argued that it is not sufficient to say that the costs
associated with the capacity changes are incorporated in all ELs from
the base case onward because the constraints on size and portability to
maintain the product as portable will have significant effects on the
practicality of technology options, particularly adding evaporator or
condenser coil area. (AHAM, No. 43 at p. 22)
GREE commented that, based on its calculations, larger chassis
designs are necessary to meet the proposed standards and consumers are
likely unwilling to accept the additional costs associated with
tooling. (GREE, Public Meeting Transcript, No. 39 at pp. 21-22)
As discussed in chapter 5 of the June 2016 ECS NOPR TSD, based on
the range of observed heat exchanger areas in its test sample, DOE
determined that a 20-percent increase in heat exchanger area is an
appropriate limit to maintain portability and avoid impacting consumer
utility. DOE also notes that all costs necessary to increase heat
exchanger areas and the corresponding chassis design changes were
considered in the product cost estimates presented in the June 2016 ECS
NOPR and are also considered in this final rule. Additionally, DOE
accounted for the changes to both CEER and SACC that would result from
incorporating the design option changes in its June 2016 ECS NOPR
engineering analysis.
AHAM noted that no portable ACs are manufactured in the U.S., and
some are manufactured by third-party manufactures instead of by those
who market them. Therefore, AHAM does not believe it is possible to
characterize the cost structure of Chinese manufacturing plants and
ultimately determine the manufacturer costs for overseas manufacturers.
During the July 2016 STD Public Meeting and in its July 21, 2016
request for data and information, AHAM requested insight into how the
cost model was developed and how DOE is able to estimate the
manufacturing costs for portable ACs. (AHAM, Public Meeting Transcript,
No. 39 at pp. 76-77)
The DOE response memo stated that DOE accounts for the location of
a manufacturing facility when determining labor costs as well as
[[Page 1406]]
tooling and equipment costs.\22\ Industry financial metrics were
estimated using publically available financial information for both
manufacturers and importers selling portable ACs in the U.S. DOE also
noted that the cost estimates in the June 2016 ECS NOPR accounted for
input received from manufacturers and importers during confidential
interviews.
---------------------------------------------------------------------------
\22\ See p. 4 of the DOE response memo, found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0038.
---------------------------------------------------------------------------
For the final rule analysis, DOE followed the same approach as used
in the June 2016 ECS NOPR to develop incremental MPC estimates at each
efficiency level. DOE updated the incremental MPC estimates from the
June 2016 ECS NOPR based on the changes to the ELs detailed in section
IV.C.1 of this final rule, feedback from interested parties, improved
test unit modeling, and updated cost modeling.
As described in section IV.C.1.a of this final rule, DOE
incorporated minor updates to its own data set and included the AHAM
test data to determine performance trends and ELs. The adjusted data
and slightly different EL curve shape compared to the June 2016 ECS
NOPR shifted a few of the data points that would be included in each
EL. Additionally, DOE did not have access to the AHAM test units for
teardowns or cost modeling, so by necessity relied on its own sample of
units to define the representative incremental MPCs at each EL. For
this final rule, DOE also calculated all MPCs in 2015$, the most recent
year for which full-year data was available at the time of the final
rule analysis. Table IV.9 presents the updated MPC estimates DOE
developed for this final rule.
Table IV.9--Portable Air Conditioner Incremental Manufacturer Production
Costs (2015$)--Final Rule Analysis
------------------------------------------------------------------------
Incremental
Efficiency level MPC (2015$)
------------------------------------------------------------------------
Baseline................................................ ..............
EL1..................................................... $18.95
EL2..................................................... 50.57
EL3..................................................... 93.84
EL4..................................................... 115.53
------------------------------------------------------------------------
Additional details on the development of the incremental cost
estimates for the final rule analysis may be found in chapter 5 of the
final rule TSD.
D. Markups Analysis
The markups analysis develops appropriate markups (e.g.,
manufacturer markups, retailer markups, distributor 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 portable ACs, the main parties in the distribution chain
are manufacturers, retailers, and consumers.
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 primarily engaged in appliance
manufacturing and whose combined product range includes portable ACs.
DOE developed baseline and incremental markups for the
manufacturers and retailers in the distribution chain. Baseline markups
are applied to the price of products with baseline efficiency, while
incremental markups are applied to the difference in price between
baseline and higher-efficiency models (the incremental cost increase).
The incremental markup is typically less than the baseline markup, and
is designed to maintain similar per-unit operating profit before and
after new or amended standards.\23\
---------------------------------------------------------------------------
\23\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that in markets that are reasonably
competitive it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------
DOE relied on economic data from the U.S. Census Bureau to estimate
average baseline and incremental markups.
AHAM commented that it strongly disagrees with the concept of
incremental markups. According to AHAM, manufacturers, wholesalers,
retailers and contractors have all provided numerous amounts of data,
studies, and surveys saying that the incremental markup concept has no
foundation in actual practice. AHAM asked what additional information
DOE would need to reassess the markups approach. AHAM further asked if
DOE would agree to put the concept of incremental markups up for peer
review. (AHAM, No. 39 at pp. 80-81) AHAM states that DOE persists in
relying on a simplistic interpretation of economic theory that assumes
only variable costs can be passed through to customers because economic
returns on capital cannot increase in a competitive marketplace.
According to AHAM, they and the other associations and industry
participants are unanimous in declaring that DOE's conclusions are
simply incorrect and that percentage margins throughout the
distribution channels have remained largely constant. In addition, AHAM
noted that Shorey Consulting has shown that empirical studies of
industry structure and other variables have only weak correlation with
profitability, demonstrating that the economic theory DOE relies upon
is proven not to apply in practice. Rather than continue to debate past
each other, AHAM commented that DOE should submit both its work and
that of the various industry groups to an independent peer review
process. (AHAM, No. 43 at p. 20)
DOE disagrees that the theory behind the concept of incremental
markups has been disproved. The concept is based on a simple notion: An
increase in profitability, which is implied by keeping a fixed markup
percentage when the product price goes up and demand is relatively
inelastic, is not likely to be viable over time in a business that is
reasonably competitive. DOE agrees that empirical data on markup
practices would be desirable, but such information is closely held and
difficult to obtain.
Regarding the Shorey Consulting interviews with appliance
retailers, although the retailers said that they maintain the same
percentage margin after amended standards for refrigerators took
effect, it is not clear to what extent the wholesale prices of
refrigerators actually increased. There is some empirical evidence
indicating that prices may not always increase following a new
standard.24 25 26 If this happened to be the case following
the new refrigerator standard, then there is no reason to suppose that
percentage margins changed either.
---------------------------------------------------------------------------
\24\ Spurlock, C.A. 2013. ``Appliance Efficiency Standards and
Price Discrimination.'' Lawrence Berkeley National Laboratory Report
(LBNL) LBNL-6283E.
\25\ Houde, S. and C.A. Spurlock. 2015. ``Do Energy Efficiency
Standards Improve Quality? Evidence from a Revealed Preference
Approach.'' LBNL LBNL-182701.
\26\ Taylor, M., C.A. Spurlock, and H.-C. Yang. 2015.
``Confronting Regulatory Cost and Quality Expectations: An
Exploration of Technical Change in Minimum Efficiency Performance
Standards.'' Resources for the Future (RFF) 15-50.
---------------------------------------------------------------------------
DOE's analysis necessarily considers a simplified version of the
world of
[[Page 1407]]
appliance retailing; namely, a situation in which other than appliance
product offerings, nothing changes in response to amended standards.
DOE's analysis assumes that product cost will increase while the other
costs remain constant (i.e., no change in labor, material, or operating
costs), and asks whether retailers will be able to keep the same markup
percentage over time. DOE recognizes that retailers are likely to seek
to maintain the same markup percentage on appliances if the price they
pay goes up as a result of appliance standards, but DOE contends that
over time downward adjustments are likely to occur due to competitive
pressures. Some retailers may find that they can gain sales by reducing
the markup and maintaining the same per-unit gross profit as they had
before the new standard took effect. Additionally, DOE contends that
retail pricing is more complicated than a simple percentage margin or
markup. Retailers undertake periodic sales and they reduce the prices
of older models as new models come out to replace
them.27 28 29 Even if retailers maintain the same percent
markup when appliance wholesale prices increase as the result of a
standard, retailers may respond to competitive pressures and revert to
pre-standard average per-unit profits by holding more frequent sales,
discounting products under promotion to a greater extent, or
discounting older products more quickly. These factors would counteract
the higher percentage markup on average, resulting in much the same
effect as a lower percentage markup in terms of the prices consumers
actually face on average.
---------------------------------------------------------------------------
\27\ Bagwell, K. and Riordan, M.H., 1991. ``High and declining
prices signal product quality.'' The American Economic Review, pp.
224-239.
\28\ Betts, E. and Peter, J.M., 1995. ``The strategy of the
retail `sale': Typology, review and synthesis.'' International
Review of Retail, Distribution and Consumer Research, 5(3), pp. 303-
331.
\29\ Elmaghraby, W. and Keskinocak, P., 2003. ``Dynamic pricing
in the presence of inventory considerations: Research overview,
current practices, and future directions.'' Management Science,
49(10), pp. 1287-1309.
---------------------------------------------------------------------------
DOE acknowledges that its approach to estimating retailer markup
practices after amended standards take effect is an approximation of
real-world practices that are both complex and varying with business
conditions. However, DOE continues to maintain that its assumption that
standards do not facilitate a sustainable increase in profitability is
reasonable. Chapter 6 of the final rule TSD provides details on DOE's
development of markups for portable ACs.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of portable AC at different efficiencies in
representative U.S. single-family homes, multi-family residences, and
commercial settings, and to assess the energy savings potential of
increased portable AC efficiency. The energy use analysis estimates the
range of energy use of portable AC in the field (i.e., as they are
actually used by consumers). The energy use analysis provides the basis
for other analyses DOE performed, particularly assessments of the
energy savings and the savings in consumer operating costs that could
result from adoption of amended or new standards.
DOE determined a range of annual energy consumption of portable ACs
as a function of the unit's annual operating hours to meet the cooling
demand, which depends on the efficiency of the unit, power (watts) of
three modes of operation (cooling, fan, and standby), and the
percentage of time in each mode. DOE also performed three sensitivity
analyses on energy consumption, including looking at the effects of
geographical distribution, room threshold size and overall operation
time on consumer benefits and costs.
1. Consumer Samples
EIA's Residential Energy Consumption Survey (RECS) provides
information on whether households use a room AC. Because portable ACs
and room ACs often serve a similar function,\30\ DOE developed a sample
of households that use room ACs from RECS 2009, which is the latest
available RECS.\31\ DOE selected the subset of RECS 2009 records that
met relevant criteria.\32\
---------------------------------------------------------------------------
\30\ It is assumed that portable ACs may perform supplemental
cooling to a particular space, but that the cooling loads between
room ACs and portable ACs are similar. For example, a portable AC
may be used to provide cooling to a single room in place of a
central AC to cool an entire home. For the purposes of estimating
energy use, DOE assumed that portable ACs are operated under similar
cooling loads as room ACs, given their similar cooling capacities.
\31\ DOE-EIA. Residential Energy Consumption Survey. 2009.
http://www.eia.gov/consumption/residential/data/2009/.
\32\ RECS household use criteria: (1) At least one room AC was
present in the household; (2) The energy consumption of the room AC
was greater than zero; (3) The capacity of the room AC was less than
14,000 Btu/hr (a cooling capacity comparable to portable ACs as
measured by industry test methods); and (4) The room being cooled
measured no more than 1,000 square feet.
---------------------------------------------------------------------------
AHAM commented that DOE's consumer sample based on room ACs does
not geographically match results AHAM obtained through an online
survey. (AHAM, No. 43 at p. 19) Although DOE has not received the full
survey results from AHAM, DOE conducted a sensitivity analysis using
data points estimated from Figure 6 in Appendix B of AHAM's comments.
DOE reweighted its residential and commercial sample such that 24
percent of the sample was from the Northeast, 13 percent from the
Midwest, 29 percent from the South, and 34 percent from the West. DOE
found that this sensitivity marginally increased LCC savings and
reduced the percent of negatively impacted consumers for both sectors.
Results for this sensitivity can be found in the final rule TSD
appendix 8F.
The California IOUs commented that DOE's estimate for its
residential room size threshold of 1,000 square feet could be further
refined using data from 2013 study by the National Association of Home
Builders. The California IOUs suggested DOE's current method limits the
sample of potential installations of portable ACs. (California IOUs,
No. 42 at p. 4)
Sizing charts provided by vendors indicate that portable ACs are
intended to cool rooms having an area as large as approximately 525 to
600 square feet. A review of retail websites, however, indicated
portable ACs may be used in rooms as large as 1,000 square feet. DOE
assumed 1,000 square feet to be the maximum room size a user would
attempt to cool using a portable AC. In practice, only 60 records in
the RECS 2009 sample (about 2 percent) represent rooms between 600 and
1,000 square feet.
As a sensitivity, DOE removed the room size threshold from its
analysis and calculated LCC results using the full room AC sample.
Removing this threshold made minimal impact on the results. In this
scenario, the average LCC savings for residential consumers under the
proposed standard (TSL 2) would be $107 (compared with $108 in the
primary estimate), and 28 percent of consumers would be impacted
negatively (compared with 27 percent in the primary estimate). The
simple payback period would be 2.8 years (compared with 2.8 years in
the primary estimate). The full sensitivity results can be found in the
final rule TSD appendix 8F.
To estimate the operating hours of portable ACs used in commercial
settings, DOE developed a building sample from the 2012 Commercial
Buildings Energy Consumption Survey
[[Page 1408]]
(CBECS),\33\ again using the operating hours of room ACs as a proxy.
DOE used the 2003 CBECS in the June 2016 ECS NOPR analysis. The method
is described in chapter 7 of the final rule TSD.
---------------------------------------------------------------------------
\33\ DOE-EIA. Commercial Buildings Energy Consumption Survey.
2012. http://www.eia.gov/consumption/commercial/data/2012/.
---------------------------------------------------------------------------
AHAM and the California IOUs encouraged DOE to replace 2003 CBECS
data with 2012 CBECS data. (AHAM, No. 39 at pp. 85-87; California IOUs,
No. 42 at p. 4)
DOE updates its inputs for analyses with credible and verifiable
sources as data become available. At the time the June 2016 ECS NOPR
analysis was completed, 2012 CBECS with expenditure microdata was not
yet available, so DOE used 2003 CBECS. Because the data set was
released in time for use in the final rule, DOE is using 2012 CBECS in
its final rule analysis as recommended by AHAM and the California IOUs.
2. Cooling Mode Hours and Sensitivity Analyses
To estimate the cooling operating hours of portable ACs using
datasets that are statistically representative, DOE used the same
method and updated datasets that were used in the 2011 direct final
rule for room ACs. 76 FR 22454 (Apr. 21, 2011). For each sample
household, RECS provides the estimated energy use for cooling by room
ACs. After assigning an efficiency and capacity to the room AC, DOE
could then estimate its operating hours in cooling mode. DOE adjusted
the operating hours in cooling mode to account for the likelihood that
improvement in building shell efficiency would reduce the cooling load
and operating hours.\34\ The estimated average of cooling operating
hours for a room AC is 612 hours/year.
---------------------------------------------------------------------------
\34\ To account for increased building efficiency at the time
that the proposed standard would take effect, DOE used the 2022
building shell index factor of 0.97 for space cooling in all
residences from the EIA's AEO. (Energy Information Administration.
Annual Energy Outlook 2016 with Projections to 2040. July 2016.)
---------------------------------------------------------------------------
Some interested parties objected to DOE's use of room AC data as a
proxy for portable AC operating hours. AHAM stated that DOE
misrepresents portable ACs by referencing and scaling characteristic
and performance data from room air conditioners. (AHAM, No. 43 at p.
18) AHAM asserted that for a standards rule to be technologically
feasible and economically justified, it must be based on product-
specific data, not assumptions and estimates. (AHAM, No. 43 at pp. 1-2)
De' Longhi stated that from their experience, while room ACs are
typically used as the main cooling system, portable ACs are often used
as supplementary systems when central systems are not activated or out
of order so that the annual hours of use for portable ACs are lower
than for room ACs. (De' Longhi, No. 41 at p. 1)
AHAM and De' Longhi stated that a De' Longhi survey \35\ cannot be
used to conclude that portable ACs and room ACs have similar cooling
mode annual operating hours. De' Longhi asserted that although both
portable ACs and room ACs are used in similar periods of the day, that
does not mean that they are used for the same number of hours in a day
and for the same number of days in a year. They believed that DOE
mischaracterized the study and drew conclusions that are not justified
from the data. De' Longhi stated that the annual hours of use for
portable ACs are on average sensibly lower than for room ACs. (AHAM,
No. 43 at pp. 18-19; De' Longhi, No. 41 at p. 2)
---------------------------------------------------------------------------
\35\ De' Longhi Attachment to Comment on the Energy Efficiency
and Renewable Energy Office (EERE) Proposed Rule: 2015-02-25 Energy
Conservation Program: Test Procedures for Portable Air Conditioners;
NOPR. May 8, 2015. https://www.regulations.gov/document?D=EERE-2014-BT-TP-0014-0016.
---------------------------------------------------------------------------
DOE maintains that room AC cooling hours are an appropriate proxy
for portable AC cooling hours as both products are used for cooling
defined spaces and their product usage is broadly similar. However, DOE
agrees with the commenters that the De' Longhi survey cannot be used to
conclusively draw a relationship between the total annual cooling mode
hours of portable ACs and room ACs. To account for potential
differences between consumer use of portable ACs and room ACs, DOE
conducted a sensitivity analysis which assumes lower annual hours of
use for portable ACs in comparison to room ACs. Specifically, in this
sensitivity analysis, DOE scaled the room AC cooling mode hours of use
by half while maintaining the assumption that portable ACs are used
during the same time of year as room ACs, since the use of both types
of cooling equipment is likely to be consistent seasonally. The results
of this sensitivity analysis estimate one-third of the energy cost
savings relative to the primary estimate. In this low-usage case, the
average LCC savings under the adopted standards (TSL 2) would be $35
(compared with $125 in the primary estimate), and 42 percent of
consumers would be impacted negatively (compared with 27 percent in the
primary estimate). The simple payback period would be 5.1 years
(compared with 2.8 years in the primary estimate). Further details are
presented in appendix 8F and appendix 10E of the final rule TSD. Thus,
even if consumers use portable ACs substantially less than room ACs,
the overall impacts on consumers would be positive. It should be noted
that lower product usage would imply a longer lifetime; however, in
this sensitivity analysis, the lifetime was not lengthened. A longer
lifetime would increase savings, reduce the payback period, and reduce
the population segment that is negatively impacted.
AHAM recommended that DOE use data from the study by Burke et al.
to calculate operating hours.\36\ (AHAM, No. 43 at p. 20) DOE believes
that it would be inaccurate to use the Burke et al. study for
estimating operating hours for the nation. As stated in the report
itself, given the limited number of test sites in two locations in the
Northeast, the Burke et al. study was not intended to be statistically
representative of portable AC users in the U.S. It should also be noted
that the annual energy use estimates presented in the study are based
on metered average outdoor temperatures which were reportedly lower
than usual for most summers. In addition, the metering period began in
July and it is likely that portable AC owners either in warmer years or
in other areas of the country may operate the units in earlier months
(May and June), which would contribute to higher annual use. DOE did
use the Burke et al. study for estimations of the fan-only mode
operation since the report provided the only publicly available fan-
only information for any cooling product.
---------------------------------------------------------------------------
\36\ Burke et al., 2014. ``Using Field-Metered Data to Quantify
Annual Energy Use of Residential Portable Air Conditioners.'' LBNL,
Berkeley, CA. LBNL Report LBNL-6469E. September 2014.
---------------------------------------------------------------------------
AHAM claims that the data DOE has used raise serious and separate
concerns under the Data Quality Act.\37\ (Public Law 106-554) According
to AHAM, the law and the Office of Management and Budget (OMB)
guidelines require agency actions aimed at ``maximizing the quality,
objectivity, utility, and integrity of information (including
statistical information) disseminated by the agency.'' Id. at Sec.
515(b)(2)(A). (AHAM, No. 43 at p. 20)
---------------------------------------------------------------------------
\37\ Reference can be found at https://www.whitehouse.gov/sites/default/files/omb/fedreg/reproducible2.pdf.
---------------------------------------------------------------------------
DOE maintains that the data sources and methodology used in its
analyses meet the guidelines developed by OMB in response to the Data
Quality Act. Data used in DOE's analysis draws from the best available
statistically-significant representation of how U.S. consumers
[[Page 1409]]
use cooling devices similar in function and cooling capacity to
portable ACs. Interested parties have been provided opportunities at
the preliminary analysis and NOPR stages to make data available to
refine DOE's analysis. When reviewed and verified, DOE has incorporated
data from comments into its analysis. For example, DOE incorporated
analysis data and information from interested parties regarding
historical shipments, and product efficiencies and capacities into the
final rule. Additionally, DOE performed sensitivity analyses for inputs
that are subject to uncertainty to assess the impact of alternative
assumptions and reports those results in the final rule TSD.
The California IOUs suggested that DOE use projected cooling
degree-days for the LCC analysis year (2022) to accurately quantify the
required cooling load. (California IOUs, No. 42 at p. 4) DOE agrees and
has incorporated this suggestion into its final rule analysis using
census division cooling degree-day trends from AEO 2016.\38\ Including
cooling degree-day trends increases operating hours by approximately 4
percent. DOE also used the projected change in building shell
efficiencies from AEO 2016 when calculating operating hours to account
for increased building shell efficiency of the stock.
---------------------------------------------------------------------------
\38\ EIA's Annual Energy Outlook. (Energy Information
Administration. Annual Energy Outlook 2016 with Projections to 2040.
July 2016.)
---------------------------------------------------------------------------
3. Fan-Only Mode and Standby Mode Hours
To estimate the number of hours in fan-only mode, DOE utilized a
field metering analysis of a sample of portable ACs in 19 homes.\39\
The survey provided data on cooling-mode and fan-only mode hours of
operation. DOE derived a distribution of the ratio of fan-only mode
hours to cooling-mode hours, and used this distribution to randomly
assign a ratio to each of the sample households, which allows
estimation of fan-only mode hours of operation. DOE assumed portable
ACs would only be plugged in during months with 5 or more cooling
degree days. The annual hours in standby mode were derived by
subtracting the cooling-mode and fan-only mode hours of operation from
the total number of hours in a months with 5 or more cooling degree
days.
---------------------------------------------------------------------------
\39\ Burke, Thomas, et al. 2014. Using Field-Metered Data to
Quantify Annual Energy Use of Portable Air Conditioners. http://www.osti.gov/scitech/servlets/purl/1166989.
---------------------------------------------------------------------------
Chapter 7 of the final rule TSD provides details on DOE's energy
use analysis for portable ACs.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
portable ACs. The effect of new or amended energy conservation
standards on individual consumers usually involves a reduction in
operating cost and an increase in purchase cost. DOE used the following
two metrics to measure consumer impacts:
The LCC (life-cycle cost) is the total consumer expense of
a product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). To compute the operating costs, DOE
discounts future operating costs to the time of purchase and sums them
over the lifetime of the product.
The simple 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 simple PBP by dividing the change
in purchase cost at higher ELs by the change in annual operating cost
for the year that new standards are assumed to take effect.
For any given EL, DOE calculates the LCC savings as the change in
LCC in a standards case relative to the LCC in the no-new-standards
case, which reflects the estimated efficiency distribution of portable
ACs in the absence of new or amended energy conservation standards. In
contrast, the simple PBP for a given EL is measured relative to the
baseline product.
For each considered EL, DOE calculated the LCC and PBP for a
nationally representative set of housing units and commercial buildings
that use portable ACs. DOE used the EIA's 2009 RECS to develop
household samples for portable ACs based on households that use room
ACs. DOE also used the EIA's 2012 CBECS to develop a sample of
commercial buildings that use portable ACs, again based on buildings
that use room ACs. For each sample household or commercial building,
DOE determined the energy consumption for the portable ACs and the
appropriate electricity price. By developing a representative sample of
households, the analysis captured the variability in energy consumption
and energy prices associated with the use of portable ACs.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Note in
the case of portable ACs, DOE assumed that installation costs would not
change with efficiency ELs. So the difference of installation cost
between the baseline and higher ELs is then $0. Inputs to the
calculation of operating expenses include annual energy consumption,
energy prices and price projections, repair and maintenance costs,
product lifetimes, and discount rates. DOE created distributions of
values for product lifetime and discount rates with probabilities
attached to each value, to account for their uncertainty and
variability. Sales tax and electricity prices are tied to the
geographic locations of purchasers drawn from the residential and
commercial samples.
The model DOE uses to calculate the LCC and PBP relies on a Monte
Carlo simulation to incorporate uncertainty and variability into the
analysis. The Monte Carlo simulation randomly samples input values from
the probability distributions and portable AC user samples. The model
calculated the LCC and PBP for products at each EL for 10,000 housing
units or commercial buildings per simulation run.
DOE calculated the LCC and PBP for all consumers as if each were to
purchase a new product in the expected year of compliance with new
standards. Any new standards would apply to portable ACs manufactured 5
years after publication of the final standard. (42 U.S.C. 6295(l)(2))
Therefore, for purposes of its analysis, DOE used 2022 as the first
year of compliance with new standards.
Table IV.10 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. For energy use, RECS and CBECS were used
for number of hours of use in cooling mode. A field metering report
provided information regarding the fan-mode of portable ACs.\40\
Details of the spreadsheet model, and of all the inputs to the LCC and
PBP analyses, are contained in chapter 8 of the final rule TSD and its
appendices.
---------------------------------------------------------------------------
\40\ Burke, Thomas, et al. 2014. Using Field-Metered Data to
Quantify Annual Energy Use of Portable Air Conditioners. http://www.osti.gov/scitech/servlets/purl/1166989.
[[Page 1410]]
Table IV.10--Summary of Inputs and Methods for the LCC and PBP Analysis
*
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost........................... Derived by multiplying MPCs by
manufacturer and retailer
markups and sales tax, as
appropriate. Producer Price
Index (PPI) series for small
household electronics fit to
an exponential model.
Installation Costs..................... Assumed no installation costs
with baseline unit and no cost
with EL.
Annual Energy Use...................... Power in each mode multiplied
by the hours per year in each
mode. Average number of hours
based on 2009 RECS, 2012
CBECS, and field metering
data. Variability: Based on
the 2009 RECS and 2012 CBECS.
Energy Prices.......................... Electricity: Based on 2014
average and marginal
electricity price data from
the Edison Electric Institute.
Variability: Marginal
electricity prices vary by
season, U.S. region, and
baseline electricity
consumption level.
Energy Price Trends.................... Based on AEO 2016 No-CPP case
price projections. Trends are
dependent on sector and census
division.
Repair and Maintenance Costs........... Assumed no change with EL.
Product Lifetime....................... Weibull distribution using
parameters from room ACs.
Discount Rates......................... Approach involves identifying
all possible debt or asset
classes that might be used to
purchase the considered
appliances, or might be
affected indirectly. Primary
data source was the Federal
Reserve Board's Survey of
Consumer Finances.
Compliance Date........................ 2022.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the final rule
TSD.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described in
section IV.D of this document (along with sales taxes). DOE used
different markups for baseline products and higher-efficiency products,
because DOE applies an incremental markup to the increase in MSP
associated with higher-efficiency products.
Economic literature and historical data suggest that the real costs
of many products may trend downward over time according to ``learning''
or ``experience'' curves. Experience curve analysis implicitly includes
factors such as efficiencies in labor, capital investment, automation,
materials prices, distribution, and economies of scale at an industry-
wide level.\41\ DOE used the most representative Producer Price Index
(PPI) series for portable ACs to fit to an exponential model to develop
an experience curve. DOE obtained historical PPI data for ``small
electric household appliances, except fans'' from the Labor
Department's Bureau of Labor Statistics (BLS) for 1983 to 2015.\42\
Although this PPI series encompasses more than portable ACs, no PPI
data specific to portable ACs were available. The PPI data reflect
nominal prices, adjusted for changes in product quality. DOE calculated
an inflation-adjusted (deflated) price index by dividing the PPI series
by the Gross Domestic Product Chained Price Index.
---------------------------------------------------------------------------
\41\ Taylor, M. and Fujita, K.S. Accounting for Technological
Change in Regulatory Impact Analyses: The Learning Curve Technique.
LBNL-6195E. LBNL, Berkeley, CA. April 2013. http://escholarship.org/uc/item/3c8709p4#page-1.
\42\ U.S. Department of Labor BLS. Producer Price Index for
1983-2013. PPI series ID: PCU33521033521014. (Last accessed
September 8, 2014.) http://www.bls.gov/ppi/.
---------------------------------------------------------------------------
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. Available evidence
indicated that no installation costs would be incurred for baseline
installation or be impacted with increased ELs.
3. Annual Energy Consumption
For each sampled household and building, DOE determined the energy
consumption for a portable AC at different ELs using the approach
described in section IV.E of this final rule.
4. Energy Prices
DOE used average prices (for baseline products) and marginal prices
(for higher-efficiency products) which vary by season, region, and
baseline electricity consumption level for the LCC. DOE estimated these
prices using data published with the Edison Electric Institute (EEI)
Typical Bills and Average Rates reports for summer and winter 2014.\43\
For the residential sector each report provides, for most of the major
IOUs in the country, the total bill assuming household consumption
levels of 500, 750, and 1,000 kWh for the billing period. For the
commercial sector the report provides typical bills for several
combinations of monthly electricity peak demand and total consumption.
---------------------------------------------------------------------------
\43\ EEI. Typical Bills and Average Rates Report. Winter 2014
published April 2014, Summer 2014 published October 2014. See http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx.
---------------------------------------------------------------------------
For both the residential and commercial sectors, DOE defined the
average price as the ratio of the total bill to the total electricity
consumption. For the residential sector, DOE used the EEI data to also
define a marginal price as the ratio of the change in the bill to the
change in energy consumption. For the commercial sector, marginal
prices cannot be estimated directly from the EEI data, so DOE used a
different approach, as described in chapter 8 of the final rule TSD.
Regionally weighted-average values for each type of price were
calculated for the nine census divisions and four large states (CA, FL,
NY and TX). Each EEI utility in a division was assigned a weight based
on the number of consumers it serves. Consumer counts were taken from
the most recent EIA Form 861 data (2012).\44\ 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.
---------------------------------------------------------------------------
\44\ DOE-EIA. Form EIA-861 Annual Electric Power Industry
Database. http://www.eia.doe.gov/cneaf/electricity/page/eia861.html.
---------------------------------------------------------------------------
DOE assigned seasonal average and marginal prices to each household
or commercial building in the LCC sample based on its location and its
baseline monthly electricity consumption for an average summer or
winter month. For a detailed discussion of the development
[[Page 1411]]
of electricity prices, see appendix 8C of the final rule TSD.
To estimate future prices, DOE used the projected annual changes in
average residential and commercial electricity prices that are
consistent with cases described on p. E-8 in AEO 2016.\45\ AEO 2016 has
an end year of 2040. 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.
---------------------------------------------------------------------------
\45\ EIA. Annual Energy Outlook 2016 with Projections to 2040.
Washington, DC. Available at www.eia.gov/forecasts/aeo/. The
standards finalized in this rulemaking will take effect a few years
prior to the 2022 commencement of the Clean Power Plan compliance
requirements. As DOE has not modeled the effect of CPP during the
30-year analysis period of this rulemaking, there is some
uncertainty as to the magnitude and overall effect of the energy
efficiency standards. These energy efficiency standards are expected
to put downward pressure on energy prices relative to the
projections in the AEO 2016 case that incorporates the CPP.
Consequently, DOE used the electricity price projections found in
the AEO 2016 No-CPP case as these electricity price projections are
expected to be lower, yielding more conservative estimates for
consumer savings due to the energy efficiency standards.
---------------------------------------------------------------------------
5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance. Maintenance costs are
associated with maintaining the operation of the product. Based on
available data and low product purchase prices, DOE concluded that
repair frequencies are low and do not increase for higher-capacity or
higher-efficiency units. DOE assumed a zero cost for all ELs.
AHAM commented that higher ELs may require use of variable-speed
compressors to meet a potential standard and this would impact the
repair rate and cost of higher ELs. (AHAM, No. 43 at pp. 25-26) AHAM
was unable to provide data to show that variable-speed compressors
would require an increased repair rate or cost, but suggested DOE
consult with manufacturers. DOE has not found any evidence that repair
rates or costs would increase with efficiency for portable ACs nor did
any manufacturer provide data to suggest this occurs in the market
today. Therefore, DOE estimates that portable AC repair rates and costs
do not change with higher efficiency units.
6. Product Lifetime
The product lifetime is the age at which the product is retired
from service. Given similar mechanical components and uses, DOE
considered that the lifetime distribution of portable ACs is the same
as that of room ACs, as estimated for the 2011 direct final rule. 76 FR
22454 (April 21, 2011). The average lifetime is 10.5 years.
AHAM also noted that although room ACs and portable ACs are used
for similar purposes, they are different products and therefore they
may have different lifetimes. (AHAM, No. 39 at p. 96) AHAM commented
that DOE should use an average product lifetime of 7 years for portable
ACs and referenced a 2010 survey conducted by AHAM. (AHAM, No. 43 at
pp. 23-24)
AHAM did not provide the survey in its comments and DOE is unable
to locate a copy of the survey in the public record; therefore, DOE is
unable to verify AHAM's estimate and determine whether the lifetime
estimate is specifically for portable ACs or for a similar product.
Additionally, if AHAM's estimate is for the portable AC product, it is
unclear how a 2010 survey could accurately measure the average lifetime
for a product that has only been available in large residential markets
since the early 2000s. An accurate calculation of the average lifetime
requires at least one full turnover of stock to sample the entire age
distribution to include the longest living units that exceed the
average lifetime. Assuming the first appreciable number of shipments of
portable ACs occurred in 2000, the oldest possible lifetime captured in
AHAM's survey would be 10 years. Excluding longer lived portable ACs
that have not yet failed would bias an estimate of the average to lower
values. Without the details of the survey methodology, DOE is unable to
include AHAM's estimate in derivation of a lifetime distribution.
ASAP stated that using the lifetime of room ACs or dehumidifiers is
reasonable, given the similarities of the products and the components
that make up those products. (ASAP, No. 39 at pp. 98-99) The Joint
Commenters noted that portable dehumidifiers are very similar to
portable ACs, as the two products share the same basic refrigeration
system components and are both portable units placed inside a room. The
Joint Commenters also noted that DOE estimates the average lifetime of
a portable dehumidifier (11 years) is slightly longer than the average
lifetime of a room AC (10.5 years) and therefore, DOE's assumption for
the average lifetime of portable ACs may be conservative. (Joint
Commenters, No. 44 at p. 6) DOE continues to use an average lifetime of
10.5 years derived from room ACs given the similarity in their
components.
Chapter 8 of the final rule TSD provides details on DOE's
development of lifetimes for portable ACs.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households to estimate the present value of future operating costs.
DOE estimated a distribution of residential discount rates for portable
ACs based on consumer financing costs and the opportunity cost of
consumer funds.
DOE applies weighted average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\46\ DOE notes that the LCC does not analyze the appliance
purchase decision, so the implicit discount rate is not relevant in
this model. The LCC estimates NPV over the lifetime of the product, so
the appropriate discount rate will reflect the general opportunity cost
of household funds, taking this time scale into account. Given the long
time horizon modeled in the LCC, the application of a marginal interest
rate associated with an initial source of funds is inaccurate.
Regardless of the method of purchase, consumers are expected to
continue to rebalance their debt and asset holdings over the LCC
analysis period, based on the restrictions consumers face in their debt
payment requirements and the relative size of the interest rates
available on debts and assets. DOE estimates the aggregate impact of
this rebalancing using the historical distribution of debts and assets.
---------------------------------------------------------------------------
\46\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: Transaction costs; risk premiums and
response to uncertainty; time preferences; interest rates at which a
consumer is able to borrow or lend.
---------------------------------------------------------------------------
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. DOE estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's Survey of Consumer Finances \47\ (SCF)
for 1995, 1998, 2001, 2004, 2007, 2010, and 2013. 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
[[Page 1412]]
apply in the year in which new or amended standards would take effect.
DOE assigned each sample household a specific discount rate drawn from
one of the distributions. The average rate across all types of
household debt and equity and income groups, weighted by the shares of
each type, is 4.5 percent. See chapter 8 of the final rule TSD for
further details on the development of consumer discount rates.
---------------------------------------------------------------------------
\47\ The Federal Reserve Board, SCF 1995, 1998, 2001, 2004,
2007, 2010, 2013. http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
---------------------------------------------------------------------------
To establish commercial discount rates for the LCC analysis, DOE
estimated the cost of capital for companies that purchase a portable
AC. The weighted average cost of capital is commonly used to estimate
the present value of cash flows to be derived from a typical company
project or investment. Most companies use both debt and equity capital
to fund investments, so their cost of capital is the weighted average
of the cost to the firm of equity and debt financing as estimated from
financial data for publicly traded firms in the sectors that purchase
computers. For this analysis, DOE used Damadoran Online \48\ as the
source of information about company debt and equity financing. The
average rate across all types of companies, weighted by the shares of
each type, is 5.6 percent. See chapter 8 of the NOPR TSD for further
details on the development of commercial discount rates.
---------------------------------------------------------------------------
\48\ Damodaran, A. Cost of Capital by Sector. January 2014. New
York, NY. http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm.
---------------------------------------------------------------------------
AHAM commented that DOE has traditionally used a real (inflation
adjusted) discount rate in the LCC calculation based on averaging the
various components of debt and assets. AHAM noted that AHAM and others
have commented that an average consumer discount rate is inappropriate
and that DOE should use a marginal rate based on the cost of available
borrowed funds, generally credit card debt. (AHAM, No. 43 at p. 24) In
response to questions by AHAM, DOE stated in the DOE response memo and
maintains that when assessing the NPV of an investment in energy
efficiency, the marginal interest rate alone (assuming it were the
interest rate on the credit card used to make the purchase, for
example) would only be the relevant discount rate if either: (1) The
consumer were restricted from rebalancing their debt and asset holdings
(by redistributing debt and assets based on the relative interest rates
available) over the entire time period modeled in the LCC analysis; or
(2) the risk associated with an investment in energy efficiency was at
a level commensurate with that reflected by credit card interest rates
(i.e., that the risk premium required for an investment in energy
efficiency was very high).\49\
---------------------------------------------------------------------------
\49\ The DOE response memo, ``Memo_AHAM Request for Info on
PACs_2016-08-19'' can be found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0038.
---------------------------------------------------------------------------
In reference to the first point, rebalancing, AHAM commented that
the inherent assumption allowing rebalancing is that consumers will
defer consumption (i.e., save) in order to generate surplus cash which
can then be used to pay down debt. AHAM stated that this assumption is
essential since consumers have no other source of investment capital
other than savings (e.g., individuals cannot sell ``equity'' in
themselves). In this case, AHAM suggested that the appropriate discount
rate would be the implied rate of return for deferring consumption.
AHAM noted that academic studies on implicit discount rates for the
consumption/savings tradeoff yield discount rates substantially higher
than either the 4.43 percent assumed by DOE or the 11.6 percent
recommended by AHAM.\50\ AHAM noted that it would be pleased if DOE
adopted a consumer discount rate based on the consumption/savings
tradeoff. (AHAM, No. 43 at pp. 24-25)
---------------------------------------------------------------------------
\50\ AHAM noted, for example, Song Yao, Carl F. Mela, Jeongwen
Chiang and Yuxin Chen (``Determining Consumers' Discount Rates With
Field Studies,'' Journal of Marketing Research, 30, 3 (May-June),
447-468.) found a weekly discount factor of .86-.91 (9.8-16.2%
interest rate) for deferred consumption in empirical consumer
research and Jean-Pierre Dube, Gunter J. Hitsch and Pranav Jindal
(``The joint identification of utility and discount functions from
stated choice data: An application to durable goods adoption'',
Quant Mark Econ (2014) 12:331-377) found a consumer discount rate of
43% for deferred consumption.
---------------------------------------------------------------------------
DOE believes that using an average discount rate in the LCC best
approximates the actual opportunity cost of funds faced by consumers.
This opportunity cost of funds is the time-value of money for
consumers. Interest rates, which are set by supply and demand for
credit and capital in the financial market, vary across consumers and
across financial investment or credit source based on the risk
associated with that consumer or with that investment type. Because the
purpose of the LCC analysis is to determine the distributional impacts
of the proposed standard across heterogeneous consumers in the
population, to account for variation in access to rates of return on
investments and interest rates of debt faced by consumers in the
population, DOE generates a discount rates based on the average of the
interest rates associated with debts and assets holdings, weighted by
the share of funds associates with each of those debts or assets in the
portfolio. This is the best approximation of the actual opportunity
cost of funds for each household,\51\ and it is the value of deferred
consumption as determined by the equilibrium of supply and demand in
the financial market. Those with very high rates of discounting for
deferred consumption will hold more debt, potentially at higher rates
of interest. Those with lower rates will hold less. This is captured in
the weighted average calculation of the discount rate used by DOE.
Additionally, DOE disagrees with the statement that consumers have no
other source of investment capital other than savings. A range of
assets is included in the weighted average discount rate calculated by
DOE precisely because that is the equity that consumers may hold. In
particular, they can either defer putting additional funds towards one
of these investments or they can extract equity from one of these
investments if they are able. These financial assets are a part of the
opportunity cost of funds held by consumers, and that is why they are
in the weighted average calculation for the discount rate use by DOE.
---------------------------------------------------------------------------
\51\ One of the academic papers cited by AHAM in their comment
deals with a product purchase decision, which is not the context of
the LCC model because the LCC does not model purchase decisions. See
Dub[eacute], J. P., Hitsch, G. J., & Jindal, P. (2014). The joint
identification of utility and discount functions from stated choice
data: An application to durable goods adoption. Quantitative
Marketing and Economics, 12(4), 331-377. The other paper cited by
AHAM is work done in a setting that is very different from that
relevant to the LCC analysis. It is based on data from Chinese
consumer behavior on a cell phone plan that changes from a flat per-
minute rate to two-part tariff.. See Yao, S., Mela, C. F., Chiang,
J., & Chen, Y. (2012). Determining consumers' discount rates with
field studies. Journal of Marketing Research, 49(6), 822-841.
---------------------------------------------------------------------------
In reference to the second point concerning risk, AHAM stated DOE
is carrying the concepts of capital asset pricing (CAPM) used in the
commercial sector (and used by DOE to set commercial discount rates),
which, essentially, assumes that the cost of equity is set in
relationship to a risk free rate and the systemic variance between a
security (or set of cash flows) and a widely diversified set of
equities. AHAM commented that DOE, in discussing point (2), focuses on
``risk premiums'' associated with types of investments. Within the
context of the CAPM model, AHAM stated that all the risks discussed by
DOE are diversifiable, non-systemic risk. AHAM suggested that they
should be incorporated (and are incorporated by the DOE Monte Carlo
process) in the cash flow
[[Page 1413]]
assessment. AHAM commented that this whole discussion on point (2) is
irrelevant to a discussion of appropriate discount rates. (AHAM, No. 43
at p. 25)
First, DOE raised the issue of risk not in the context of its
method but rather to explain circumstances in which a higher discount
rate might be appropriate. In any case, DOE disagrees that the
discussion regarding the risk premium appropriate for an investment in
energy efficiency is irrelevant to the choice of discount rate used in
the LCC. As DOE stated before, while there is limited data available on
the risk associated with specific types of energy efficiency
investments, Mills et al. (2006) present results from an analysis
demonstrating that the risk associated with the returns from investing
in an ENERGY STAR Building are in line with that of long-term
government bonds (i.e., quite low). These results are shown in Figure
IV.3, below. This is suggestive that there is no reason to assume that
the risk premium required for an investment in energy efficiency should
be particularly high, and certainly not high enough to justify a
required rate of return at a level commensurate with a credit card
interest rate.
[GRAPHIC] [TIFF OMITTED] TR10JA20.018
AHAM stated that the actual question would be what discount rate
consumers use to evaluate investments and should that discount rate be
some theoretical value (consumers ``ought'' to look at investments in
some manner) or a factual value. AHAM commented that the factual value,
or imputed, discount rate for energy or any other investment is
substantially greater than four percent, inflation adjusted. AHAM
concluded that DOE should either use the short-term marginal cost of
funds for consumers, the actual rate used to finance most significant
purchases, or it should use a rate to reflect the time value in
deferring consumption in the consumption versus saving tradeoff. AHAM
noted that either rate is substantially higher than the 4.43 percent
used by DOE. (AHAM, No. 43 at p. 25)
---------------------------------------------------------------------------
\52\ Mills, E., Kromer, S., Weiss, G. and Mathew, P.A., 2006.
From volatility to value: Analyzing and managing financial and
performance risk in energy savings projects. Energy Policy, 34(2),
pp.188-199.
---------------------------------------------------------------------------
As DOE has responded in the past to comments on this topic, the LCC
analysis is not modeling a purchase decision. The LCC analysis
estimates the NPV of financial trade-offs of increased upfront product
costs weighed against reduced operating costs over the lifetime of the
covered product, assuming the product has already been obtained and
installed. Implicit or ``imputed'' discount rates referred to by AHAM
are not the appropriate rates to use in the context of the LCC analysis
because such rates deviate from market interest rates due to a variety
of factors (e.g., imperfect information, option values, transaction
costs, cognitive biases such as present-based preferences or loss
aversion, etc.). All of these factors are irrelevant from the
perspective of the LCC analysis; they are already sunk costs. The
short-term marginal rate is not the appropriate discount rate to use
because fixing the discount rate at the marginal rate associated with a
credit card assumes that consumers purchase the appliance with a credit
card, and keep that purchase on the credit card throughout the entire
time it takes to pay off that debt with only operating costs savings
from the more efficient product. There is little evidence that
consumers behave in this way.
8. Energy 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
EL, DOE's LCC analysis considered the projected distribution (market
shares) of product efficiencies under the no-new-standards case (i.e.,
the case without new energy conservation standards).
To estimate the energy efficiency distribution of portable ACs for
2022, DOE's LCC analysis considered the projected distribution (market
shares) of product efficiencies under the no-new-standards case (i.e.,
the case without new energy conservation standards). Based on the
engineering analysis, DOE found that gains in efficiency were achieved
by utilizing more efficient components in existing test units. DOE used
product component characteristics to estimate the current efficiency
distribution of portable ACs on the market. DOE based EL 1, EL2, and EL
3 on the performance observed in its test sample used to develop the
engineering analysis. Therefore, DOE estimated a share of 37 percent at
the baseline, 48 percent for EL 1, 13 percent for EL 2, 2.2
[[Page 1414]]
percent for EL 3, and no share at EL 4. EL 4 represents the maximum
theoretical performance based on modeling the max-tech design options.
The estimated market shares for the no-new-standards case for portable
ACs and the average EER and CEER values for each EL are shown in Table
IV.11. See chapter 8 of the final rule TSD for further information on
the derivation of the efficiency distributions.
Table IV.11--Portable Air Conditioner No-New-Standards Case Efficiency Distribution
----------------------------------------------------------------------------------------------------------------
Market share
Efficiency level EER CEER (%)
----------------------------------------------------------------------------------------------------------------
Baseline........................................................ 5.35 5.08 37
1............................................................... 6.05 5.94 47.8
2............................................................... 7.15 7.13 13
3............................................................... 8.48 8.46 2.2
4............................................................... 10.75 10.73 0
----------------------------------------------------------------------------------------------------------------
9. Payback Period Analysis
The simple 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 simple PBP calculation for each EL are the change
in total installed cost of the product and the change in the first-year
annual operating expenditures relative to the baseline. The PBP
calculation uses the same inputs as the LCC analysis, except that
discount rates are not applied.
As noted above, EPCA, as amended, establishes a rebuttable
presumption that a standard is economically justified if the Secretary
finds that the additional cost to the consumer of purchasing a product
complying with an energy conservation standard level will be less than
three times the value of the first year's energy savings resulting from
the standard, as calculated under the applicable test procedure. (42
U.S.C. 6295(o)(2)(B)(iii)) For each considered EL, 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 projection for
the year in which compliance with the new standards would be required
(see section V.B.1.c of this final rule).
G. Shipments Analysis
DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\53\
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.
---------------------------------------------------------------------------
\53\ DOE uses 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.
---------------------------------------------------------------------------
DOE received data on portable AC shipments in 2014 from
manufacturer interviews. The manufacturer interviews also provided
information which suggested that the average annual growth in portable
AC shipments between 2004 and 2013 was 30 percent. To estimate
historical shipments prior to 2004, DOE interpolated between 1985 (the
date that portable ACs were introduced to the residential market) and
2004.
DOE estimated a saturation rate to project shipments of portable
ACs. DOE assumed that the portable AC saturation rate would be no
greater than half the current room AC saturation rate (based on RECS
2009) by the end of the analysis period, i.e., 2051. For each year of
the projection period, the saturation rate of portable ACs was
determined from a combination of the total stock of the product and
total housing stock. The total stock of portable ACs was based on
product lifetime and the survival function developed in the LCC
analysis. DOE used total housing stock from AEO 2016. Based on this
revised approach, DOE estimated that the shipments of portable ACs
would increase from 1.32 million in 2014 to 1.67 million in 2051.
For the final rule analysis, DOE applied price and efficiency
elasticity parameters to estimate the effect of new standards on
portable AC shipments. DOE estimated the price and efficiency
elasticity parameters from a regression analysis that incorporated
shipments, purchase price, and efficiency data specific to several
residential appliances during 1989-2009. Based on evidence that the
price elasticity of demand is significantly different over the short
run and long run for other consumer goods (i.e., automobiles), DOE
assumed that these elasticities decline over time. DOE estimated
shipments in each standards case using the price and efficiency
elasticity along with the change in the product price and operating
costs between a standards case and the no-new-standards case.
AHAM commented that it believes that DOE has under-estimated the
price/feature elasticity effects on portable ACs. AHAM stated that DOE
has used a generic elasticity factor without looking at the specific
conditions of the portable AC marketplace and that importers who
purchase portable ACs and name-brand report that they are in this
business because of retailer demand for a full product line. AHAM notes
that if manufacturers are forced to recalibrate cooling capacity and
increase size and weight, the dynamic of the portable AC market will
diminish, with retailers ceasing to require portable ACs as part of a
perceived full-line of products and leading to a negative impact on
shipments. As such, AHAM recommended that DOE conduct sensitivity
analyses on energy saved and on manufacturer impact based on a 15
percent and a 30 percent decline in shipments from the 1.32 million
unit base case. (AHAM, No. 43 at p. 26)
AHAM's suggestion of a 15 percent or 30 percent decline in
shipments does not appear to be based on any data source. At TSL 2, a
15 percent decline in shipments implies a price elasticity of -1.7. A
30 percent decline implies a price elasticity of -3.4 which is
significantly smaller (i.e., more elastic) than any good found in the
literature review. A literature review of typical price elasticity
values performed by Fujita \54\ finds a range between -0.14
[[Page 1415]]
and -0.42 for appliances. The value used by DOE, -0.45, exceeds the
high end of the range, which suggests that it is reasonable to apply to
portable ACs. The concern raised by AHAM that retailers may cease to
carry portable ACs is unlikely to come to pass because the adopted
standards would not necessarily significantly increase size and weight,
and furthermore portable ACs occupy a unique market niche.
---------------------------------------------------------------------------
\54\ Fujita, K.S. Estimating Price Elasticity using Market-Level
Appliance Data. 2015 http://eetd.lbl.gov/sites/all/files/lbnl-188289.pdf.
---------------------------------------------------------------------------
AHAM commented that the decline in shipments from the no-new-
standards case should not count as a beneficial reduction in energy
consumption. While the use of energy by portable ACs will decline when
fewer of them are bought, AHAM stated that this is not a net national
benefit. Rather, AHAM noted that the loss of consumer utility and the
decline in consumer purchases of a product are the sort of results that
the EPCA statute specifically prohibits when it leads to a product or a
set of product features being withdrawn from the market. AHAM commented
that in the case of portable ACs, the cost will increase and product
features will worsen, if not disappear, leading to fewer portable ACs
being purchased. AHAM suggested that DOE should specifically exclude
the effects of energy savings from its energy reduction calculations in
the NIA. (AHAM, No. 43 at p. 28-29)
DOE agrees that the energy savings and the NPV should reflect
shipments from only the affected stock (i.e., shipments impacted by a
standard) and has calculated the energy savings and the NPV
accordingly.
For details on the shipments analysis, see chapter 9 of the final
rule TSD for further information.
H. National Impact Analysis
The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific ELs.\55\ (``Consumer'' in this
context refers to consumers of the product being regulated.) DOE
calculates the NES and NPV for the potential standard levels considered
based on projections of annual product shipments, along with the annual
energy consumption and total installed cost data from the energy use
and LCC analyses. For the present analysis, DOE projected the energy
savings, operating cost savings, product costs, and NPV of consumer
benefits over the lifetime of portable ACs sold from 2022 through 2051.
---------------------------------------------------------------------------
\55\ The NIA accounts for impacts in the 50 states and U.S.
territories.
---------------------------------------------------------------------------
DOE evaluates the impacts of new 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 if DOE adopted new standards at
specific energy ELs (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.
Higher-efficiency portable ACs reduce the operating costs for a
consumer, which can lead to greater use of the product. A direct
rebound effect occurs when a product that is made more efficient is
used more intensively, such that the expected energy savings from the
efficiency improvement may not fully materialize. DOE examined a 2009
review of empirical estimates of the rebound effect for various energy-
using products.\56\ 80 FR 13120, 13148. This review concluded that the
econometric and quasi-experimental studies suggest a mean value for the
direct rebound effect for household heating of around 20 percent. DOE
also examined a 2012 ACEEE paper \57\ and a 2013 paper by Thomas and
Azevedo.\58\ Both of these publications examined the same studies that
were reviewed by Sorrell, as well as Greening et al.,\59\ and
identified methodological problems with some of the studies. The
studies, believed to be most reliable by Thomas and Azevedo, show a
direct rebound effect for space conditioning products in the 1-percent
to 15-percent range, while Nadel concludes that a more likely range is
1 to 12 percent, with rebound effects sometimes higher than this range
for low-income households who could not afford to adequately heat their
homes prior to weatherization. Based on DOE's review of these recent
assessments (see chapter 10 of the final rule TSD), DOE used a 15
percent rebound effect for this final rule.
---------------------------------------------------------------------------
\56\ Steven Sorrell, et al, Empirical Estimates of the Direct
Rebound Effect: A Review, 37 Energy Policy 1356-71 (2009).
\57\ Steven Nadel, ``The Rebound Effect: Large or Small?'' ACEEE
White Paper (August 2012) (Available at: www.aceee.org/white-paper/reboundeffect-large-or-small).
\58\ Brinda Thomas & Ines Azevedo, Estimating Direct and
Indirect Rebound Effects for U.S. Households with Input-Output
Analysis, Part 1: Theoretical Framework, 86 Ecological Econ. 199-201
(2013), available at www.sciencedirect.com/science/article/pii/S0921800912004764.
\59\ 65 Lorna A. Greening, et al., Energy Efficiency and
Consumption--The Rebound Effect--A Survey, 28 Energy Policy 389-401
(2002).
---------------------------------------------------------------------------
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 at https://www.regulations.gov/docket?D=EERE-2013-BT-STD-0033. The NIA spreadsheet model uses typical values (as
opposed to probability distributions) as inputs.
Table IV.12 summarizes the inputs and methods DOE used for the NIA
analysis for the final rule. Discussion of these inputs and methods
follows the table. See chapter 10 of the final rule TSD for further
details.
Table IV.12--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments.............................. Annual shipments from shipments
model.
Compliance Date of Standard............ 2022.
Efficiency Trends...................... No-New-Standards case: Annual
increase in efficiency of 0.25
percent between 2022 and 2051.
Standards cases: Roll-up plus
shift scenario.
Annual Energy Consumption per Unit..... Annual weighted-average values
are a function of energy use
at each TSL.
Total Installed Cost per Unit.......... Annual weighted-average values
are a function of cost at each
TSL. Incorporates projection
of future product prices based
on historical data.
[[Page 1416]]
Annual Energy Cost per Unit............ Annual weighted-average values
as a function of the annual
energy consumption per unit
and energy prices.
Repair and Maintenance Cost per Unit... Annual values do not change
with EL.
Energy Prices and Price Trends......... Average and marginal
electricity prices for
residential and commercial
sectors from life-cycle cost
and payback period analysis.
AEO 2016 no-CPP case price
projections (to 2040) and
extrapolation through 2051.
Energy Site-to-Primary and FFC A time-series conversion factor
Conversion. based on AEO 2016.
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. Section IV.F.8 of this document describes how 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 for the year of anticipated compliance with
an amended or new standard. To project the trend in efficiency absent
new standards for portable ACs over the entire shipments projection
period, DOE used as a starting point the shipments-weighted cooling
energy efficiency ratio (SWEER) estimated for 2022 in the LCC analysis
and assumed an annual increase in efficiency equal to the increase
estimated for room ACs in the 2011 direct final rule: 0.25 percent
between 2022 and 2051. 76 FR 22454 (April 21, 2011). The approach is
further described in chapter 10 of the final rule TSD.
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 (2022). In this scenario, the market 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.
To develop standards case efficiency trends after 2022, DOE
developed SWEER growth trends for each standard level that maintained,
throughout the analysis period (2022-2051), the same difference in per-
unit average cost as was determined between the no-new-standards case
and each standards case in 2022. The approach is further described in
chapter 10 of the final rule TSD.
2. National Energy Savings
The NES analysis involves a comparison of national energy
consumption of the considered products between each potential standards
case (TSL) and the case with no new or amended energy conservation
standards. DOE calculated the annual NES by multiplying the number of
units (stock) of each product (by vintage or age) by the annual energy
consumption savings per unit (also by vintage). DOE calculated unit
annual energy consumption savings based on the difference in unit
annual energy consumption for the no-new-standards case and for each
higher efficiency standard case. DOE estimated energy consumption and
savings based on site energy and converted the electricity consumption
and savings to primary energy (i.e., the energy consumed by power
plants to generate site electricity) using annual conversion factors
derived from AEO 2016. 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 GHG and other emissions in the NIA and emissions
analyses included in future energy conservation standards rulemakings.
76 FR 51281 (Aug. 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
(Aug. 17, 2012). NEMS is a public domain, multi-sector, partial
equilibrium model of the U.S. energy sector \60\ that EIA uses to
prepare its AEO. The FFC factors incorporate losses in production and
delivery in the case of natural gas (including fugitive emissions) and
additional energy used to produce and deliver the various fuels used by
power plants. The approach used for deriving FFC measures of energy use
and emissions is described in appendix 10B of the final rule TSD.
---------------------------------------------------------------------------
\60\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581 (2009), October
2009. Available at http://www.eia.gov/forecasts/aeo/index.cfm.
---------------------------------------------------------------------------
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 (energy costs and repair and maintenance costs),
and (3) a discount factor to calculate the present value of costs and
savings. DOE calculates net savings each year as the difference between
the no-new-standards case and each standards case in terms of total
savings in operating costs versus total increases in installed costs.
DOE calculates operating cost savings over the lifetime of each product
shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed
portable AC price trends based on historical PPI data. DOE applied the
same trends to project prices at each considered EL. By 2051, which is
the end date of the projection period, the average portable AC price is
projected to drop 53 percent relative to 2013. DOE's projection of
product prices is described in appendix 10C of the final rule TSD.
To evaluate the effect of uncertainty regarding the price trend
estimates, DOE investigated the impact of different product price
projections on the consumer NPV for the considered TSLs for portable
ACs. In addition to the default price trend, DOE considered two product
price sensitivity cases: (1) A
[[Page 1417]]
high price decline case based on the AEO 2016 deflator for ``furniture
and appliances''; and (2) a low price decline case based on BLS'
inflation-adjusted PPI for small electric household appliances spanning
1998-2015. The derivation of these price trends and the results of
these sensitivity cases are described in appendix 10C of the final rule
TSD.
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of the appropriate form of energy. To estimate energy
prices in future years, DOE multiplied the average electricity prices
by the projection of annual national-average residential and commercial
electricity price changes in the Reference case described on p. E-8 in
AEO 2016.\61\ AEO 2016 has an end year of 2040. To estimate price
trends after 2040, DOE used the average annual rate of change in prices
from 2030 to 2040. As part of the NIA, DOE also analyzed scenarios that
used inputs from the AEO 2016 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 final rule TSD.
---------------------------------------------------------------------------
\61\ EIA. Annual Energy Outlook 2016 with Projections to 2040.
Washington, DC. Available at www.eia.gov/forecasts/aeo/. The
standards finalized in this rulemaking will take effect a few years
prior to the 2022 commencement of the Clean Power Plan compliance
requirements. As DOE has not modeled the effect of CPP during the
30-year analysis period of this rulemaking, there is some
uncertainty as to the magnitude and overall effect of the energy
efficiency standards. These energy efficiency standards are expected
to put downward pressure on energy prices relative to the
projections in the AEO 2016 case that incorporates the CPP.
Consequently, DOE used the electricity price projections found in
the AEO 2016 No-CPP case as these electricity price projections are
expected to be lower, yielding more conservative estimates for
consumer savings due to the energy efficiency standards.
---------------------------------------------------------------------------
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
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 OMB to Federal agencies
on the development of regulatory analysis.\62\ 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.
---------------------------------------------------------------------------
\62\ OMB. Circular A-4: Regulatory Analysis. September 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 energy conservation
standards on consumers, DOE evaluates the impact on identifiable
subgroups of consumers that may be disproportionately affected by a new
or amended national standard. The purpose of a subgroup analysis is to
determine the extent of any such disproportional impacts. DOE evaluates
impacts on particular subgroups of consumers by analyzing the LCC
impacts and PBP for those particular consumers from alternative
standard levels. For this final rule, DOE analyzed the impacts of the
considered standard levels on three subgroups: (1) Low-income
households, (2) senior-only households, and (3) small businesses. The
analysis used subsets of the RECS 2009 sample composed of households
that meet the criteria and CBECS 2012 for the considered subgroups. DOE
used the LCC and PBP spreadsheet model to estimate the impacts of the
considered EL 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 financial impacts of new
energy conservation standards on manufacturers of portable ACs and to
estimate the potential impacts of such standards on direct employment
and manufacturing capacity. The MIA has both quantitative and
qualitative aspects and includes analyses of projected industry cash
flows, INPV, investments in R&D and manufacturing capital, and domestic
manufacturing employment. Additionally, the MIA seeks to determine how
new or amended energy conservation standards might affect manufacturing
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 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 standards cases (TSLs). To capture the uncertainty
relating to manufacturer pricing strategies following new or amended
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 a potential standard's impact on manufacturing capacity,
competition within the industry, cumulative impact of other DOE and
non-DOE regulations, and impacts on manufacturer subgroups. The
complete MIA is outlined in chapter 12 of the 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 portable AC manufacturing
industry based on the market and technology assessment, preliminary
manufacturer interviews, and publicly-available information. This
included a top-down analysis of portable AC manufacturers that DOE used
to derive preliminary financial inputs for the GRIM (e.g., revenues;
materials, labor, overhead, and depreciation expenses; selling,
general, and administrative expenses (SG&A); and R&D expenses). DOE
also used public sources of information to further calibrate its
initial characterization of the portable AC manufacturing industry,
including company filings of form 10-K from the SEC, corporate annual
reports, the U.S. Census Bureau's ``Economic Census,'' and reports from
Hoovers.\63\
---------------------------------------------------------------------------
\63\ Available at: http://www.hoovers.com/.
---------------------------------------------------------------------------
In Phase 2 of the MIA, DOE prepared a framework industry cash-flow
analysis to quantify the potential impacts of portable AC 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
[[Page 1418]]
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) Creating a
need for increased investment, (2) raising production costs per unit,
and (3) altering revenue due to higher per-unit prices and changes in
sales volumes.
In addition, during Phase 2, DOE developed interview guides to
distribute to manufacturers of portable ACs in order to develop other
key GRIM inputs, including product and capital conversion costs, and to
gather additional information on the anticipated effects of energy
conservation standards on revenues, direct employment, capital assets,
industry competitiveness, and subgroup impacts.
In Phase 3 of the MIA, DOE conducted structured, detailed
interviews with representative manufacturers. During these interviews,
DOE discussed engineering, manufacturing, procurement, and financial
topics to validate assumptions used in the GRIM and to identify key
issues or concerns. A description of the key issues raised by portable
AC manufacturers during interviews conducted for the June 2016 ECS NOPR
can be found in section IV.J.3 of the June 2016 ECS NOPR. See section
IV.J.3 of this final rule for a description of public comments received
by DOE regarding the June 2016 ECS NOPR. DOE also used manufacturer
feedback to qualitatively assess impacts of new standards on
manufacturing capacity, direct employment, and cumulative regulatory
burden. See appendix 12A of the final rule TSD for an example of the
NOPR-phase interview guide.
As part of Phase 3, DOE evaluated whether subgroups of
manufacturers may be disproportionately impacted by new standards or
may not be accurately represented by the average cost assumptions used
to develop the industry cash flow analysis. Such manufacturer subgroups
may include small business manufacturers, low-volume manufacturers
(LVMs), niche players, and/or manufacturers exhibiting a cost structure
that largely differs from the industry average. DOE identified one
manufacturer subgroup for a separate impact analysis: Small business
manufacturers. The small business subgroup is discussed in section VI.B
of this document, ``Review under the Regulatory Flexibility Act'' and
in chapter 12 of the final rule TSD.
2. Government Regulatory Impact Model (GRIM) and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to new
or amended standards that result in a higher or lower industry value.
The GRIM uses a standard, annual discounted cash-flow analysis 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 a new or amended energy conservation standard. The
GRIM spreadsheet uses the inputs to arrive at a series of annual cash
flows, beginning in 2017 (the base year of the analysis) and continuing
to 2051. DOE calculated INPVs by summing the stream of annual
discounted cash flows during this period. For manufacturers of portable
ACs, DOE used a real discount rate of 6.6 percent, which was derived
from industry financials and then modified according to feedback
received during manufacturer interviews.
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 or
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis, and information gathered from industry during the course of
manufacturer interviews. The GRIM results are presented 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
final rule TSD.
a. Manufacturer Production Costs
Manufacturing a higher efficiency product is typically more
expensive than manufacturing a baseline product due to the use of more
complex and typically more costly components. The changes in the MPCs
of the analyzed products can affect the revenues, gross margins, and
cash flow of the industry. For each EL, DOE used the MPCs developed in
the engineering analysis, as described in section IV.C.2 of this final
rule and further detailed in chapter 5 of the final rule TSD.
Additionally, DOE used information from its teardown analysis,
described in section IV.C of this final rule, to disaggregate the MPCs
into material and labor costs. For a complete description of the MPCs,
see chapter 5 of the final rule TSD.
b. Shipment Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments by EL.
Changes in sales volumes and efficiency mix over time can significantly
affect manufacturer finances. For this analysis, the GRIM used the
NIA's annual shipment forecasts derived from the shipments analysis
from 2017 (the base year) to 2051 (the end of the analysis period). See
chapter 9 of the NOPR TSD for additional details.
c. Product and Capital Conversion Costs
New energy conservation standards may cause manufacturers to incur
conversion costs to bring their production facilities and equipment
designs into compliance with the new standards. DOE evaluated the level
of conversion-related expenditures that would be needed to comply with
each considered EL. 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 investments in R&D,
testing, marketing, and other non-capitalized costs necessary to make
product designs comply with new or amended energy conservation
standards. Capital conversion costs are investments in property, plant,
and equipment necessary to adapt or change existing production
facilities such that new compliant product designs can be fabricated
and assembled.
DOE used multiple sources of data to evaluate the level of product
and capital conversion costs and stranded assets manufacturers would
likely face to comply with new energy conservation standards. In
estimating per-platform conversion costs at each EL considered in this
final rule, DOE primarily used estimates of capital requirements
derived from the portable AC product teardown analysis and the
engineering model (as described in section IV.C of this final rule) in
combination with the conversion cost assumptions used in the final rule
for dehumidifiers. DOE also used feedback provided by manufacturers
during interviews. Using the test sample efficiency distribution
(including AHAM-provided data points), per-platform conversion cost
estimates were then aggregated and scaled to derive total industry
estimates of product and capital conversion costs.
In general, DOE assumes that all conversion-related investments
occur
[[Page 1419]]
between the year the final rule is published and the year by which
manufacturers must comply with the new or amended standards. The
investment figures used in the GRIM can be found in section V.B.2 of
this final rule. For additional information on the estimated product
conversion and capital conversion costs, see chapter 12 of the final
rule TSD.
d. Markup Scenarios
MSPs include direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs) and all non-production
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate
the MSPs in the GRIM, DOE applied non-production cost markups to the
MPCs estimated in the engineering analysis for each product class and
EL. Modifying these markups in the standards case yields different sets
of impacts on manufacturers. For the MIA, DOE modeled two standards-
case markup scenarios to represent uncertainty regarding the potential
impacts on prices and profitability for manufacturers following the
implementation of new or amended energy conservation standards: (1) A
preservation of gross margin percentage markup scenario; and (2) a
preservation of per-unit operating profit markup scenario. These
scenarios lead to different markup values that, when applied to the
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
ELs, which assumes that manufacturers would be able to maintain the
same amount of profit as a percentage of revenues at all ELs within a
product class. DOE used the baseline manufacturer markup, 1.42, which
accounts for the two sourcing structures that characterize the portable
AC market. Single-duct and dual-duct portable ACs sold in the U.S. are
manufactured by overseas original equipment manufacturers (OEMs) either
for sale by contract to an importer or for direct sale to retailers and
builders. The MPCs developed in the engineering analysis, as detailed
in chapter 5 of the final rule TSD, reflect the cost of manufacturing
at the OEM. For the OEM to importer sourcing structure, this production
cost is marked up once by the OEM and again by the contracting the
company who imports the product and sells it to retailers. This markup
was used for all products when modeling the no-new-standards in the
GRIM. This scenario represents the upper bound of industry
profitability as manufacturers are able to fully pass on additional
production costs due to standards to their customers under this
scenario.
Under the preservation of per-unit operating profit markup
scenario, DOE modeled a situation in which manufacturers are not able
to increase per-unit operating profit in proportion to increases in
manufacturer production costs. This scenario represents the lower bound
of profitability and a more substantial impact on the portable AC
industry as manufacturers accept a lower margin in an attempt to offer
price competitive products while maintaining the same level of earnings
before interest and tax (EBIT) they saw prior to new or amended
standards.
A comparison of industry financial impacts under the two markup
scenarios is presented in section V.B.2.a of this final rule.
3. Discussion of Comments
During and following the July 2016 STD NOPR public meeting,
manufacturers and trade organizations commented on the potential impact
of new energy conservation standards on portable AC manufacturers.
These comments are outlined below. DOE considered these comments when
updating the analysis for this final rule.
During the July 2016 STD Public Meeting, both NAM and AHAM
requested that DOE provide more details about conversion cost model
assumptions in order to facilitate more focused feedback from member
companies. Specific requests included the number of companies and
production lines that were assumed in developing the industry
conversion cost estimates. (NAM, Public Meeting Transcript, No. 39 at
pp. 118-121; AHAM, Public Meeting Transcript, No. 39 at pp. 120-121)
Relatedly, during the July 20l6 Public Meeting, ASAP commented that
the industry capital conversion cost estimated for the portable AC
industry to reach TSL 2 is approximately eight times greater than the
industry capital conversion costs estimated for dehumidifier
manufacturers to comply with the standards adopted in the 2016 final
rule for dehumidifiers (also TSL 2), despite the fact that, in both
cases, DOE estimated that approximately 50 percent of platforms will
require complete redesigns. ASAP requested that DOE provide details
about the number of platforms assumed in estimates of industry
conversion costs. (ASAP, Public Meeting Transcript, No. 39 at pp. 122-
123)
DOE addressed the AHAM, NAM, and ASAP requests for information
related to the inputs used in the estimation of industry conversion
costs in the DOE response memo on August 19, 2016.\64\
---------------------------------------------------------------------------
\64\ DOE's response to AHAM's request can be found at https://www.regulations.gov/document?D=EERE-2013-BT-STD-0033-0038.
---------------------------------------------------------------------------
Regarding ASAP's comments related to differences in the magnitude
of industry capital conversion cost estimates between the portable AC
and the dehumidifier rulemakings, multiple factors explain the
differences in industry conversion cost estimates between this final
rule and the dehumidifiers final rule. First, on a per-platform capital
investment basis, DOE estimates that portable ACs are more costly to
produce than dehumidifiers, and, accordingly, capital changes are more
costly. Additionally, DOE clarifies that, in the June 2016 ECS NOPR, it
had estimated that approximately 77 percent of portable AC platforms
would require at least a partial redesign (including a change in
chassis size) at TSL 2. 81 FR 38398, 38448 (June 13, 2016). Finally,
for the June 2016 ECS NOPR, DOE estimated that there were approximately
48 portable AC platforms available on the U.S. market (updated to 54
for this final rule), a substantially greater number of platforms than
was estimated for the dehumidifier industry (DOE estimated there were
approximately 30 dehumidifier platforms available on the U.S. market).
Again, DOE provided information related to conversion cost model
assumptions used for this final rule in the DOE response memo on August
19, 2016.\65\
---------------------------------------------------------------------------
\65\ Id.
---------------------------------------------------------------------------
Regarding future shipments of portable ACs, AHAM commented that if
energy conservation standards result in reduced consumer demand, which,
in turn, leads to reduced shipments volumes relative to those estimated
in the June 2016 ECS NOPR, negative impacts to manufacturers will be
compounded. AHAM suggested that DOE re-examine manufacturer impacts to
include a significantly reduced shipment scenario reflecting the
potential reduction in consumer demand. (AHAM, No. 43 at p. 28) AHAM
suggested that after doing this, DOE reevaluate its balancing of costs
and benefits taking into account the increased burden on manufacturers
when shipment volumes drop as AHAM projects. (AHAM, No. 43 at p. 28)
As discussed in section IV.G of this document, AHAM's suggestion of
a decline in shipments relative to what was forecasted in the June 2016
ECS NOPR does not appear to be based on any data source. Accordingly,
DOE has not modeled an alternative shipments
[[Page 1420]]
and manufacturer impacts scenario. See section IV.G of this document
for details on DOE's justification of its portable AC shipments
forecasts.
Relatedly, AHAM also commented that the estimated range of percent
reduction in INPV (28.1 to 30.6) is dramatic for a small industry
segment and out of proportion to the potential benefits. (AHAM, No. 43
at p. 28)
As discussed in section V.C.1 of this document, DOE weighs both the
benefits and burdens associated with each TSL in order to decide upon a
final standard level. Please see section V.C.1 for the cost-benefit
discussion associated with the standard adopted in this final rule.
Finally, AHAM provided several comments relating to DOE's treatment
of cumulative regulatory burdens. AHAM suggested that DOE include in
its analysis of cumulative regulatory impacts any rulemaking that would
have an overlapping compliance period to that of new the portable ACs
standard. AHAM stated that this adjustment would more realistically
reflect regulatory burden because it evaluates all rules with which
manufacturers must comply at any given point. AHAM also stated that, in
general, the time and resources needed to evaluate and respond to DOE's
test procedures and energy conservation standards should not be
excluded from the cumulative regulatory burden discussion. AHAM further
commented that cumulative regulatory burden analysis should also
account for the timing and technical and economic relationship of those
rulemakings. AHAM stated that, for example, DOE's recent practice of
amending the test procedure while at the same time proposing amended
standards increases the burden on manufacturers in responding to DOE's
proposed rules. AHAM added that home appliances are now in an endless
cycle of regulation, where as soon as one compliance effort ends or is
near completion, another round of regulation to change the standard
again begins. (AHAM, No. 43 at pp. 29-30)
For this final rule analysis of cumulative regulatory burdens, DOE
has extended the analysis to include energy conservation standards for
other products also produced by portable AC manufacturers with a
standards compliance year occurring within the compliance period for
the new portable AC standard, as set forth in this final rule (2017 to
2022). Additionally, as in the June 2016 ECS NOPR analysis, the
cumulative regulatory burden analysis includes energy conservation
standards for products also produced by portable AC manufacturers with
compliance years occurring within 3 years after the compliance year for
the new portable AC standard. DOE will consider the remaining issues
put forth by AHAM in the future as it continues to evaluate its
approach to assessing cumulative regulatory burden.
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 GHGs, 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 2016, as described in
section IV.M. Details of the methodology are described in the
appendices to chapters 13 and 15 of the final rule TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA--GHG
Emissions Factors Hub.\66\ The FFC upstream emissions are estimated
based on the methodology described in chapter 15 of the 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.
---------------------------------------------------------------------------
\66\ Available at www2.epa.gov/climateleadership/center-corporate-climate-leadership-ghg-emission-factors-hub.
---------------------------------------------------------------------------
The emissions intensity factors are expressed in terms of physical
units per MWh or MMBtu of site energy savings. Total emissions
reductions are estimated using the energy savings calculated in the
NIA.
For CH4 and N2O, DOE calculated emissions
reduction in tons and also in terms of units of CO2
equivalent (CO2eq). Emissions of CH4 and
N2O are often converted to CO2eq by multiplying
each ton of gas by the gas' GWP over a 100-year time horizon. Based on
the Fifth Assessment Report of the Intergovernmental Panel on Climate
Change,\67\ DOE used GWP values of 28 for CH4 and 265 for
N2O.
---------------------------------------------------------------------------
\67\ 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 2016 generally represents current
legislation and environmental regulations, including recent government
actions, for which implementing regulations were available as of the
end of February 2016. DOE's estimation of impacts accounts for the
presence of the emissions control programs discussed in the following
paragraphs.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States and the
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2
emissions from 28 eastern States and DC were also limited under the
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR
created an allowance-based trading program that operates along with the
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court
of Appeals for the District of Columbia Circuit, but it remained in
effect.\68\ In 2011, EPA issued a replacement for CAIR, the Cross-State
Air Pollution Rule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21,
2012, the D.C. Circuit issued a decision to vacate CSAPR,\69\ 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.\70\ On October 23, 2014, the D.C. Circuit lifted the
stay of CSAPR.\71\ Pursuant to this action,
[[Page 1421]]
CSAPR went into effect (and CAIR ceased to be in effect) as of January
1, 2015.\72\ AEO 2016 incorporates implementation of CSAPR.
---------------------------------------------------------------------------
\68\ See North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008),
modified on rehearing, 550 F.3d 1176 (D.C. Cir. 2008).
\69\ See EME Homer City Generation, L.P. v. EPA, 696 F.3d 7
(D.C. Cir. 2012).
\70\ See EPA v. EME Homer City Generation, L.P. 134 S. Ct. 1584
(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.
\71\ See EME Homer City Generation, L.P. v. EPA, Order (D.C.
Cir. filed October 23, 2014) (No. 11-1302).
\72\ On July 28, 2015, the D.C. Circuit issued its opinion
regarding the remaining issues raised with respect to CSAPR that
were remanded by the Supreme Court. The D.C. Circuit largely upheld
CSAPR, but remanded to EPA without vacatur certain States' emission
budgets for reconsideration. EME Homer City Generation, LP v. EPA,
795 F.3d 118 (D.C. Cir. 2015).
---------------------------------------------------------------------------
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 years, 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 final 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
2016 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 CSAPR, 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.\73\ Therefore, DOE believes that energy conservation standards
that decrease electricity generation will generally reduce
SO2 emissions in 2016 and beyond. CSAPR also applies to
NOX and it supersedes the regulation of NOX under
CAIR.
---------------------------------------------------------------------------
\73\ DOE notes that on June 29, 2015, the U.S. Supreme Court
ruled that the EPA erred when the agency concluded that cost did not
need to be considered in the finding that regulation of hazardous
air pollutants from coal- and oil-fired electric utility steam
generating units (EGUs) is appropriate and necessary under section
112 of the Clean Air Act (CAA). Michigan v. EPA, 135 S. Ct. 2699
(2015). The Supreme Court did not vacate the MATS rule, and DOE has
tentatively determined that the Court's decision on the MATS rule
does not change the assumptions regarding the impact of energy
conservation standards on SO2 emissions. Further, the
Court's decision does not change the impact of the energy
conservation standards on mercury emissions. The EPA, in response to
the U.S. Supreme Court's direction, has now considered cost in
evaluating whether it is appropriate and necessary to regulate coal-
and oil-fired EGUs under the CAA. EPA concluded in its final
supplemental finding that a consideration of cost does not alter the
EPA's previous determination that regulation of hazardous air
pollutants, including mercury, from coal- and oil-fired EGUs, is
appropriate and necessary. 81 FR 24420 (April 25, 2016). The MATS
rule remains in effect, but litigation is pending in the D.C.
Circuit Court of Appeals over EPA's final supplemental finding MATS
rule. https://www.gpo.gov/fdsys/pkg/FR-2016-04-25/pdf/2016-09429.pdf.
---------------------------------------------------------------------------
CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia. 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 final rule for these States.
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 2016, which
incorporates the MATS.
The AEO 2016 Reference case (and some other cases) assumes
implementation of the Clean Power Plan (CPP), which is the EPA program
to regulate CO2 emissions at existing fossil-fired electric
power plants.\74\ DOE used the AEO 2016 No-CPP case as a basis for
developing emissions factors for the electric power sector to be
consistent with its use of the No-CPP case in the NIA.\75\
---------------------------------------------------------------------------
\74\ U.S. Environmental Protection Agency, ``Carbon Pollution
Emission Guidelines for Existing Stationary Sources: Electric
Utility Generating Units'' (Washington, DC: October 23, 2015).
https://www.federalregister.gov/articles/2015/10/23/2015-22842/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating.
\75\ As DOE has not modeled the effect of CPP during the 30-year
analysis period of this rulemaking, there is some uncertainty as to
the magnitude and overall effect of the energy efficiency standards.
With respect to estimated CO2 and NOX
emissions reductions and their associated monetized benefits, if
implemented the CPP would result in an overall decrease in
CO2 emissions from electric generating units (EGUs), and
would thus likely reduce some of the estimated CO2
reductions associated with this rulemaking.
---------------------------------------------------------------------------
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, CH4, N2O 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 projection period
for each TSL. This section summarizes the basis for the values used for
monetizing the emissions benefits and presents the values considered in
this final rule.
For this final rule, DOE relied on a set of values for the social
cost of carbon (SC-CO2) 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 final rule TSD.
1. Social Cost of Carbon
The SC-CO2 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 SC-CO2 are provided in dollars
per metric ton of CO2. A domestic SC-CO2 value is
meant to reflect the value of damages in the U.S. resulting from a unit
change in CO2 emissions, while a global SC-CO2
value is meant to reflect the value of damages worldwide.
Under section 1(b)(6) of Executive Order 12866, ``Regulatory
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to
the extent permitted by law, ``assess both the costs and the benefits
of the intended regulation and, recognizing that some costs and
benefits are difficult to quantify, propose or adopt a regulation only
upon a reasoned determination that the benefits of the intended
regulation justify its costs.'' The purpose of the SC-CO2
estimates presented here is to allow agencies to incorporate the
monetized social benefits of reducing CO2 emissions into
[[Page 1422]]
cost-benefit analyses of regulatory actions. The estimates are
presented with an acknowledgement of the many uncertainties involved
and with a clear understanding that they should be updated over time to
reflect increasing knowledge of the science and economics of climate
impacts.
As part of the interagency process that developed these SC-
CO2 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 SC-CO2 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 SC-CO2 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 \76\ 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.
---------------------------------------------------------------------------
\76\ National Research Council. Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use. 2009. National Academies
Press: Washington, DC.
---------------------------------------------------------------------------
Despite the limits of both quantification and monetization, SC-
CO2 estimates can be useful in estimating the social
benefits of reducing CO2 emissions. Although any numerical
estimate of the benefits of reducing CO2 emissions is
subject to some uncertainty, that does not relieve DOE of its
obligation to attempt to factor those benefits into its cost-benefit
analysis. Moreover, the interagency working group's (IWG) SC-
CO2 estimates are well supported by the existing scientific
and economic literature. As a result, DOE has relied on the IWG's SC-
CO2 estimates in quantifying the social benefits of reducing
CO2 emissions. DOE estimates the benefits from reduced (or
costs from increased) emissions in any future year by multiplying the
change in emissions in that year by the SC-CO2 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 current SC-CO2
values reflect the IWG's best assessment, based on current data, of the
societal effect of CO2 emissions. The IWG 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 IWG will continue to explore the issues raised by this
analysis and consider public comments as part of the ongoing
interagency process.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing CO2 emissions. To ensure consistency in how
benefits are evaluated across Federal agencies, the Administration
sought to develop a transparent and defensible method, specifically
designed for the rulemaking process, to quantify avoided climate change
damages from reduced CO2 emissions. The IWG did not
undertake any original analysis. Instead, it combined SC-CO2
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 IWG was a set of five interim values that
represented the first sustained interagency effort within the U.S.
government to develop an SC-CO2 for use in regulatory
analysis. The results of this preliminary effort were presented in
several proposed and final rules issued by DOE and other agencies.
c. Current Approach and Key Assumptions
After the release of the interim values, the IWG reconvened on a
regular basis to generate improved SC-CO2 estimates.
Specially, the IWG considered public comments and further explored the
technical literature in relevant fields. It relied on three integrated
assessment models commonly used to estimate the SC-CO2: 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 SC-CO2 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 IWG 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 IWG selected four sets of SC-CO2 values for
use in regulatory analyses. Three sets of values are based on the
average SC-CO2 from the three integrated assessment models,
at discount rates of 2.5, 3, and 5 percent. The fourth set, which
represents the 95th percentile SC-CO2 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 SC-CO2 distribution. The values grow in real
terms over time. Additionally, the IWG determined that a range of
values from 7 percent to 23 percent should be used to adjust the global
SC-CO2 to calculate domestic effects,\77\ although
preference is given to consideration of the global benefits of reducing
CO2 emissions. Table IV.13 presents the values in the 2010
IWG report.\78\
---------------------------------------------------------------------------
\77\ 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.
\78\ U.S. Government--IWG on Social Cost of Carbon. Social Cost
of Carbon for Regulatory Impact Analysis Under Executive Order
12866. February 2010. https://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf.
[[Page 1423]]
Table IV.13--Annual SC-CO2 Values From 2010 IWG Report
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate and statistic
-----------------------------------------------------------------
Year 5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010.......................................... 4.7 21.4 35.1 64.9
2015.......................................... 5.7 23.8 38.4 72.8
2020.......................................... 6.8 26.3 41.7 80.7
2025.......................................... 8.2 29.6 45.9 90.4
2030.......................................... 9.7 32.8 50.0 100.0
2035.......................................... 11.2 36.0 54.2 109.7
2040.......................................... 12.7 39.2 58.4 119.3
2045.......................................... 14.2 42.1 61.7 127.8
2050.......................................... 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
In 2013 the IWG released an update (which was revised in July 2015)
that contained SC-CO2 values that were generated using the
most recent versions of the three integrated assessment models that
have been published in the peer-reviewed literature.\79\ DOE used these
values for this final rule. Table IV.14 shows the four sets of SC-
CO2 estimates from the latest interagency update in 5-year
increments from 2010 through 2050. The full set of annual SC-
CO2 estimates from 2010 through 2050 is reported in appendix
14A of the final rule TSD. The central value that emerges is the
average SC-CO2 across models at the 3-percent discount rate.
However, for purposes of capturing the uncertainties involved in
regulatory impact analysis, the IWG emphasizes the importance of
including all four sets of SC-CO2 values.
---------------------------------------------------------------------------
\79\ U.S. Government--IWG 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. https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
Table IV.14--Annual SC-CO2 Values From 2013 IWG Update (Revised July 2015)
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate and statistic
-----------------------------------------------------------------
Year 5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010.......................................... 10 31 50 86
2015.......................................... 11 36 56 105
2020.......................................... 12 42 62 123
2025.......................................... 14 46 68 138
2030.......................................... 16 50 73 152
2035.......................................... 18 55 78 168
2040.......................................... 21 60 84 183
2045.......................................... 23 64 89 197
2050.......................................... 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SC-CO2 estimates should be treated
as provisional and revisable because they will evolve with improved
scientific and economic understanding. The IWG 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 SC-
CO2. The IWG 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.\80\
---------------------------------------------------------------------------
\80\ In November 2013, OMB announced a new opportunity for
public comment on the interagency technical support document
underlying the revised SC-CO2 estimates. 78 FR 70586. In
July 2015 OMB published a detailed summary and formal response to
the many comments that were received: This is available at 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.
---------------------------------------------------------------------------
DOE converted the values from the 2013 interagency report (revised
July 2015), 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 SC-CO2 cases, the values for emissions
in 2020 were $13.5, $47.4, $69.9, and $139 per metric ton avoided
(values expressed in 2015$). DOE derived values after 2050 based on the
trend in 2010-2050 in each of the four cases in the interagency update.
DOE multiplied the CO2 emissions reduction estimated for
each year by the SC-CO2 value for that year in each of the
four cases. To calculate a present value of the stream of monetary
values, DOE
[[Page 1424]]
discounted the values in each of the four cases using the specific
discount rate that had been used to obtain the SC-CO2 values
in each case.
DOE received several comments on the development of and the use of
the SC-CO2 values in its analyses. A group of trade
associations led by the U.S. Chamber of Commerce objected to DOE's
continued use of the SC-CO2 in the cost-benefit analysis and
stated that the SC-CO2 calculation should not be used in any
rulemaking until it undergoes a more rigorous notice, review, and
comment process. (U.S. Chamber of Commerce, No. 36 at p. 4) AHAM
opposed DOE's analysis of the social cost of carbon in this rulemaking
and supported the comments submitted by the U.S. Chamber of Commerce.
(AHAM, No. 43 at p. 29) IECA stated that before DOE applies any SC-
CO2 estimate in its rulemaking, DOE must correct the
methodological flaws that commenters have raised about the IWG's SC-
CO2 estimate. IECA referenced a U.S. Government
Accountability Office report that IECA believes highlights severe
uncertainties in SC-CO2 values. (IECA, No. 33 at p. 2)
In contrast, the Joint Advocates stated that only a partial
accounting of the costs of climate change (those most easily monetized)
can be provided, which inevitably involves incorporating elements of
uncertainty. The Joint Advocates commented that accounting for the
economic harms caused by climate change is a critical component of
sound benefit-cost analyses of regulations that directly or indirectly
limit GHGs. The Joint Advocates stated that several Executive Orders
direct Federal agencies to consider non-economic costs and benefits,
such as environmental and public health impacts. (Joint Advocates, No.
23 at pp. 2-3) Furthermore, the Joint Advocates argued that without an
SC-CO2 estimate, regulators would by default be using a
value of zero for the benefits of reducing carbon pollution, thereby
implying that carbon pollution has no costs. The Joint Advocates stated
that it would be arbitrary for a Federal agency to weigh the societal
benefits and costs of a rule with significant carbon pollution effects
but to assign no value at all to the considerable benefits of reducing
carbon pollution. (Joint Advocates, No. 23 at p. 3)
The Joint Advocates stated that assessment and use of the
Integrated Assessment Models (IAMs) in developing the SC-CO2
values has been transparent. The Joint Advocates further noted that
repeated opportunities for public comment demonstrate that the IWG's
SC-CO2 estimates were developed and are being used
transparently. (Joint Advocates, No. 23 at p. 4) The Joint Advocates
stated that (1) the IAMs used reflect the best available, peer-reviewed
science to quantify the benefits of carbon emission reductions; (2)
uncertainty is not a valid reason for rejecting the SC-CO2
analysis, and (3) the IWG was rigorous in addressing uncertainty
inherent in estimating the economic cost of pollution. (Joint
Advocates, No. 23 at pp. 5, 17-18, 18-19) The Joint Advocates added
that the increase in the SC-CO2 estimate in the 2013 update
reflects the growing scientific and economic research on the risks and
costs of climate change, but is still very likely an underestimate of
the SC-CO2. (Joint Advocates, No. 23 at p. 4)
In response to the comments on the SC-CO2, in conducting
the interagency process that developed the SC-CO2 values,
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. Key uncertainties
and model differences transparently and consistently inform the range
of SC-CO2 estimates. These uncertainties and model
differences are discussed in the IWG's reports, as are the major
assumptions. Specifically, uncertainties in the assumptions regarding
climate sensitivity, as well as other model inputs such as economic
growth and emissions trajectories, are discussed and the reasons for
the specific input assumptions chosen are explained. However, the three
integrated assessment models used to estimate the SC-CO2 are
frequently cited in the peer-reviewed literature and were used in the
last assessment of the IPCC. In addition, new versions of the models
that were used in 2013 to estimate revised SC-CO2 values
were published in the peer-reviewed literature. The Government
Accountability Office (GAO) report mentioned by IECA describes the
approach the IWG used to develop estimates of the SC-CO2 and
noted that evaluating the quality of the IWG's approach was outside the
scope of GAO's review. Although uncertainties remain, the revised SC-
CO2 values are based on the best available scientific
information on the impacts of climate change. The current estimates of
the SC-CO2 have been developed over many years, using the
best science available, and with input from the public. DOE notes that
not using SC-CO2 estimates because of uncertainty would be
tantamount to assuming that the benefits of reduced carbon emissions
are zero, which is inappropriate. Furthermore, the commenters have not
offered alternative estimates of the SC-CO2 that they
believe are more accurate.
As noted previously, in November 2013, OMB announced a new
opportunity for public comment on the interagency technical support
document underlying the revised SC-CO2 estimates. 78 FR
70586 (Nov. 26, 2013). In July 2015, OMB published a detailed summary
and formal response to the many comments that were received. DOE stands
ready to work with OMB and the other members of the IWG on further
review and revision of the SC-CO2 estimates as
appropriate.\81\
---------------------------------------------------------------------------
\81\ See https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions. OMB also stated its
intention to seek independent expert advice on opportunities to
improve the estimates, including many of the approaches suggested by
commenters.
---------------------------------------------------------------------------
IECA stated that the SC-CO2 places U.S. manufacturing at
a distinct competitive disadvantage. IECA added that the higher SC-
CO2 cost drives manufacturing companies offshore and
increases imports of more carbon-intensive manufactured goods. (IECA,
No. 33 at pp. 1-2) In response, DOE notes that the SC-CO2 is simply a
metric that Federal agencies use to estimate the societal benefits of
policy actions that reduce CO2 emissions.
IECA stated that the SC-CO2 value is unrealistically
high in comparison to carbon market prices. (IECA, No. 33 at p. 3) In
response, DOE notes that the SC-CO2 is an estimate of the
monetized damages associated with an incremental increase in carbon
emissions in a given year, whereas carbon trading prices in existing
markets are simply a function of the demand and supply of tradable
permits in those markets. Such prices depend on the arrangements in
specific carbon markets, and do not necessarily bear relation to the
damages associated with an incremental increase in carbon emissions.
IECA stated that the SC-CO2 estimates must be made
consistent with OMB Circular A-4, and noted that it uses a lower
discount rate than recommended by OMB Circular A-4 and values global
benefits rather than solely U.S. domestic benefits. (IECA, No. 33 at p.
5)
OMB Circular A-4 provides two suggested discount rates for use in
regulatory analysis: 3 percent and 7 percent. Circular A-4 states that
the 3 percent discount rate is appropriate for ``regulation [that]
primarily and directly affects private consumption (e.g., through
higher consumer prices for goods and services).'' The IWG that
developed the SC-CO2 values for use by Federal agencies
examined the
[[Page 1425]]
economics literature and concluded that the consumption rate of
interest is the correct concept to use in evaluating the net social
costs of a marginal change in CO2 emissions, as the impacts
of climate change are measured in consumption-equivalent units in the
three models used to estimate the SC-CO2. The IWG chose to
use three discount rates to span a plausible range of constant discount
rates: 2.5, 3, and 5 percent per year. The central value, 3 percent, is
consistent with estimates provided in the economics literature and
OMB's Circular A-4 guidance for the consumption rate of interest.
Regarding the use of global SC-CO2 values, DOE's
analysis estimates both global and domestic benefits of CO2
emissions reductions. Following the recommendation of the IWG, DOE
places more focus on a global measure of SC-CO2. The climate
change problem is highly unusual in at least two respects. First, it
involves a global externality: Emissions of most GHGs contribute to
damages around the world even when they are emitted in the U.S.
Consequently, to address the global nature of the problem, the SC-
CO2 must incorporate the full (global) damages caused by GHG
emissions. Second, climate change presents a problem that the U.S.
alone cannot solve. Even if the U.S. were to reduce its GHG emissions
to zero, that step would be far from enough to avoid substantial
climate change. Other countries would also need to take action to
reduce emissions if significant changes in the global climate are to be
avoided. Emphasizing the need for a global solution to a global
problem, the U.S. has been actively involved in seeking international
agreements to reduce emissions and in encouraging other nations,
including emerging major economies, to take significant steps to reduce
emissions. When these considerations are taken as a whole, the IWG
concluded that a global measure of the benefits from reducing U.S.
emissions is preferable. DOE's approach is not in contradiction of the
requirement to weigh the need for national energy conservation, as one
of the main reasons for national energy conservation is to contribute
to efforts to mitigate the effects of global climate change.
2. Social Cost of Methane and Nitrous Oxide
The Joint Advocates stated that EPA and other agencies have begun
using a methodology developed to specifically measure the social cost
of methane in recent proposed rulemakings, and recommended that DOE use
the social cost of methane metric to more accurately reflect the true
benefits of energy conservation standards. They stated that the
methodology in the study used to develop the social cost of methane
provides reasonable estimates that reflect updated evidence and provide
consistency with the Government's accepted methodology for estimating
the SC-CO2. (Joint Advocates, No. 23 at pp. 19-20)
While carbon dioxide is the most prevalent GHG emitted into the
atmosphere, other GHGs are also important contributors. These include
methane and nitrous oxide. GWP values are often used to convert
emissions of non-CO2 GHGs to CO2-equivalents to
facilitate comparison of policies and inventories involving different
GHGs. While GWPs allow for some useful comparisons across gases on a
physical basis, using the SC-CO2 to value the damages
associated with changes in CO2-equivalent emissions is not
optimal. This is because non-CO2 GHGs differ not just in
their potential to absorb infrared radiation over a given time frame,
but also in the temporal pathway of their impact on radiative forcing,
which is relevant for estimating their social cost but not reflected in
the GWP. Physical impacts other than temperature change also vary
across gases in ways that are not captured by GWP.
In light of these limitations and the paucity of peer-reviewed
estimates of the social cost of non-CO2 gases in the
literature, the 2010 Social Cost of Carbon Technical Support Document
did not include an estimate of the social cost of non-CO2
GHGs and did not endorse the use of GWP to approximate the value of
non-CO2 emission changes in regulatory analysis. Instead,
the IWG noted that more work was needed to link non-CO2 GHG
emission changes to economic impacts.
Since that time, new estimates of the social cost of non-
CO2 GHG emissions have been developed in the scientific
literature, and a recent study by Marten et al. (2015) provided the
first set of published estimates for the social cost of CH4
and N2O emissions that are consistent with the methodology
and modeling assumptions underlying the IWG SC-CO2
estimates.\82\ Specifically, Marten et al. used the same set of three
integrated assessment models, five socioeconomic and emissions
scenarios, equilibrium climate sensitivity distribution, three constant
discount rates, and the aggregation approach used by the IWG to develop
the SC-CO2 estimates. An addendum to the IWG's Technical
Support Document on Social Cost of Carbon for Regulatory Impact
Analysis under Executive Order 12866 summarizes the Marten et al.
methodology and presents the SC-CH4 and SC-N2O
estimates from that study as a way for agencies to incorporate the
social benefits of reducing CH4 and N2O emissions
into benefit-cost analyses of regulatory actions that have small, or
``marginal,'' impacts on cumulative global emissions.\83\
---------------------------------------------------------------------------
\82\ Marten, A.L., Kopits, E.A., Griffiths, C.W., Newbold, S.C.,
and A. Wolverton. 2015. Incremental CH4 and
N2O Mitigation Benefits Consistent with the U.S.
Government's SC-CO2 Estimates. Climate Policy. 15(2):
272-298 (published online, 2014).
\83\ U.S. Government--IWG on Social Cost of GHGs. Addendum to
Technical Support Document on Social Cost of Carbon for Regulatory
Impact Analysis under Executive Order 12866: Application of the
Methodology to Estimate the Social Cost of Methane and the Social
Cost of Nitrous Oxide. August 2016. https://www.whitehouse.gov/sites/default/files/omb/inforeg/august_2016_sc_ch4_sc_n2o_addendum_final_8_26_16.pdf.
---------------------------------------------------------------------------
The methodology and estimates described in the addendum have
undergone multiple stages of peer review and their use in regulatory
analysis has been subject to public comment. The estimates are
presented with an acknowledgement of the limitations and uncertainties
involved and with a clear understanding that they should be updated
over time to reflect increasing knowledge of the science and economics
of climate impacts, just as the IWG has committed to do for the SC-
CO2. OMB has determined that the use of the Marten et al.
estimates in regulatory analysis is consistent with the requirements of
OMB's Information Quality Guidelines Bulletin for Peer Review and OMB
Circular A-4.
The SC-CH4 and SC-N2O estimates are presented
in Table IV.15. Following the same approach as with the SC-
CO2, values for 2010, 2020, 2030, 2040, and 2050 are
calculated by combining all outputs from all scenarios and models for a
given discount rate. Values for the years in between are calculated
using linear interpolation. The full set of annual SC-CH4
and SC-N2O estimates between 2010 and 2050 is reported in
appendix 14A of the final rule TSD. DOE derived values after 2050 based
on the trend in 2010-2050 in each of the four cases in the IWG
addendum.
[[Page 1426]]
Table IV.15--Annual SC-CH4 and SC-N2O Estimates From 2016 IWG Addendum
[2007$ per metric ton]
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC-CH4 SC-N2O
-------------------------------------------------------------------------------------------
Discount rate and statistic Discount rate and statistic
-------------------------------------------------------------------------------------------
Year 5% 3% 2.5% 3% 5% 3% 2.5% 3%
-------------------------------------------------------------------------------------------
95th 95th
Average Average Average percentile Average Average Average percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010........................................................ 370 870 1,200 2,400 3,400 12,000 18,000 31,000
2015........................................................ 450 1,000 1,400 2,800 4,000 13,000 20,000 35,000
2020........................................................ 540 1,200 1,600 3,200 4,700 15,000 22,000 39,000
2025........................................................ 650 1,400 1,800 3,700 5,500 17,000 24,000 44,000
2030........................................................ 760 1,600 2,000 4,200 6,300 19,000 27,000 49,000
2035........................................................ 900 1,800 2,300 4,900 7,400 21,000 29,000 55,000
2040........................................................ 1,000 2,000 2,600 5,500 8,400 23,000 32,000 60,000
2045........................................................ 1,200 2,300 2,800 6,100 9,500 25,000 34,000 66,000
2050........................................................ 1,300 2,500 3,100 6,700 11,000 27,000 37,000 72,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
DOE multiplied the CH4 and N2O emissions
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates 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 SC-CH4 and
SC-N2O estimates in each case. Results for CH4
and N2O emissions reduction estimates can be found in
section V.B.6 of this document and are included in the costs and
benefits for those that contribute to the determination of the economic
justification of each TSL level.
3. Social Cost of Other Air Pollutants
As noted previously, DOE 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 CSAPR.
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.\84\ 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 appendix 14B of the final rule TSD. DOE primarily relied on the low
estimates to be conservative.\85\ The national average low values for
2020 (in 2015$) are $3,187/ton at 3-percent discount rate and $2,869/
ton at 7-percent discount rate. DOE developed values specific to the
sector for portable ACs using a method described in appendix 14B of the
final rule TSD. For this analysis DOE used linear interpolation to
define values for the years between 2020 and 2025 and between 2025 and
2030; for years beyond 2030 the value is held constant.
---------------------------------------------------------------------------
\84\ 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.
\85\ 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 citations for 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 reduction in other
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 generation 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 2016. 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. As
discussed in section IV.K, DOE is using the AEO 2016 No-CPP case as a
basis for its analysis. For the current analysis, impacts are
quantified by comparing the levels of electricity sector generation,
installed capacity, fuel consumption and emissions in the AEO 2016 No-
CPP case and various side cases. Details of the methodology are
provided in the appendices to chapters 13 and 15 of the 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
[[Page 1427]]
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 consumers on energy, (2)
reduced spending on new energy supply by the utility industry, (3)
increased consumer spending on the products to which the new standards
apply and other goods and services, 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 BLS. BLS
regularly publishes its estimates of the number of jobs per million
dollars of economic activity in different sectors of the economy, as
well as the jobs created elsewhere in the economy by this same economic
activity. Data from BLS indicate that expenditures in the utility
sector generally create fewer jobs (both directly and indirectly) than
expenditures in other sectors of the economy.\86\ 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, the BLS data suggest that net national
employment may increase due to shifts in economic activity resulting
from energy conservation standards.
---------------------------------------------------------------------------
\86\ See U.S. Department of Commerce--Bureau of Economic
Analysis. Regional Multipliers: A User Handbook for the Regional
Input-Output Modeling System (RIMS II). 1997. U.S. Government
Printing Office: Washington, DC. Available at http://www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf.
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this final rule using an input/output model of the
U.S. economy called Impact of Sector Energy Technologies version 4
(ImSET).\87\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model, which was designed to estimate the
national employment and income effects of energy-saving technologies.
The ImSET software includes a computer-based I-O model having
structural coefficients that characterize economic flows among 187
sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\87\ Livingston, O.V, S.R. Bender, M.J. Scott, and R.W. Schultz.
ImSET 4.0: Impact of Sector Energy Technologies Model Description
and User's Guide. Pacific Northwest National Laboratory. Richland,
WA. PNNL-24563.
---------------------------------------------------------------------------
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 used ImSET only
to generate results for near-term timeframes (2022-2027), where these
uncertainties are reduced. For more details on the employment impact
analysis, see chapter 16 of the 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
portable ACs. It addresses the TSLs examined by DOE, the projected
impacts of each of these levels if adopted as energy conservation
standards for portable ACs, and the standards levels that DOE is
adopting in this final rule. Additional details regarding DOE's
analyses are contained in the final rule TSD supporting this document.
A. Trial Standard Levels (TSLs)
DOE analyzed the benefits and burdens of four TSLs for portable
ACs. These TSLs are equal to each of the ELs analyzed by DOE with
results presented in this document. Detailed results for TSLs that DOE
analyzed are in the final rule TSD.
Table V.1 presents the TSLs and the corresponding ELs, and average
EERs and CEERs at each level that DOE has identified for potential new
energy conservation standards for portable ACs. TSL 4 represents the
maximum technologically feasible (``max-tech'') energy efficiency. TSL
3 consists of an intermediate EL below the max-tech level,
corresponding to the single highest efficiency observed in DOE's test
sample. TSL 2 represents the maximum available efficiency across the
full range of capacities, and TSL 1 represents an intermediate level
between the baseline and TSL 2.
Table V.1--Trial Standard Levels for Portable Air Conditioners
----------------------------------------------------------------------------------------------------------------
TSL EL EER (Btu/Wh) CEER (Btu/Wh)
----------------------------------------------------------------------------------------------------------------
1............................................................... 1 6.05 5.94
2............................................................... 2 7.15 7.13
3............................................................... 3 8.48 8.46
4............................................................... 4 10.75 10.73
----------------------------------------------------------------------------------------------------------------
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on portable ACs consumers by
looking at the effects that potential new standards at each TSL would
have on the LCC and PBP. DOE also examined the impacts of potential
standards on selected consumer subgroups and three sensitivity analyses
on energy consumption. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products affect consumers in two
ways: (1) Purchase price increases 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 final rule
TSD provides detailed
[[Page 1428]]
information on the LCC and PBP analyses.
Table V.2 through Table V.7 show the LCC and PBP results for the
TSLs considered for portable ACs for both sectors, residential and
commercial. The LCC results presented in Table V.2 and Table V.3
combined the results for residential and commercial users, which means
that DOE had to assign an appropriate weight to the results for each
type of user. Using the weighting from the room AC rulemaking,\88\ DOE
assumed that 87 percent of shipments are to the residential sector and
13 percent are to the commercial sector. In the first of each pair of
tables, the simple payback is measured relative to the baseline product
(EL 0). In the second table, the impacts are measured relative to the
efficiency distribution in the no-new-standards case in the compliance
year (see section IV.F of this final rule). Because some consumers
purchase products with higher efficiency in the no-new-standards case,
the average savings are less than the difference between the average
LCC of EL 0 and the average LCC at each TSL. The savings refer only to
consumers who are affected by a standard at a given TSL. Those who
already purchase a product with efficiency at or above a given TSL are
not affected. Consumers for whom the LCC increases at a given TSL
experience a net cost.
---------------------------------------------------------------------------
\88\ Room AC Standards Rulemaking, Direct Final Rule, Chapter 8,
page 51. April 18, 2011. http://www.regulations.gov/#!documentDetail;D=EERE-2007-BT-STD-0010-0053.
Table V.2--Average LCC and PBP Results for Portable ACs, Residential Setting
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
---------------------------------------------------------------- Simple payback Average
TSL EL First year's Lifetime (years) lifetime
Installed cost operating cost operating cost LCC (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0 559 119 995 1,554 .............. 10
1....................................... 1 588 106 892 1,480 2.3 10
2....................................... 2 635 92 769 1,404 2.8 10
3....................................... 3 700 78 655 1,355 3.5 10
4....................................... 4 733 63 533 1,265 3.1 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline (EL 0) product.
Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Portable ACs, Residential Setting
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL EL savings * experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1........................................................... 1 73 9
2........................................................... 2 108 27
3........................................................... 3 143 38
4........................................................... 4 229 34
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.4--Average LCC and PBP Results for Portable ACs, Commercial Setting
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
---------------------------------------------------------------- Simple payback Average
TSL EL First year's Lifetime (years) lifetime
Installed cost operating cost operating cost LCC (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0 560 246 1,818 2,378 .............. 10
1....................................... 1 588 221 1,636 2,224 1.2 10
2....................................... 2 636 192 1,419 2,055 1.4 10
3....................................... 3 701 165 1,218 1,919 1.7 10
4....................................... 4 733 135 999 1,732 1.6 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline (EL 0) product.
Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Portable ACs, Commercial Setting
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL EL savings * experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1........................................................... 1 155 3
[[Page 1429]]
2........................................................... 2 238 9
3........................................................... 3 342 14
4........................................................... 4 522 12
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.6--Average LCC and PBP Results for Portable ACs, Both Sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
---------------------------------------------------------------- Simple payback Average
TSL EL First year's Lifetime (years) lifetime
Installed cost operating cost operating cost LCC (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0 559 135 1,103 1,663 .............. 10
1....................................... 1 588 122 990 1,578 2.2 10
2....................................... 2 635 105 855 1,490 2.6 10
3....................................... 3 700 89 729 1,429 3.2 10
4....................................... 4 733 73 594 1,327 2.9 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline (EL 0) product.
Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Portable ACs, Both Sectors
----------------------------------------------------------------------------------------------------------------
Percent of
Average LCC consumers that
TSL EL savings * experience net
(2015$) cost
----------------------------------------------------------------------------------------------------------------
1........................................................... 1 84 8
2........................................................... 2 125 24
3........................................................... 3 169 35
4........................................................... 4 268 31
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
As discussed in section IV.E, DOE conducted a sensitivity analysis
that assumes consumers use portable ACs 50 percent less than room ACs.
For the proposed standard, TSL 2, the average LCC savings for all
consumers declines to $35 (from $125) and 42 percent of consumers
experience a net cost under the sensitivity analysis (from 24 percent).
See appendix 8F and 10E of the final rule TSD for additional
information.
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on low-income households, senior-only households, and
small businesses. Table V.8 compares the average LCC savings and PBP at
each EL for the three consumer subgroups, along with the average LCC
savings for the entire sample. In most cases, the average LCC savings
and PBP for low-income households, senior-only households, and small
businesses at the considered ELs are not substantially different from
the average for all households. Chapter 11 of the final rule TSD
presents the complete LCC and PBP results for the subgroups.
Table V.8--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households Plus Light-Commercial Establishments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2015$) Simple payback period (years)
-------------------------------------------------------------------------------------------------------------------------
TSL Low-income Senior-only Small Both Low-income Senior-only Small Both
households households businesses sectors households households businesses sectors
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................. 96 72 143 84 1.9 2.3 1.2 2.2
2............................. 142 106 218 125 2.3 2.8 1.4 2.6
3............................. 195 141 312 169 2.9 3.5 1.7 3.2
4............................. 304 226 477 268 2.6 3.2 1.6 2.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1430]]
c. Rebuttable Presumption Payback
As discussed in section III.E.2, EPCA establishes a rebuttable
presumption that an energy conservation standard is economically
justified if the increased purchase cost for a product that meets the
standard is less than three times the value of the first-year energy
savings resulting from the standard. In calculating a rebuttable
presumption PBP for each of the considered TSLs, DOE used point values,
and, as required by EPCA, based the energy use calculation on the DOE
test procedure for portable ACs. In contrast, the PBPs presented in
section V.B.1.a were calculated using distributions for input values,
with energy use based on field metering studies and RECS data.
Table V.9 presents the rebuttable-presumption PBP for the
considered TSLs for portable ACs. While DOE examined the rebuttable-
presumption criterion, it considered whether the standard levels
considered for the final 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), that considers the full range of impacts to
the consumer, manufacturer, Nation, and environment. The results of
that analysis serve as the basis for DOE to definitively evaluate the
economic justification for a potential standard level, thereby
supporting or rebutting the results of any preliminary determination of
economic justification. Table V.9 shows the rebuttable presumption PBPs
for the considered TSLs for portable ACs.
Table V.9--Portable Air Conditioners: Rebuttable PBPs
[Years]
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Residential................................. 1.7 2.1 2.6 2.3
Commercial.................................. 2.3 2.8 3.4 3.1
Both sectors................................ 1.8 2.2 2.7 2.4
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of new energy
conservation standards on portable AC manufacturers. The next section
describes the expected impacts on manufacturers at each considered TSL.
Chapter 12 of the 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 portable AC manufacturers, as well as the conversion costs that DOE
estimates manufacturers would incur at each TSL. To evaluate the range
of cash-flow impacts on the portable AC manufacturing industry, DOE
used two different markup scenarios to model the range of anticipated
market responses to new energy conservation standards.
To assess the lower (less severe) end of the range of potential
impacts, DOE modeled a preservation of gross margin percentage markup
scenario, in which a flat markup of 1.42 (i.e., the baseline
manufacturer markup) is applied across all ELs. In this scenario, DOE
assumed that a manufacturer's absolute dollar markup would increase as
production costs increase in the new energy conservation standards
case. During interviews, manufacturers have indicated that it is
optimistic to assume that they would be able to maintain the same gross
margin markup as their production costs increase in response to a new
energy conservation standard, particularly at higher TSLs.
To assess the higher (more severe) end of the range of potential
impacts, DOE modeled the preservation of per-unit operating profit
markup scenario, which assumes that manufacturers would not be able to
preserve the same overall gross margin, but instead would cut their
markup for minimally compliant products to maintain a cost-competitive
product offering while maintaining the same overall level of operating
profit in absolute dollars as in the no-new-standards case. The two
tables below show the range of potential INPV impacts for manufacturers
of portable ACs. Table V.10 reflects the lower bound of impacts (higher
profitability) and Table V.11 represents the upper bound of impacts
(lower profitability).
Each scenario results in a unique set of cash flows and
corresponding industry values at each TSL. In the following discussion,
the INPV results refer to the sum of discounted cash flows through
2051, the difference in INPV between the no-new-standards case and each
standards case, and the total industry conversion costs required for
each standards case.
Table V.10--Manufacturer Impact Analysis Under the Preservation of Gross Margin Percentage Markup Scenario for Analysis Period
[2017-2051]
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards ---------------------------------------------------
case 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................... 2015$ Millions........................... 738.5 684.7 526.1 406.5 373.0
Change in INPV........................... 2015$ Millions........................... .............. (53.8) (212.4) (332.0) (365.5)
(%)...................................... .............. (7.3%) (28.8%) (45.0%) (49.5%)
Free Cash Flow (2021).................... 2015$ Millions........................... 50.5 16.1 (78.6) (153.4) (173.0)
Change in Free Cash Flow (2021).......... (%)...................................... .............. (68.0%) (255.5%) (403.6%) (442.3%)
Product Conversion Costs................. 2015$ Millions........................... .............. 33.1 124.4 179.0 192.2
Capital Conversion Costs................. 2015$ Millions........................... .............. 52.3 196.5 314.3 344.5
Total Conversion Costs................... 2015$ Millions........................... .............. 85.5 320.9 493.3 536.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
[[Page 1431]]
Table V.11--Manufacturer Impact Analysis under the Preservation of Per-Unit Operating Profit Markup Scenario for Analysis Period
[2017-2051]
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards ---------------------------------------------------
case 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV..................................... 2015$ Millions........................... 738.5 676.8 485.1 324.7 248.1
Change in INPV........................... 2015$ Millions........................... .............. (61.8) (253.4) (413.9) (490.4)
(%)...................................... .............. (8.4%) (34.3%) (56.0%) (66.4%)
Free Cash Flow (2021).................... 2015$ Millions........................... 50.5 16.1 (78.6) (153.4) (173.0)
Change in Free Cash Flow (2021).......... (%)...................................... .............. (68.0%) (255.5%) (403.6%) (442.3%)
Product Conversion Costs................. 2015$ Millions........................... .............. 33.1 124.4 179.0 192.2
Capital Conversion Costs................. 2015$ Millions........................... .............. 52.3 196.5 314.3 344.5
Total Conversion Costs................... 2015$ Millions........................... .............. 85.5 320.9 493.3 536.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
Beyond impacts on INPV, DOE includes a comparison of free cash flow
between the no-new-standards case and the standards case at each TSL in
the year before new standards take effect to provide perspective on the
short-run cash flow impacts in the discussion of the results below.
At TSL 1, DOE estimates the impact on INPV for manufacturers of
portable ACs to range from -$61.8 million to -$53.8 million, or a
decrease in INPV of 8.4 percent to 7.3 percent, under the preservation
of per-unit operating profit markup scenario and the preservation of
gross margin percentage markup scenario, respectively. At this TSL,
industry free cash flow is estimated to decrease by approximately 68.0
percent to $16.1 million, compared to the no-new-standards case value
of $50.5 million in 2021, the year before the projected compliance
date.
At TSL 1, the industry as a whole is expected to incur $33.1
million in product conversion costs attributed to upfront research,
development, testing, and certification, as well as $52.3 million in
one-time investments in property, plant, and equipment (PP&E) necessary
to manufacture updated platforms. The industry conversion cost burden
at TSL 1 would be associated with updates for portable ACs sold in the
U.S. that are currently at the baseline, approximately 22 percent of
platforms and 37 percent of shipments. At TSL 1, roughly 67 percent of
non-compliant platforms will require some new components, including
larger heat exchangers (with increases in heat exchanger area of up to
20 percent), which may necessitate larger chassis sizes. The remaining
non-compliant portable ACs will likely require a complete platform
redesign, necessitating all new components and high associated re-
tooling and R&D costs.
At TSL 2, DOE estimates the impact on INPV for manufacturers of
portable ACs to range from -$253.4 million to -$212.4 million, or a
decrease in INPV of 34.3 percent to 28.8 percent, under the
preservation of per-unit operating profit markup scenario and the
preservation of gross margin percentage markup scenario, respectively.
At this TSL, industry free cash flow is estimated to decrease by
approximately 255.5 percent to -$78.6 million, compared to the no-new-
standards case value of $50.5 million in 2021, the year before the
projected compliance date.
At TSL 2, the industry as a whole is expected to incur $124.4
million in product conversion costs associated with the upfront
research, development, testing, and certification; as well as $196.5
million in one-time investments in PP&E for products requiring platform
updates. The industry conversion cost burden at this TSL would be
associated with updates for portable ACs sold in the U.S. that are
currently below the EL corresponding to TSL 2, approximately 83 percent
of platforms and 85 percent of shipments. At TSL 2, roughly 67 percent
of non-compliant platforms will require some new components, including
larger heat exchangers (with increases in heat exchanger area of up to
20 percent), which may necessitate larger chassis sizes. The remaining
non-compliant portable ACs will likely require a complete platform
redesign, necessitating all new components and high associated re-
tooling and R&D costs.
At TSL 3, DOE estimates the impact on INPV for manufacturers of
portable ACs to range from -$413.9 million to -$332.0 million, or a
decrease in INPV of 56.0 percent to 45.0 percent, under the
preservation of per-unit operating profit markup scenario and the
preservation of gross margin percentage markup scenario, respectively.
At this TSL, industry free cash flow is estimated to decrease by
approximately 403.6 percent to -$153.4 million, compared to the no-new-
standards case value of $50.5 million in 2021, the year before the
projected compliance date.
At TSL 3, the industry as a whole is expected to incur $179.0
million in product conversion costs associated with the upfront
research, development, testing, and certification; as well as $314.3
million in one-time investments in PP&E for products requiring platform
redesigns. Again, the industry conversion cost burden at this TSL would
be associated with updates for portable ACs sold in the U.S. that are
currently below the EL corresponding to TSL 3, approximately 98 percent
of platforms and 98 percent of shipments. At TSL 3, roughly 14 percent
of non-compliant platforms will require some new components, including
larger heat exchangers (with increases in heat exchanger area of up to
20 percent), which may necessitate larger chassis sizes. The remaining
86 percent of non-compliant portable ACs will likely require a complete
platform redesign, necessitating all new components and high associated
re-tooling and R&D costs.
At TSL 4, DOE estimates the impact on INPV for manufacturers of
portable ACs to range from -$490.4 million to -$365.5 million, or a
decrease in INPV of 66.4 percent to 49.5 percent, under the
preservation of per-unit operating profit markup scenario and the
preservation of gross margin percentage markup scenario, respectively.
At this TSL, industry free cash flow is estimated to decrease by
approximately 442.3 percent to -$173.0 million, compared to the base-
case value of $50.5 million in 2021, the year before the projected
compliance date.
At TSL 4, the industry as a whole is expected to spend $192.2
million in product conversion costs associated with the research and
development and
[[Page 1432]]
testing and certification, as well as $344.5 million in one-time
investments in PP&E for complete platform redesigns. The industry
conversion cost burden at this TSL would be associated with updates for
portable ACs sold in the U.S. that are currently below the EL
corresponding to TSL 4, estimated to be 100 percent of platforms and
shipments. At TSL 4, all of the non-compliant portable ACs will likely
require a complete platform redesign, necessitating all new components
and high associated re-tooling and R&D costs.
b. Impacts on Employment
To quantitatively assess the impacts of energy conservation
standards on direct employment, DOE used the GRIM to estimate the
domestic labor expenditures and number of production and non-production
employees in the no-new-standards case and at each TSL. DOE used
statistical data from the U.S. Census Bureau's 2014 Annual Survey of
Manufactures (ASM),\89\ results of the engineering analysis, and
manufacturer feedback to calculate industry-wide labor expenditures and
direct domestic employment levels.
---------------------------------------------------------------------------
\89\ Available online at http://www.census.gov/programs-surveys/asm.html.
---------------------------------------------------------------------------
Labor expenditures related to product manufacturing depend on 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. The total labor expenditures in the GRIM were
then converted to domestic production employment levels. To do this,
DOE relied on the Production Workers Annual Wages, Production Workers
Annual Hours, Total Fringe Benefits, Annual Payroll, Production Workers
Average for Year, and Number of Employees from the ASM to convert total
labor expenditure to total production employees.
The total production employees is then multiplied by the U.S. labor
percentage to convert total production employment to total domestic
production employment. The U.S. labor percentage represents the
industry fraction of domestic manufacturing production capacity for the
covered product. This value is derived from manufacturer feedback,
product database analysis, and publicly available information.
However, DOE estimates that none of the portable ACs subject to the
standards considered in this final rule analysis (single-duct and dual-
duct portable ACs) are produced domestically. Therefore, DOE does not
provide an estimate of direct employment impacts. Indirect employment
impacts in the broader U.S. economy are documented in chapter 16 of the
final rule TSD.
c. Impacts on Manufacturing Capacity
As noted in the previous section, no single-duct or dual-duct
portable ACs are manufactured in the U.S. Therefore, new energy
conservation standards would have no impact on U.S. production
capacity.
d. Impacts on Subgroups of Manufacturers
The Small Business Administration (SBA) defines a ``small
business'' as having 1,250 employees or less for North American
Industry Classification System (NAICS) 333415 (``Air-Conditioning and
Warm Air Heating Equipment and Commercial and Industrial Refrigeration
Equipment Manufacturing''). Based on this SBA employee threshold, DOE
identified one entity involved in the design and distribution of
portable ACs in the U.S. that qualifies as a small business. Based upon
available information, DOE does not believe that this company is a
manufacturer. However, even if this small business does manufacture
portable ACs, because the product sold by this company incorporates the
highest-efficiency variable-speed compressor currently available on the
market, DOE believes that the product will comply with the standard EL
adopted in this final rule (EL 2). Therefore, DOE believes that costs
for this company would be limited to testing, certification, and
updates to marketing materials and product literature. 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.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the product-specific
regulatory actions of other Federal agencies that affect the
manufacturers of a covered product or equipment. While any one
regulation may not impose a significant burden on manufacturers, the
combined effects of several existing or impending regulations may have
serious consequences for some manufacturers, groups of manufacturers,
or an entire industry. Assessing the impact of a single regulation may
overlook this cumulative regulatory burden. In addition to energy
conservation standards, other regulations can significantly affect
manufacturers' financial operations. Multiple regulations affecting the
same manufacturer can strain profits and lead companies to abandon
product lines or markets with lower expected future returns than
competing products. For these reasons, DOE conducts an analysis of
cumulative regulatory burden as part of its rulemakings pertaining to
appliance efficiency.
Some portable AC manufacturers also make other products or
equipment that could be subject to energy conservation standards set by
DOE. DOE looks at the regulations that could affect portable AC
manufacturers that will take effect approximately 3 years before and
after the 2022 compliance date of the standards established in this
final rule.
The compliance dates and expected industry conversion costs of
relevant energy conservation standards are indicated in Table V.12.
Included in the table are Federal regulations that have compliance
dates 3 years before and after the portable AC compliance date (and
also 8 years before the portable AC compliance date).
Table V.12--Other Energy Conservation Standards Rulemakings Affecting the Portable AC Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of manufacturers Approx. Industry conversion costs Industry conversion costs/
Federal energy conservation standard manufacturers * in portable standards (millions $) revenue ***
ACs rule ** year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Dehumidifiers, 81 FR 38338 (June 13, 30 6 2019 $52.5 million (2014$)...... 4.5%.
2016).
Kitchen Ranges and Ovens, 81 FR 60784 21 3 2019 $119.2 million (2015$)..... less than 1%.
(Sep. 2, 2016).
Miscellaneous Refrigeration Products, 81 48 2 2019 $75.6 million (2015$)...... 4.9%.
FR 75194 (October 28, 2016).
Res. Clothes Washers, 77 FR 32308 (May 13 1 2018 $418.5 million (2010$)..... 2.3%.
31, 2012) [dagger].
[[Page 1433]]
PTACs, 80 FR 43162 (July 21, 2015) 12 3 2017 N/A [Dagger]............... N/A [Dagger].
[dagger].
Microwave Ovens, 78 FR 36316 (June 17, 12 2 2016 $43.1 million (2011$)...... less than 1%.
2013) [dagger].
External Power Supplies, 79 FR 7846 243 1 2015 $43.4 million (2012$)...... 2.3%.
(February 10, 2014) [dagger].
Residential Central Air Conditioners and 45 2 2015 $18.0 million (2009$)...... less than 1%.
Heat Pumps, 76 FR 37408 (June 27, 2011)
[dagger].
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory
burden.
** This column presents the number of OEMs producing portable ACs that are also listed as manufacturers in the listed energy conservation standard
contributing to cumulative regulatory burden.
*** This column presents conversion costs as a percentage of cumulative revenue for the industry during the conversion period. The conversion period is
the 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] Consistent with Chapter 12 of the TSD, DOE has assessed whether this rule will have significant impacts on manufacturers that are also subject
to significant impacts from other EPCA rules with compliance dates within 3 years of this rule's compliance date. However, DOE recognizes that a
manufacturer incurs costs during some period before a compliance date as it prepares to comply, such as by revising product designs and manufacturing
processes, testing products, and preparing certifications. As such, to illustrate a broader set of rules that may also create additional burden on
manufacturers, DOE has included additional rules with compliance dates that fall within 8 years before the compliance date of this rule by expanding
the timeframe of potential cumulative regulatory burden. Note that the inclusion of any given rule in this Table does not indicate that DOE considers
the rule to contribute significantly to cumulative impact. DOE has chosen to broaden its list of rules in order to provide additional information
about its rulemaking activities. DOE will continue to evaluate its approach to assessing cumulative regulatory burden for use in future rulemakings to
ensure that it is effectively capturing the overlapping impacts of its regulations. DOE plans to seek public comment on the approaches it has used
here (i.e., both the 3- and 8-year timeframes from the compliance date) in order to better understand at what point in the compliance cycle
manufacturers most experience the effects of cumulative and overlapping burden from the regulation of multiple products.
[Dagger] As detailed in the energy conservation standards final rule for PTACs and PTHPs, DOE established amended energy efficiency standards for PTACs
at the minimum efficiency level specified in the ANSI/ASHRAE/IES Standard 90.1-2013 for PTACs. For PTHPs, DOE is not amending energy conservation
standards, which are already equivalent to the PTHP standards in ANSI/ASHRAE/Illuminating Engineering Society (IES) Standard 90.1-2013. Accordingly,
there were no conversion costs associated with amended energy conservation standards for PTACs and PTHPs.
In addition to other Federal energy conservation standards,
manufacturers cited potential restrictions on the use of certain
refrigerants and State-level refrigerant recovery regulations as
sources of cumulative regulatory burden for portable AC manufacturers.
For more details, see chapter 12, section 12.7.3, of the final rule
TSD.
DOE plans to seek public comment on the approaches it has used here
(i.e., both the 3- and 8-year timeframes from the compliance date) in
order to better understand at what point in the compliance cycle
manufacturers most experience the effects of cumulative and overlapping
burden from the regulation of multiple product classes.
3. National Impact Analysis
This section presents DOE's estimates of the NES and the NPV of
consumer benefits that would result from each of the TSLs considered as
potential new standards.
a. Significance of Energy Savings
To estimate the energy savings attributable to potential standards
for portable ACs, DOE compared their energy consumption under the no-
new-standards case to their anticipated energy consumption under each
TSL. The savings are measured over the entire lifetime of products
purchased in the 30-year period that begins in the year of anticipated
compliance with new standards (2022-2051). Table V.13 presents DOE's
projections of the NES for each TSL considered for portable ACs. The
savings were calculated using the approach described in section IV.H.2
of this document.
Table V.13--Cumulative National Energy Savings for Portable Air Conditioners; 30 Years of Shipments
[2022-2051]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Savings ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(Quads)
----------------------------------------------------------------------------------------------------------------
Source Energy Savings........................... 0.12 0.47 0.90 1.23
Full Fuel Cycle Energy Savings.................. 0.12 0.49 0.95 1.28
----------------------------------------------------------------------------------------------------------------
OMB Circular A-4 \90\ requires 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 9 years, rather than 30
years of product shipments. The choice of a nine-year period is a proxy
for the timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\91\ The review timeframe established in EPCA is generally
not
[[Page 1434]]
synchronized with the product lifetime, product manufacturing cycles,
or other factors specific to portable ACs. Thus, such results are
presented for informational purposes only and are not indicative of any
change in DOE's analytical methodology. The NES sensitivity analysis
results based on a nine-year analytical period are presented in Table
V.14. The impacts are counted over the lifetime of portable ACs
purchased in 2022-2030.
---------------------------------------------------------------------------
\90\ OMB, ``Circular A-4: Regulatory Analysis'' (Sept. 17, 2003)
(Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
\91\ Section 325(m) of EPCA requires DOE to review its standards
at least once every 6 years, and requires, for certain products, a
3-year period after any new standard is promulgated before
compliance is required, except that in no case may any new standards
be required within 6 years of the compliance date of the previous
standards. While adding a 6-year review to the 3-year compliance
period adds up to 9 years, DOE notes that it may undertake reviews
at any time within the 6 year period and that the 3-year compliance
date may yield to the 6-year backstop. A 9-year analysis period may
not be appropriate given the variability that occurs in the timing
of standards reviews and the fact that for some consumer products,
the compliance period is 5 years rather than 3 years.
Table V.14--Cumulative National Energy Savings for Portable Air Conditioners; 9 Years of Shipments
[2022-2030]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Savings ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(Quads)
----------------------------------------------------------------------------------------------------------------
Source Energy Savings........................... 0.04 0.14 0.25 0.36
Full-Fuel-Cycle Energy Savings.................. 0.04 0.15 0.26 0.38
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the TSLs considered for portable ACs.
In accordance with OMB's guidelines on regulatory analysis,\92\ DOE
calculated NPV using both a 7-percent and a 3-percent real discount
rate. Table V.15 shows the consumer NPV results with impacts counted
over the lifetime of products purchased in 2022-2051.
Table V.15--Cumulative Net Present Value of Consumer Benefits for Portable Air Conditioners; 30 Years of
Shipments
[2022-2051]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
3 percent....................................... 0.81 3.06 5.56 7.96
7 percent....................................... 0.35 1.25 2.17 3.21
----------------------------------------------------------------------------------------------------------------
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.16. The impacts are counted over the
lifetime of products purchased in 2022-2030. As mentioned previously,
such results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology or decision
criteria.
Table V.16--Cumulative Net Present Value of Consumer Benefits for Portable Air Conditioners; Nine Years of
Shipments
[2022-2030]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
3 percent....................................... 0.34 1.19 1.94 2.96
7 percent....................................... 0.19 0.64 1.02 1.59
----------------------------------------------------------------------------------------------------------------
The results in Table V.16 reflect the use of a default trend to
estimate the change in price for portable ACs over the analysis period
(see section IV.F.1 of this document). DOE also conducted a sensitivity
analysis that considered one scenario with a lower rate of price
decline and 50 percent fewer operating hours than the reference case,
and one scenario with a higher rate of price decline than the reference
case. The results of these alternative cases are presented in appendix
10C of the final rule TSD. In the high-price-decline case, the NPV of
consumer benefits is higher than in the default case due to higher
energy price trends. In the low-price-decline case, the NPV of consumer
benefits is lower than in the default case due to lower energy price
trends and the 50 percent fewer operating hours.
---------------------------------------------------------------------------
\92\ OMB. Circular A-4: Regulatory Analysis. September 17, 2003.
www.whitehouse.gov/omb/circulars_a004_a-4/.
---------------------------------------------------------------------------
c. Indirect Impacts on Employment
DOE expects that new energy conservation standards for portable ACs
will reduce energy expenditures for consumers of those products, with
the resulting net savings being redirected to other forms of economic
activity. These expected shifts in spending and economic activity could
affect the demand for labor. As described in section IV.N of this
document, DOE used an input/output model of the U.S. economy to
estimate indirect
[[Page 1435]]
employment impacts of the TSLs that DOE considered. DOE understands
that there are uncertainties involved in projecting employment impacts,
especially changes in the later years of the analysis. Therefore, DOE
generated results for near-term timeframes (2022-2029), 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 final rule TSD presents detailed results
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
As discussed in section IV.C.1.b of this document, DOE has
concluded that the standards adopted in this final rule will not lessen
the utility or performance of the portable ACs under consideration in
this rulemaking. Manufacturers of these products currently offer units
that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
DOE considered any lessening of competition that would be likely to
result from new or amended standards. As discussed in section
III.E.1.e, the Attorney General of the United States (Attorney General)
is required to determine the impact, if any, of any lessening of
competition likely to result from a proposed standard and to transmit
such determination in writing to the Secretary within 60 days of the
publication of a proposed rule, together with an analysis of the nature
and extent of the impact. To assist the Attorney General in making this
determination, DOE provided the DOJ June 2016 ECS with copies of the
June 2016 ECS NOPR and the NOPR TSD for review. In its assessment
letter responding to DOE, DOJ concluded that the proposed energy
conservation standards for portable ACs are unlikely to have a
significant adverse impact on competition. DOE is publishing the
Attorney General's assessment at the end of this final rule.
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 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 potential energy conservation
standards for portable ACs is expected to yield environmental benefits
in the form of reduced emissions of certain air pollutants and GHGs.
Table V.17 provides DOE's estimate of cumulative emissions reductions
expected to result from the TSLs considered in this rulemaking. The
emissions were calculated using the multipliers discussed in section
IV.K. DOE reports annual emissions reductions for each TSL in chapter
13 of the final rule TSD.
Table V.17--Cumulative Emissions Reduction for Portable ACs Shipped in 2022-2051
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 6.0 24.2 47.0 63.9
SO2 (thousand tons)............................. 4.1 16.2 31.3 42.7
NOX (thousand tons)............................. 3.1 12.3 23.9 32.5
Hg (tons)....................................... 0.01 0.06 0.12 0.16
CH4 (thousand tons)............................. 0.6 2.5 4.9 6.7
N2O (thousand tons)............................. 0.09 0.36 0.70 0.95
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.3 1.4 2.6 3.6
SO2 (thousand tons)............................. 0.04 0.16 0.30 0.41
NOX (thousand tons)............................. 4.9 19.8 38.6 52.4
Hg (tons)....................................... 0.00 0.00 0.00 0.00
CH4 (thousand tons)............................. 30.4 122.3 238.0 323.2
N2O (thousand tons)............................. 0.00 0.01 0.02 0.02
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 6.4 25.6 49.6 67.5
SO2 (thousand tons)............................. 4.1 16.4 31.6 43.1
NOX (thousand tons)............................. 8.0 32.2 62.5 85.0
Hg (tons)....................................... 0.01 0.06 0.12 0.16
CH4 (thousand tons)............................. 31.1 124.8 242.9 329.8
CH4 (thousand tons COeq) *...................... 870 3,495 6,801 9,235
N2O (thousand tons)............................. 0.09 0.37 0.71 0.97
N2O (thousand tons COeq) *...................... 24.3 97.5 188.9 257.1
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same GWP.
[[Page 1436]]
As part of the analysis for this rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
that DOE estimated for each of the considered TSLs for portable ACs. As
discussed in section IV.L of this document, for CO2, DOE
used the most recent values for the SC-CO2 developed by an
interagency process. The four sets of SC-CO2 values
correspond to the average values from distributions that use a 5-
percent discount rate, a 3-percent discount rate, and a 2.5-percent
discount rate, and the 95th-percentile values from a distribution that
uses a 3-percent discount rate. The actual SC-CO2 values
used for emissions in each year are presented in appendix 14A of the
final rule TSD.
Table V.18 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate that 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 final rule TSD.
Table V.18--Present Value of CO2 Emissions Reduction for Portable ACs Shipped in 2022-2051
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC-CO2 case
-------------------------------------------------------------------------------------------
TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate,
average average average 95th percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................................... 45.9 208 330 635
2........................................................... 182 829 1,316 2,529
3........................................................... 347 1,595 2,535 4,866
4........................................................... 477 2,182 3,464 6,656
--------------------------------------------------------------------------------------------------------------------------------------------------------
As discussed in section IV.L.2, DOE estimated monetary benefits
likely to result from the reduced emissions of CH4 and
N2O that DOE estimated for each of the considered TSLs for
portable ACs. DOE used the recent values for the SC-CH4 and
SC-N2O developed by the interagency working group.
Table V.19 presents the value of the CH4 emissions
reduction at each TSL, and Table V.20 presents the value of the
N2O emissions reduction at each TSL.
Table V.19--Present Value of Methane Emissions Reduction for Portable ACs Shipped in 2022-2051
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC-CH4 case
-------------------------------------------------------------------------------------------
TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate,
average average average 95th percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................................... 9.9 31.2 44.2 83.2
2........................................................... 39.5 125.0 177.2 333.4
3........................................................... 76.0 242.3 343.9 646.1
4........................................................... 104.1 329.9 467.8 879.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.20--Present Value of Nitrous Oxide Emissions Reduction for Portable ACs Shipped in 2022-2051
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC-N2O case
-------------------------------------------------------------------------------------------
TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate,
average average average 95th percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................................... 0.2 1.0 1.6 2.8
2........................................................... 1.0 4.1 6.5 11.0
3........................................................... 1.9 7.9 12.5 21.1
4........................................................... 2.6 10.8 17.1 28.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
world economy continues to evolve rapidly. Thus, any value placed on
reduced CO2 emissions in this rulemaking is subject to
change. DOE, together with other Federal agencies, will continue to
review various methodologies for estimating the monetary value of
reductions in CO2 and other GHG emissions. This ongoing
review will consider the comments on this subject that are part of the
public record for this and other rulemakings, as well as other
methodological assumptions and issues. 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 notes,
however, that the adopted standards would be economically justified, as
defined by
[[Page 1437]]
EPCA, even without inclusion of monetized benefits of reduced GHG
emissions.
DOE also estimated the monetary value of the economic benefits
associated with NOX emissions reductions anticipated to
result from the considered TSLs for portable ACs. The dollar-per-ton
values that DOE used are discussed in section IV.L of this document.
Table V.21 presents the present values for NOX emissions
reduction for each TSL calculated using 7-percent and 3-percent
discount rates. This table presents results that use the low dollar-
per-ton values, which reflect DOE's primary estimate. Results that
reflect the range of NOX dollar-per-ton values are presented
in Table V.21.
Table V.21--Present Value of NOX Emissions Reduction for Portable ACs Shipped in 2022-2051 *
----------------------------------------------------------------------------------------------------------------
TSL 3% Discount rate 7% Discount rate
----------------------------------------------------------------------------------------------------------------
(million 2015$)
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1................................................................. 14.1 5.8
2................................................................. 55.8 22.6
3................................................................. 106.6 42.4
4................................................................. 146.5 59.0
----------------------------------------------------------------------------------------------------------------
* Results are based on the low benefit-per-ton values.
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No
other factors were considered in this analysis.
8. Summary of National Economic Impacts
Table V.22 presents the NPV values that result from adding the
estimates of the potential economic benefits resulting from reduced GHG
and NOX emissions to the NPV of consumer savings calculated
for each TSL considered in this rulemaking.
Table V.22--Consumer NPV Combined With Present Value of Benefits From Emissions Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% discount rate added with:
-------------------------------------------------------------------------------------------
TSL GHG 5% discount rate, 3% Discount rate, GHG 2.5% discount GHG 3% discount rate,
average case average case rate, average case 95th percentile case
--------------------------------------------------------------------------------------------------------------------------------------------------------
(billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................................... 0.9 1.1 1.2 1.5
2........................................................... 3.3 4.1 4.6 6.0
3........................................................... 6.1 7.5 8.6 11.2
4........................................................... 8.7 10.6 12.1 15.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% discount rate added with:
-------------------------------------------------------------------------------------------
TSL GHG 5% discount rate, GHG 3% discount rate, GHG 3% discount rate, GHG 3% discount rate,
average case average case average case 95th percentile case
--------------------------------------------------------------------------------------------------------------------------------------------------------
(billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................................... 0.4 0.6 0.7 1.1
2........................................................... 1.5 2.2 2.8 4.2
3........................................................... 2.6 4.1 5.1 7.7
4........................................................... 3.9 5.8 7.2 10.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The GHG benefits include the estimated benefits for reductions in CO2, CH4, and N2O emissions using the four sets of SC-CO2, SC-CH4, and SC-N2O
values developed by the IWG.
The national operating cost savings are domestic U.S. monetary
savings that occur as a result of purchasing the covered portable ACs,
and are measured for the lifetime of products shipped in 2022-2051. The
benefits associated with reduced GHG emissions achieved as a result of
the adopted standards are also calculated based on the lifetime of
portable ACs shipped in 2022-2051. However, the GHG reduction is a
benefit that accrues globally. Because CO2 emissions have a
very long residence time in the atmosphere, the SC-CO2
values for future emissions reflect climate-related impacts that
continue through 2300.
C. Conclusion
When considering new or amended energy conservation standards, the
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
[[Page 1438]]
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 final rule, DOE considered the impacts of potential new
standards for portable ACs 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 EL 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. These include
the impacts on identifiable subgroups of consumers who may be
disproportionately affected by a national standard and impacts on
employment.
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 standard 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 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.\93\
---------------------------------------------------------------------------
\93\ P.C. Reiss and M.W. White. Household Electricity Demand,
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883.
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------
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 which these
impacts are defined and estimated in the regulatory process.\94\ 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.
---------------------------------------------------------------------------
\94\ Sanstad, A.H. Notes on the Economics of Household Energy
Consumption and Technology Choice. 2010. LBNL. https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf.
---------------------------------------------------------------------------
1. Benefits and Burdens of TSLs Considered for Portable AC Standards
Table V.23 and Table V.24 summarize the quantitative impacts
estimated for each TSL for portable ACs. The national impacts are
measured over the lifetime of portable ACs purchased in the 30-year
period that begins in the anticipated year of compliance with new
standards (2022-2051). The energy savings, emissions reductions, and
value of emissions reductions refer to full-fuel-cycle results. The ELs
contained in each TSL are described in section V.A of this document.
[[Page 1439]]
Table V.23--Summary of Analytical Results for Portable ACs TSLs: National Impacts
[2022-2051]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy Savings (quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Quads........................... 0.12........................ 0.49........................ 0.95........................ 1.28.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Costs and Benefits (billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................ 0.81........................ 3.06........................ 5.56........................ 7.96.
7% discount rate................ 0.35........................ 1.25........................ 2.17........................ 3.21.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction (Total FFC Emission)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 6.4......................... 25.6........................ 49.6........................ 67.5.
SO2 (thousand tons)............. 4.1......................... 16.4........................ 31.6........................ 43.1.
NOX (thousand tons)............. 8.0......................... 32.2........................ 62.5........................ 85.0.
Hg (tons)....................... 0.01........................ 0.06........................ 0.12........................ 0.16.
CH4 (thousand tons)............. 31.1........................ 124.8....................... 242.9....................... 329.8.
N2O (thousand tons)............. 0.09........................ 0.37........................ 0.71........................ 0.97.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (billion 2015$) **.......... 0.046 to 0.635.............. 0.182 to 2.529.............. 0.347 to 4.866.............. 0.477 to 6.656.
NOX--3% discount rate (million 14.1........................ 55.8........................ 106.6....................... 146.5.
2015$).
NOX--7% discount rate (million 5.8......................... 22.6........................ 42.4........................ 59.0.
2015$).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Table V.24--Summary of Analytical Results for Portable ACs TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (million 2015$) (No- 676.8 to 684.7.............. 485.1 to 526.1.............. 324.7 to 406.5.............. 248.1 to 373.0.
new-standards case INPV = 738.5.
Industry NPV (% change)......... (8.4%) to (7.3%)............ (34.3%) to (28.8%).......... (56.0%) to (45.0%).......... (66.4%) to (49.5%).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential..................... 73.......................... 108......................... 143......................... 229.
Commercial...................... 155......................... 238......................... 342......................... 522.
Both Sectors.................... 84.......................... 125......................... 169......................... 268.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential..................... 2.3......................... 2.8......................... 3.5......................... 3.1.
Commercial...................... 1.2......................... 1.4......................... 1.7......................... 1.6.
Both Sectors.................... 2.2......................... 2.6......................... 3.2......................... 2.9.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Consumers that Experience a Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential..................... 9........................... 27.......................... 38.......................... 34.
Commercial...................... 3........................... 9........................... 14.......................... 12.
Both Sectors.................... 8........................... 24.......................... 35.......................... 31.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values. The entry ``n.a.'' means not applicable because there is no change in the standard at certain TSLs.
* Weighted by shares of each product class in total projected shipments in 2022.
DOE first considered TSL 4, which represents the max-tech
efficiency level. TSL 4 would save an estimated 1.28 quads of energy,
an amount DOE considers significant. Under TSL 4, the NPV of consumer
benefit would be $3.21 billion using a discount rate of 7 percent, and
$7.96 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 4 are 67.5 Mt of
CO2, 43.1 thousand tons of SO2, 85.0 thousand
tons of NOX, 0.16 ton of Hg, 329.8 thousand tons of
CH4, and 0.97 thousand tons of N2O. The estimated
monetary value of the GHG emissions reduction at TSL 4 ranges from $477
million to $6,656 million for CO2, from $104 million to $880
million for CH4, and from $3 million to $29 million for
N2O. The estimated monetary value of the NOX
emissions reduction at TSL 4 is $59.0 million using a 7-percent
discount rate and $146.5 million using a 3-percent discount rate.
At TSL 4, the average LCC impact is a savings of $229 for the
residential sector, $522 for the commercial sector, and $268 for both
sectors. The simple payback period is 3.1 years for the residential
sector, 1.6 years for the commercial sector, and 2.9 years for both
sectors. The fraction of consumers experiencing a net LCC cost is 34
percent for the residential sector, 12 percent for the commercial
sector, and 31 percent for both sectors.
At TSL 4, the projected change in INPV ranges from a decrease of
$490.4 million to a decrease of $365.5 million, which correspond to
decreases of 66.4 percent and 49.5 percent, respectively. DOE estimates
that no portion of the market will meet the efficiency standard
specified by this TSL in 2021, the year before the compliance year. As
such, manufacturers would have to redesign all products by the 2022
compliance date to meet demand. Redesigning all units to meet the max-
tech efficiency level would require considerable capital and product
conversion expenditures. At TSL 4, the capital conversion costs
[[Page 1440]]
total as much as $344.5 million, roughly 12.9 times the industry annual
ordinary capital expenditure in 2021 (the year leading up to new
standards). DOE estimates that complete platform redesigns would cost
the industry $192.2 million in product conversion costs. These
conversion costs largely relate to the extensive research programs
required to develop new products that meet the efficiency standards at
TSL 4. These costs are equivalent to 17.0 times the industry annual
budget for research and development. As such, the conversion costs
associated with the changes in products and manufacturing facilities
required at TSL 4 would require significant use of manufacturers'
financial reserves (manufacturer capital pools), impacting other areas
of business that compete for these resources and significantly reducing
INPV. In addition, manufacturers could face a substantial impact on
profitability at TSL 4. Because manufacturers are more likely to reduce
their margins to maintain a price-competitive product at higher TSLs,
DOE expects that TSL 4 would yield impacts closer to the high end of
the range of INPV impacts. If the high end of the range of impacts is
reached, as DOE expects, TSL 4 could result in a net loss to
manufacturers of 66.4 percent of INPV.
Beyond the direct financial impact on manufacturers, TSL 4 may also
contribute to the unavailability of portable ACs at certain cooling
capacities. The efficiency at TSL 4 is a theoretical level that DOE
developed by modeling the most efficient components available. However,
DOE is aware that the highest-efficiency compressors that are necessary
to meet TSL 4 may not be available to all manufacturers for the full
range of capacities of portable ACs. Because specific high-efficiency
components available are driven largely by the markets for other
products with higher shipments (e.g., room ACs), portable AC
manufacturers may be constrained in their design choices. This may have
the potential to eliminate portable ACs of certain cooling capacities
from the market, should TSL 4 be selected.
The Secretary concludes that at TSL 4 for portable ACs, the
benefits of energy savings, positive NPV of consumer benefits, emission
reductions, and the estimated monetary value of the emissions
reductions would be outweighed by the economic burden on some
consumers, and the impacts on manufacturers, including the conversion
costs and profit margin impacts that could result in a large reduction
in INPV. Consequently, the Secretary has concluded that TSL 4 is not
economically justified.
DOE then considered TSL 3, which would save an estimated 0.95 quads
of energy, an amount DOE considers significant. Under TSL 3, the NPV of
consumer benefit would be $2.17 billion using a discount rate of 7
percent, and $5.56 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 3 are 49.6 Mt of
CO2, 31.6 thousand tons of SO2, 62.5 thousand
tons of NOX, 0.12 tons of Hg, 242.9 thousand tons of
CH4, and 0.71 thousand tons of N2O. The estimated
monetary value of the GHG emissions reduction at TSL 3 ranges from $347
million to $4,866 million for CO2, from $76 million to $646
million for CH4, and from $2 million to $21 million for
N2O. The estimated monetary value of the NOX
emissions reduction at TSL 4 is $42.4 million using a 7-percent
discount rate and $106.6 million using a 3-percent discount rate.
At TSL 3, the average LCC impact is a savings of $143 for the
residential sector, $342 for the commercial sector, and $169 for both
sectors. The simple payback period is 3.5 years for the residential
sector, 1.7 years for the commercial sector, and 3.2 years for both
sectors. The fraction of consumers experiencing a net LCC cost is 38
percent for the residential sector, 14 percent for the commercial
sector, and 35 percent for both sectors.
At TSL 3, the projected change in INPV ranges from a decrease of
$413.9 million to a decrease of $332.0 million, which correspond to
decreases of 56.0 percent and 45.0 percent, respectively. DOE estimates
that approximately 2 percent of available platforms and 2 percent of
shipments will meet the efficiency standards specified by this TSL in
2021, the year before the compliance year. As such, manufacturers would
have to make upgrades to 98 percent of platforms by the 2022 compliance
date to meet demand. Redesigning these units to meet the EL would
require considerable capital and product conversion expenditures. At
TSL 3, the capital conversion costs total as much as $314.3 million,
roughly 11.8 times the industry annual ordinary capital expenditure in
2021 (the year leading up to new standards). DOE estimates that
complete platform redesigns would cost the industry $179.0 million in
product conversion costs. These conversion costs largely relate to the
extensive research programs required to develop new products that meet
the efficiency standards at TSL 3. These costs are equivalent to 15.8
times the industry annual budget for research and development. As such,
the conversion costs associated with the changes in products and
manufacturing facilities required at TSL 3 would require significant
use of manufacturers' financial reserves (manufacturer capital pools),
impacting other areas of business that compete for these resources and
significantly reducing INPV. In addition, manufacturers could face a
substantial impact on profitability at TSL 3. Because manufacturers are
more likely to reduce their margins to maintain a price-competitive
product at higher TSLs, especially in the lower-capacity portable
segment, DOE expects that TSL 3 would yield impacts closer to the high
end of the range of INPV impacts. If the high end of the range of
impacts is reached, as DOE expects, TSL 3 could result in a net loss to
manufacturers of 56.0 percent of INPV.
Similar to TSL 4, beyond the direct financial impact on
manufacturers, TSL 3 may also contribute to the unavailability of
portable ACs at certain cooling capacities. TSL 3 is based on the
single highest efficiency unit in DOE's test sample. However, DOE
believes few, if any, other units on the market are able to achieve
these efficiencies and that the highest efficiency single-speed
compressors likely necessary to meet TSL 3 may not be available to all
manufacturers for the full range of capacities of portable ACs. Because
high-efficiency components available at any given time are driven
largely by the markets for other products with higher shipments (e.g.,
room ACs), portable AC manufacturers may be constrained in their design
choices. This may have the potential to eliminate portable ACs of
certain cooling capacities from the market.
The Secretary concludes that at TSL 3 for portable ACs, the
benefits of energy savings, positive NPV of consumer benefits, emission
reductions, and the estimated monetary value of the emissions
reductions would be outweighed by the 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 3 is not
economically justified.
DOE then considered TSL 2, which would save an estimated 0.49 quads
of energy, an amount DOE considers significant. Under TSL 2, the NPV of
consumer benefit would be $1.25 billion using a discount rate of 7
percent, and $3.06 billion using a discount rate of 3 percent.
[[Page 1441]]
The cumulative emissions reductions at TSL 2 are 25.6 Mt of
CO2, 16.4 thousand tons of SO2, 32.2 thousand
tons of NOX, 0.06 tons of Hg, 124.8 thousand tons of
CH4, and 0.37 thousand tons of N2O. The estimated
monetary value of the GHG emissions reduction at TSL 2 ranges from $182
million to $2,529 million for CO2, from $40 million to $333
million for CH4, and from $1 million to $11 million for
N2O. The estimated monetary value of the NOX
emissions reduction at TSL 2 is $22.6 million using a 7-percent
discount rate and $55.8 million using a 3-percent discount rate.
At TSL 2, the average LCC impact is a savings of $108 for the
residential sector, $238 for the commercial sector, and $125 for both
sectors. The simple payback period is 2.8 years for the residential
sector, 1.4 years for the commercial sector, and 2.6 years for both
sectors. The fraction of consumers experiencing a net LCC cost is 27
percent for the residential sector, 9 percent for the commercial
sector, and 24 percent for both sectors.
At TSL 2, the projected change in INPV ranges from a decrease of
$253.4 million to a decrease of $212.4 million, which correspond to
decreases of 34.3 percent and 28.8 percent, respectively. DOE estimates
that approximately 17 percent of available platforms and 15 percent of
shipments will meet the efficiency standards specified by this TSL in
2021, the year before the compliance year. As such, manufacturers would
have to make upgrades to 83 percent of platforms by the 2022 compliance
date to meet demand. At TSL 2, the capital conversion costs total as
much as $196.5 million, roughly 7.4 times the industry annual ordinary
capital expenditure in 2021 (the year leading up to new standards). DOE
estimates that complete platform redesigns would cost the industry
$124.4 million in product conversion costs. These conversion costs
largely relate to the extensive research programs required to develop
new products that meet the efficiency standards at TSL 2. These costs
are equivalent to 11.0 times the industry annual budget for R&D.
Because manufacturers are more likely to reduce their margins to
maintain a price-competitive product at higher TSLs, especially in the
lower-capacity portable segment, DOE expects that TSL 2 would yield
impacts closer to the high end of the range of INPV impacts. If the
high end of the range of impacts is reached, as DOE expects, TSL 2
could result in a net loss to manufacturers of 34.3 percent of INPV.
After considering the analysis and weighing the benefits and
burdens, the Secretary has concluded that at TSL 2 for portable ACs,
the benefits of energy savings, positive NPV of consumer benefits,
emission reductions, the estimated monetary value of the emissions
reductions, and positive average LCC savings would outweigh the
negative impacts on some consumers and on manufacturers, including the
conversion costs that could result in a reduction in INPV for
manufacturers. Accordingly, the Secretary has concluded that TSL 2
would offer the maximum improvement in efficiency that is
technologically feasible and economically justified, as defined by
EPCA, and would result in the significant conservation of energy.
Therefore, based on the above considerations, DOE adopts the energy
conservation standards for portable ACs at TSL 2. The new energy
conservation standards for portable ACs, which are expressed as CEER as
a function of SACC, are shown in Table V.25.
[GRAPHIC] [TIFF OMITTED] TR10JA20.019
2. Annualized Benefits and Costs of the Adopted Standards
The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The annualized net benefit is
(1) the annualized national economic value (expressed in 2015$) 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 GHG and NOX emission
reductions.\95\
---------------------------------------------------------------------------
\95\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2014, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(2020, 2030, etc.), and then discounted the present value from each
year to 2015. The calculation uses discount rates of 3 and 7 percent
for all costs and benefits except for the value of CO2
reductions, for which DOE used case-specific discount rates. Using
the present value, DOE then calculated the fixed annual payment over
a 30-year period, starting in the compliance year that yields the
same present value.
---------------------------------------------------------------------------
Table V.26 shows the annualized values for portable ACs under TSL
2, expressed in 2015$. The results under the primary estimate are as
follows.
Using a 7-percent discount rate for benefits and costs other than
GHG reductions (for which DOE used average social costs with a 3-
percent discount rate),\96\ the estimated cost of the adopted standards
for portable ACs is $61 million per year in increased equipment costs,
while the estimated annual benefits are $202.7 million in reduced
equipment operating costs, $56.7 million in GHG reductions, and $2.6
million in reduced NOX emissions. In this case, the net
benefit would amount to $201 million per year.
---------------------------------------------------------------------------
\96\ DOE used average social costs with a 3-percent discount
rate; these values are considered as the ``central'' estimates by
the IWG.
---------------------------------------------------------------------------
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the adopted standards for portable ACs is $59 million
per year in increased equipment costs, while the estimated annual
benefits are $240.0 million in reduced operating costs, $56.7 million
in GHG reductions, and $3.3 million in reduced NOX
emissions. In this case, the net benefit amounts to $241 million per
year.
[[Page 1442]]
Table V.26--Selected Categories of Annualized Benefits and Costs of Adopted Standards (TSL 2) for Portable ACs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low-net- benefits High-net- benefits
Discount rate Primary estimate estimate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings..... 7%............................... 202.7.................... 99.1..................... 214.4.
3%............................... 240.0.................... 116.3.................... 256.1.
CO2 Reduction (using mean SC-CO2 at 5%............................... 18.4..................... 8.8...................... 19.9.
5% discount rate) **.
CO2 Reduction (using mean SC-CO2 at 3%............................... 56.7..................... 27.0..................... 61.4.
3% discount rate) **.
CO2 Reduction (using mean SC-CO2 at 2.5%............................. 81.1..................... 38.6..................... 87.9.
2.5% discount rate) **.
CO2 Reduction (using 95th percentile 3%............................... 169.9.................... 80.9..................... 184.1.
SC-CO2 at 3% discount rate) **.
NOX Reduction [dagger].............. 7%............................... 2.6...................... 1.2...................... 6.2.
3%............................... 3.3...................... 1.6...................... 8.1.
Total Benefits [Dagger]......... 7% plus CO2 range................ 224 to 375............... 213 to 354............... 240 to 405.
7%............................... 262...................... 249...................... 282.
3% plus CO2 range................ 262 to 413............... 248 to 389............... 284 to 448.
3%............................... 300...................... 283...................... 326.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs.. 7%............................... 61....................... 61....................... 56.
3%............................... 59....................... 59....................... 53.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [Dagger].................. 7% plus CO2 range................ 163 to 314............... 48 to 120................ 185 to 349.
7%............................... 201...................... 67....................... 226.
3% plus CO2 range................ 203 to 354............... 68 to 140................ 231 to 395.
3%............................... 241...................... 86....................... 272.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with portable ACs shipped in 2022-2051. These results include benefits to consumers
which accrue after 2051 from the portable ACs purchased from 2022-2051. The incremental installed costs include incremental equipment cost as well as
installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Net Benefits, and High Net
Benefits Estimates utilize projections of energy price trends from the AEO 2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth
case, respectively. In addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low
Benefits Estimate, and a high decline rate in the High Benefits Estimate. The Low Benefits Estimate reflects a 50-percent reduction in the operating
hours relative to the reference case operating hours. The methods used to derive projected price trends are explained in section IV.F of this
document. The benefits and costs are based on equipment efficiency distributions as described in sections IV.F.8 and IV.H.1 of this document.
Purchases of higher efficiency equipment are a result of many different factors unique to each consumer including past purchases, expected usage, and
others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the no-new-standards case may
correlate positively with higher energy prices. To the extent that this occurs, it would be expected to result in some lowering of the consumer
operating cost savings from those calculated in this rule. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-N2O values for use in regulatory analyses. Three sets of values are based on the
average social costs from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. The fourth set, which
represents the 95th percentile of the social cost distributions calculated using a 3-percent discount rate, is included to represent higher-than-
expected impacts from climate change further out in the tails of the social cost distributions The SC-CO2 values are emission year specific. See
section IV.L.1 of this document for more details.
[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 for further discussion. For the
Primary Estimate and Low Net Benefits Estimate, DOE used national benefit-per-ton estimates for NOX emitted from the Electric Generating Unit sector
based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For the High Net Benefits Estimate, the benefit-per-ton
estimates were based on the Six Cities study (Lepuele et al. 2011); these are nearly two-and-a-half times larger than those from the ACS study.
[Dagger] Total Benefits for both the 3-percent and 7-percent cases are presented using the average social costs with 3-percent discount rate. In the
rows labeled ``7% plus GHG range'' and ``3% plus GHG range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and
those values are added to the full range of social cost values.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Section 1(b)(1) of Executive Order (E.O.) 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 portable ACs
are intended to address are as follows:
(1) Insufficient information and the high costs of gathering and
analyzing relevant information leads some consumers to miss
opportunities to make cost-effective investments in energy efficiency.
(2) In some cases the benefits of more efficient equipment are not
realized due to misaligned incentives between purchasers and users. An
example of such a case is when the equipment purchase decision is made
by a building contractor or building owner who does not pay the energy
costs.
(3) There are external benefits resulting from improved energy
efficiency of products or equipment 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 GHGs 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 regulatory action in
this document is a significant regulatory action under section (3)(f)
of E.O. 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
[[Page 1443]]
consistent with a statutory mandate. DOE has included these documents
in the rulemaking record.
In addition, the Administrator of OIRA has determined that the
regulatory action is an ``economically'' significant regulatory action
under section (3)(f)(1) of E.O. 12866. Accordingly, pursuant to section
6(a)(3)(C) of the Order, DOE has provided to OIRA an assessment,
including the underlying analysis, of benefits and costs anticipated
from the regulatory action, together with, to the extent feasible, a
quantification of those costs; and an assessment, including the
underlying analysis, of costs and benefits of potentially effective and
reasonably feasible alternatives to the planned regulation, and an
explanation why the planned regulatory action is preferable to the
identified potential alternatives. These assessments can be found in
the TSD for this rulemaking.
DOE has also reviewed this regulation pursuant to E.O. 13563,
issued on January 18, 2011. 76 FR 3281, Jan. 21, 2011. E.O. 13563 is
supplemental to and explicitly reaffirms the principles, structures,
and definitions governing regulatory review established in E.O. 12866.
To the extent permitted by law, agencies are required by E.O. 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 E.O. 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 final rule is consistent with these principles,
including the requirement that, to the extent permitted by law,
benefits justify costs.
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) and a
final regulatory flexibility analysis (FRFA) for any rule that by law
must be proposed for public comment, unless the agency certifies that
the rule, if promulgated, will not have a significant economic impact
on a substantial number of small entities. As required by E.O. 13272,
``Proper Consideration of Small Entities in Agency Rulemaking,'' 67 FR
53461 (Aug. 16, 2002), DOE published procedures and policies on
February 19, 2003, to ensure that the potential impacts of its rules on
small entities are properly considered during the rulemaking process.
68 FR 7990. DOE has made its procedures and policies available on the
Office of the General Counsel's website (http://energy.gov/gc/office-general-counsel).
DOE reviewed this final rule pursuant to the Regulatory Flexibility
Act and the procedures and policies discussed above. Consistent with
the June 2016 ECS NOPR, 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.
For manufacturers of portable ACs, the SBA has set a size
threshold, which defines those entities classified as ``small
businesses'' for the purposes of the statute. DOE used the SBA's small
business size standards to determine whether any small entities would
be subject to the requirements of the rule. (See 13 CFR part 121.) The
size standards are listed by NAICS code and industry description and
are available at www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Manufacturing of portable ACs is classified
under NAICS 333415, ``Air-Conditioning and Warm Air Heating Equipment
and Commercial and Industrial Refrigeration Equipment Manufacturing
Other Major Household Appliance Manufacturing.'' The SBA sets a
threshold of 1,250 employees or fewer for an entity to be considered as
a small business for this category.
To estimate the number of companies that could be small business
manufacturers of products covered by this rulemaking, DOE conducted a
market survey using all available public information. To identify small
business manufacturers, DOE surveyed the AHAM membership directory,\97\
California Energy Commission's (CEC's) Appliance Database,\98\ and
individual company websites. DOE screened out companies that did not
themselves manufacture products covered by this rulemaking, did not
meet the definition of a ``small business,'' or are foreign owned and
operated. In the June 2016 ECS NOPR, DOE estimated that there were no
domestic manufacturers of portable ACs that meet the SBA's definition
of a ``small business.'' DOE subsequently identified one small,
domestic business responsible for the design and distribution of a
dual-duct portable AC. Based upon available information, DOE does not
believe that this company is a manufacturer. Because the product sold
by this company incorporates the highest-efficiency variable-speed
compressor currently available on the market, DOE believes that the
product will comply with the standard EL adopted in this final rule (EL
2). Therefore, DOE does not expect this small business to incur any
design or capital-related costs.
---------------------------------------------------------------------------
\97\ Available at: https://www.aham.org/AHAM/AuxCurrentMembers.
\98\ Available at: https://cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx.
---------------------------------------------------------------------------
This small business may incur costs associated with certification,
testing, and marketing updates. The product sold by this company is
listed in the CEC's Appliance Database, indicating that this company
already allocates a portion of its resources to testing and
certification of its portable AC product under ANSI/ASHRAE 128-2001.
Preemption of California's standard by the standard adopted in this
final rule implies that the small business would divert its existing
testing budget to testing according to DOE's test procedure in appendix
CC. Testing and certifying under appendix CC would add costs relative
to testing to ANSI/ASHRAE 128-2001 due to the dual test condition
requirement for dual-duct portable ACs (the product configuration sold
by the small business). While DOE does not have third-party test
laboratory quotes for portable AC testing costs, DOE expects that the
costs would be similar to testing whole-home dehumidifiers \99\ because
both require ducted test setups within environmentally-controlled
chambers. Based on this assumption, DOE estimates that testing of one
portable AC
[[Page 1444]]
platform under appendix CC may cost an additional $7,000 compared to
current testing. Additionally, based on feedback from manufacturers,
DOE estimates that updates to marketing materials and product
literature for this company may total $3,000. DOE assumes these upfront
costs will be spread over a 5-year period leading up to the compliance
year. Accordingly, on an annual basis, the estimated upfront product
conversion costs equate to less than 1 percent of this entity's annual
revenues.
---------------------------------------------------------------------------
\99\ Test Procedure Final Rule for Dehumidifiers, 80 FR 45802
(July 31, 2015).
---------------------------------------------------------------------------
On the basis of the foregoing, DOE certifies that the rule will not
have a significant economic impact on a substantial number of small
entities. Accordingly, DOE has not prepared a FRFA for this rule. DOE
has transmitted this certification and supporting statement of factual
basis to the Chief Counsel for Advocacy of the SBA for review under 5
U.S.C. 605(b).
Significant Alternatives to the Rule
Additional compliance flexibilities may be available through other
means. EPCA provides that a manufacturer of a covered consumer product
whose annual gross revenue from all of its operations does not exceed
$8 million may apply for an exemption from all or part of an energy
conservation standard for a period not longer than 24 months after the
effective date of a final rule establishing the standard. (42 U.S.C.
6295(t)) Additionally, section 504 of the Department of Energy
Organization Act, 42 U.S.C. 7194, provides authority for the Secretary
to adjust a rule issued under EPCA in order to prevent ``special
hardship, inequity, or unfair distribution of burdens'' that may be
imposed on that manufacturer as a result of such rule. Manufacturers
should refer to 10 CFR part 430, subpart E, and part 1003 for
additional details.
C. Review Under the Paperwork Reduction Act
DOE has determined that portable ACs are a covered product under
EPCA. 81 FR 22514 (April 18, 2016). Because portable ACs are a covered
product, manufacturers will need to certify to DOE that their products
comply with the energy conservation standards established in this final
rule. In certifying compliance, manufacturers must test their products
according to the DOE test procedures, including any amendments adopted
for those test procedures. DOE has established regulations for the
certification and recordkeeping requirements for all covered consumer
products and commercial equipment, including portable ACs. 76 FR 12422
(Mar. 7, 2011); 80 FR 5099 (Jan. 30, 2015). The collection-of-
information requirement for the certification and recordkeeping is
subject to review and approval by OMB under the Paperwork Reduction Act
(PRA). This requirement has been approved by OMB under OMB control
number 1910-1400. Public reporting burden for the certification is
estimated to average 30 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act (NEPA) of 1969,
DOE has determined that the 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 rule. DOE's CX determination for this rule is
available at http://energy.gov/nepa/categorical-exclusion-cx-determinations-cx.
E. Review Under Executive Order 13132
E.O. 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 E.O. 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 E.O. 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 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 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 E.O. 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 E.O. 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 (Feb. 7, 1996). Regarding the review required by section 3(a),
section 3(b) of E.O. 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 E.O. 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 final rule meets the relevant standards of E.O. 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
[[Page 1445]]
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.
This final rule does not contain a Federal intergovernmental
mandate because it does not require expenditures of $100 million or
more in any one year by the private sector. The final rule could result
in expenditures of $100 million or more, but there is no requirement
that mandates that result. Potential expenditures may include: (1)
Investment in R&D and in capital expenditures by portable AC
manufacturers in the years between the final rule and the compliance
date for the new standards, and (2) incremental additional expenditures
by consumers to purchase higher-efficiency portable ACs, starting at
the compliance date for the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the final rule. (2 U.S.C. 1532(c)) The content requirements
of section 202(b) of UMRA relevant to a private sector mandate
substantially overlap the economic analysis requirements that apply
under section 325(o) of EPCA and Executive Order 12866. The
SUPPLEMENTARY INFORMATION section of this document and the TSD for this
final rule respond to those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. (2 U.S.C. 1535(a)) DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the rule unless DOE publishes an
explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. This final rule establishes
energy conservation standards for portable ACs that are designed to
achieve the maximum improvement in energy efficiency that DOE has
determined to be both technologically feasible and economically
justified, as required by 6295(o)(2)(A) and 6295(o)(3)(B). A full
discussion of the alternatives considered by DOE is presented in
chapter 17 of the TSD for this final rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
Pursuant to Executive Order 12630, ``Governmental Actions and
Interference with Constitutionally Protected Property Rights,'' 53 FR
8859 (March 18, 1988), DOE has determined that this rule would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
information quality guidelines established by each agency pursuant to
general guidelines issued by OMB. OMB's guidelines were published at 67
FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR
62446 (Oct. 7, 2002). DOE has reviewed this 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 portable ACs, 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 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 (OSTP), issued its Final Information
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14,
2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the Bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' Id. at 70 FR 2667.
[[Page 1446]]
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 website: www.energy.gov/eere/buildings/peer-review.
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 rule is a ``major rule'' as
defined by 5 U.S.C. 804(2).
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects
10 CFR Part 429
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Reporting and
recordkeeping requirements.
10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
and Small businesses.
Issued in Washington, DC, on December 28, 2016.
David J. Friedman,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
Note: DOE is publishing this document concerning portable air
conditioners to comply with an order from the U.S. District Court for
the Northern District of California in the consolidated cases of
Natural Resources Defense Council, et al. v. Perry and People of the
State of California et al. v. Perry, Case No. 17-cv-03404-VC, as
affirmed by the U.S. Court of Appeals for the Ninth Circuit in the
consolidated cases Nos. 18-15380 and 18-15475. DOE reaffirmed the
original signature and date in the Energy Conservation Standards
implementation of the court order published elsewhere in this issue of
the Federal Register. This document is substantively identical to the
signed document DOE had previously posted to its website but has been
edited and formatted in conformance with the publication requirements
for the Federal Register and CFR to ensure the document can be given
legal effect.
Editorial Note: This document was received for publication by
the Office of the Federal Register on December 3, 2019.
For the reasons set forth in the preamble, DOE amends parts 429 and
430 of chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, to read as set forth below:
PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT
0
1. The authority citation for Part 429 continues to read as follows:
Authority: 42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
0
2. Section 429.12 is amended by:
0
a. In paragraph (b)(13), removing ``Sec. Sec. 429.14 through 429.60''
and adding in its place, ``Sec. Sec. 429.14 through 429.62''; and
0
b. In paragraph (d), add a new entry to the end of the table to read as
follows:
Sec. 429.12 General requirements applicable to certification reports.
* * * * *
(d) * * *
------------------------------------------------------------------------
------------------------------------------------------------------------
* * * * *
Portable air conditioners................ February 1.
------------------------------------------------------------------------
* * * * *
0
3. Section 429.62 is amended by adding paragraph (b) to read as
follows:
Sec. 429.62 Portable air conditioners.
* * * * *
(b) Certification reports. (1) The requirements of Sec. 429.12 are
applicable to single-duct and dual-duct portable air conditioners; and
(2) Pursuant to Sec. 429.12(b)(13), a certification report shall
include the following public product-specific information: The combined
energy efficiency ratio (CEER in British thermal units per Watt-hour
(Btu/Wh)), the seasonally adjusted cooling capacity in British thermal
units per hour (Btu/h), the duct configuration (single-duct, dual-duct,
or ability to operate in both configurations), presence of heating
function, and primary condensate removal feature (auto-evaporation,
gravity drain, removable internal collection bucket, or condensate
pump).
0
4. Section 429.134 is amended by adding paragraph (r) to read as
follows:
Sec. 429.134 Product-specific enforcement provisions.
* * * * *
(r) Portable air conditioners. Verification of seasonally adjusted
cooling capacity. The seasonally adjusted cooling capacity will be
measured pursuant to the test requirements of 10 CFR part 430 for each
unit tested. The results of the measurement(s) will be averaged and
compared to the value of seasonally adjusted cooling capacity certified
by the manufacturer. The certified seasonally adjusted cooling capacity
will be considered valid only if the average measured seasonally
adjusted cooling capacity is within five percent of the certified
seasonally adjusted cooling capacity.
(1) If the certified seasonally adjusted cooling capacity is found
to be valid, the certified value will be used as the basis for
determining the minimum allowed combined energy efficiency ratio for
the basic model.
(2) If the certified seasonally adjusted cooling capacity is found
to be invalid, the average measured seasonally adjusted cooling
capacity will be used to determine the minimum allowed combined energy
efficiency ratio for the basic model.
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
5. The authority citation for Part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
6. Section 430.32 is amended by adding paragraph (cc) to read as
follows:
Sec. 430.32 Energy and water conservation standards and their
effective dates.
* * * * *
(cc) Portable air conditioners. Single-duct portable air
conditioners and dual-duct portable air conditioners manufactured on or
after January 10, 2025 must have a combined energy efficiency ratio
(CEER) in Btu/Wh no less than SACC: Seasonally adjusted cooling
capacity in Btu/h, as determined in appendix CC of subpart B of this
part.
[[Page 1447]]
[GRAPHIC] [TIFF OMITTED] TR10JA20.020
Note: The following letter will not appear in the Code of Federal
Regulations.
U.S. DEPARTMENT OF JUSTICE
Antitrust Division
Renata B. Hesse
Acting Assistant Attorney General
RFK Main Justice Building
950 Pennsylvania Avenue NW
Washington, DC 20530-0001
(202) 514-2401 / (202) 616-2645 (Fax)
August 12, 2016
Anne Harkavy
Deputy General Counsel for Litigation, Regulation and Enforcement
U.S. Department of Energy
Washington, DC 20585
Re: Docket No. EERE-2013-BT-STD-0033
Dear Deputy General Counsel Harkavy:
I am responding to your June 13, 2016 letter seeking the views of
the Attorney General about the potential impact on competition of
proposed energy conservation standards for portable air conditioners.
Your request was submitted under Section 325(o)(2)(B)(i)(V) of the
Energy Policy and Conservation Act, as amended (ECPA), 42 U.S.C.
6295(o)(2)(B)(i)(V), which requires the Attorney General to make a
determination of the impact of any lessening of competition that is
likely to result from the imposition of proposed energy conservation
standards. The Attorney General's responsibility for responding to
requests from other departments about the effect of a program on
competition was delegated to the Assistant Attorney General for the
Antitrust Division in 28 CFR 0.40(g).
In conducting its analysis, the Antitrust Division examines whether
a proposed standard may lessen competition, for example, by
substantially limiting consumer choice or increasing industry
concentration. A lessening of competition could result in higher prices
to manufacturers and consumers.
We have reviewed the proposed standards contained in the Notice of
Proposed Rulemaking (81 FR 38398, June 13, 2016) and the related
technical support documents. We have also monitored the public meeting
held on the proposed standards on July 20, 2016, and conducted
interviews with industry members.
Based on the information currently available, we do not believe
that the proposed energy conservation standards for portable air
conditioners are likely to have a significant adverse impact on
competition.
Sincerely,
Renata B. Hesse
[FR Doc. 2019-26350 Filed 1-9-20; 8:45 am]
BILLING CODE 6450-01-P