[Federal Register Volume 85, Number 7 (Friday, January 10, 2020)]
[Rules and Regulations]
[Pages 1447-1504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26354]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2016-BT-STD-0022]
RIN 1904-AD69


Energy Conservation Program: Energy Conservation Standards for 
Uninterruptible Power Supplies

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

ACTION: Final rule.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
battery chargers. EPCA also requires the U.S. Department of Energy 
(DOE) to periodically determine whether more-stringent standards would 
be technologically feasible and economically justified, and would save 
a significant amount of energy. In this final rule, DOE is adopting new 
energy conservation standards for uninterruptible power supplies, a 
class of battery chargers. It has determined that the new energy 
conservation standards for these products would result in significant 
conservation of energy, and are technologically feasible and 
economically justified.

DATES: The effective date of this rule is March 10, 2020. Compliance 
with the new standards established for uninterruptible power supplies 
in this final rule is required on and after January 10, 2022.

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 http://www.regulations.gov/#!docketDetail;D=EERE-2016-BT-STD-0022. 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: 
    Jeremy Dommu, 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) 586-9870. Email: [email protected].
    Celia Sher, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 287-6122. 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
    1. Current Standards
    2. History of Standards Rulemaking for UPSs
III. General Discussion
    A. Test Procedure
    B. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    C. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    D. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price (LCC 
and PBP)
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption

[[Page 1448]]

    E. Compliance Date
    F. General Comments
    1. Proposed Standard Levels
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage and Product Classes
    2. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Testing
    2. Representative Units and Efficiency Levels
    3. Cost Analysis
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    1. Shipment Projections in the No-New-Standards Case
    2. Shipments in a Standards Case
    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. GRIM Analysis and Key Inputs
    a. Capital and Product Conversion Costs
    b. Manufacturer Production Costs
    c. Shipment Scenarios
    d. Markup Scenarios
    3. Manufacturer Interviews
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Current Approach and Key Assumptions
    2. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Impacts on 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 UPSs 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\ These products include battery 
chargers, the subject of this rulemaking.
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2015, 
Public Law 114-11 (April 30, 2015).
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    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that 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)) EPCA also provides that not later than 6 
years after issuance of any final rule establishing or amending a 
standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a notice of 
proposed rulemaking including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m))
    In accordance with these and other statutory provisions discussed 
in this document, DOE is adopting new energy conservation standards for 
uninterruptible power supplies (hereafter referred to as ``UPSs''), a 
class of battery chargers. The adopted standards, which are expressed 
in average load adjusted efficiency, are shown in Table I-1. These 
standards apply to all products listed in Table I-1 and manufactured 
in, or imported into, the United States starting on and after two years 
after the publication of this final rule that utilize a NEMA 1-15P or 
5-15P input plug and have an AC output.

[[Page 1449]]



                                                    Table I-1--Energy Conservation Standards for UPSs
                                                         [Compliance starting January 10, 2022]
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          UPS product class                              Rated output power                                        Minimum efficiency
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Voltage and Frequency Dependent.....                                      0 W < Prated <=300 W        -1.20E-06 * P\2\rated + 7.17E-04 * Prated + 0.862.
                                                                        300 W < Prated <=700 W        -7.85E-08 * P\2\rated + 1.01E-04 * Prated + 0.946.
                                                                                 Prated >700 W        -7.23E-09 * P\2\rated + 7.52E-06 * Prated + 0.977.
Voltage Independent.................                                      0 W < Prated <=300 W        -1.20E-08 * P\2\rated + 7.19E-04 * Prated + 0.863.
                                                                        300 W < Prated <=700 W        -7.67E-08 * P\2\rated + 1.05E-04 * Prated + 0.946.
                                                                                 Prated >700 W        -4.62E-09 * P\2\rated + 8.54E-06 * Prated + 0.979.
Voltage and Frequency Independent...                                      0 W < Prated <=300 W        -3.13E-08 * P\2\rated + 1.96E-04 * Prated + 0.543.
                                                                        300 W < Prated <=700 W        -2.60E-08 * P\2\rated + 3.65E-04 * Prated + 0.764.
                                                                                 Prated >700 W        -1.70E-08 * P\2\rated + 3.85E-06 * Prated + 0.876.
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A. Benefits and Costs to Consumers

    Table I-2 summarizes DOE's evaluation of the economic impacts of 
the adopted standards on consumers of UPSs, as measured by the average 
life-cycle cost (LCC) savings and the simple payback period (PBP).\3\ 
The average LCC savings are positive for all product classes, and the 
PBP is less than the average lifetime of UPSs, which is estimated to be 
between 5 and 10 years (see section IV.F).
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    \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 new standards (see section 
IV.F.8). The simple PBP, which is designed to compare specific 
efficiency levels, is measured relative to the baseline product (see 
section IV.C).

                Table I-2--Impacts of Adopted Energy Conservation Standards on Consumers of UPSs
----------------------------------------------------------------------------------------------------------------
                                                                                                      Simple
                                                                                    Average LCC       payback
                 Product class                             Description                savings         period
                                                                                      (2015$)         (years)
----------------------------------------------------------------------------------------------------------------
10a...........................................  VFD UPS.........................             $32           * 0.0
10b...........................................  VI UPS..........................              12             3.7
10c...........................................  VFI UPS.........................              36             4.4
----------------------------------------------------------------------------------------------------------------
* The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and less
  efficient baseline units continue to exist in the market, likely because some consumers are familiar with
  their well-established performance. These consumers are reluctant to purchase newer, more efficient products
  that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.

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

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the reference year through the end of 
the analysis period (2016-2048). Using a real discount rate of 6.1 
percent, DOE estimates that the INPV for manufacturers of UPSs in the 
case without new standards is $2,575 million in 2015$. Under the 
adopted standards, DOE expects the change in INPV to range from -15.9 
percent to 6.3 percent, which is approximately -$409 million to $162 
million. In order to bring products into compliance with adopted 
standards, DOE expects the industry to incur total conversion costs of 
$36 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
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    \4\ All monetary values in this document are expressed in 2015 
dollars and, where appropriate, are discounted to 2016 unless 
explicitly stated otherwise.
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    DOE's analyses indicate that the adopted energy conservation 
standards for UPSs would save a significant amount of energy. Relative 
to the case without new standards, the lifetime energy savings for UPSs 
purchased in the 30-year period that begins in the anticipated year of 
compliance with the new standards (2019-2048), amount to 0.94 
quadrillion British thermal units (Btu), or quads.\5\ This represents a 
savings of 15 percent relative to the energy use of these products in 
the case without new standards (referred to as the ``no-new-standards 
case'').
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    \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.
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    The cumulative net present value (NPV) of total consumer benefits 
of the standards for UPSs ranges from $1.3 billion (at a 7-percent 
discount rate) to $3.0 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 UPSs purchased in 2019-
2048.
    In addition, the adopted standards for UPSs 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)

[[Page 1450]]

of 49 million metric tons (Mt) \6\ of carbon dioxide (CO2), 
39 thousand tons of sulfur dioxide (SO2), 63 thousand tons 
of nitrogen oxides (NOX), 238 thousand tons of methane 
(CH4), 0.73 thousand tons of nitrous oxide (N2O), 
and 0.13 tons of mercury (Hg).\7\ The estimated cumulative reduction in 
CO2 emissions through 2030 amounts to 12 Mt, which is 
equivalent to the emissions resulting from the annual electricity use 
of 1.8 million homes.
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    \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-new-
standards-case, which reflects key assumptions in the Annual Energy 
Outlook 2016 (AEO2016). AEO2016 represents current federal and state 
legislation and final implementation of regulations as of the end of 
February 2016. AEO2016 incorporates implementation of the Clean 
Power Plan (CPP). DOE is using the AEO2016 No-CPP case as a basis 
for its analysis because the standards finalized in this rulemaking 
will take effect before the requirements of the CPP. The standards 
finalized in this rulemaking will reduce the projected burden on the 
States to meet the requirements of the CPP since these standards are 
not included in the AEO2016 Reference Case.
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    The value of the CO2 reduction is calculated using a 
range of values per metric ton (t) of CO2 (otherwise known 
as the ``social cost of CO2,'' 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. Using 
discount rates appropriate for each set of SC-CO2 values, 
DOE estimates that the present value of the CO2 emissions 
reduction (not including CO2 equivalent emissions of other 
gases with global warming potential) is between $0.37 billion and $5.0 
billion, with a value of $1.7 billion using the central SC-
CO2 case represented by $47.4/metric ton (t) in 2020. DOE 
also estimates the present value of the NOX emissions 
reduction to be $0.06 billion using a 7-percent discount rate, and 
$0.12 billion using a 3-percent discount rate.\9\ 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.
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    \8\ United States Government--Interagency Working Group on 
Social Cost of Carbon. Technical Support Document: Technical Update 
of the Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. May 2013. Revised July 2015. https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
    \9\ DOE estimated the monetized value of NOX 
emissions reductions associated with electricity savings using 
benefit per ton estimates from the Regulatory Impact Analysis for 
the Clean Power Plan Final Rule, published in August 2015 by EPA's 
Office of Air Quality Planning and Standards. Available at 
www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis. See section IV.L.2 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. To be conservative, DOE is primarily 
using a lower national benefit-per-ton estimate for NOX 
emitted from the Electricity Generating Unit sector based on an 
estimate of premature mortality derived from the ACS study (Krewski 
et al. 2009). If the benefit-per-ton estimates were based on the Six 
Cities study (Lepuele et al. 2011), the values would be nearly two-
and-a-half times larger.
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    Table I-3 summarizes the economic benefits and costs expected to 
result from the adopted standards for UPSs.

Table I-3--Selected Categories of Economic Benefits and Costs of Adopted
                Energy Conservation Standards for UPSs *
------------------------------------------------------------------------
                                          Present  value
                Category                      (billion    Discount  rate
                                              2015$)         (percent)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings.........             2.8               7
                                                     5.6               3
CO2 Reduction (using avg. SC-CO2 at 5%              0.37               5
 discount rate) **......................
CO2 Reduction (using avg. SC-CO2 at 3%               1.7               3
 discount rate) **......................
CO2 Reduction (using avg. SC-CO2 at 2.5%             2.6             2.5
 discount rate) **......................
CO2 Reduction (using 95th percentile SC-             5.0               3
 CO2 at 3% discount rate) **............
NOX Reduction [dagger]..................            0.06               7
                                                    0.12               3
Total Benefits [Dagger].................             4.5               7
                                                     7.3               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....             1.4               7
                                                     2.6               3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction                      3.1               7
 Monetized Value [Dagger]...............
                                                     4.8               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with UPSs
  shipped in 2019-2048. These results include benefits to consumers
  which accrue after 2048 from the products purchased in 2019-2048. The
  incremental installed costs include incremental equipment cost as well
  as installation costs. The 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 CO2 reduction benefits are global benefits due to actions that
  occur domestically.
** The interagency group 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 integrated assessment models, at discount rates of 5
  percent, 3 percent, and 2.5 percent. For example, for 2020 emissions,
  these values are $13.5/t, $47.4/t, and $69.9/t, in 2015$,
  respectively. The fourth set ($139/t in 2015$ for 2015 emissions),
  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 SC-CO2 distribution. The SC-CO2 values are emission year
  specific. See section IV.L.1 for more details.

[[Page 1451]]

 
[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.2 for
  further discussion. To be conservative, 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 SC-CO2 with 3-percent discount rate.

    The benefits and costs of the adopted standards, for UPSs sold in 
2019-2048, 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.\10\
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    \10\ 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.
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    The national operating cost savings are domestic private U.S. 
consumer monetary savings that occur as a result of purchasing the 
covered products and are measured for the lifetime of UPSs shipped in 
2019-2048. The benefits associated with reduced CO2 
emissions achieved as a result of the adopted standards are also 
calculated based on the lifetime of UPSs shipped in 2019-2048. 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. DOE 
maintains that consideration of global benefits is appropriate because 
of the global nature of the climate change problem.
    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 CO2 reduction, (for which DOE used a 3-percent discount 
rate along with the SC-CO2 series that has a value of $47.4/
t in 2020),\11\ the estimated cost of the standards in this rule is 
$131 million per year in increased equipment costs, while the estimated 
annual benefits are $255 million in reduced equipment operating costs, 
$90 million in CO2 reductions, and $5.1 million in reduced 
NOX emissions. In this case, the net benefit amounts to $219 
million per year. Using a 3-percent discount rate for all benefits and 
costs and the SC-CO2 series has a value of $47.4/t in 2020, 
the estimated cost of the standards is $140 million per year in 
increased equipment costs, while the estimated annual benefits are $301 
million in reduced operating costs, $90 million in CO2 
reductions, and $6.6 million in reduced NOX emissions. In 
this case, the net benefit amounts to $257 million per year.
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    \11\ DOE used a 3-percent discount rate because the SC-
CO2 values for the series used in the calculation were 
derived using a 3-percent discount rate.

                             Table I-4--Selected Categories of Annualized Benefits and Costs of Adopted Standards for UPSs *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Low-net-  benefits         High-net-  benefits
                                          Discount rate  (percent)          Primary  estimate               estimate                    estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      (million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....  7..............................  255.......................  231.......................  284.
                                      3..............................  301.......................  270.......................  341.
CO2 Reduction (using avg. SC-CO2 at   5..............................  27........................  24........................  30.
 5% discount rate) **.
CO2 Reduction (using avg. SC-CO2 at   3..............................  90........................  80........................  101.
 3% discount rate) **.
CO2 Reduction (using avg. SC-CO2 at   2.5............................  131.......................  116.......................  148.
 2.5% discount rate) **.
CO2 Reduction (using 95th percentile  3..............................  273.......................  242.......................  308.
 SC-CO2 at 3% discount rate ) **.
NOX Reduction [dagger]..............  7..............................  5.1.......................  4.6.......................  13.
                                      3..............................  6.6.......................  5.9.......................  17.
    Total Benefits [Dagger].........  7 plus CO2 range...............  287 to 533................  260 to 478................  327 to 606.
                                      7..............................  349.......................  316.......................  398.
                                      3 plus CO2 range...............  335 to 581................  300 to 519................  388 to 666.
                                      3..............................  397.......................  356.......................  459.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs..  7..............................  131.......................  118.......................  145.
                                      3..............................  140.......................  124.......................  157.
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                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [Dagger]..................  7 plus CO2 range...............  156 to 402................  142 to 361................  182 to 460.
                                      7..............................  219.......................  198.......................  253.
                                      3 plus CO2 range...............  195 to 441................  176 to 394................  231 to 509.

[[Page 1452]]

 
                                      3..............................  257.......................  231.......................  302.
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* This table presents the annualized costs and benefits associated with UPSs shipped in 2019-2048. These results include benefits to consumers which
  accrue after 2048 from the UPSs purchased from 2019-2048. The incremental installed costs include incremental equipment cost as well as installation
  costs. The results 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 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 prices from the AEO 2016 No-CPP case, Low Economic Growth case, and High
  Economic Growth case, respectively. Shipment projections are also scaled based on the GDP index in the Low and High Economic Growth cases. Note that
  the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The CO2 reduction benefits are calculated using four different sets of SC-CO2 values. The first three use the average SC-CO2 calculated using 5-
  percent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SC-CO2 distribution calculated
  using a 3-percent discount rate. The SC-CO2 values are emission year specific. See section IV.L.1 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.2 for further discussion. For the
  Primary Estimate and Low Net Benefits Estimate, DOE used national benefit-per-ton estimates for NOX emitted from the Electric 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 SC-CO2 with 3-percent discount rate. In the rows
  labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those
  values are added to the full range of CO2 values.

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

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 battery 
chargers. DOE's regulations define ``battery charger'' as a device that 
charges batteries for consumer products, including battery chargers 
embedded in other consumer products. 10 CFR 430.2.

A. Authority

    Title III, Part B of the Energy Policy and Conservation Act of 1975 
(EPCA or the Act), Public Law 94-163 (codified as 42 U.S.C. 6291-6309) 
established the Energy Conservation Program for Consumer Products Other 
Than Automobiles, a program covering most major household appliances 
(collectively referred to as ``covered products''), which includes 
battery chargers.
    Section 309 of the Energy Independence and Security Act of 2007 
(``EISA 2007'') amended EPCA by directing DOE to prescribe, by rule, 
definitions and test procedure for the power use of battery chargers 
(42 U.S.C. 6295(u)(1)), and to issue a final rule that prescribes 
energy conservation standards for battery chargers or classes of 
battery chargers or determine that no energy conservation standard is 
technologically feasible and economically justified. (42 U.S.C. 
6295(u)(1)(E)). DOE finalized energy conservation standards for some 
classes of battery chargers on June 13, 2016 (81 FR 38266), and the 
standards prescribed in this final rule for other classes of battery 
chargers represent an extension of those requirements.
    Pursuant to EPCA, DOE's energy conservation program for covered 
products consists essentially of four parts: (1) Testing, (2) labeling, 
(3) the establishment of Federal energy conservation standards, and (4) 
certification and enforcement procedures. The Federal Trade Commission 
(FTC) is primarily responsible for labeling, and DOE implements the 
remainder of the program. Subject to certain criteria and conditions, 
DOE is required to develop test procedures to measure the energy 
efficiency, energy use, or estimated annual operating cost of each 
covered product. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of 
covered products must use the prescribed DOE test procedure as the 
basis for certifying to DOE that their products comply with the 
applicable energy conservation standards adopted under EPCA and when 
making representations to the public regarding the energy use or 
efficiency of those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) 
Similarly, DOE must use these test procedures to determine whether the 
products comply with standards adopted pursuant to EPCA. (42 U.S.C. 
6295(s)) The DOE test procedure for battery chargers appears at title 
10 of the Code of Federal Regulations (CFR) part 430, subpart B, 
appendix Y.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including battery chargers. 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)) Moreover, DOE may not 
prescribe a standard: (1) For certain products, including battery 
chargers, if no test procedure has been established for the product, or 
(2) if DOE determines by rule that the standard is not

[[Page 1453]]

technologically feasible or economically justified. (42 U.S.C. 
6295(o)(3)(A)and (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, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of a covered 
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe 
an amended or new standard if interested persons have established by a 
preponderance of the evidence that the standard is likely to result in 
the unavailability in the United States in any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Additionally, 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 
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 EISA 2007), 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)).

B. Background

1. Current Standards
    In a final rule published on June 13, 2016, DOE prescribed the 
current energy conservation standards for battery chargers manufactured 
on and after July 13, 2018. 81 FR 38266. These standards, which do not 
cover UPSs, are set forth in DOE's regulations at 10 CFR 430.32 and are 
repeated in Table II-1.

                      Table II-1--Federal Energy Efficiency Standards for Battery Chargers
----------------------------------------------------------------------------------------------------------------
                                                                                             Adopted standard as
                              Product class     Battery energy  watt-        Special           a  function of
      Product class            description           hours  (Wh)        characteristic or   battery energy  (kWh/
                                                                         battery voltage             yr)
----------------------------------------------------------------------------------------------------------------
1.......................  Low-Energy..........  <=5 Wh..............  Inductive Connection  3.04.
                                                                       in Wet Environments.
2.......................  Low-Energy, Low-      <100 Wh.............  <4 V................  0.1440 * Ebatt +
                           Voltage.                                                          2.95.
3.......................  Low-Energy, Medium-   ....................  4-10 V..............  For Ebatt <10Wh,
                           Voltage.                                                          1.42 kWh/y Ebatt
                                                                                             >=10 Wh, 0.0255 *
                                                                                             Ebatt + 1.16.
4.......................  Low-Energy, High-     ....................  >10 V...............  0.11 * Ebatt + 3.18.
                           Voltage.
5.......................  Medium-Energy, Low-   100-3000 Wh.........  <20 V...............  0.0257 * Ebatt +
                           Voltage.                                                          .815.
6.......................  Medium-Energy, High-  ....................  >=20 V..............  0.0778 * Ebatt +
                           Voltage.                                                          2.4.
7.......................  High-Energy.........  ....................  >3000 Wh............  0.0502 * Ebatt +
                                                                                             4.53.
----------------------------------------------------------------------------------------------------------------

2. History of Standards Rulemaking for UPSs
    DOE originally proposed energy conservation standards for battery 
chargers including UPSs in the battery charger energy conservation 
standards NOPR published on March 27, 2012 (March 2012 NOPR). In this 
NOPR, DOE proposed to test all covered battery chargers, including 
UPSs, using the battery charger test procedure finalized on June 1, 
2011 and to regulate them

[[Page 1454]]

using a unit energy consumption (``UEC'') metric. See 77 FR 18478.
    DOE issued a battery charger energy conservation standards 
supplemental notice of proposed rulemaking (``SNOPR'') to propose 
revised energy standards for battery chargers on September 1, 2015. See 
80 FR 52850. This notice did not propose standards for UPSs because of 
DOE's intention to regulate UPS as part of the separate rulemaking for 
computer and battery backup systems. DOE also issued a battery charger 
test procedure NOPR on August 6, 2015, which proposed to exclude backup 
battery chargers, including UPSs, from the scope of the battery charger 
test procedure. See 80 FR 46855. DOE held a public meeting on September 
15, 2015 to discuss both of these notices.
    During 2014, DOE explored whether to regulate UPSs as ``computer 
systems.'' See, e.g., 79 FR 11345 (Feb. 28, 2014) (proposed coverage 
determination); 79 FR 41656 (July 17, 2014) (computer systems framework 
document). DOE received a number of comments in response to those 
documents (and the related public meetings) regarding testing of UPSs 
and the appropriate venue to address these devices.
    Additionally, DOE received a number of stakeholder comments on the 
August 2015 battery charger test procedure NOPR and the September 2015 
battery charger energy conservation standard SNOPR regarding regulation 
of UPSs. After considering these comments, DOE reconsidered its 
position and found that since a UPS meets the definition of a battery 
charger, it is more appropriate to regulate UPSs as part of the battery 
charger rulemaking, rather than the computers rulemaking. While the 
changes proposed in the August 2015 battery charger test procedure NOPR 
and the September 2015 energy conservation standard SNOPR were 
finalized on May 20, 2016 (81 FR 31827) and June 13, 2016 (81 FR 
38266), respectively, DOE continues to conduct rulemaking activities to 
consider test procedures and energy conservations standards for UPSs as 
part of ongoing and future battery charger rulemaking proceedings.
    DOE published a notice of proposed rulemaking on May 19, 2016 to 
amend the battery charger test procedure to include specific testing 
requirements for UPSs (``UPS test procedure NOPR''). See 81 FR 31542. 
Subsequently, DOE proposed energy conservation standards for UPSs as 
part of the battery charger regulations in the NOPR published on August 
5, 2016 (August 2016 NOPR). See 81 FR 52196. On December 12, 2016, DOE 
finalized the addition of specific testing provisions for UPSs in the 
UPS test procedure final rulemaking. See 81 FR 89806. DOE is now 
finalizing energy conservation standards for UPSs as part of the 
battery charger regulation in this final rule.

III. General Discussion

    In response to the August 2016 NOPR, DOE received written comments 
from 8 interested parties, including manufacturers, trade associations, 
standards development organizations and energy efficiency advocacy 
groups. Table III-1 lists the entities that commented on the August 
2016 NOPR. These comments are discussed in further detail below. The 
full set of comments on the August 2016 NOPR can be found at: https://www.regulations.gov/docket?D=EERE-2016-BT-STD-0022.

             Table III-1--Interested Parties That Provided Written Comments on the August 2016 NOPR
----------------------------------------------------------------------------------------------------------------
                                                                                                    Comment No.
                Commenter                           Acronym               Organization  type/         (docket
                                                                              affiliation           reference)
----------------------------------------------------------------------------------------------------------------
Appliance Standards Awareness Project,    ASAP et al................  Efficiency Organizations..            0020
 Alliance to Save Energy, Northwest
 Energy Efficiency Alliance, Natural
 Resources Defense Council, Northeast
 Energy Efficiency Partnerships, and
 Northwest Power and Conservation
 Council.
California Investor Owned Utilities.....  CA IOUs...................  Utility Association.......            0016
Edison Electric Institute...............  EEI.......................  Utility Association.......            0021
Industrial Energy Consumers of America..  IECA......................  Manufacturer Association..            0015
National Electrical Manufacturers         NEMA & ITI................  Manufacturer Associations.            0019
 Associations and Information Technology
 Industry Council.
Philips Lighting........................  Philips Lighting..........  Manufacturer..............            0022
Schneider Electric......................  Schneider Electric........  Manufacturer..............            0017
U.S. Chamber of Commerce, American Coke   Associations..............  Manufacturer Associations.            0018
 and Coal Chemicals Institute, American
 Forest & Paper Association, American
 Fuel & Petrochemical Manufacturers,
 American Petroleum Institute,
 Association of Home Appliance
 Manufacturers, Brick Industry
 Association, Council of Industrial
 Boiler Owners, National Association of
 Manufacturers, National Mining
 Association, National Oilseed
 Processors Association, and Portland
 Cement Association.
----------------------------------------------------------------------------------------------------------------

    A number of interested parties also provided oral comments at the 
September 16, 2016, public meeting. These comments can be found in the 
public meeting transcript (Pub. Mtg. Tr., No. 0014) which is available 
on the docket.

A. Test Procedure

    DOE published the UPS test procedure final rule on December 12, 
2016. 81 FR 89806. DOE advises all stakeholders to review that final 
rule.

B. 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

[[Page 1455]]

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 UPSs, 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 technical support document (TSD).
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such 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 UPSs, 
using the design parameters for the most efficient products available 
on the market or in working prototypes. The max-tech levels that DOE 
determined for this rulemaking are described in section IV.B of this 
final rule and in chapter 5 of the final rule TSD.

C. Energy Savings

1. Determination of Savings
    For each trial standard level (TSL), DOE projected energy savings 
from application of the TSL to UPSs purchased in the 30-year period 
that begins in the year of compliance with the adopted standards (2019-
2048).\12\ The savings are measured over the entire lifetime of UPSs 
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 new energy conservation standards.
---------------------------------------------------------------------------

    \12\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet models to 
estimate national energy savings (NES) from potential new standards for 
UPSs. The NIA spreadsheet model (described in section IV.H of this 
final rule) 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 national energy savings in terms 
of primary energy savings, which is the savings in the energy that is 
used to generate and transmit the site electricity. For 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.\13\ 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.
---------------------------------------------------------------------------

    \13\ 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 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.

D. Economic Justification

1. Specific Criteria
    As noted in this preamble, 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 amended standards on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include (1) industry net 
present value (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 payback period (PBP) associated with new or amended 
standards. These measures are discussed further in the following 
section. For consumers in the aggregate, DOE also calculates the 
national net present value of the 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 (LCC and 
PBP)
    EPCA requires DOE to consider the savings in operating costs 
throughout

[[Page 1456]]

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 standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section IV.H, 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 
UPS 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.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. The adopted standards are likely to result in 
environmental benefits in the form of reduced emissions of air 
pollutants and greenhouse gases (GHGs) associated with energy 
production and use. DOE conducts an emissions analysis to estimate how 
potential standards may affect these emissions, as discussed in section 
IV.K of this document; the estimated 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 DOE identifies 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 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 final rule.

E. Compliance Date

    The compliance date is the date when a covered product is required 
to meet a new or amended standard. In the August 2016 NOPR, DOE 
proposed a compliance period of two year following the publication date 
of a final UPS

[[Page 1457]]

standard, which would result in a 2019 compliance date.
    CA IOUs suggested that DOE align the compliance date for the UPS 
energy conservation standards with the June 2018 battery charger 
standards compliance date. (CA IOUs, No.0016 at p.1) After considering 
this recommendation, DOE believes that a two-year compliance interval 
is necessary to ensure that manufacturers have sufficient time to 
comply with the standards DOE is adopting for UPSs. UPSs were 
considered in the initial battery charger rulemaking efforts, which set 
a two year compliance period, and DOE feels that adopting an identical 
two year compliance period in this rulemaking is appropriate. 81 FR 
38266.
    CA IOUs additionally stated their understanding that the current 
California Title 20 UPS standards will remain in effect in California 
until the compliance date for the federal UPS standards in 2019. (CA 
IOUs, No.0016 at p.2) DOE clarifies that state energy conservation 
standards for UPSs prescribed or enacted before publication of this 
final rule, will not be preempted until the compliance date of the 
Federal energy conservation standards for UPSs. (42 U.S.C. 6295(ii)(1)) 
DOE further notes that the final DOE test procedure for UPSs preempts 
any state regulation regarding the testing of the energy efficiency of 
UPSs. See 42 U.S.C. 6297(a)(1).

F. General Comments

    During the September 16, 2016 public meeting, and in subsequent 
written comments responding to the NOPR, stakeholders provided input 
regarding general issues pertinent to the rulemaking, such as issues 
regarding the proposed standard levels. These issues are discussed in 
this section.
1. Proposed Standard Levels
    Schneider Electric disagreed with DOE's proposed standards, stating 
that the combination of broad scope and excessive minimum requirements, 
particularly for VI UPSs, will likely result in less consumer choice 
and a higher cost of compliance than estimated by DOE. (Schneider 
Electric, No. 0017 at p. 3) Schneider Electric also expressed concern 
that the proposed standard for VI UPSs is higher than that of VFD UPSs. 
(Schneider Electric, No. 0017 at p. 15) In contrast, ASAP et al. 
recommended that DOE adopt TSL 3 instead of TSL 2, in order to increase 
energy savings. They noted that TSL 3 would increase FFC energy savings 
by 6.8 percent and CO2 savings by 6.4 percent. ASAP et al. 
believe that DOE's proposal of TSL 2 over TSL 3 is influenced by overly 
conservative assumptions in its analysis. (ASAP et al., No. 0020 at pp. 
1-2)
    The Department appreciates the stakeholder comments with regard to 
its proposed standards. In selecting a given standard, DOE must choose 
the level that achieves the maximum energy savings that is determined 
to be technologically feasible and economically justified. In making 
such a determination, DOE must consider, to the extent practicable, the 
benefits and burdens based on the seven criteria described in EPCA (see 
42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)). DOE's weighing of the benefits 
and burdens based on the final rule analysis and rationale for the 
standard selection is discussed in section V of this document. With 
regard to TSL 3, DOE notes that the NOPR analysis showed a negative net 
present value using a 7 percent discount rate for VFD UPSs at TSL 3, 
and marginally negative average LCC savings for VFD UPSs at TSL 3.\14\ 
For this reason, DOE determined in the NOPR that TSL 3 was not 
economically justified.
---------------------------------------------------------------------------

    \14\ See chapters 8 and 10 of the NOPR technical support 
document, available at: https://www.regulations.gov/document?D=EERE-2016-BT-STD-0022-0001.
---------------------------------------------------------------------------

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to UPSs. Separate subsections address each 
component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards adopted 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 national impacts analysis uses a 
second spreadsheet set that provides shipments projections and 
calculates national energy savings and net present value of total 
consumer costs and savings expected to result from potential energy 
conservation standards. DOE uses the third spreadsheet tool, the 
Government Regulatory Impact Model (GRIM), to assess manufacturer 
impacts of potential standards. These three spreadsheet tools are 
available on the DOE website for this rulemaking: http://www.regulations.gov/#!docketDetail;D=EERE-2016-BT-STD-0022. 
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 UPSs. The key findings of 
DOE's market assessment are summarized in this section IV.A. See 
chapter 3 of the final rule TSD for further discussion of the market 
and technology assessment.
1. Scope of Coverage and Product Classes
    In the August 2016 NOPR, DOE proposed to maintain the scope of 
coverage for UPS energy conservation standards as defined by its 
proposal for the UPS test procedure. 81 FR 52206.
    NEMA and ITI contended that DOE has misclassified UPSs as battery 
chargers and that the primary function of UPSs is equipment protection 
rather than charging batteries. A majority of UPSs fall outside the 
scope of the standalone battery charging systems and therefore should 
not be defined as battery chargers. (NEMA and ITI, No. 0019 at p. 2) As 
explained in section III.A of the UPS test procedure NOPR published on 
May 19, 2016, DOE notes that UPSs meet the statutory definition of 
battery charger as stated in 10 CFR 430.2. UPSs may provide various 
types of power conditioning and monitoring functionality depending on 
their architecture and input dependency. They also maintain the fully-
charged state of lead acid batteries with high self-discharge rates so 
that in the event of a power outage, they are able to provide backup 
power instantly to the connected load. Maintaining the lead acid 
battery therefore directly affects a UPS's overall energy efficiency. 
In 10 CFR 430.2, a battery charger is defined as a device that charges 
batteries for consumer products. The definition of battery charger does 
not state that the primary function of the device must be to charge 
batteries for consumer

[[Page 1458]]

products. Because UPSs that are in the scope of this rulemaking 
maintain lead acid batteries, DOE concludes that UPSs meet the 
definition of battery charger. 81 FR 31545.
    During the public meeting held on September 16, 2016, Schneider 
Electric noted that households in the North America are generally wired 
for 12A at 120V, which gives them an approximate upper power limit of 
1440W. Schneider Electric requested that DOE limit the scope of UPS 
rulemaking to a rounded up value of 1500W. (Schneider Electric, Pub. 
Mtg. Tr., No. 0014 at pp. 12-13) DOE notes that the December 12, 2016 
UPS test procedure final rulemaking revised the scope of the UPS test 
procedure based on stakeholder comments received on the UPS test 
procedure NOPR. The UPS test procedure only applies to UPSs that use 
battery(s) as their energy storage systems, use a standardized NEMA 1-
15P or 5-15P input plug and have an AC output. 81 FR 89806. NEMA 1-15P 
or 5-15P input plugs are capable of handling up to 15A at 125V, which 
gives them an upper power limit of 1875 W. In subsequent written 
comments since the public meeting, both NEMA and ITI, and Schneider 
Electric have expressed implicit support in favor of DOE's adoption of 
NEMA 1-15P and 5-15P input plugs to limit the scope of UPS rulemaking, 
but have requested that this limitation be added to both the test 
procedure and energy conservation standards. (NEMA and ITI, No. 0019 at 
p. 4; Schneider Electric, No. 0017 at p. 1) DOE agrees with NEMA and 
ITI and Schneider Electric and is therefore updating the scope such 
that any product that meets the definition of a UPS, utilizes a NEMA 1-
15P or 5-15P input plug and has an AC output is covered under the 
energy conservation standard being adopted in this final rule. DOE 
notes that this harmonizes with the scope of the recent UPS test 
procedure. 81 FR 89806.
    Philips Lighting requested that DOE clarify whether the proposed 
energy conservation standards only apply to consumer UPSs. Further, 
Philips Lighting requested DOE to state that emergency UPS systems, 
i.e. those listed in UL 924 Standard for Emergency Lighting and Power 
Equipment, are non-consumer products and are not subject to the 
proposed energy conservation standards. (Philips Lighting, No. 0022 at 
p. 1) Lastly, Philips Lighting inquired if certain lighting products 
such as lighting inverters and backup battery systems will be subject 
to the proposed energy conservation standards. (Philips Lighting, Pub. 
Mtg. Tr., No. 0014 at pp. 68-69)
    DOE notes that its authority to implement energy conservation 
standards for battery chargers under EPCA extends only to consumer 
products. Thus, this rule applies to those UPSs that are of a type 
which, to any significant extent, are distributed into commerce for 
personal use or consumption. See 42 U.S.C. 6291(1). Additionally, the 
battery charger energy conservation standards, of which the UPS energy 
conservation standards are a subset, explicitly exclude from scope all 
back-up battery chargers except those that meet the definition of a 
UPS, utilize battery(s) as their energy storage system, use a 
standardized NEMA 1-15P or 5-15P input plug and have an AC output.
2. Technology Options
    In the July 2014 computer and battery backup systems (computer 
systems) framework document, DOE identified three technology options 
for UPSs that would be expected to improve the efficiency of UPSs. The 
technologies options are: semiconductor improvements, digital signal 
processing and space vector modulation, and transformer-less UPS 
topologies.\15\ Since the July 2014 framework document for computer 
systems, DOE has identified the following additional technology options 
from stakeholder comments and manufacturer interviews for UPSs: use of 
core materials with high magnetic permeability such as Sendust and Litz 
wiring in inductor design, wide band gap semiconductors such as silicon 
carbide and gallium arsenide, capacitors with low equivalent series 
resistance (ESR), printed circuit boards (PCBs) with higher copper 
content, and variable speed fan control.
---------------------------------------------------------------------------

    \15\ See July 2014 computer and battery backup systems framework 
document, pp. 48-49.
---------------------------------------------------------------------------

    DOE's further research into space vector modulation technology for 
UPSs has shown that it may have limited advantage in the scope of this 
rule and is intended primarily for higher power applications. 
Therefore, DOE did not consider this technology.
    After identifying all potential technology options for improving 
the efficiency of UPSs, DOE performed the screening analysis (See 
section IV.B of this document and chapter 4 of the Final Rule TSD) on 
these technologies to determine which to consider further in the 
analysis and which to eliminate.

B. Screening Analysis

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

10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b)
    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the above four criteria, it 
will be excluded from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed in 
the subsequent sections of this preamble.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
Transformer-Less UPS designs
    Transformer-less UPS designs offer some of the highest efficiencies 
in the industry with lowered weight, wider input voltage tolerances, 
near unity input power factor, reduced harmonic distortion and need for 
components that mitigate electromagnetic interference (EMI) generated 
by the device. However, interviews with manufacturers have shown this 
to be a limited access

[[Page 1459]]

technology with select manufacturers holding the intellectual property 
required for effective implementation. DOE therefore did not consider 
this technology for this rule.
2. Remaining Technologies
    Through a review of each technology, DOE tentatively concludes that 
all of the other identified technologies listed in section IV.A.2 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: use of materials with high 
magnetic permeability such as Sendust for the inductor core and Litz 
wiring in indictor coils, silicon carbide, gallium arsenide and other 
wide band gap semiconductors, capacitors with low ESR, PCBs with higher 
copper content and variable speed fan control.
    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been in 
commercially-available products or working prototypes. DOE also finds 
that all of the remaining technology options meet the other screening 
criteria. For additional details, see chapter 4 of the Final Rule TSD.
    NEMA and ITI contended that the remaining technology options 
combined will result in less than one percent increase in UPS 
efficiency at optimum performance and the burden of redesigning and 
testing for sub-percent improvement in UPS efficiency is not justified. 
(NEMA and ITI, No. 0019 at pp. 5-6) Schneider Electric argued that of 
all the remaining technologies, only higher copper content in PCBs and 
line cords has the potential of offering significant improvement in UPS 
efficiency only at the 100 percent loading point, which accounts for 30 
percent of the average load adjusted efficiency. Further, Schneider 
Electric noted DOE is effectively limiting market participation to 
companies who own or have access to the fundamental intellectual 
property required to produce high efficiency UPSs by pushing UPS energy 
efficiency requirements well above the ENERGY STAR requirements. 
(Schneider Electric, No. 0017 at p. 3)
    DOE notes that all remaining technology options were identified in 
consultation with manufacturers and other interested parties. These 
parties identified all remaining technology options as viable options 
for improving UPS efficiencies across all three product classes. Thus, 
while these remaining technologies may have varying effects on UPS 
efficiencies in each of the three product classes, DOE disagrees with 
Schneider Electric's written comment that only higher copper content in 
PCBs will likely create significant UPS efficiency gains and that all 
remaining technology options combined will improve UPS efficiency by 
less than one percent. Further, DOE notes that all remaining technology 
options satisfied the screening criteria, which ensures that the 
technology options are not protected by intellectual property laws and 
are readily available to all UPS manufacturers. Manufacturers may use 
any of the remaining technology options or their combination to improve 
the average load adjusted efficiencies of their UPS basic models. 
Lastly, DOE points out that per a stakeholder comment from ICF 
International at the September 16, 2016 public meeting, 78% of all UPS 
available in commerce are ENERGY STAR compliant, which demonstrates 
that technology options required to attain high levels of energy 
efficiency are readily available to multiple UPS manufacturers. (ICF, 
Pub. Mtg. Tr., No. 0014 at p. 24)
    NEMA and ITI noted that VFD and VI UPSs typically do not have 
constantly rotating fans and argued that variable speed fan control 
technology will have limited effect on VFD and VI UPS efficiencies. 
Further, NEMA and ITI argued that wide band gap semiconductors are only 
useful in VFI UPS design with little usefulness in VI UPS designs and 
no usefulness in VFD UPS designs. NEMA and ITI contended that wide band 
gap semiconductors typically offer 0.25 percent improvement in UPS 
efficiency in applicable designs while costing up to three times more 
than traditional semiconductors. Lastly, NEMA and ITI argued that the 
use of Sendust and Litz wiring is limited to transformer-less UPS 
designs, which are not being pursued due to intellectual property 
limitations and requested that DOE consult with DOJ if the use of such 
designs is pursued. (NEMA and ITI, No. 0019 at p. 5)
    DOE notes that of all the representative units across all three 
product classes, only the representative unit corresponding to EL 0 for 
VFI UPSs utilized variable speed fan control. None of the other 
representative units, including those used to generate EL 1 and EL 2 
for VFI UPSs, utilized variable speed fan control or wide band gap 
semiconductors. While these two technology options were identified in 
consultation with manufacturers and other interested parties as viable 
options for improving UPS efficiencies across all three product 
classes, the efficiency levels being adopted in this final rule can be 
achieved without these two technology options as demonstrated by the 
representative units in VFD and VI UPS product classes. DOE disagrees 
with NEMA and ITI's claim that Sendust and Litz wiring technology 
options are limited to transformer-less UPS designs. UPSs across all 
three product classes incorporate a battery charger to keep their 
internal batteries fully charged. At the least, Sendust and Litz wiring 
may be used in the core and winding of transformers and inductors in 
these battery chargers to improve its efficiency which will improve the 
overall UPS efficiency.
    Lastly, NEMA and ITI noted that some of the remaining technology 
options coupled with the high proposed energy conservation standards 
will tread into patent-protected areas, potentially lessening 
competition. NEMA and ITI noted that DOE is obliged to consult with DOJ 
regarding the potential competition effects and marketplace issues. 
(NEMA and ITI, No. 0019 at p. 16) As explained in section IV.B, DOE 
identified these technologies in consultation with manufacturers and 
other interested parties. These technology options have been screened 
for intellectual property protection and are readily available to all 
UPS manufacturers. Therefore, DOE disagrees with the stakeholder claim 
that these technology options will tread into patent-protected areas. 
Further, DOJ concluded that the proposed energy conservation standards 
for UPSs are unlikely to have a significant adverse impact on 
competition. DOJ's assessment letter is attached to the end of this 
rule.

C. Engineering Analysis

    In the engineering analysis, DOE establishes the relationship 
between the manufacturer production cost (MPC) and improved UPS 
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

[[Page 1460]]

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 UPS 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.
    DOE used a combination of the design-option and efficiency-level 
approach when determining the efficiency curves for UPSs. UPSs are 
composed of a single highly integrated PCB consisting of control and 
power conversion circuitry without any interchangeable components. The 
efficiency-level approach therefore is more suited to creating the 
cost-efficiency relationship since components cannot be removed to 
understand their impact on overall power consumption. However, DOE did 
use the design-option approach to determine the maximum technologically 
feasible EL because these products are not available on the market 
currently.
    DOE began its analysis by completing a comprehensive study of the 
market for units that are in scope. A review of retail sales data, the 
ENERGY STAR qualified product list of compliant devices and 
manufacturer interviews aided DOE in identifying the most prevalent 
units in the market as well as those that are the least and most 
expensive and efficient. DOE then used a combination of purchased units 
for in-house efficiency testing as well as efficiency data directly 
from the ENERGY STAR database of compliant devices. The data from 
testing and the ENERGY STAR database allowed DOE to choose 
representative units and create multiple ELs for each product class.
1. Testing
    In taking the hybrid efficiency-level and design option approach, 
DOE chose multiple units of the same product class striving to ensure 
variations between successive units (e.g. LCDs, communication ports, 
etc.) were removed. The resultant efficiency values and data obtained 
from manufacturers were then curve-fitted and extrapolated to the 
entire power range (defined by the scope) to create multiple ELs. For 
example, DOE tested several VFD representative units and identified 
additional ones from the ENERY STAR data in the 300-500W range to 
create four ELs for VFD UPSs, which when compared against the device's 
MPC demonstrated a direct positive correlation.
    NEMA and ITI and Schneider Electric noted that because of 
differences between DOE's proposed test procedure and ENERGY STAR's 
test procedure for UPSs, DOE must adjust the average load adjusted 
efficiency of representative units whose efficiency data were collected 
from ENERGY STAR data by 0.2 to 0.4 percent. (NEMA and ITI, No. 0019, 
pp. 9-10, Schneider Electric, No. 0017 at p. 15) Similarly, during the 
public meeting held on September 16, 2016, ICF International stated 
that the differences between the two test procedures would produce a 
variance between 0.1 to 0.3 percent in the average load adjusted 
efficiency of UPSs. (ICF International, Pub. Mtg. Tr., No. 0014 at pp. 
93). NEMA and ITI requested in written comments that if the DOE 
persists on pursuing the strict ELs as proposed in the NOPR, DOE must 
either mathematically determine the impacts of the proposed new UPS 
test procedure and adjust the ENERGY STAR data accordingly or undertake 
an extensive amount of additional physical testing and base the 
standard on these new data. (Schneider Electric, No. 0019 at p. 2)
    DOE identifies in Table IV-1 the representative units that were 
tested as well as those whose efficiency values were collected from the 
ENERGY STAR database. DOE has revised its analysis for all ELs 
identified in Table IV-1 for which the efficiency value of 
representative units were collected from the ENERGY STAR database to 
account for the differences between DOE's test procedure and the ENERGY 
STAR test procedure for UPSs. Further, Table IV-1 shows that among the 
ELs proposed as energy conservation standards during the NOPR and 
finalized in this rulemaking, EL 1 for VFD UPSs and EL 1 for VI UPSs 
use a representative unit where the efficiency value was collected from 
the ENERGY STAR database and therefore did not have a battery connected 
during test. DOE is adopting the EL 1 for VFD UPSs and EL 1 for VI UPSs 
but notes that because DOE has revised its analysis to account for the 
differences between DOE's test procedure and the ENERGY STAR test 
procedure for UPSs, the standard equations have been slightly altered. 
For VFI UPSs, DOE is finalizing the proposed standard equation at EL 1 
because the representative units for this EL was tested using DOE's 
proposed test procedure which automatically captures the losses due to 
a connected battery, and thus, no adjustments are necessary. The test 
data and the corresponding analysis for this EL therefore does not 
require an update.

                          Table IV-1--Test Procedure Used For Each Representative Unit
----------------------------------------------------------------------------------------------------------------
      Product class               EL 0                  EL 1                  EL 2                  EL 3
----------------------------------------------------------------------------------------------------------------
VFD UPS.................  DOE.................  ENERGY STAR.........  DOE.................  Not Applicable.
VI UPS..................  DOE.................  ENERGY STAR.........  DOE.................  Not Applicable.
VFI UPS.................  DOE.................  DOE.................  ENERGY STAR.........  Not Applicable.
----------------------------------------------------------------------------------------------------------------

2. Representative Units and Efficiency Levels
    Individual ELs for a UPS product class were created by curve-
fitting and extrapolating the efficiency values of either a test unit 
or that of a unit identified from the ENERGY STAR database as explained 
in the previous section, IV.C. Each of the ELs are labeled EL 0 through 
EL 3 and reflect increasing efficiency due to technological advances. 
EL 0 represents baseline performance, EL 1 is described as the minimum 
required efficiency to be ENERGY STAR compliant, EL 2 is the best 
technology currently available in the market and EL 3 is the maximum 
efficiency theoretically achievable. As such, a representative unit for 
EL 0 was selected from the least efficient market segment of a 
particular product class. EL 1 and EL 2 were then represented by the 
least and most efficient ENERGY STAR unit respectively in the same 
power range. While DOE derived EL 0 through EL 2 via testing and using 
the online ENERGY STAR database, DOE created EL 3 from data obtained 
during manufacturer interviews.
    Schneider Electric disagreed with DOE's approach of deriving an EL 
extending to the entire output power range of the scope based on the 
test result of a single representative unit. Schneider Electric further 
contended that DOE's selection of representative units appears 
arbitrary, that the corresponding ELs fail to account for fixed core 
losses that dominate at lower

[[Page 1461]]

output power ranges and the shape of the ELs in all three product 
classes does not align with either the data provided by DOE or the 
ENERGY STAR database. Similarly, NEMA and ITI argued that the DOE 
offers no proof of why a curve makes more sense, or why it offers 
sufficient improvement over the well-established flat-bar requirements 
of ENERGY STAR. NEMA and ITI also argued that a curve based approach 
unfairly prejudices products that have a slightly lower efficiency 
because they are satisfying consumer demanded secondary functions like 
USB charge ports, wireless connectivity etc. Schneider Electric also 
argued that DOE's data set appears statistically insignificant in terms 
of the number of units tested, feature sets and power levels when 
compared to the consumer UPS market and underrepresents UPSs with rated 
output powers less than 300W, which incur higher fixed losses. 
Specifically, Schneider Electric disagreed with DOE's methodology of 
determining ELs for VFD UPSs with rated output power greater than 700W, 
VI UPSs with rated output power less than 300W, and VFI UPSs with rated 
output power less than 700W without testing UPSs in these output power 
ranges. If DOE were to select and test representative units in these 
ranges, Schneider Electric asserted DOE would find that there are not 
enough models in the marketplace for all UPSs under 300W, VFD UPSs 
greater than 1000W and VFI units under 600W to establish statistically 
valid baselines from which to derive requirements. However, Schneider 
Electric did note other units with lower efficiencies among DOE's test 
data set that had a lower average weighted efficiency and these would 
have been more suited as the representative unit for baseline 
efficiency, EL 0. (NEMA and ITI, No. 0019 at pp. 6-7; Schneider 
Electric, No. 0017 at pp. 2, 4, 6-9; Schneider Electric, Pub. Mtg. Tr., 
No. 0014 at pp. 50-51)
    As explained earlier in this section, DOE did not select 
representative units nor establish ELs based on a statistical analysis 
of the efficiency distributions of the UPS market. DOE selected 
representative units on the basis of a unit's ability to achieve a 
certain average load adjusted efficiency at a particular cost while 
ensuring that the technology used to arrive at that efficiency passes 
DOE's screening analysis and is readily available to all manufacturers. 
In selecting representative units, DOE intentionally strived to 
minimize additional feature sets so that they would have minimal impact 
on the unit's efficiency measurement. Similarly, DOE attempted to keep 
the output power range constant between successive representative units 
of the same product class, ensuring that the resultant efficiency 
levels can be reasonably compared to one another without additional 
variables. Therefore, contrary to Schneider Electric's comment, DOE's 
selection of representative units were not arbitrary and were carefully 
selected.
    Further, in measuring the input and output powers of a single 
representative unit at multiple loading points, DOE also effectively 
captured the energy performance of UPSs across the entire output power 
range. For example, measuring a 400W VFD UPS at 25% load successfully 
captures how fixed losses dominate at lower power levels. DOE's 
proposed ELs, each of which was derived using a single representative 
unit, is shown in Figure IV-1 through Figure IV-3. The shape of these 
ELs demonstrate less stringent efficiency requirements at lower output 
power levels since high efficiency values are harder to achieve where 
fixed losses dominate. DOE therefore believes that its use of a single 
representative unit to derive ELs for the entire output power range of 
the scope is accurate and reiterates that the ELs were not generated to 
conform to all the units tested by DOE for the NOPR analysis or to the 
publically available ENERGY STAR database. To expect the ELs to align 
with these data is to have misunderstood how DOE's engineering analysis 
and testing were performed. Finally in response to NEMA and ITI's 
comment regarding a preference for a flat line standard similar to that 
of ENERGY STAR, DOE believes that would be inaccurate in that it would 
treat UPSs of all power ranges equally, incentivizing secondary 
features across certain power ranges while excluding them from others.
    While DOE did not derive ELs using statistical analysis of the 
efficiency distribution of the UPS market, DOE did use efficiency 
distribution data in its downstream analyses to evaluate what 
proportion of the UPS market would shift in response to a certain EL as 
well as each EL's cost and benefit to the individual consumer, the 
manufacturer and the Nation.
    Lastly, in response to Schneider Electric's argument that there are 
units among DOE's dataset with a lower average load adjusted efficiency 
than the ones selected by DOE as representative units for establishing 
EL 0 for VFD and VI UPSs, DOE clarifies that while EL 0 establishes a 
baseline, its intention is not to represent the absolute least 
efficient units in the marketplace. Instead EL 0 simply represents a 
market segment that demonstrates a generally lower efficiency trend and 
the bulk of UPS shipments below EL 1. This is because, in the absence 
of preexisting Federal energy conservation standards, which is the case 
for UPSs, the absolute least efficient unit available in the market can 
be as inefficient as a certain UPS manufacturer desires, making it an 
outlier instead of a representation of the general least efficient 
market segment. Therefore, selecting the least efficient units found in 
commerce as EL 0 representative units is not an accurate representation 
of the general least efficient market segment.
    Figure IV-1 through Figure IV-3 are graphical representations of 
the ELs for VFD UPS, VI UPS and VFI UPS types respectively.\16\ Each EL 
is subdivided into power ranges for simplicity and is a piecewise 
approximation of the unit's overall efficiency across the entire power 
range as shown in the figures. Chapter 5 of the Final Rule TSD has 
additional detail on the curve-fit equations for each EL and UPS 
product class.
---------------------------------------------------------------------------

    \16\ These figures are also available in Docket No. EERE-2016-
BT-STD-0022
---------------------------------------------------------------------------

BILLING CODE 6450-01-P

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[GRAPHIC] [TIFF OMITTED] TR10JA20.000


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[GRAPHIC] [TIFF OMITTED] TR10JA20.001

BILLING CODE 6450-01-C
    Schneider Electric noted that five VFD UPSs tested by DOE pass 
DOE's proposed energy conservation standard for the VFD UPS product 
class within the margin of gauge R&R variances for the test equipment 
at Schneider Electric, indicating a marginal failure. Further, 
Schneider Electric noted that none of the VI UPS units tested by DOE as 
part of the NOPR analysis or any of the compliant VI UPSs with rated 
output power less than 1000W listed in the ENERGY STAR database meet 
DOE's proposed EL 2 for the VI UPS product class. Schneider Electric 
argued that adoption of EL 2 for the VI UPS product class will 
eliminate VI UPSs with rated output powers less than 1000W, which

[[Page 1464]]

would be a violation of clause 325(o)(4) of EPCA. Lastly, Schneider 
Electric argued that there is no evidence in the NOPR TSD or the ENERGY 
STAR database to support that VFI UPSs with rated output powers less 
than 700W will pass DOE's proposed EL 1 for the VFI UPS product class. 
(Schneider Electric, No. 0017 at pp. 4, 9-10, 11-12)
    DOE notes that that compliance certification sampling provisions 
outlined in 10 CFR part 429 provide the necessary allowance in 
certified rating to accommodate small part to part variations such as 
gauge R&R variances. In response to Schneider Electric's comment that 
none of the units tested by DOE passes the proposed standard, DOE 
clarifies that this is due to the best-fit curves overshooting at 
certain data points resulting in a set of equations that are marginally 
more stringent than intended by as much as one-tenth of a percent. 
Among the test data published in the August 2016 NOPR were the 
efficiency values for the VI UPS EL 2 representative unit. Because EL 2 
for VI UPSs was created using this representative unit's efficiency 
values, the unit itself would only pass the standard if it remained 
exactly as derived. However, due to the over approximation by the best 
fit curves as explained above, the EL appeared more stringent at 
certain data points causing the representative unit to demonstrate a 
marginal fail. DOE has adjusted the standard equations to account for 
this over approximation in this final rule which will resolve the issue 
with the EL 2 representative unit not passing the very EL it helped 
create. Additionally, the lack of a VI UPS unit in the ENERGY STAR 
database does not necessarily mean products that can achieve the 
required efficiency does not exist in the marketplace. ENERGY STAR is a 
voluntary program with stringent testing and compliance requirements, 
which manufacturers may not choose to undergo. The EL 2 representative 
unit for VI UPSs is again such an example. Similarly, as of October 10, 
2016, there are five compliant VFI UPSs in the ENERGY STAR database 
under 700W, of which three units pass the EL 1 standard for VFI UPSs 
with significant margin to account for differences between DOE's test 
procedure and ENERGY STAR's. This refutes Schneider Electric's argument 
that there are currently no VFI UPSs under 700W in the ENERGY STAR 
database and continues to demonstrate that technology options are 
readily available to UPS manufacturers to produce VFI UPSs that meet 
DOE's adopted energy conservation standard.
    It is also important to note that, In addition to the changes made 
to the analysis discussed in the previous two sections, IV.C.1 and 
IV.C.2, DOE updated its analysis with AEO2016 data as explained in 
section IV.H.2. In selecting a given standard, DOE must choose the 
level that achieves the maximum energy savings that is determined to be 
technologically feasible and economically justified. In making such a 
determination, DOE found that TSL 2 is no longer economically justified 
as a result of the above changes. Therefore, as described in section 
V.C, DOE is adopting TSL 1 in this final rule, which includes a less 
stringent standard for VI UPSs than initially proposed, and accordingly 
alleviates objections from Schneider Electric on the stringency of the 
proposed level for this product class.
    Schneider Electric and NEMA and ITI also requested that DOE 
thoroughly examine the performance of secondary features that are 
unrelated to battery charging. All three stakeholders commented that 
these secondary features which include services such as USB charging 
ports, wired and wireless connectivity, displays, communications and 
other functions provide significant added utility to the consumer and 
DOE risks eliminating these consumer demanded utilities from UPS 
products by only considering cost versus electrical efficiency 
relationship. Further Schneider Electric provided a list of these 
consumer requested features along with what their corresponding 
allowance should be and proposed an alternate adjusted efficiency 
metric that accommodates the suggested allowances in place of the 
average load adjust efficiency metric proposed by DOE in the UPS test 
procedure. (NEMA and ITI, No. 0019 at pp. 3; Schneider Electric, No. 
0017 at pp. 1-2, 13)
    After careful review of the stakeholder comments summarized above, 
DOE is including provisions in the UPS test procedure to allow the 
limiting of secondary features that do not contribute to the 
maintenance of fully charged battery(s) or delivery of load power, 
similar to the provisions in place in the test procedure for all other 
battery chargers. See the December 12, 2016 UPS test procedure final 
rulemaking. 81 FR 89806. This will allow manufacturers to disable these 
secondary features in order to reduce or eliminate the impact that the 
energy consumption of these features has on the measured efficiency 
metric. However, DOE is not adopting the proposed alternative 
calculation that Schneider Electric proposed at this time. DOE does 
note that there are provisions in place, as outlined in 10 CFR 430.27, 
for an interested party to submit a petition for a test procedure 
waiver for a basic model of a covered product if the basic model's 
design prevents it from being tested according to the test procedure or 
if the results of the test procedure yield materially inaccurate or 
unrepresentative comparative data. When a waiver or interim waiver is 
granted, manufacturers are permitted to use an alternative test method 
to evaluate the performance of their product type in a manner 
representative of the energy consumption characteristics of the basic 
model. Accordingly, manufacturers may pursue this approach to petition 
DOE to allow the use of an alternative test method, which may include 
an alternative method for calculating the efficiency metric used to 
certify compliance with applicable energy conservation standards. More 
information on the waiver process is available on DOE's website: http://energy.gov/eere/buildings/test-procedure-waivers.
3. Cost Analysis
    For UPSs, DOE developed average manufacturer and distribution 
markups for ELs by examining the annual Securities and Exchange 
Commission (SEC) 10-K reports filed by publicly-traded UPS 
manufacturers and distribution chains and further verified during 
stakeholder interviews. DOE used these validated markups to convert 
consumer prices into manufacturer selling prices (MSPs) and then into 
MPCs.
    In general, DOE's cost analysis of representative units 
demonstrated a direct correlation between MPC and average load adjusted 
efficiency (see Figure 5.5.1 through 5.5.3 in chapter 5 of the Final 
Rule TSD). However, the one exception to this correlation was the EL 1 
representative unit for VFD UPSs. This representative unit has a higher 
output power rating and average load adjusted efficiency, but a lower 
MPC compared to the EL 0 representative unit of the same product class.
    In addition to the two representative units discussed here, DOE has 
found other VFD UPSs that demonstrate this negative correlation between 
MPC and average load adjusted efficiency between EL 0 and EL 1.
    DOE believes that this exception to the otherwise direct 
correlation between MPC and average load adjusted efficiency of UPSs 
has several possible explanations. For the VFD UPSs in scope of this 
rulemaking, DOE believes consumers may typically be more concerned with 
the reliability of the

[[Page 1465]]

protection the product provides, than its energy efficiency. Despite 
the presence of less expensive and more efficient units, DOE believes 
less efficient legacy units continue to be sold in the marketplace 
because consumers are familiar with these models and trust the level of 
protection and safety they offer even if more energy efficient UPS 
models with similar functionality and dependability are available at 
lower prices. Additionally, an unproven model that is more efficient 
yet less expensive may be perceived by consumers as less reliable. This 
perceived negative correlation between reliability and price of UPSs 
may take away an incentive from UPS manufacturers to improve the design 
of these models that have established a reputation of being dependable. 
Further, DOE's own analysis and consultation with subject matter 
experts, and stakeholders comments have confirmed that increases in UPS 
efficiency using the technology options identified in section IV.B.2 
will not negatively impact the reliability of the product.
    It is also worth noting that the difference in MSP between the VFD 
UPS EL 0 and EL 1 representative units is $5.10 and while this can be 
significant on its own, it may only be a small fraction of the cost of 
the connected equipment that it is protecting or the potential loss in 
productivity if said connected equipment were to lose power. DOE 
believes this is one of the reasons why devices at EL 0 continue to 
exist in the market place at a price higher than more efficient EL 1 
models.
    However, negative costs are unexpected in an economic theory that 
assumes a perfect capital market with perfect rationality of agents 
having complete information. In such a market, because more efficient 
UPSs save consumers money on operating costs compared to the baseline 
product, consumers would have an incentive to purchase them even in the 
absence of standards. For these reasons, DOE discussed perceived lower 
reliability of less expensive models as a possible explanation for the 
exception to the otherwise direct correlation between MPC and average 
load adjusted efficiency of UPSs and requested comments on its 
understanding of why less efficient UPSs continue to exist in the 
market at a price higher than more efficient units. DOE also requested 
comments on the impact that energy conservation standards for UPSs will 
have on the costs and efficiencies of existing UPS models, including 
various aspects of the inputs to the installed cost analysis, such as 
assumptions about consumers' response to first cost versus long-term 
operating cost, assumptions for manufacturer capital and product 
conversion costs, and other factors.
    NEMA and ITI responded to this request for comment by stating their 
agreement with DOE's analysis that less efficient VFD units continue to 
sell in the marketplace at a higher price due to perceived reliability. 
However, NEMA and ITI also stated that DOE did not analyze the high 
likelihood that these products include other features such as USB 
charging ports, wired and wireless connectivity, integrated on-board 
data displays, or other performance features in the NOPR TSD. Taken in 
this context, the DOE's statement can be followed to a logical 
conclusion that consumers will accept slightly lower efficiency and 
higher cost for greater functionality and utility. Similarly, Schneider 
Electric commented that less efficient UPSs continue to exist in the 
market at a higher price due to various factors such as but not limited 
to form factor, display functionality, legibility, outlet quantity, 
position, line cord length, battery runtime, surge protection rating, 
environmentally friendly materials and packaging, communication and 
software capability, brand reputation and reliability and product 
warranty. (NEMA and ITI, No. 0019 at p. 13; Schneider Electric, No. 
0017 at p. 16)
    DOE appreciates the feedback from NEMA and ITI and Schneider 
Electric and generally agrees with some of the features highlighted 
such as brand reputation, product warranty, form factor, materials and 
packaging as possible reasons for why less efficient units continue to 
exist in the market at a higher price. DOE has therefore kept the cost 
analysis intact from the NOPR.

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the consumer prices, derived in the 
engineering analysis, into the MSPs for each product class and EL. The 
MSPs calculated in the markups analysis are then used as inputs to the 
MIA. The prices derived in the engineering analysis are marked up to 
reflect the distribution chain of UPSs. At each step in the 
distribution channel, companies mark up the price of the product to 
cover business costs and profit margin. For UPSs, the main parties in 
the distribution chain are retailers. The final prices, which also 
include sales taxes, are then used in the LCC and PBP analyses.
    For retailers, DOE developed separate markups for baseline products 
(baseline markups) and for the incremental cost of more-efficient 
products (incremental markups). Incremental markups are coefficients 
that relate the change in the MSP of higher-efficiency models to the 
change in the retailer sales price. DOE relied on economic data from 
the U.S. Census Bureau \17\ to estimate average baseline and 
incremental markups.
---------------------------------------------------------------------------

    \17\ U.S. Census Bureau. Annual Retail Trade Survey, Electronics 
and Appliance Stores. 2012. www.census.gov/retail/arts/historic_releases.html.
---------------------------------------------------------------------------

    The manufacturer markups, which convert MSPs to MPCs are calculated 
as part of the MIA and are not presented in the markups analysis. DOE 
developed average manufacturer markups by examining the annual SEC 10-K 
reports filed by publicly traded UPS manufacturers then refining these 
estimates based on manufacturer feedback.
    Chapter 6 of the final rule TSD provides details on DOE's 
development of markups for UPSs.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of UPSs at different efficiencies in representative 
U.S. single-family homes, multi-family residences, and commercial 
buildings, and to assess the energy savings potential of increased UPS 
efficiency. The energy use analysis estimates the range of energy use 
of UPSs 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.
    To develop energy use estimates, DOE multiplied UPS power loss as a 
function of rated output power, as derived in the engineering analysis, 
by annual operating hours. In the NOPR, DOE assumed that UPSs are 
operated for 24 hours per day, 365 days per year, at a typical load 
specific to each product class. DOE assumed average loading for VFD 
UPSs to be 25 percent, average loading for VI products to be 50 
percent, and average loading for VFI products to be 75 percent.
    CA IOUs agreed with DOE's loading assumption of 25% for VFD UPSs, 
but noted that existing computer usage data suggest this loading is 
likely to be low. Furthermore, CA IOUs disagreed with DOE's loading 
assumption of 50% for VI UPSs, arguing that these products are much 
more likely to be utilized with

[[Page 1466]]

servers instead of desktop computers, and that average loading is more 
likely to be similar to VFI UPS. CA IOUs requested DOE assume a similar 
loading assumption for VI UPSs as in the ENERGY STAR UPS specification. 
(CA IOUs, No. 0016 at pp. 2-3) In the absence of energy use field data 
for UPSs, Schneider supports the average loading conditions used in 
ENERGY STAR. (Schneider Electric, No. 0017 at p. 16)
    In response to these comments, DOE has adjusted its loading 
assumptions for all product classes in the energy use analysis to match 
those in the ENERGY STAR UPS specification and in the DOE UPS test 
procedure. For VFD UPSs with rated output power of 1500 W or less, the 
weighted average loading assumption uses the following weights: 0.2 at 
25 percent loading, 0.2 at 50 percent loading, 0.3 at 75 percent 
loading, and 0.3 at 100 percent loading. For all other UPSs, the 
weighted average loading assumption uses the following weights: 0.3 at 
50 percent loading, 0.4 at 75 percent loading, and 0.3 at 100 percent 
loading. DOE agrees that little field data exist on the energy use of 
UPSs, and that in the absence of such data, it is preferable to rely 
upon the consensus loading assumptions agreed upon as part of the 
ENERGY STAR specification development.
    CA IOUs additionally requested that DOE consider the efficiency 
degradation of UPSs which may occur over the lifetime of a product. 
Age-induced battery degradation and elevated self-discharge rates would 
lead to an increase in energy use with age. (CA IOUs, No. 0016 at p. 3) 
DOE notes that no data are available, nor were they submitted, on how 
the energy use of UPSs may change with age. Furthermore, it is possible 
to regularly replace UPS batteries over the lifetime of a UPS, 
eliminating the potential efficiency degradation due to an aging 
battery. The battery replacement cost is assumed to be the same across 
all efficiency levels in the analysis, and therefore was not included 
in the LCC analysis. For these reasons, DOE did not include efficiency 
degradation with age in its energy use analysis for the final rule.
    CA IOUs further requested that DOE revise its energy use analysis 
to take into account the usage of UPSs that can act as mobile battery 
packs. CA IOUs contend that the energy usage of such devices is 
significantly different from other UPSs, since the device undergoes far 
more discharge cycles and is likely to operate more frequently with a 
partially discharged battery, increasing energy use. (CA IOUs, No. 0016 
at pp. 4-5) DOE notes that devices that act only as a mobile battery 
pack, and are not designed to provide continuity of load in case of 
input power failure, do not meet the definition of a UPS. Additionally, 
any UPS that only has outputs providing direct current (e.g., USB 
ports) is outside the scope of this rulemaking. Many products 
classified as mobile battery packs would therefore not be subject to 
energy conservation standards for UPSs. DOE's market analysis suggests 
that hybrid devices that meet the definition of a UPS, include AC 
outputs, and can additionally act as a mobile battery pack, constitute 
a very small minority of the total UPS market. There are a limited 
number of models meeting this description available on the market. 
Furthermore, these devices are far less likely to be regularly used as 
a mobile battery pack, given that removing the mobile battery pack 
(including the battery component) for remote device charging negates 
the UPS functionality of the device to provide continuity of load in 
case of input power failure. DOE assumes that consumers would only 
occasionally use the mobile battery pack with such devices. For these 
reasons, DOE believes that the energy usage of such devices is likely 
to be very similar to traditional UPSs, and has not adjusted its energy 
use analysis with respect to UPSs that can act as mobile battery packs.
    EEI requested that the energy use analysis be revised to account 
for the energy consumption of the UPS components only, and not include 
the energy usage of connected loads. (EEI, No. 0021 at p. 4) DOE 
clarifies that its energy use analysis only considers the energy 
consumed by the UPS device itself, including energy conversion losses 
that occur while providing power to a connected load. The energy use 
analysis does not include energy that merely passes through the UPS. 
However, in order to calculate this energy consumption by the UPS, it 
is necessary to assume the energy going through the UPS to the 
connected end-use equipment. It is for this reason that DOE considers 
the type of connected equipment when determining the average loading 
condition assumptions. In the absence of any field data for UPSs, DOE 
is relying on the ENERGY STAR loading assumptions for the final rule.
    To capture the diversity of products available to consumers, DOE 
collected data on the distribution of UPS output power rating from 
product specifications listed on online retail websites. DOE then 
developed product samples for each UPS product class based on a market-
weighted distribution of product features found to impact efficiency as 
determined by the engineering analysis.
    Chapter 7 of the final rule TSD provides details on DOE's energy 
use analysis for UPSs.

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 
UPSs. The effect of new or amended energy conservation standards on 
individual consumers usually involves a reduction in operating cost and 
an increase in purchase cost. DOE used the following two metrics to 
measure consumer impacts:
     The LCC (life-cycle cost) is the total consumer expense of 
an appliance or product over the life of that product, consisting of 
total installed cost (manufacturer selling price, distribution chain 
markups, sales tax, and installation costs) plus operating costs 
(expenses for energy use, maintenance, and repair). To compute the 
operating costs, DOE discounts future operating costs to the time of 
purchase and sums them over the lifetime of the product.
     The PBP (payback period) is the estimated amount of time 
(in years) it takes consumers to recover the increased purchase cost 
(including installation) of a more-efficient product through lower 
operating costs. DOE calculates the PBP by dividing the change in 
purchase cost at higher efficiency levels by the change in annual 
operating cost for the year that amended or new standards are assumed 
to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of UPSs in the absence of new or 
amended energy conservation standards. In contrast, the PBP for a given 
efficiency level is measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units, as well as one for commercial buildings. For each sample 
household and commercial building, DOE determined the energy 
consumption for the UPS 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 UPSs.

[[Page 1467]]

    DOE was unable to locate a survey sample specific to UPS users for 
either the residential or commercial sector. However, as mentioned in 
the previous section, manufacturer interviews indicate that most VFD 
products are used with personal computers, around three quarters of 
low-end VI products are used with computers and workstations, and 
around three quarters of higher-end VI and VFI products are used with 
servers. DOE thus created residential and commercial samples for 
desktop computers as a proxy for the sample of VFD and VI UPS owners, 
and a sample for servers as a proxy for the sample of VFI UPS owners.
    DOE developed its residential sample from the set of individual 
responses to the Consumer Electronics Association's (CEA's) 16th Annual 
CE Ownership and Market Potential Study.\18\ CEA administered the 
survey to a random, nationally representative sample of more than 2,000 
U.S. adults in January and February 2014. The individual-level survey 
data that CEA provided to DOE were weighted to reflect the known 
demographics of the sample population; weighting by geographic region, 
gender, age, and race were used to make the data generalizable to the 
entire U.S. adult population. From this dataset, DOE constructed its 
household sample for UPSs by considering the number of desktop 
computers per household in conjunction with 2013 household income and 
state of residence.
---------------------------------------------------------------------------

    \18\ Available for purchase at http://store.ce.org/Default.aspx?TabID=251&productId=782583.
---------------------------------------------------------------------------

    To create a commercial building sample, DOE relied on EIA's 
Commercial Buildings Energy Consumption Survey (CBECS), a nationally 
representative survey with a rich dataset of energy-related 
characteristics of the nation's stock of commercial buildings.\19\ 
Individual survey responses from the most recent survey in 2012 allowed 
DOE to consider how the commercial penetration of servers and desktop 
computers varies by principal building activity and by Census Division. 
DOE used these microdata to construct the commercial sample of UPSs, 
which are assumed to back up and condition power for servers and 
desktop computers.
---------------------------------------------------------------------------

    \19\ U.S. Department of Energy--U.S. Energy Information 
Administration. Commercial Buildings Energy Consumption Survey 
(CBECS). 2012 Public Use Microdata File. 2015. Washington, DC. 
http://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=microdata.
---------------------------------------------------------------------------

    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP relies on 
a Monte Carlo simulation to incorporate uncertainty and variability 
into the analysis. The Monte Carlo simulations randomly sample input 
values from the probability distributions and UPS user samples. The 
model calculated the LCC and PBP for products at each efficiency level 
for 10,000 housing units and 10,000 commercial buildings per simulation 
run.
    DOE calculated the LCC and PBP for all consumers of UPSs as if each 
were to purchase a new product in the first year of required compliance 
with new standards. Any new standards would apply to UPSs manufactured 
two years after the date on which any new standard is published. 
Therefore, for purposes of its analysis, DOE used 2019 as the first 
year of compliance with any new standards for UPSs.
    Table IV-2 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. Details of the spreadsheet model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the final rule TSD and its appendices.

                    Table IV-2--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. Used
                                                          historical data to derive a price scaling index to
                                                          project product costs.
Installation Costs.....................................  Assumed no change with efficiency level.
Annual Energy Use......................................  Power loss (a function of rated output power)
                                                          multiplied by annual operating hours. Average number
                                                          of hours at a typical load based on ENERGY STAR load
                                                          profile. Variability: Distribution of rated power from
                                                          online retail websites.
Energy Prices..........................................  Electricity: Based on 2014 marginal electricity price
                                                          data from the Edison Electric Institute. Variability:
                                                          Electricity prices vary by season, U.S. region, and
                                                          baseline electricity consumption level.
Energy Price Trends....................................  Based on AEO2016 price projections.
Repair and Maintenance Costs...........................  Assumed no change with efficiency level.
Product Lifetime.......................................  Based on literature review and manufacturer interviews.
                                                          Variability: Based on a Weibull distribution.
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........................................  2019.
----------------------------------------------------------------------------------------------------------------
* 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 above 
(along with sales taxes). DOE used different markups for baseline 
products and higher-efficiency products, because DOE applies an 
incremental markup to the increase in MSP associated with higher-
efficiency product. The prices used in the LCC and PBP analysis are MPC 
in the compliance year, as described in chapter 5 of the TSD.
    Examination of historical price trends for a number of appliances 
that have been subject to energy conservation standards indicates that 
an assumption of constant real prices and costs may overestimate long-
term trends in appliance prices. Economic literature and historical 
data suggest that the real costs of these products may in fact trend 
downward over time according to

[[Page 1468]]

``learning'' or ``experience'' curves. On February 22, 2011, DOE 
published a notice of data availability (NODA) stating that DOE may 
consider refining its analysis by addressing equipment price trends. 76 
FR 9696. It also raised the possibility that once sufficient long-term 
data are available on the cost or price trends for a given product 
subject to energy conservation standards, DOE would consider these data 
to forecast future trends. However, DOE found no data or manufacturer 
input to suggest appreciable price trends for UPSs, and thus assumed no 
price trend for UPSs.
    ASAP et al. noted that DOE has included price trends in its 
analyses for several other products, including mature products, and 
implied that DOE should incorporate a price trend for UPSs. (ASAP et 
al., No. 0020 at p. 3) DOE notes that its methodology for determining 
appropriate price trends for a given product relies on collecting 
sufficient historical data on shipments and prices to perform the 
necessary analysis. DOE reiterates that it was unable to find any such 
data for UPSs. In the absence of data, DOE assumed no price trend for 
UPSs in the final rule.
2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product. DOE found no 
evidence that installation costs would be impacted with increased 
efficiency levels for UPSs. DOE received no comments on installation 
costs for UPSs.
3. Annual Energy Consumption
    For each sampled household and commercial building, DOE determined 
the energy consumption for a UPS at different efficiency levels using 
the approach described in section IV.E of this document.
4. Energy Prices
    DOE used marginal electricity prices to characterize the 
incremental savings associated with ELs above the baseline. The 
marginal electricity prices vary by season, region, and baseline 
household 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.\20\ DOE assigned seasonal 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 of 
electricity prices, see appendix 8D of the final rule TSD.
---------------------------------------------------------------------------

    \20\ Edison Electric Institute. Typical Bills and Average Rates 
Report. Winter 2014 published April 2014, Summer 2014 published 
October 2014. http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx.
---------------------------------------------------------------------------

    To estimate electricity prices in future years, DOE multiplied the 
average regional prices by annual energy price factors derived from the 
forecasts of annual average residential and commercial electricity 
price changes by region that are consistent with cases described on p. 
E-8 in AEO 2016.\21\ 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 2020 to 2040. DOE received no comments on its estimation of 
energy prices.
---------------------------------------------------------------------------

    \21\ 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. For UPSs, DOE 
assumed that small incremental increases in product efficiency produce 
no, or only minor, changes in repair and maintenance costs compared to 
baseline efficiency products. DOE received no comments on maintain or 
repair costs.
6. Product Lifetime
    For UPSs, DOE performed a search of the published literature to 
identify minimum and maximum average lifetimes from a variety of 
sources. DOE also considered input from manufacturer interviews 
conducted in early 2015. Table IV-3 summarizes the UPS lifetimes that 
DOE compiled from the literature and manufacture interviews. Where a 
range for lifetime was given, DOE noted the minimum and maximum values; 
where there was only one figure, DOE recorded this figure as both the 
minimum and maximum value. DOE computed mean lifetime by averaging 
these values across the product class.

                    Table IV-3--UPS Product Lifetimes From Literature and Manufacturer Input
----------------------------------------------------------------------------------------------------------------
                                                                         Lifetimes (years)
      Product class             Description      ---------------------------------------------------------------
                                                      Minimum          Mean           Median          Maximum
----------------------------------------------------------------------------------------------------------------
10a......................  VFD UPS..............               3               5               5               7
10b......................  VI UPS...............               5             6.3               6               8
10c......................  VFI UPS..............               8              10              10              12
----------------------------------------------------------------------------------------------------------------

    Using these minimum, maximum, and mean lifetimes, DOE constructed 
survival functions for the various UPS product classes. No more than 10 
percent of units were assumed to fail before the minimum lifetime, and 
no more than 90 percent of units were assumed to fail before the 
maximum lifetime. DOE assumed these survival functions have the form of 
a cumulative Weibull distribution, a probability distribution commonly 
used to model appliance lifetimes. Its form is similar to that of an 
exponential distribution, which models a fixed failure rate, except a 
Weibull distribution allows for a failure rate that can increase over 
time as appliances age. DOE received no comments on its estimate of UPS 
lifetimes. For additional discussion of UPS lifetimes, refer to chapter 
8 of the final rule TSD.
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 UPSs 
based on

[[Page 1469]]

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.\22\ 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 net present value 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.
---------------------------------------------------------------------------

    \22\ 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. It estimated the average percentage shares of the 
various types of debt and equity by household income group using data 
from the Federal Reserve Board's Survey of Consumer Finances \23\ (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 apply in 
the year in which 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 4.3 
percent. DOE received no comments on its estimate of residential 
discount rates. See chapter 8 of the final rule TSD for further details 
on the development of consumer discount rates.
---------------------------------------------------------------------------

    \23\ Board of Governors of the Federal Reserve System. Survey of 
Consumer Finances. Various dates. Washington, DC. 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 UPS. 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 
UPSs. For this analysis, DOE used Damodaran online \24\ 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 5.2 percent. DOE received no comments on its estimate of 
commercial discount rates. See chapter 8 of the final rule TSD for 
further details on the development of commercial discount rates.
---------------------------------------------------------------------------

    \24\ Damodaran, A. Cost of Capital by Sector. January 2014. 
(Last accessed September 25, 2014.) New York, NY. http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm.
---------------------------------------------------------------------------

8. 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 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-
standards case (i.e., the case without amended or new energy 
conservation standards). To estimate the efficiency distribution of 
UPSs for 2019, DOE examined a recent ENERGY STAR qualified product 
list. Although these model lists are not sales-weighted, DOE assumed 
they were a reasonable representation of the market.
    The estimated market penetration of ENERGY STAR-qualified UPSs was 
78 percent in 2013, the most recent year for which data were 
available.\25\ During the public meeting held on September 16, 2016, 
ICF International confirmed that ENERGY STAR compliant UPSs have an 
estimated 78 percent market penetration. (ICF International, Pub. Mtg. 
Tr., No. 0014 at p. 24) DOE assumed market penetration to be 78 percent 
for all three UPS product classes, as the 2013 Unit Shipment Data 
report does not distinguish between UPS architectures. In order to 
assess how qualified products fit into proposed efficiency levels, DOE 
analyzed a qualified product list downloaded on February 16, 2016, 
after cross-checking inconsistencies in reported UPS product type with 
product specifications on retail websites. For the 266 qualified in-
scope models, DOE compared average efficiency to the efficiency 
required for each EL, as determined in the engineering analysis. 
Finally, DOE assumed that the market share represented by non-ENERGY-
STAR-qualified products would belong to the least-efficient efficiency 
level analyzed. The estimated market shares for the no-new-standards 
case for UPSs are shown in Table IV-4. DOE received no other comments 
on the estimated market shares for the no-new-standards case. See 
chapter 8 of the final rule TSD for further information on the 
derivation of the efficiency distributions.
---------------------------------------------------------------------------

    \25\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 Unit Shipment Data. 2014. Washington, DC. 
https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.

           Table IV-4--Estimated Market Shares (%) in Each Efficiency Level for No-New-Standards Case
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                                                 ---------------------------------------------------------------
      Product class             Description            EL 0
                                                    (baseline)         EL 1            EL 2            EL 3
----------------------------------------------------------------------------------------------------------------
10a......................  VFD UPS..............              31              47              21             1.5
10b......................  VI UPS...............              65              29             6.4             0.0
10c......................  VFI UPS..............              71              23             5.8             0.0
----------------------------------------------------------------------------------------------------------------


[[Page 1470]]

    These market shares in each efficiency level were estimated based 
on national data. Regional data are not available. All other factors 
being the same, it would be anticipated that higher efficiency 
purchases in certain regions in the no-standards case would correlate 
positively with higher energy prices. To the extent that this occurs, 
it would be expected to result in some lowering of the consumer 
operating cost savings from those calculated in this final rule.
9. Payback Period Analysis
    The payback period 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. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. The 
PBP calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
    As noted above, EPCA, as amended, establishes a rebuttable 
presumption that a standard is economically justified if the Secretary 
finds that the additional cost to the consumer of purchasing a product 
complying with an energy conservation standard level will be less than 
three times the value of the first year's energy savings resulting from 
the standard, as calculated under the applicable test procedure. (42 
U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
projection for the year in which compliance with the new standards 
would be required.

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.\26\ 
Because UPSs back up and condition power for electronics, whose 
technology evolves more rapidly than many other appliances, DOE did not 
rely on a stock accounting approach common to other appliances. 
Instead, DOE largely elected to extrapolate forecasted trends from 
market research data. Data from Frost & Sullivan \27\ and ENERGY STAR 
unit shipments \28\ provided the foundation for DOE's shipments 
analysis for UPSs. DOE calculated shipment values for 30 years, from 
2019, the first year of compliance, through 2048, the last year of the 
analysis period.
---------------------------------------------------------------------------

    \26\ 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.
    \27\ Cherian, A. Analysis of the Global Uninterruptible Power 
Supplies Market: Need for Greater Power Reliability Driving Growth. 
Frost & Sullivan. 2013. San Antonio, TX. http://www.frost.com/c/10077/sublib/display-report.do?id=NC62-01-00-00-00.
    \28\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 UPS Unit Shipment Data. 2013. Washington, 
DC. https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.
---------------------------------------------------------------------------

1. Shipment Projections in the No-New-Standards Case
    DOE relied on data from Frost & Sullivan and ENERGY STAR to develop 
the shipments in the no-standards case for UPSs.\29\ Frost & Sullivan 
provide global UPS unit shipments from 2009 to 2019 for the relevant 
output range <1000 W. Because the next output power range for which 
shipments are provided is 1-5 kilo-watts (kW), and only UPSs with a 
NEMA 1-15P or 5-15P plug (approximately corresponding to a rated output 
power <1800 W) are in scope, DOE excluded this power range from the 
shipments analysis. Doing so results in a more conservative shipment 
projection. For <1000 W, Frost & Sullivan supply North American revenue 
as a percent of global revenue for 2009 to 2019, so DOE assumed that 
the percent of revenue is a reasonable proxy for percent of shipments. 
Multiplying global shipments by the North American percentage of 
revenue, and then by 0.9 under the assumption that the United States 
makes up 90 percent of the North American market, yielded U.S. UPS 
shipments.
---------------------------------------------------------------------------

    \29\ Cherian, A. Analysis of the Global Uninterruptible Power 
Supplies Market: Need for Greater Power Reliability Driving Growth. 
Frost & Sullivan. 2013. San Antonio, TX. http://www.frost.com/c/10077/sublib/display-report.do?id=NC62-01-00-00-00.
---------------------------------------------------------------------------

    Frost & Sullivan provide no classification by type of UPS within 
the relevant power range. However, the 2013 ENERGY STAR unit shipment 
data collection process \30\ provides such a breakdown; in that year, 
market penetration of UPSs was 78 percent,\31\ so DOE assumed these 
data are representative of the market. DOE used these data to determine 
how <1000 W UPSs are apportioned among different topologies for 2013 to 
2019, assuming this allocation stays constant: 50 percent VFD, 39 
percent VI, and 12 percent VFI. The Frost & Sullivan data indicate that 
the commercial sector dominates UPS revenue in the <1000 W market 
segment; therefore, DOE assumed a split of 90 percent commercial and 10 
percent residential shipments.
---------------------------------------------------------------------------

    \30\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 UPS Unit Shipment Data. 2013. Washington, 
DC. https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.
    \31\ Ibid.
---------------------------------------------------------------------------

    To project UPS shipments from 2020-2048, DOE extrapolated the 
linear trends forecasted by Frost & Sullivan from 2014 to 2019. In 
conjunction with the 2013 fixed split between topologies and a fixed 
portion of 0.9 for the United States relative to North American 
shipments, DOE projected the increasing linear trend in global UPS 
shipments <1 kW and the decreasing linear share of North American 
revenue to forecast shipments from 2019 to 2048.
    NEMA and ITI noted that ENERGY STAR shipment data for UPSs indicate 
an 18 percent decline in shipments from 2014 and 2015. They also note 
that shipment projections of desktop computers show a declining market. 
NEMA and ITI state that DOE's shipments analysis is in error, and 
relies on historical data which is no longer applicable. (NEMA and ITI, 
No. 0019 at p. 13) In response to DOE's request for shipment data in 
the NOPR, Schneider also noted that ENERGY STAR shipment volume 
estimates have been in decline, but did not provide any shipment data 
due to confidentiality restrictions. (Schneider Electric, No. 0017 at 
p. 16)
    DOE clarifies that its shipment analysis does not depend on 
historical data gathered independently, but rather relies on the 
analysis provided by the market research firm Frost & Sullivan. Frost & 
Sullivan provide their own market projections out to 2019 (partially 
based on its own historical data), after which DOE linearly 
extrapolated the shipment trends. DOE has no reason to suspect the 
Frost & Sullivan analysis is flawed, and continues to rely on it for 
the final rule. DOE acknowledges that there may have been short-lived 
market impacts in the past year or two due to various economic factors, 
and that the ENERGY STAR shipment data may reflect this dynamic. 
However, DOE notes that the penetration of ENERGY STAR products in the 
market may fluctuate, and ENERGY STAR shipment estimates do not provide 
a complete picture of the market. DOE further emphasizes that its 
shipment analysis is a long term projection over 30 years starting in 
2019.

[[Page 1471]]

    DOE acknowledges that desktop computer shipments are in decline, 
but notes that server shipments are not. Furthermore, Schneider 
acknowledged during the public meeting held on September 16, 2016, that 
there are growing applications of UPSs other than desktop computers and 
servers (e.g., voice over internet Protocol, modems, routers, other 
wired and wireless network devices). (Schneider Electric, Pub. Mtg. 
Tr., No. 0014 at pp. 83-84; ASAP et al., No. 0020 at p. 2) DOE 
therefore believes it is reasonable to assume that the UPS market will 
grow during the time period of its analysis, as supported by Frost & 
Sullivan's analysis, even if the desktop computer market declines.
    DOE acknowledges that there is some uncertainty regarding the 
future market growth of UPSs, and few analyses exist in the literature 
over the time period in DOE's analysis. As a result, DOE performed a 
sensitivity scenario of the national impact analysis assuming lower 
shipment growth over the 30-year analysis period. This sensitivity 
scenario is described in appendix 10B of the final rule TSD. While the 
absolute value of the energy savings estimates vary using this 
alternate shipments scenario, the relative comparison of the different 
trial standard levels analyzed does not.
2. Shipments in a Standards Case
    Increases in product prices resulting from standards may affect 
shipment volumes. To DOE's knowledge, price elasticity estimates are 
not readily available in existing literature for UPSs, and hence DOE 
assumed a price elasticity of demand of zero.
    During the public meeting held on September 16, 2016, Schneider 
inquired if price elasticity was factored into the analysis. (Schneider 
Electric, Pub. Mtg. Tr., No. 0014 at pp. 64-65) Schneider believes that 
DOE's analysis overestimates the market's willingness to absorb costs. 
(Schneider Electric, No. 0017 at p. 16) EEI similarly inquired as to 
how prices could increase without having a negative effect on shipments 
and manufacturer profits. (EEI, Pub. Mtg. Tr., No. 0014 at p. 66) NEMA 
and ITI disagreed with DOE's underlying assumption that consumers will 
continue to purchase UPSs of specific topologies regardless of price 
impacts. They stated that consumers of UPSs are very price-conscious. 
(NEMA and ITI, No. 0019 at p.6) NEMA and ITI also stated that as mobile 
computing and cloud computing services have grown relative to desktop 
computing, consumers can more easily opt to switch to these options 
instead of purchasing a more expensive UPS. Therefore, the price 
elasticity for UPSs is non-zero. (NEMA and ITI, No. 0019 at p. 14) No 
data were provided, however, to support the above statements.
    DOE assumes that UPSs are not discretionary electronic devices, and 
consumers purchase UPSs for power continuity, power reliability, 
safety, and security needs which cannot be addressed by other products. 
Consumers with such critical needs are unlikely to forgo or delay the 
purchase of a UPS. DOE further assumes that in response to a modest 
price increase in UPSs, consumers are very unlikely to respond by 
switching from desktop computing to a much more expensive mobile 
computing platform with similar performance. DOE therefore believes 
that the UPS market is price inelastic, and continues to assume a price 
elasticity of demand of zero in its analysis in the absence of any data 
suggesting otherwise. Furthermore, there are many features available in 
specific UPS product classes (e.g., power conditioning, precise voltage 
regulation) that provide important utility. DOE believes it is unlikely 
that a consumer would substitute or interchange different UPS 
topologies. Schneider confirmed DOE's understanding during the public 
meeting held on September 16, 2016, that the different product classes 
are not substitutes for one another and provide different utility. 
(Schneider Electric, Pub. Mtg. Tr., No. 0014 at p. 104) DOE therefore 
continues to assume in its analysis a cross-elasticity of demand of 
zero, and that there is no product class switching in response to 
energy conservation standards.
    See chapter 9 of the final rule TSD for further details on the 
development of shipments projections. In response to the above comments 
regarding the price elasticity of demand, DOE acknowledges that no data 
exist to inform the analysis for UPSs. As a result, DOE performed a 
sensitivity scenario of the national impact analysis assuming a non-
zero price elasticity of demand in the residential sector. DOE did not 
perform a sensitivity scenario using a non-zero price elasticity in the 
commercial sector, as DOE believes business requirements for safety and 
security result in an inelastic market. A price elasticity developed 
for household appliances was used in the absence of any literature 
estimates specific to UPSs. This sensitivity scenario is described in 
appendix 10B of the final rule TSD. While the absolute value of the 
energy and operating cost savings estimates vary using this alternate 
price elasticity scenario, the relative comparison of the different 
trial standard levels analyzed does not.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the national 
net present value (NPV) from a national perspective of total consumer 
costs and savings that would be expected to result from new or amended 
standards at specific efficiency levels.\32\ (``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 UPSs sold from 2019 through 2048.
---------------------------------------------------------------------------

    \32\ The NIA accounts for impacts in the 50 states and U.S. 
territories.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each product class if DOE 
adopted new or amended standards at specific energy efficiency levels 
(i.e., the TSLs or standards cases) for that class. For the standards 
cases, DOE considers how a given standard would likely affect the 
market shares of products with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    Table IV-5 summarizes the inputs and methods DOE used for the NIA 
analysis for the final rule. Discussion of these inputs and methods 
follows the

[[Page 1472]]

table. See chapter 10 of the final rule TSD for further details.

    Table IV-5--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
            Inputs                               Method
------------------------------------------------------------------------
Shipments....................  Annual shipments from shipments model.
Compliance Date of Standard..  2019.
Efficiency Trends............  No-New-Standards case: no efficiency
                                trend Standard cases: ``roll-up''
                                scenario.
Annual Energy Consumption per  Annual weighted-average values are a
 Unit.                          function of energy use at each TSL.
Total Installed Cost per Unit  Annual weighted-average values are a
                                function of cost at each TSL.
                                Incorporates projection of future
                                product prices based on historical data.
Annual Energy Cost per Unit..  Annual weighted-average values as a
                                function of the annual energy
                                consumption per unit and energy prices.
Repair and Maintenance Cost    Annual values do not change with
 per Unit.                      efficiency level.
Energy Prices................  AEO2016 projections (to 2040) and
                                extrapolation through 2048.
Energy Site-to-Primary and     A time-series conversion factor based on
 FFC Conversion.                AEO2016.
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 rule 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 for UPSs 
over the entire shipments projection period, DOE examined past 
improvements in efficiency over time. Little data exist to suggest that 
UPS efficiencies would improve in the 30 years following 2019 in the 
no-standards case. The approach is further described in chapter 10 of 
the final rule TSD.
    Schneider submitted a figure showing that UPS efficiency has 
improved from 1995 to 2016 in the absence of a mandatory energy 
conservation standard, due to consumer demand and the impact of 
voluntary programs such as ENERGY STAR. (Schneider Electric, No. 0017 
at p. 17) Similarly, NEMA and ITI stated that there is little relevant 
historic efficiency trend information because the UPS market has 
already been transformed by the ENERGY STAR UPS program. (NEMA and ITI, 
No. 0019 at 14) In contrast, CA IOUs agreed with DOE's assessment that 
UPS efficiencies would not improve in the no-new-standards case, as 
evidenced by the reported average maintenance-mode power consumptions 
of UPSs in the California Energy Commission (CEC) appliance database 
from 2013-to-date. (CA IOUs, No. 0016 at pp. 3-4) DOE notes that the 
figure submitted by Schneider was for a 1500 VA VFI UPS only, and was 
not accompanied by the underlying data, nor were any details provided 
regarding how the data were assembled. It is unclear whether the figure 
is representative of all UPSs, of all VFI UPSs, of only a subset of VFI 
UPSs at this rated output power, or of only a single UPS with a 
specific set of unchanging features. Schneider did not provide data on 
the efficiency trend for all product classes of UPSs. Given these 
limitations with the figure submitted by Schneider, and the available 
data found in the CEC appliance database, there is not sufficient data 
to suggest UPS efficiency has improved in the absence of an energy 
conservation standard. DOE continues to assume no efficiency 
improvement in the no-new-standards case for the final rule.
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective (2019). In this scenario, the market 
shares of products in the no-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 2019, DOE 
implemented the same trend as in the no-standards case: Zero percent 
for UPSs.
2. National Energy Savings
    The national energy savings 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 national energy 
consumption by multiplying the number of units (stock) of each product 
(by vintage or age) by the unit energy consumption (also by vintage). 
DOE calculated annual NES based on the difference in national energy 
consumption for the no-new-standards case and for each higher 
efficiency standard case. DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy (i.e., the energy consumed by power plants to 
generate site electricity) using annual conversion factors derived from 
AEO2016. Cumulative energy savings are the sum of the NES for each year 
over the timeframe of the analysis.
    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use full-fuel-cycle (FFC) measures of 
energy use and greenhouse gas and other emissions in the national 
impact analyses and emissions analyses included in future energy 
conservation standards rulemakings. 76 FR 51281 (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 \33\ that EIA uses to prepare its Annual Energy Outlook. The FFC 
factors incorporate losses in production and delivery in the case of 
natural gas (including fugitive

[[Page 1473]]

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 10A of 
the final rule TSD.
---------------------------------------------------------------------------

    \33\ 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.
---------------------------------------------------------------------------

    EEI disagreed with DOE's use of AEO2015 in the analysis for the 
NOPR, stating that the site-to-primary and FFC conversion factors do 
not take into account the latest estimates available in AEO2016. (EEI, 
No. 0021 at pp. 5-6) DOE has updated its analysis with AEO2016 for the 
final rule.
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.
    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 
electricity prices in future years, DOE multiplied the average regional 
prices by annual energy price factors derived from the forecasts of 
annual average residential and commercial electricity price changes by 
region that are consistent with cases described on p. E-8 in AEO 
2016.\34\ 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 
2020 through 2040. As part of the NIA, DOE also analyzed scenarios that 
used inputs from variants of the AEO2016 that have lower and higher 
economic growth and lower and higher energy price trends. NIA results 
based on these cases are presented in appendix 10B of the final rule 
TSD.
---------------------------------------------------------------------------

    \34\ 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 the Office of Management 
and Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\35\ 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.
---------------------------------------------------------------------------

    \35\ United States Office of Management and Budget. 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 or amended 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 two 
subgroups: (1) Low-income households and (2) small businesses. DOE used 
the LCC and PBP spreadsheet model to estimate the impacts of the 
considered efficiency levels on these subgroups. Chapter 11 in the 
final rule TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE conducted an MIA for UPSs to estimate the financial impacts of 
new energy conservation standards on manufacturers of UPSs. The MIA has 
both quantitative and qualitative aspects. 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 are data on the 
industry cost structure, manufacturer production costs (MPCs), and 
shipments; as well as assumptions about manufacturer markups and 
manufacturer conversion costs. The key MIA output is INPV. The GRIM 
calculates annual cash flows using standard accounting principles. DOE 
used the GRIM to compare changes in INPV between the no-standards case 
and various TSLs (the standards cases). The difference in INPV between 
the no-standards case and the standards cases represents the financial 
impact of new energy conservation standards on UPS manufacturers. 
Different sets of assumptions (markup scenarios) produce different INPV 
results. The qualitative part of the MIA addresses factors such as 
manufacturing capacity; characteristics of, and impacts on, any 
particular subgroup of manufacturers; the cumulative regulatory burden 
placed on UPS manufacturers; and any impacts on competition.
2. GRIM Analysis and Key Inputs
    DOE uses the GRIM to quantify the changes in cash flows over time 
due to new energy conservation standards. These changes in cash flows 
result in either a higher or lower INPV for the standards cases 
compared to the no-standards case. The GRIM analysis uses a standard 
annual cash flow analysis that incorporates manufacturer costs, 
manufacturer markups, shipments, and industry financial information as 
inputs. It then models changes in costs, investments, and manufacturer 
margins that result from new energy conservation standards. The GRIM 
uses these inputs to calculate a series of annual cash flows beginning 
with the reference year of the analysis, 2016, and continuing through 
the terminal year of the analysis, 2048. DOE computes INPV by summing 
the stream of annual discounted cash flows during the analysis period. 
DOE used a real discount rate of 6.1 percent, the same discount rate 
used in the August 2016 NOPR, for UPS manufacturers in this final rule. 
NEMA and Schneider commented that the discount rate was inappropriate 
for this analysis (NEMA and ITI, No. 0019, at p. 14) (Schneider 
Electric, No. 0017 at p. 18). DOE used publicly available information 
from the SEC 10-Ks of publicly traded UPS manufacturers to estimate a 
discount rate that was reflective of the capital structure of the UPS 
industry. DOE then asked for feedback on its estimated discount rate of 
8.2 percent during manufacturer interviews. Based on

[[Page 1474]]

manufacturer feedback, DOE adjusted the discount rate to be 6.1 percent 
for use in the UPS August 2016 NOPR and final rule GRIMs. Many of the 
GRIM inputs came from the engineering analysis, shipment analysis, 
manufacturer interviews, and other research conducted during the MIA. 
The major GRIM inputs are described in detail in the following 
sections.
a. Capital and Product Conversion Costs
    DOE expects new energy conservation standards for UPSs to cause 
manufacturers to incur conversion costs to bring their production 
facilities and product designs into compliance with new standards. For 
the MIA, DOE classified these conversion costs into two major groups: 
(1) Capital conversion costs and (2) product conversion costs. Capital 
conversion costs are investments in property, plant, and equipment 
necessary to adapt or change existing production facilities such that 
new product designs can be fabricated and assembled. Product conversion 
costs are investments in research, development, testing, marketing, 
certification, and other non-capitalized costs necessary to make 
product designs comply with new standards.
    In the August 2016 NOPR, DOE estimated product conversion costs for 
manufacturers that would have to redesign their UPSs to meet standards. 
DOE did not estimate capital conversion costs in the August 2016 NOPR. 
After reviewing comments in response to the August 2016 NOPR, DOE 
included capital conversion costs and increased product conversion 
costs for the final rule, based on these comment responses. The revised 
conversion costs used in the final rule are significantly higher at 
each of the TSLs than the conversion costs presented in the August 2016 
NOPR. The conversion costs used in this final rule are presented in 
section V.B.2.a.
    During the NOPR public meeting, NEMA questioned how the shipments 
analysis impacted the product conversion costs estimated and commented 
that only the products that already meet adopted standards would not 
require redesign (NEMA and ITI, No. 0019 at p. 15) (NEMA, Pub. Mtg. 
Tr., No. 0014 at p. 62). DOE agrees that UPSs that do not meet adopted 
standards would require redesign. DOE uses the efficiency distributions 
for each product class from the shipments analysis to determine how 
many UPS models in each product class would not meet the required ELs. 
For the final rule, DOE updated the efficiency distributions used in 
the shipments analysis. DOE used this updated efficiency distribution 
in the final rule MIA. More information on the updated shipments 
analysis can be found in section IV.G if this final rule and in chapter 
9 of the final rule TSD.
    NEMA and Schneider also commented that compliance with adopted 
standards would require investments in testing equipment and tooling to 
print new circuit boards for redesigned UPSs. (NEMA and ITI, No. 0019 
at p. 15) (Schneider Electric, No. 0017 at p. 19) In the final rule, 
DOE accounted for these additional investments for tooling in the 
capital conversion cost estimates included in the final rule, based on 
these comment responses. DOE did not include the cost of testing 
equipment in the capital conversion costs. DOE recognizes that 
manufacturers will incur additional testing costs in complying with 
adopted standards. However, DOE included these additional testing costs 
as part of the product conversion costs, since DOE believes that most 
UPS manufacturers will outsource testing to third parties. To estimate 
industry-wide testing costs, DOE used quotes from third party 
laboratories to calculate the cost of testing two units for all of the 
models in the UPS industry. DOE notes that the UPS final rule test 
procedure does not require manufacturers to test two units per platform 
and stipulates that manufacturers may choose to test either one or two 
units per model. DOE used the cost of testing two units per platform to 
reflect DOE's uncertainty of which testing option a manufacturer may 
choose. Please see the December 12, 2016 UPS test procedure final 
rulemaking for more information. 81 FR 89806.
    Schneider commented that testing equipment would become stranded 
because the increase in price of UPS caused by the adopted standards 
would reduce the demand for UPSs (Schneider Electric, No. 0017 at p. 
20). DOE did not estimate stranded assets for testing equipment. The 
shipments analysis shows that UPS shipment volume increases throughout 
the analysis period, indicating that there would not be reduced demand 
for UPSs following adopted standards. Based on the shipments analysis, 
DOE does not believe that testing equipment would become stranded at 
any of the analyzed ELs. For more information on the shipments 
analysis, please see section IV.G of this final rule and chapter 9 of 
the final rule TSD.
    Schneider further commented on the duration of UPS product design 
cycles and asserted that these cycles are typically longer than the two 
year compliance period for adopted UPS standards (Schneider Electric, 
No. 0017 at p. 2, 19) (Schneider Electric, Pub. Mtg. Tr., No. 0014 at 
p. 75-76). In the final rule, DOE accounted for the increased level of 
investment required to redesign UPS models outside of the regular 
product design cycles by significantly increasing the product redesign 
cost estimates included in the product conversion costs of the August 
2016 NOPR.
    ASAP and the CA IOUs commented that the product conversion costs 
estimated in the August 2016 NOPR were over-estimated, given that the 
majority of manufacturers would choose to increase their production 
capacity for transformer-less UPSs instead of redesigning covered UPSs 
that do not meet adopted standards (ASAP et al., No. 0020 at p. 2) (CA 
IOUs, No. 0016 at p. 1-2). DOE estimates conversion costs specific to 
bringing covered products into compliance with adopted standards. DOE 
does not factor any potential manufacturer decisions regarding products 
that are outside of the scope of the rulemaking in its calculation of 
conversion costs. Conversely, Schneider commented that the required 
efficiency levels incentivize manufacturers to produce UPSs that are 
either less than 300W or greater than 1000W instead of redesigning 
failing UPSs within the wattage range of current product offerings. 
Schneider stated that DOE did not account for investments manufacturers 
would need to make to bring these products into compliance with adopted 
standards (Schneider Electric, No. 007 at p. 5, 8). DOE estimates 
conversion costs specific to bringing current product offerings into 
compliance without increasing or decreasing their current wattage. DOE 
does not model a situation where manufacturers adjust UPS wattages as a 
result of adopted energy conservation standards in either the shipment 
analysis or the conversion costs estimates in the MIA.
    See chapter 12 of the final rule TSD for a complete description of 
DOE's assumptions for capital and product conversion costs.
b. Manufacturer Production Costs
    Manufacturing more efficient UPSs is more expensive than 
manufacturing baseline products due to the need for more costly 
materials and components. The higher MPCs for these more efficient 
products can affect the revenue and gross margin, and cash flow for the 
industry, making these product costs key inputs for the GRIM and the 
MIA. In the MIA, DOE used the MPCs calculated in the engineering 
analysis,

[[Page 1475]]

as described in section IV.C and further detailed in chapter 5 of the 
final rule TSD. DOE used the same MPCs in this final rule that were 
used in the August 2016 NOPR.
c. Shipment Scenarios
    INPV, the key GRIM output, depends on industry revenue, which 
depends on the quantity and prices of UPSs shipped in each year of the 
analysis period. Industry revenue calculations require forecasts of: 
(1) Total annual shipment volume of UPSs; (2) the distribution of 
shipments across product classes (because prices vary by product 
class); and, (3) the distribution of shipments across ELs (because 
prices vary by efficiency).
    In the no-standards case shipment analysis, shipments of UPSs were 
based on market forecast data from Frost and Sullivan and ENERGY STAR. 
Since UPS technology evolves more rapidly than other appliance 
technologies, DOE extrapolated forecasted trends from market research 
data instead of relying on a stock accounting approach.
    DOE modeled a roll-up shipment scenario to estimate shipments of 
UPSs. In the roll-up shipment scenario, consumers who would have 
purchased UPSs that fail to meet the new standards in the no-standards 
case, purchase UPSs that just meet the new standards, but are not more 
efficient than those standards, in the standards cases. Those consumers 
that would have purchased compliant UPSs in the no-standards case 
continue to purchase the exact same UPSs in the standards cases. DOE 
updated the shipments analysis for the final rule based on comments and 
data provided in response to the shipment analysis presented in the 
August 2016 NOPR. The MIA used these updated shipments in the final 
rule.
    For a complete description of the updated shipments see the 
shipments analysis discussion in section IV.G of this final rule and in 
chapter 9 of the final rule TSD.
d. Markup Scenarios
    As discussed in section IV.J.2.b, the MPCs for UPSs are the 
manufacturers' costs for those products. These costs include materials, 
direct labor, depreciation, and overhead, which are collectively 
referred to as the cost of goods sold (COGS). The MSP is the price 
received by UPS manufacturers from their customers, typically a 
distributor but could be the direct users, regardless of the downstream 
distribution channel through which the UPSs are ultimately sold. The 
MSP is not the cost the end-user pays for the UPS since there are 
typically multiple sales along the distribution chain and various 
markups applied to each sale. The MSP equals the MPC multiplied by the 
manufacturer markup. The manufacturer markup covers all the UPS 
manufacturer's non-production costs (i.e., SG&A, R&D, and interest) as 
well as profit. Total industry revenue for UPS manufacturers equals the 
MSPs at each EL multiplied by the number of shipments at that EL for 
each product class.
    Modifying these manufacturer markups in the standards cases yields 
a different set of impacts on UPS manufacturers than in the no-
standards case. For the MIA, DOE modeled two standards case markup 
scenarios to represent the uncertainty regarding the potential impacts 
on prices and profitability for UPS manufacturers following the 
implementation of new energy conservation standards. The two markup 
scenarios are; (1) a preservation of gross margin, or flat, markup 
scenario and (2) a pass through markup scenario. Each scenario leads to 
different manufacturer markup values, which, when applied to the 
inputted MPCs, result in varying revenue and cash flow impacts on UPS 
manufacturers.
    DOE modeled two markup scenarios to represent the upper and lower 
bounds of prices and profitability following adopted standards. The 
preservation of gross margin markup scenario represents the best case 
scenario for manufacturers. DOE recognizes that manufacturers do not 
expect to be able to mark up the additional cost of production in the 
standards cases, given the competitive UPS market, and modeled the pass 
through markup scenario to represent a lower bound on profitability. 
DOE used the same markup scenarios in the final rule MIA that were used 
in the in August 2016 NOPR.
3. Manufacturer Interviews
    DOE conducted interviews with manufacturers following the 
publication of the July 2014 framework document in preparation for the 
NOPR analysis. Schneider inquired if DOE had conducted additional 
interviews specific to UPSs after the manufacturer interviews that took 
place in preparation for the March 27, 2012 battery charger NOPR 
(Schneider Electric, Pub. Mtg. Tr., No. 0014 at p. 54). DOE did conduct 
manufacturer interviews with UPS manufacturers in 2016 in preparation 
for the August 2016 NOPR. DOE did not conduct any further interviews 
with manufacturers between the August 2016 NOPR and the final rule, 
because further interviews were not necessary to alter the MIA for the 
final rule. Instead DOE, relied on comments from interested parties to 
update the MIA for the final rule.
    During these interviews, DOE asked manufacturers to describe their 
major concerns with this UPS rulemaking. UPS manufacturers identified 
one key issue during these interviews, the burden of testing and 
certification.
    UPS manufacturers stated that the costs associated with testing and 
certifying all of their products covered by this rulemaking could be 
burdensome. UPS manufacturers commented that since efficient products 
do not typically earn a premium in the UPS market, manufacturers do not 
regularly conduct efficiency testing or pursue energy-efficient 
certifications for the majority of their product offerings. As a 
result, the testing and certification required for compliance with a 
potential standard represents additional costs to the typical product 
testing conducted by UPS manufacturers. Since adopted standards would 
require all UPS offerings to be tested and certified, UPS manufacturers 
explained that this process could become expensive. DOE included the 
testing and certification costs as part of the product conversion costs 
included in section IV.J.2.a of this final rule.
    In response to the August 2016 NOPR, NEMA and Schneider commented 
that the test procedure could require multiple days to complete, which 
could become costly. NEMA and Schneider further stated that the 
increased testing time could place a constraint on production capacity 
(NEMA, Pub. Mtg. Tr., No. 0014 at p. 60) (Schneider Electric, No. 0017 
at p. 19, 21). DOE did not test any models covered by the scope of the 
adopted standards that required multiple days to test. DOE does not 
find that the time needed to complete the test procedure would limit 
manufacturers' ability to meet demand for compliant UPSs.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions to emissions of all species 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion. The associated

[[Page 1476]]

emissions are referred to as upstream emissions.
    The analysis of power sector emissions uses marginal emissions 
factors that were derived from data in AEO2016, 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.\36\ 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.
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    \36\ 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 
national impact analysis.
    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO2016 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.\37\ 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,\38\ 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.\39\ On October 23, 2014, the D.C. Circuit lifted the 
stay of CSAPR.\40\ Pursuant to this action, CSAPR went into effect (and 
CAIR ceased to be in effect) as of January 1, 2015.\41\ AEO2016 
incorporates implementation of CSAPR.
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    \37\ See North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), 
modified on rehearing, 550 F.3d 1176 (D.C. Cir. 2008).
    \38\ See EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 
(D.C. Cir. 2012).
    \39\ 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.
    \40\ See EME Homer City Generation, L.P. v. EPA, Order (D.C. 
Cir. filed October 23, 2014) (No. 11-1302).
    \41\ 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 vacating certain States' emission 
budgets for reconsideration. EME Homer City Generation, LP v. EPA, 
795 F.3d 118 (D.C. Cir. 2015).
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    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. AEO2016 
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.\42\ Therefore, DOE believes that energy conservation standards 
that decrease electricity generation will generally reduce 
SO2 emissions in 2016 and beyond.
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    \42\ 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.
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    CSAPR 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 CSAPR 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 AEO2016, which 
incorporates the MATS.

[[Page 1477]]

    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.\43\ For the current analysis, impacts are quantified by 
comparing the levels of electricity sector generation, installed 
capacity, fuel consumption and emissions consistent with the 
projections described on page E-8 of AEO 2016 and various side 
cases.\44\
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    \43\ U.S. EPA, ``Carbon Pollution Emission Guidelines for 
Existing Stationary Sources: Electric Utility Generating Units'' (80 
FR 64662, October 23, 2015). https://www.federalregister.gov/articles/2015/10/23/2015-22842/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating.
    \44\ 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.
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L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this rule, DOE considered the 
estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation analogous to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of products 
shipped in the projection period for each TSL. This section summarizes 
the basis for the monetary values used for CO2 and 
NOX emissions 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 CO2 (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 United States 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 
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 \45\ 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.
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    \45\ 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 (IWG) SC-
CO2 estimates are well supported by the existing scientific 
and economic literature. As a result, DOE has relied on these estimates 
in quantifying the social benefits of reducing CO2 
emissions. DOE estimates the benefits from reduced 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 interagency group will continue to explore the issues 
raised by this analysis and consider public comments as part of the 
ongoing interagency process.
    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing carbon dioxide emissions. To ensure consistency in how 
benefits are evaluated across Federal agencies, the Administration 
sought to develop a transparent and defensible method, specifically 
designed for the rulemaking process, to quantify avoided climate change 
damages from reduced CO2 emissions. The interagency group 
did not undertake any original analysis. Instead, it combined 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 interagency group was a 
set of five interim values that represented the first sustained 
interagency effort within the U.S. government to develop an SC-
CO2 estimate for use in regulatory analysis. The results of 
this preliminary effort were presented in several

[[Page 1478]]

proposed and final rules issued by DOE and other agencies.
b. 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 group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the 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 interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the 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,\46\ although 
preference is given to consideration of the global benefits of reducing 
CO2 emissions. Table IV-6 presents the values in the 2010 
interagency group report.\47\
---------------------------------------------------------------------------

    \46\ 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.
    \47\ United States Government-Interagency Working Group 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.

                          Table IV-6--Annual SC-CO2 Values From 2010 Interagency Report
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       Percentile
----------------------------------------------------------------------------------------------------------------
2010............................................             4.7            21.4            35.1            64.9
2015............................................             5.7            23.8            38.4            72.8
2020............................................             6.8            26.3            41.7            80.7
2025............................................             8.2            29.6            45.9            90.4
2030............................................             9.7            32.8            50.0           100.0
2035............................................            11.2            36.0            54.2           109.7
2040............................................            12.7            39.2            58.4           119.3
2045............................................            14.2            42.1            61.7           127.8
2050............................................            15.7            44.9            65.0           136.2
----------------------------------------------------------------------------------------------------------------

    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.\48\ DOE used these 
values for this final rule. Table IV-7 shows the updated sets of SC-
CO2 estimates from the 2013 interagency update (revised July 
2015) 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.
---------------------------------------------------------------------------

    \48\ United States Government-Interagency Working Group on 
Social Cost of Carbon. Technical Support Document: Technical Update 
of the Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. May 2013. Revised July 2015. https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.

                Table IV-7--Annual SC-CO2 Values From 2013 Interagency Update (Revised July 2015)
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount Rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       Percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              10              31              50              86

[[Page 1479]]

 
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 interagency group also 
recognizes that the existing models are imperfect and incomplete. The 
National Research Council report mentioned previously points out that 
there is tension between the goal of producing quantified estimates of 
the economic damages from an incremental ton of carbon and the limits 
of existing efforts to model these effects. There are a number of 
analytical challenges that are being addressed by the research 
community, including research programs housed in many of the Federal 
agencies participating in the IWG process. The interagency group 
intends to periodically review and reconsider those estimates to 
reflect increasing knowledge of the science and economics of climate 
impacts, as well as improvements in modeling.\49\
---------------------------------------------------------------------------

    \49\ 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 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.
    The U.S. Chamber of Commerce (USCC) and the Industrial Energy 
Consumers of America commented on the development of and the use of the 
SC-CO2 values in DOE's analyses. A group of trade 
associations led by the USCC 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. 0078 at p. 41) 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 (GAO) report that highlights severe uncertainties 
in SC-CO2 values. (IECA, No. 0015 at p. 2)
    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. Although uncertainties remain, the revised 
estimates that were issued in November 2013 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. 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.
    The GAO report mentioned by IECA noted that the working group's 
processes and methods used consensus-based decision making, relied on 
existing academic literature and models, and took steps to disclose 
limitations and incorporate new information.\50\
---------------------------------------------------------------------------

    \50\ http://www.gao.gov/products/GAO-14-663. (Last accessed 
Sept. 22, 2016)
---------------------------------------------------------------------------

    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. 0015 at 
p. 5)

[[Page 1480]]

    OMB Circular A-4 \51\ provides two suggested discount rates for use 
in regulatory analysis: 3% and 7%. Circular A-4 states that the 3% 
discount rate is appropriate for ``regulation [that] primarily and 
directly affects private consumption (e.g., through higher consumer 
prices for goods and services).'' (OMB Circular A-4 p. 33). The 
interagency working group that developed the SC-CO2 values 
for use by Federal agencies examined the 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 interagency working group 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.
---------------------------------------------------------------------------

    \51\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/.
---------------------------------------------------------------------------

    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 greenhouse gases 
contribute to damages around the world even when they are emitted in 
the United States. 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 United States alone cannot solve. Even if the United 
States were to reduce its greenhouse gas 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 
United States 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 
interagency group 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.
    IECA stated that the social cost of carbon 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. 0015 at pp. 1-2) DOE notes that the SC-CO2 
is not a cost imposed on any manufacturers. It is simply a metric that 
Federal agencies use to estimate the societal benefits of policy 
actions that reduce CO2 emissions.
    IECA stated that the social cost of carbon value is unrealistically 
high in comparison to carbon market prices. (IECA, No. 0015 at p. 3) 
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 
bear no necessary relation to the damages associated with an 
incremental increase in carbon emissions.
2. Social Cost of Other Air Pollutants
    As noted previously, DOE estimated how the considered energy 
conservation standards would 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.\52\ 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.\53\ 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 UPSs 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.
---------------------------------------------------------------------------

    \52\ 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.
    \53\ 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 AEO2016. 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. For 
the current analysis, impacts are quantified by comparing the levels of 
electricity sector generation, installed capacity, fuel consumption and 
emissions consistent with the projections described on page E-8 of AEO 
2016 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,

[[Page 1481]]

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 potential new or amended energy conservation standards.
    EEI disagreed with DOE's utility impact analysis, believing the 
results are overstated. EEI believes that 0 MW of capacity will be 
installed with or without the proposed standards coming into effect, 
and that there should be no estimated savings associated with 
``avoiding'' renewable capacity that will be built anyway. (EEI, No. 
0021 at pp. 7-8) DOE's analysis does not estimate how much new power 
plant capacity will not be installed as a result of lower demand caused 
by standards. Rather, the analysis estimates the difference in total 
installed capacity in the standards case compared to the base case. The 
lower electricity demand could allow more coal-fired capacity to be 
retired, and also mean that less renewable capacity will be needed.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a standard. Employment impacts from new or amended 
energy conservation standards include both direct and indirect impacts. 
Direct employment impacts are any changes in the number of employees of 
manufacturers of the products subject to standards, their suppliers, 
and related service firms. The MIA addresses those impacts. Indirect 
employment impacts are changes in national employment that occur due to 
the shift in expenditures and capital investment caused by the purchase 
and operation of more-efficient appliances. Indirect employment impacts 
from standards consist of the net jobs created or eliminated in the 
national economy, other than in the manufacturing sector being 
regulated, caused by (1) reduced spending by 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 Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. Data from BLS indicate that 
expenditures in the utility sector generally create fewer jobs (both 
directly and indirectly) than expenditures in other sectors of the 
economy.\54\ 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.
---------------------------------------------------------------------------

    \54\ 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).\55\ 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.
---------------------------------------------------------------------------

    \55\ 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. 2015. 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 (2019-2025), 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 UPSs. 
It addresses the TSLs examined by DOE, the projected impacts of each of 
these levels if adopted as energy conservation standards for UPSs, 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

    DOE analyzed the benefits and burdens of four TSLs for UPSs. These 
TSLs were developed by combining specific efficiency levels for each of 
the product classes analyzed by DOE. DOE presents the results for the 
TSLs in this document, while the results for all efficiency levels that 
DOE analyzed are in the final rule TSD.
    Table V-1 presents the TSLs and the corresponding efficiency levels 
that DOE has identified for potential energy conservation standards for 
UPSs. TSL 4 represents the maximum technologically feasible (``max-
tech'') energy efficiency for all product classes. TSL 3 represents 
maximum NES while at positive NPV in aggregate across all three product 
classes (the NPV of VFD UPSs is negative). TSL 2 represents maximum 
energy savings at positive NPV for all product classes. TSL 1 
represents the minimum possible standard considered, and also 
corresponds to the maximum consumer NPV for each product class.

[[Page 1482]]



                                    Table V-1 Trial Standard Levels for UPSs
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
      Product class             Description      ---------------------------------------------------------------
                                                       TSL 1           TSL 2           TSL 3           TSL 4
----------------------------------------------------------------------------------------------------------------
10a......................  VFD UPSs.............            EL 1            EL 1            EL 2            EL 3
10b......................  VI UPSs..............            EL 1            EL 2            EL 2            EL 3
10c......................  VFI UPSs.............            EL 1            EL 1            EL 1            EL 3
----------------------------------------------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on UPS 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. 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 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 each product class. In the first of each pair of 
tables, the simple payback is measured relative to the baseline 
product. In the second table, the impacts are measured relative to the 
efficiency distribution in the in the no-new-standards case in the 
compliance year (see section IV.F.8 of this document). 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 the baseline product 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.

                                              Table V-2--Average LCC and PBP Results for Product Class 10a
                                                                       [VFD UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ----------------------------------------------------------------     Simple          Average
             TSL                    Efficiency level                       First year's      Lifetime                         payback        lifetime
                                                             Installed       operating       operating          LCC           (years)         (years)
                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential:
                               Baseline.................              98              16              72             169  ..............             5.0
    1........................  1........................              92               8              34             126               0             5.0
    2........................  1........................              92               8              34             126             * 0             5.0
    3........................  2........................             121               5              23             144             2.2             5.0
    4........................  3........................             139               3              13             152             3.2             5.0
Commercial:
                               Baseline.................              70              12              50             121  ..............             5.0
    1........................  1........................              66               6              24              90               0             5.0
    2........................  1........................              66               6              24              90             * 0             5.0
    3........................  2........................              91               4              16             107             2.6             5.0
    4........................  3........................             107               2               9             116             3.8             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 product.
* The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and less efficient baseline units continue to
  exist in the market, likely because some consumers are familiar with their well-established performance. These consumers are reluctant to purchase
  newer, more efficient products that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.


           Table V-3--Average LCC Savings Relative to the No-New-Standards Case for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                  Efficiency      Average LCC      consumers
                                                                       level         savings *         that
                                                                                      (2015$)       experience
                                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
Residential:
    1...........................................................               1              43               0
    2...........................................................               1              43            ** 0
    3...........................................................               2              -1              50

[[Page 1483]]

 
    4...........................................................               3              -9              75
Commercial:
    1...........................................................               1              31               0
    2...........................................................               1              31            ** 0
    3...........................................................               2              -5              51
    4...........................................................               3             -13              81
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
** The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and
  less efficient baseline units continue to exist in the market, likely because some consumers are familiar with
  their well-established performance. These consumers are reluctant to purchase newer, more efficient products
  that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.


                                              Table V-4--Average LCC and PBP Results for Product Class 10b
                                                                        [VI UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ----------------------------------------------------------------     Simple          Average
             TSL                    Efficiency level                       First year's      Lifetime                         payback        lifetime
                                                             Installed       operating       operating          LCC           (years)         (years)
                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential:
                               Baseline.................             111              22             124             235  ..............             6.3
    1........................  1........................             141              13              72             213             3.1             6.3
    2........................  2........................             162               9              52             214             3.9             6.3
    3........................  2........................             162               9              52             214             3.9             6.3
    4........................  3........................             623               6              32             655              31             6.3
Commercial:
                               Baseline.................              80              16              87             167  ..............             6.3
    1........................  1........................             106              10              50             156             3.5             6.3
    2........................  2........................             125               7              36             161             4.7             6.3
    3........................  2........................             125               7              36             161             4.7             6.3
    4........................  3........................             533               4              22             556              37             6.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 product.


           Table V-5--Average LCC Savings Relative to the No-New-Standards Case for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                  Efficiency      Average LCC      consumers
                                                                       level         savings *         that
                                                                                      (2015$)       experience
                                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
Residential:
    1...........................................................               1              23               8
    2...........................................................               2              14              41
    3...........................................................               2              14              41
    4...........................................................               3            -428             100
Commercial:
    1...........................................................               1              11               9
    2...........................................................               2               2              51
    3...........................................................               2               2              51
    4...........................................................               3            -392             100
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


[[Page 1484]]


                                              Table V-6--Average LCC and PBP Results for Product Class 10c
                                                                       [VFI UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ----------------------------------------------------------------     Simple          Average
             TSL                    Efficiency level                       First year's      Lifetime                         payback        lifetime
                                                             Installed       operating       operating          LCC           (years)         (years)
                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential:
                               Baseline.................             409             125           1,037           1,445  ..............            10.0
    1........................  1........................             460             111             919           1,379             3.6            10.0
    2........................  1........................             460             111             919           1,379             3.6            10.0
    3........................  1........................             460             111             919           1,379             3.6            10.0
    4........................  3........................           1,181              72             594           1,776              14            10.0
Commercial:
                               Baseline.................             293              88             685             978  ..............            10.0
    1........................  1........................             339              78             607             946             4.5            10.0
    2........................  1........................             339              78             607             946             4.5            10.0
    3........................  1........................             339              78             607             946             4.5            10.0
    4........................  3........................             975              51             393           1,368              18            10.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 product.


           Table V-7--Average LCC Savings Relative to the No-New-Standards Case for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                  Efficiency      Average LCC      consumers
                                                                       level         Savings *         that
                                                                                      (2015$)       experience
                                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
Residential:
    1...........................................................               1              66               3
    2...........................................................               1              66               3
    3...........................................................               1              66               3
    4...........................................................               3            -344              91
Commercial:
    1...........................................................               1              32               2
    2...........................................................               1              32               2
    3...........................................................               1              32               2
    4...........................................................               3            -393             100
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households and small businesses. Table V-
8 through Table V-13 compares the average LCC savings and PBP at each 
efficiency level for the consumer subgroups, along with the average LCC 
savings for the entire consumer sample. In most cases, the average LCC 
savings and PBP for low-income households and small businesses at the 
considered efficiency levels are not substantially different from the 
average for all households. Chapter 11 of the final rule TSD presents 
the complete LCC and PBP results for the subgroups.

 Table V-8--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              47              43             0.0             0.0
2...............................................              47              43           * 0.0           * 0.0
3...............................................               1              -1             2.0             2.2
4...............................................              -7              -9             2.9             3.2
----------------------------------------------------------------------------------------------------------------
* The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and less
  efficient baseline units continue to exist in the market, likely because some consumers are familiar with
  their well-established performance. These consumers are reluctant to purchase newer, more efficient products
  that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.


[[Page 1485]]


 Table V-9--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              27              23             2.9             3.1
2...............................................              18              14             3.6             3.9
3...............................................              18              14             3.6             3.9
4...............................................            -424            -428              29              31
----------------------------------------------------------------------------------------------------------------


Table V-10--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              75              66             3.4             3.6
2...............................................              75              66             3.4             3.6
3...............................................              75              66             3.4             3.6
4...............................................            -313            -344              13              14
----------------------------------------------------------------------------------------------------------------


   Table V-11--Comparison of LCC Savings and PBP for Small Businesses and All Businesses for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................              30              31             0.0             0.0
2...............................................              30              31           * 0.0           * 0.0
3...............................................              -5              -5             2.6             2.6
4...............................................             -14             -13             3.8             3.8
----------------------------------------------------------------------------------------------------------------
* The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and less
  efficient baseline units continue to exist in the market, likely because some consumers are familiar with
  their well-established performance. These consumers are reluctant to purchase newer, more efficient products
  that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.


   Table V-12--Comparison of LCC Savings and PBP for Small Businesses and All Businesses for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................               9              11             3.7             3.7
2...............................................               1               2             4.7             4.7
3...............................................               1               2             4.7             4.7
4...............................................            -394            -392              37              37
----------------------------------------------------------------------------------------------------------------


[[Page 1486]]


   Table V-13--Comparison of LCC Savings and PBP for Small Businesses and All Businesses for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................              29              32             4.5             4.5
2...............................................              29              32             4.5             4.5
3...............................................              29              32             4.5             4.5
4...............................................            -402            -393              18              18
----------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section IV.F.9, EPCA establishes a rebuttable 
presumption that an energy conservation standard is economically 
justified if the increased purchase cost for a product that meets the 
standard is less than three times the value of the first-year energy 
savings resulting from the standard. In calculating a rebuttable 
presumption payback period for each of the considered TSLs, DOE used 
discrete values, and, as required by EPCA, based the energy use 
calculation on the DOE test procedures for UPSs. In contrast, the PBPs 
presented in section V.B.1.a were calculated using distributions that 
reflect the range of energy use in the field.
    Table V-14 presents the rebuttable-presumption payback periods for 
the considered TSLs for UPSs. While DOE examined the rebuttable-
presumption criterion, it considered whether the standard levels 
considered for this rule are economically justified through a more 
detailed analysis of the economic impacts of those levels, pursuant to 
42 U.S.C. 6295(o)(2)(B)(i), 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-14--Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
                               TSL                                10a (VFD UPSs)   10b (VI UPSs)  10c (VFI UPSs)
----------------------------------------------------------------------------------------------------------------
Residential:
    1...........................................................               0             3.1             3.6
    2...........................................................             * 0             3.9             3.6
    3...........................................................             2.2             3.9             3.6
    4...........................................................             3.2              31              14
Commercial:
    1...........................................................               0             3.7             4.5
    2...........................................................             * 0             4.7             4.5
    3...........................................................             2.6             4.7             4.5
    4...........................................................             3.8              37              18
----------------------------------------------------------------------------------------------------------------
* The payback period is 0 due to the negative incremental cost at this efficiency level. More expensive and less
  efficient baseline units continue to exist in the market, likely because some consumers are familiar with
  their well-established performance. These consumers are reluctant to purchase newer, more efficient products
  that are just as reliable because they are unfamiliar with them. See section IV.C.3 for more details.

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of new energy 
conservation standards on UPS manufacturers. The following section 
describes the estimated impacts on UPS manufacturers at each analyzed 
TSL. Chapter 12 of the final rule TSD explains the analysis in further 
detail.
a. Industry Cash Flow Analysis Results
    Table V-15 and Table V-16 present the financial impacts 
(represented by changes in INPV) of analyzed standards on UPS 
manufacturers as well as the conversion costs that DOE estimates UPS 
manufacturers would incur at each TSL. To evaluate the range of cash-
flow impacts on the UPS industry, DOE modeled two markup scenarios that 
correspond to the range of anticipated market responses to new 
standards. 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 
difference in industry value between the no-standards case and the 
standards cases that result from the sum of discounted cash flows from 
the reference year (2016) through the end of the analysis period 
(2048). The results also discuss the difference in cash flows between 
the no-standards case and the standards cases in the year before the 
compliance date for new standards. This difference in cash flow 
represents the size of the required conversion costs relative to the 
cash flow generated by the UPS industry in the absence of new energy 
conservation standards.
    To assess the upper (less severe) bound of the range of potential 
impacts on UPS manufacturers, DOE modeled a preservation of gross 
margin markup scenario. This scenario assumes that in the standards 
cases, manufacturers would be able to fully pass on higher production 
costs required to produce more efficient products to their consumers. 
Specifically, the industry would be able to maintain its average no-
standards case gross margin (as a percentage of revenue) despite the 
higher product costs in the standards cases. In general, the larger the 
product price increases, the less likely manufacturers are to achieve 
the cash flow from operations calculated in this scenario because it is 
less likely that

[[Page 1487]]

manufacturers would be able to fully mark up these larger cost 
increases.
    To assess the lower (more severe) bound of the range of potential 
impacts on manufacturers, DOE modeled the pass through markup scenario. 
In this scenario DOE assumes that manufacturers are able to pass 
through the incremental costs of more efficient UPSs to their 
customers, but without earning any additional operating profit on those 
higher costs. This scenario represents the lower bound of the range of 
potential impacts on manufacturers because manufacture margins are 
compressed as a result of this markup scenario.

                Table V-15--Manufacturer Impact Analysis for Uninterruptible Power Supplies--Preservation of Gross Margin Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                        Units              No standards  ---------------------------------------------------------------
                                                                               case              1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2015$ millions..............           2,575           2,737           2,832           2,964           7,376
Change in INPV............................  2015$ millions..............  ..............             162             257             389           4,801
                                            %...........................  ..............             6.3            10.0            15.1           186.4
Product Conversion Costs..................  2015$ millions..............  ..............              28              35              38              44
Capital Conversion Costs..................  2015$ millions..............  ..............               9              11              12              14
Total Conversion Costs....................  2015$ millions..............  ..............              36              47              50              58
--------------------------------------------------------------------------------------------------------------------------------------------------------


                        Table V-16--Manufacturer Impact Analysis for Uninterruptible Power Supplies--Pass Through Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                        Units              No standards  ---------------------------------------------------------------
                                                                               case              1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2015$ millions..............           2,575           2,167           1,939           1,599           (691)
Change in INPV............................  2015$ millions..............  ..............           (409)           (636)           (976)         (3,266)
                                            %...........................  ..............          (15.9)          (24.7)          (37.9)         (126.8)
Product Conversion Costs..................  2015$ millions..............  ..............              28              35              38              44
Capital Conversion Costs..................  2015$ millions..............  ..............               9              11              12              14
Total Conversion Costs....................  2015$ millions..............  ..............              36              47              50              58
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative numbers.

    TSL 1 sets the efficiency level at EL 1 for all UPSs. At TSL 1, DOE 
estimates impacts on INPV to range from -$409 million to $162 million, 
or a change in INPV of -15.9 percent to 6.3 percent. At this TSL, 
industry free cash flow is estimated to decrease by approximately 15.2 
percent to $74 million, compared to the no-standards case value of $87 
million in 2018, the year leading up to the adopted standards.
    As TSLs approach max-tech, the number of UPS shipments that do not 
meet required efficiency levels, and subsequently the number of UPSs 
requiring redesign, increases. Conversion costs scale with the 
increased number of UPSs that require redesign to meet efficiency 
levels. At TSL 1, DOE estimates that UPS manufacturers will incur a 
total of $36 million in conversion costs. DOE estimates that 
manufacturers will incur $28 million in product conversion costs at TSL 
1 as manufacturers comply with test procedure requirements and increase 
R&D efforts necessary to redesign UPSs that do not meet efficiency 
levels. Capital conversion costs are estimated to be $9 million at TSL 
1, driven by investments in tooling required to print new circuit 
boards for redesigned UPSs.
    At TSL 1, the shipment-weighted-average MPCs decrease by 
approximately 2 percent for VFD UPSs and increase by approximately 18 
percent for VI UPSs and 10 percent for VFI UPSs relative to the no-
standards case MPCs in 2019, the compliance year of the adopted 
standards. In the preservation of gross margin markup scenario, 
manufacturers are able to recover their $36 million in conversion costs 
over the course of the analysis period through the increases in MPCs 
for VI and VFI UPSs causing a slightly positive change in INPV at TSL 1 
under the preservation of gross margin markup scenario.
    Under the pass through markup scenario, the MPC increases at TSL 1 
result in reductions in manufacturer markups from 1.57 in the no-
standards case to 1.44 for VI UPSs and from 1.76 in the no-standards 
case to 1.67 for VFI UPSs at TSL 1. The MPC decrease for VFD UPSs at 
TSL 1 results in an increase in manufacturer markup from 1.55 in the 
no-standards case to 1.57 at TSL 1. The reductions in manufacturer 
markups for VI and VFI UPSs and $36 million in conversion costs 
incurred by manufacturers cause a moderately negative change in INPV at 
TSL 1 under the pass through markup scenario.
    TSL 2 sets the efficiency level at EL 1 for VFD and VFI UPSs and EL 
2 for VI UPSs. At TSL 2, DOE estimates impacts on INPV to range from -
$636 million to $257 million, or a change in INPV of -24.7 percent to 
10.0 percent. At this TSL, industry free cash flow is estimated to 
decrease by approximately 19.5 percent to $70 million, compared to the 
no-standards case value of $87 million in 2018, the year leading up to 
the adopted standards.
    DOE expects higher conversion costs at TSL 2 than at TSL 1 because 
TSL 2 sets the efficiency level at EL 2 for VI UPSs, resulting in an 
increased number of VI UPSs that do not meet the efficiency levels 
required at this TSL. DOE estimates that manufacturers will incur a 
total of $47 million in conversion costs at TSL 2. DOE estimates that 
manufacturers will incur $35 million in product conversion costs at TSL 
2 as manufacturers comply with test procedure requirements and increase 
R&D efforts necessary to redesign UPSs to meet the required efficiency 
levels at TSL 2. Capital conversion costs are estimated to be $11 
million at TSL 2, driven by investments in tooling required to print 
new circuit boards for redesigned UPSs.

[[Page 1488]]

    At TSL 2, the shipment-weighted-average MPCs decrease by 
approximately 2 percent for VFD UPSs and increase by approximately 38 
percent for VI UPSs and 10 percent for VFI UPSs relative to the no-
standards case MPCs in 2019, the compliance year of the standards. In 
the preservation of gross margin markup scenario, manufacturers are 
able to recover their $47 million in conversion costs over the course 
of the analysis period through the increases in MPCs for VI and VFI 
UPSs causing a moderately positive change in INPV at TSL 2 under the 
preservation of gross margin markup scenario.
    Under the pass through markup scenario at TSL 2, the MPC increases 
result in reductions in manufacturer markups from 1.57 in the no-
standards case to 1.37 for VI UPSs at TSL 2 and from 1.76 in the no-
standards case to 1.67 for VFI UPSs at TSL 2. The MPC decrease for VFD 
UPSs at TSL 2 results in an increase in manufacturer markup from 1.55 
in the no-standards case to 1.57 in the standards case at TSL 2. The 
reductions in manufacturer markups for VI and VFI UPSs and $47 million 
in conversion costs cause a significantly negative change in INPV at 
TSL 2 under the pass through markup scenario.
    TSL 3 sets the efficiency level at EL 1 for VFI UPSs and EL 2 for 
VFD and VI UPSs. At TSL 3, DOE estimates impacts on INPV to range from 
-$976 million to $389 million, or a change in INPV of -37.9 percent to 
15.1 percent. At this TSL, industry free cash flow is estimated to 
decrease by approximately 20.9 percent to $69 million, compared to the 
no-standards case value of $87 million in 2018, the year leading up to 
the adopted standards.
    DOE estimates that manufacturers will incur a total of $50 million 
in conversion costs at TSL 3. DOE estimates that manufacturers will 
incur $38 million in product conversion costs at TSL 3 as manufacturers 
comply with test procedure requirements and increase R&D efforts 
necessary to redesign VFD and VI UPSs to have best-in-market efficiency 
and VFI UPSs to meet the required efficiency level at TSL 3. Capital 
conversion costs are estimated to be $12 million at TSL 3, driven by 
investments in tooling required to print new circuit boards for 
redesigned UPSs.
    At TSL 3, the shipment-weighted-average MPCs increase by 
approximately 25 percent for VFD UPSs, 38 percent for VI UPSs, and 10 
percent for VFI UPSs relative to the no-standards case MPCs in 2019, 
the compliance year of the adopted standards. In the preservation of 
gross margin markup scenario, manufacturers are able to recover their 
$50 million in conversion costs over the course of the analysis period 
through the increases in MPCs causing a moderately positive change in 
INPV at TSL 3 under the preservation of gross margin markup scenario.
    Under the pass through markup scenario at TSL 3, the increases in 
shipment-weighted-average MPCs result in reductions in manufacturer 
markups, from 1.55 in the no-standards case to 1.43 for VFD UPSs at TSL 
3, from 1.57 in the no-standards case to 1.37 for VI UPSs at TSL 3, and 
from 1.76 in the no-standards case to 1.67 for VFI UPSs at TSL 3. The 
reductions in manufacturer markups and $50 million in conversion costs 
incurred by manufacturers cause a significantly negative change in INPV 
at TSL 3 under the pass through markup scenario.
    TSL 4 sets the efficiency level at EL 3 for all UPSs, which 
represents max-tech. At TSL 4, DOE estimates impacts on INPV to range 
from -$3,266 million to $4,801 million, or a change in INPV of -126.8 
percent to 186.4 percent. At this TSL, industry free cash flow is 
estimated to decrease by approximately 24.3 percent to $66 million, 
compared to the no-standards case value of $87 million in 2018, the 
year leading up to the adopted standards.
    DOE expects that manufacturers will incur higher total conversion 
costs at TSL 4 than at any of the lower TSLs because manufacturers will 
required to redesign the vast majority of their UPSs to meet max-tech. 
DOE estimates that manufacturers will incur $44 million in product 
conversion costs as manufacturers comply with test procedure 
requirements and increase R&D efforts necessary to redesign UPSs to 
meet max-tech at TSL 4. Capital conversion costs are estimated to be 
$14 million at TSL 4, driven by investments in tooling required to 
print new circuit boards for the majority of UPSs.
    At TSL 4, the shipment-weighted-average MPCs increase significantly 
by approximately 46 percent for VFD UPSs, 489 percent for VI UPSs, and 
207 percent for VFI UPSs relative to the no-standards case MPCs in 
2019, the compliance year of the adopted standards. In the preservation 
of gross margin markup scenario, manufacturers are able to recover 
their $58 million in conversion costs over the course of the analysis 
period through the increases in MPCs causing a significantly positive 
change in INPV at TSL 4 under the preservation of gross margin markup 
scenario.
    Under the pass through markup scenario at TSL 4, the MPC increases 
result in reductions in manufacturer markups, from 1.55 in the no-
standards case to 1.36 for VFD UPSs at TSL 4, from 1.57 in the no-
standards case to 1.30 for VI UPSs at TSL 4, and from 1.76 in the no-
standards case to 1.30 for VFI UPSs at TSL 4. The reductions in 
manufacturer markups and $58 million in conversion costs incurred by 
manufacturers cause a significantly negative change in INPV at TSL 4 
under the pass through markup scenario.
b. Impacts on Employment
    Manufacturer interviews, comment responses to the August 2016 NOPR, 
and DOE's research indicate that all UPS components that would be 
modified to improve the efficiency of UPSs are manufactured abroad 
(Schneider Electric, Pub. Mtg. Tr., No. 0014 at p. 72). DOE was able to 
identify a handful of UPS manufacturers that do assemble these UPS 
components domestically. Based on manufacturer interviews, DOE stated 
in the August 2016 NOPR that there would most likely not be an impact 
on the amount of domestic workers involved in the assembly of UPSs due 
to new energy conservation standards. 81 FR 52230. Subsequently, DOE 
did not conduct a quantitative domestic employment impact analysis on 
UPS manufacturers in the August 2016 NOPR.
    NEMA and Schneider Electric commented that manufacturers may move 
their assembly abroad as testing and assembling compliant UPSs becomes 
more expensive (Schneider Electric, No. 0017 at p. 20). NEMA went on to 
reference the number of companies listed in the Online Certifications 
Directory from Underwriters Laboratories \56\ with the ``YEDU'' UPS 
category code as examples of UPS manufacturers with domestic assembly 
that could be moved abroad due to adopted standards (NEMA and ITI, No. 
0019 at p. 15). In the final rule, DOE quantified the potential impacts 
on domestic UPS assembly employment. DOE recognizes that while there is 
no domestic UPS production, or production employees, there could be 
impacts to domestic UPS assembly employment as a result of adopted 
standards. DOE reviewed the Online Certifications Directory from 
Underwriters Laboratories and used the listings to determine the 
proportion of UPS assembly that takes place in the United States. DOE 
found 83 manufacturer listings registered under

[[Page 1489]]

the ``YEDU'' code for certification of UPS models. DOE did not include 
any manufacturer listings registered with Underwriters Laboratories for 
certification of products outside the scope of this rulemaking, such as 
remote battery supply cabinets. Of the 83 total listings registered for 
certification of UPS models, DOE found 45 UPS manufacturers with 
domestic facilities. Using these listings, DOE determined that 
approximately 54 percent of UPS assembly takes place in the United 
States.
---------------------------------------------------------------------------

    \56\ Underwriters Laboratories. Online Certifications Directory. 
Last Accessed October 10, 2016. http://database.ul.com/cgi-bin/XYV/template/LISEXT/1FRAME/index.html?utm_source=ulcom&utm_medium=web&utm_campaign=database.
---------------------------------------------------------------------------

    DOE used the GRIM to estimate the domestic assembly expenditures 
and the number of domestic assembly workers in the no-standards case at 
each TSL. DOE used statistical data from the U.S. Census Bureau's 2014 
Annual Survey of Manufacturers to calculate labor expenditures 
associated with the North American Industry Classification System 
(NAICS) code 335999. DOE estimated that 10 percent of labor 
expenditures for this NAICS code is attributed to UPS assembly 
expenditures in the no-standards case.
    Table V-17 represents the potential impacts the adopted standards 
could have on domestic UPS assembly employment. The upper bound of the 
results estimates the maximum change in the number of assembly workers 
that could occur after compliance with adopted energy conservation 
standards when assuming that manufacturers continue to assemble the 
same scope of covered products. It also assumes that domestic assembly 
does not shift to lower labor-cost countries. To address the risk of 
manufacturers choosing to assemble UPSs abroad, the lower bound of the 
employment results estimate the maximum decrease in domestic UPS 
assembly workers in the industry if some or all existing assembly was 
moved outside of the United States. While the results present a range 
of estimates, the following sections also include qualitative 
discussions of the impacts on UPS assembly at the various TSLs. 
Finally, the domestic UPS assembly employment impacts shown are 
independent of the employment impacts from the broader U.S. economy, 
documented in chapter 17 of the final rule TSD.
    DOE estimates that in the absence of new energy conservation 
standards, there would be approximately 206 domestic employees involved 
in assembling UPSs in 2019. Table V-17 presents the range of potential 
impacts of adopted energy conservation standards on domestic assembly 
workers in the UPS industry.

 Table V-17--Potential Changes in the Total Number of Domestic Uninterruptable Power Supply Assembly Workers in
                                                      2019
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                   No standards  ---------------------------------------------------------------
                                       case              1               2               3               4
----------------------------------------------------------------------------------------------------------------
Total Number of Domestic                     206             206             206             206             206
 Assembly Workers in 2019
 (without changes in production
 locations).....................
Potential Changes in Domestic     ..............          0-(41)          0-(62)         0-(103)         0-(206)
 Assembly Workers in 2019 *.....
----------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.

    At the upper end of the employment impact range, DOE does not 
expect any impact on the amount of domestic workers involved in the 
assembly of UPSs at the analyzed TSLs. While compliant UPS component 
configurations may change or become more costly, DOE estimates that the 
same amount of employees would be needed to assemble these products.
    At the lower end of the range, DOE models a situation where some 
domestic employment associated with UPS assembly moves abroad as a 
result of new energy conservation standards. As UPS MPCs increase due 
to adopted standards, NEMA and Schneider stated that manufacturers may 
relocate domestic assembly facilities to countries with lower labor 
costs in an effort to reduce the total cost of UPS production 
(Schneider Electric, No. 0017 at p. 20) (NEMA and ITI, No. 0019 at p. 
15). The lower end of the employment impact range represents these 
potential relocation decisions as decreases in domestic assembly 
employment at higher TSLs. At TSL 1, the TSL adopted in this final 
rule, DOE concludes that, based on the shipment analysis, manufacturer 
interviews, and the results of the domestic assembly employment 
analysis, manufacturers could face a moderate negative impact on 
domestic assembly employment due to the increased total cost of UPS 
assembly in 2019.
    DOE also recognizes there are several UPS and UPS component 
manufacturers that have employees in the U.S. that work on design, 
technical support, sales, training, testing, certification, and other 
requirements. However, feedback from manufacturer interviews and 
comment responses to the August 2016 NOPR did not indicate there would 
be negative changes in the domestic employment of the design, technical 
support, or other departments of UPS and UPS component manufacturers 
located in the U.S. in response to new energy conservation standards.
c. Impacts on Manufacturing Capacity
    UPS manufacturers stated that they did not anticipate any capacity 
constraints at any of the analyzed ELs, given a two-year timeframe from 
the publication of a final rule and the compliance year.
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop an industry cash-flow 
estimate may not be adequate for assessing differential impacts among 
manufacturer subgroups. Small manufacturers, niche product 
manufacturers, and manufacturers exhibiting cost structures 
substantially different from the industry average could be affected 
disproportionately. DOE identified one manufacturer subgroup that it 
believes could be disproportionally impacted by energy conservation 
standards and would require a separate analysis in the MIA, small 
businesses. DOE analyzes the impacts on small businesses in a separate 
analysis in section VI.B of this final rule as part of the Regulatory 
Flexibility Analysis. DOE did not identify any other adversely impacted 
manufacturer subgroups for this rulemaking based on the results of the 
industry characterization.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves considering 
the cumulative impact of multiple DOE

[[Page 1490]]

standards and the regulatory actions of other Federal agencies and 
States that affect the manufacturers of a covered product. A standard 
level is not economically justified if it contributes to an 
unacceptable cumulative regulatory burden. While any one regulation may 
not impose a significant burden on manufacturers, the combined effects 
of several existing or impending regulations may have serious 
consequences for some manufacturers, groups of manufacturers, 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 UPS manufacturers could also make other products that could be 
subject to energy conservation standards set by DOE. DOE looks at these 
regulations that could affect UPS manufacturers that will take effect 
approximately 3 years before or after the estimated 2019 compliance 
date of adopted energy conservation standards for UPSs.\57\ These 
energy conservation standards include distribution transformers \58\, 
electric motors,\59\ external power supplies,\60\ metal halide lamp 
fixtures,\61\ walk-in coolers and freezers,\62\ battery chargers,\63\ 
general service fluorescent lamps,\64\ ceiling fan light kits,\65\ 
dehumidifiers,\66\ and single package vertical air conditioners and 
single package vertical heat pumps.\67\
---------------------------------------------------------------------------

    \57\ See the [Dagger] footnote in Table V-18 for more 
information on the timeframe examined as part of the cumulative 
regulatory burden analysis.
    \58\ Energy conservation standards for distribution transformers 
became effective on January 1, 2016. 78 FR 23336. [Docket Number 
EERE-2010-BT-STD-0048]
    \59\ Energy conservation standards for electric motors became 
effective on June 1, 2016. 79 FR 30933. [Docket Number EERE-2010-BT-
STD-0027]
    \60\ Energy conservation standards for external power supplies 
became effective on February 10, 2016. 79 FR 7846. [Docket Number 
EERE-2008-BT-STD-0005]
    \61\ Energy conservation standards for metal halide lamp 
fixtures will become effective on February 10, 2017. 79 FR 7745. 
[Docket Number EERE-2009-BT-STD-0018]
    \62\ Energy conservation standards for walk-in coolers and 
freezers estimated to become effective on September 16, 2019. 81 FR 
62980. [Docket Number EERE-2015-BT-STD-0016]
    \63\ Energy conservation standards for battery chargers will 
become effective on June 13, 2018. 81 FR 38266. [Docket Number EERE-
2008-BT-STD-0005]
    \64\ Energy conservation standards for general service 
fluorescent lamps will become effective on January 26, 2018. 80 FR 
4041 [Docket Number EERE-2011-BT-STD-0006]
    \65\ Energy conservation standards for ceiling fan light kits 
will become effective on January 7, 2019. 81 FR 580. [Docket Number 
EERE-2012-BT-STD-0045]
    \66\ Energy conservation standards for dehumidifiers will become 
effective on June 13, 2019. 80 FR 38338. [Docket Number EERE-2012-
BT-STD-0027]
    \67\ Energy conservation standards for single package vertical 
air conditioners and single package vertical heat pumps will become 
effective on September 23, 2019. 80 FR 57438. [Docket Number EERE-
2012-BT-STD-0041]
---------------------------------------------------------------------------

    The compliance dates and expected industry conversion costs of 
relevant energy conservation standards are presented in Table V-18. 
Included in the table are Federal regulations that have compliance 
dates three (and six) years before or after the UPS compliance date.

      Table V-18--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Uninterruptible Power Supply
                                                                      Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        Estimated total
                                                                      Number of                                                             industry
                                                   Number of        manufacturers      Compliance        Estimated total industry          conversion
    Federal energy conservation standards       manufacturers *    from this  rule        date              conversion expense             expense as
                                                                     affected **                                                         percentage of
                                                                                                                                          revenue ***
--------------------------------------------------------------------------------------------------------------------------------------------------------
Distribution Transformers, 78 FR 23336 (April                 38                  3            2016  $60.9 Million (2011$)...........               <1.0
 18, 2013).
Electric Motors, 79 FR 30933 (May 29, 2014)..                  7                  2            2016  $84.6 Million (2013$)...........                1.2
External Power Supplies, 79 FR 7846 (February                243                  6            2016  $43.4 Million (2012$)...........                2.3
 10, 2014).
Residential Central Air Conditioners and Heat                 39                  1            2016  $44.0 Million (2009$)...........                0.1
 Pumps, 76 FR 37408 (June 27, 2011).
Metal Halide Lamp Fixtures, 79 FR 7745                       101                  5            2017  $25.7 Million (2012$)...........                2.3
 (February 10, 2014).
Battery Chargers, 81 FR 38266 (June 13, 2016)                107                  3            2018  $19.5 Million (2013$)...........               <1.0
General Service Fluorescent Lamps, 80 FR 4041                 55                  2            2018  $26.6 Million (2013$)...........               <1.0
 (January 26, 2015).
Ceiling Fan Light Kits, 81 FR 580 (January                    67                  2            2019  $18.9-$17.0 Million (2014$).....         2.0 to 1.8
 06, 2016).
Dehumidifiers, 80 FR 38338 (June 13, 2016)...                 25                  1            2019  $52.5 Million (2014$)...........                4.5
Single Package Vertical Air Conditioners and                   9                  1            2019  $9.2 Million (2014$)............                1.9
 Single Package Vertical Heat Pumps, 80 FR
 57438 (September 23, 2015).

[[Page 1491]]

 
Walk-In Coolers and Freezers, 81 FR 62980                     64                  1   2019 [dagger]  $16.2 Million (2015$)...........                1.7
 (September 16, 2016).
Fluorescent Lamp Ballasts, 76 FR 70548                        41                  2            2014  $74.0 Million (2010$)...........                2.7
 (November 14, 2011) [Dagger].
Small Electric Motors, 75 FR 10874 (March 9,                   5                  1            2015  $51.3 Million (2009$)...........                3.1
 2010) [Dagger].
Residential Water Heaters, 75 FR 20112 (April                 39                  1            2015  $17.5 Million (2009$)...........                4.9
 16, 2010) [Dagger].
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The number of manufacturers listed in the final rule for the energy conservation standard that is contributing to cumulative regulatory burden.
** The number of manufacturers producing UPSs that are affected by the listed energy conservation standards.
*** 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] The final rule for this energy conservation standard has not been published. The data points in the table are estimates from the pre-
  publication stage.
[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 three 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 six years of the compliance date of this rule by expanding the
  timeframe of potential cumulative regulatory burden. Note that the inclusion of any given rule in this Table does not 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 6 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.

    DOE discusses these and other requirements and includes the full 
details of the cumulative regulatory burden analysis in chapter 12 of 
the final rule TSD. 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 6 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 national energy 
savings and the NPV of consumer benefits that would result from each of 
the TSLs considered as potential amended standards.
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential new 
standards for UPSs, 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 amended standards (2019-2048). Table V-19 presents 
DOE's projections of the national energy savings for each TSL 
considered for UPSs. The savings were calculated using the approach 
described in section IV.H.2 of this final rule.

                 Table V-19--Cumulative National Energy Savings for UPSs; 30 Years of Shipments
                                                   [2019-2048]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                              (quads)
----------------------------------------------------------------------------------------------------------------
Primary energy..................................            0.90             1.1             1.2             2.9
FFC energy......................................            0.94             1.2             1.3             3.0
----------------------------------------------------------------------------------------------------------------


[[Page 1492]]

    OMB Circular A-4 \68\ 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 9-year period is a proxy 
for the timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\69\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to UPSs. 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 9-year analytical period are presented in Table V-
20. The impacts are counted over the lifetime of UPSs purchased in 
2019-2048.
---------------------------------------------------------------------------

    \68\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/.
    \69\ 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 products, the 
compliance period is 5 years rather than 3 years.

                  Table V-20--Cumulative National Energy Savings for UPSs; 9 Years of Shipments
                                                   [2019-2048]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                              (quads)
----------------------------------------------------------------------------------------------------------------
Primary energy..................................            0.21            0.26            0.28            0.66
FFC energy......................................            0.21            0.27            0.30            0.69
----------------------------------------------------------------------------------------------------------------

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 UPSs. In 
accordance with OMB's guidelines on regulatory analysis,\70\ DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V-21 shows the consumer NPV results with impacts counted 
over the lifetime of products purchased in 2019-2048.
---------------------------------------------------------------------------

    \70\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/.

          Table V-21--Cumulative Net Present Value of Consumer Benefits for UPSs; 30 Years of Shipments
                                                   [2019-2048]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
             Discount rate (percent)             ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2015$)
----------------------------------------------------------------------------------------------------------------
3...............................................             3.0             2.5            0.75             -53
7...............................................             1.3             1.0            0.03             -30
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V-22. The impacts are counted over the 
lifetime of products purchased in 2019-2048. 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-22--Cumulative Net Present Value of Consumer Benefits for UPSs; 9 Years of Shipments
                                                   [2019-2048]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
             Discount rate (percent)             ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2015$)
----------------------------------------------------------------------------------------------------------------
3...............................................            0.97            0.84            0.30             -16
7...............................................            0.61            0.48            0.05             -13
----------------------------------------------------------------------------------------------------------------


[[Page 1493]]

c. Indirect Impacts on Employment
    DOE expects that amended energy conservation standards for UPSs 
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 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 
(2019-2025), 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 of this final rule, DOE has concluded 
that the standards adopted in this final rule will not lessen the 
utility or performance of UPSs 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 UPS standards. As discussed in section III.D.1.e, EPCA 
directs the Attorney General of the United States (Attorney General) to 
determine the impact, if any, of any lessening of competition likely to 
result from a proposed standard and to transmit such determination 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. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the Attorney 
General in making this determination, DOE provided DOJ with copies of 
the August 2016 NOPR and the TSD for review. In its assessment letter 
responding to DOE, DOJ concluded that the proposed energy conservation 
standards for UPSs 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 UPSs is expected to yield environmental benefits in the 
form of reduced emissions of certain air pollutants and greenhouse 
gases. Table V-23 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 of this document. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the final rule TSD.

                    Table V-23--Cumulative Emissions Reduction for UPSs Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................              46              58              64             148
SO2 (thousand tons).............................              39              48              54             125
NOX (thousand tons).............................              25              31              34              79
Hg (tons).......................................            0.13            0.16            0.18            0.41
CH4 (thousand tons).............................             5.0             6.2             7.0              16
N2O (thousand tons).............................            0.72            0.89            0.99             2.3
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................             2.6             3.2             3.6             8.3
SO2 (thousand tons).............................            0.31            0.39            0.43             1.0
NOX (thousand tons).............................              38              47              52             122
Hg (tons).......................................            0.00            0.00            0.00            0.00
CH4 (thousand tons).............................             233             290             322             749
N2O (thousand tons).............................            0.02            0.02            0.02            0.06
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................              49              61              68             156
SO2 (thousand tons).............................              39              49              54             126
NOX (thousand tons).............................              63              78              87             201
Hg (tons).......................................            0.13            0.16            0.18            0.41
CH4 (thousand tons).............................             238             296             329             765
N2O (thousand tons).............................            0.73            0.91             1.0             2.3
----------------------------------------------------------------------------------------------------------------


[[Page 1494]]

    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 UPSs. As 
discussed in section 0 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, 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-24 presents the global value of CO2 emissions 
reductions at each TSL. 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-24--Present Value of CO2 Emissions Reduction for UPSs Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CO2 case
                                                 ---------------------------------------------------------------
                       TSL                                                                          3% Discount
                                                    5% Discount     3% Discount    2.5% Discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (million 2015$)
----------------------------------------------------------------------------------------------------------------
1...............................................             375           1,659           2,612           5,050
2...............................................             467           2,065           3,251           6,286
3...............................................             521           2,301           3,621           7,003
4...............................................           1,189           5,280           8,322          16,080
----------------------------------------------------------------------------------------------------------------

    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 
resulting from the interagency review process. DOE notes, however, that 
the adopted standards would be economically justified 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 UPSs. The dollar-per-ton values 
that DOE used are discussed in section IV.L of this document. Table V-
25 presents the present values for NOX emissions reductions 
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.

               Table V-25 Present Value of NOX Emissions Reduction for UPSs Shipped in 2019-2048 *
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CO2 case
                                                 ---------------------------------------------------------------
                       TSL                                                                          3% Discount
                                                    5% Discount     3% Discount    2.5% Discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (million 2015$)
----------------------------------------------------------------------------------------------------------------
1...............................................             122              55
2...............................................             152              69
3...............................................             170              78
4...............................................             386             174
----------------------------------------------------------------------------------------------------------------
* 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-26 presents the NPV values that result from adding the 
estimates of the potential economic benefits resulting from reduced 
CO2 and NOX emissions to the NPV of consumer 
savings calculated for each TSL considered in this rulemaking.

[[Page 1495]]



     Table V-26--Consumer NPV Combined With Present Value of Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                     Consumer NPV and low NOX values at 3% discount rate added
                                                                               with:
                                                 ---------------------------------------------------------------
                                                                                                      CO2 3%
                       TSL                            CO2 5%          CO2 3%         CO2 2.5%     discount rate,
                                                  discount rate,  discount rate,  discount rate,       95th
                                                   average case    average case    average case     percentile
                                                                                                       case
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2015$)
----------------------------------------------------------------------------------------------------------------
1...............................................             3.5             4.8             5.7             8.1
2...............................................             3.2             4.8             5.9             9.0
3...............................................             1.4             3.2             4.5             7.9
4...............................................             -52             -48             -45             -37
----------------------------------------------------------------------------------------------------------------


 
                                                     Consumer NPV and low NOX values at 7% discount rate added
                                                                               with:
                                                 ---------------------------------------------------------------
                                                                                                      CO2 3%
                       TSL                            CO2 5%          CO2 3%         CO2 2.5%     discount rate,
                                                  discount rate,  discount rate,  discount rate,       95th
                                                   average case    average case    average case     percentile
                                                                                                       case
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2015$)
----------------------------------------------------------------------------------------------------------------
1...............................................             1.8             3.1             4.0             6.4
2...............................................             1.6             3.2             4.4             7.4
3...............................................            0.63             2.4             3.7             7.1
4...............................................             -29             -25             -22             -14
----------------------------------------------------------------------------------------------------------------

    The national operating cost savings are domestic U.S. monetary 
savings that occur as a result of purchasing the covered UPSs, and are 
measured for the lifetime of products shipped in 2019-2048. The 
benefits associated with reduced CO2 emissions achieved as a 
result of the adopted standards are also calculated based on the 
lifetime of UPSs shipped in 2019-2048. However, the CO2 
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 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 new standards 
for UPSs at each TSL, beginning with the maximum technologically 
feasible level, to determine whether that level was economically 
justified. Where the max-tech level was not justified, DOE then 
considered the next most efficient level and undertook the same 
evaluation until it reached the highest efficiency level that is both 
technologically feasible and economically justified and saves a 
significant amount of energy.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. 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

[[Page 1496]]

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.\71\
---------------------------------------------------------------------------

    \71\ 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.\72\ 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.
---------------------------------------------------------------------------

    \72\ Sanstad, A. H. Notes on the Economics of Household Energy 
Consumption and Technology Choice. 2010. Lawrence Berkeley National 
Laboratory. https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf.
---------------------------------------------------------------------------

1. Benefits and Burdens of TSLs Considered for UPSs Standards
    Table V-27 and Table V-28 summarize the quantitative impacts 
estimated for each TSL for UPSs. The national impacts are measured over 
the lifetime of UPSs purchased in the 30-year period that begins in the 
anticipated year of compliance with amended standards (2019-2048). The 
energy savings, emissions reductions, and value of emissions reductions 
refer to full-fuel-cycle results. The efficiency levels contained in 
each TSL are described in section V.A of this final rule.

                    Table V-27--Summary of Analytical Results for UPSs TSLs: National Impacts
----------------------------------------------------------------------------------------------------------------
          Category                   TSL 1               TSL 2               TSL 3                 TSL 4
----------------------------------------------------------------------------------------------------------------
                                 Cumulative FFC National Energy Savings (quads)
----------------------------------------------------------------------------------------------------------------
quads.......................  0.94..............  1.2...............  1.3...............  3.0.
----------------------------------------------------------------------------------------------------------------
                               NPV of Consumer Costs and Benefits (billion 2015$)
----------------------------------------------------------------------------------------------------------------
3% discount rate............  3.0...............  2.5...............  0.75..............  -53.
7% discount rate............  1.3...............  1.0...............  0.03..............  -30.
----------------------------------------------------------------------------------------------------------------
                                       Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...  49................  61................  68................  156.
SO2 (thousand tons).........  39................  49................  54................  126.
NOX (thousand tons).........  63................  78................  87................  201.
Hg (tons)...................  0.13..............  0.16..............  0.18..............  0.41.
CH4 (thousand tons).........  238...............  296...............  329...............  765.
N2O (thousand tons).........  0.73..............  0.91..............  1.0...............  2.3.
----------------------------------------------------------------------------------------------------------------
                                          Value of Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (billion 2015$) **......  0.375 to 5.050....  0.467 to 6.286....  0.521 to 7.003....  1.189 to 16.080.
NOX--3% discount rate         122...............  152...............  170...............  386.
 (million 2015$).
NOX--7% discount rate         55................  69................  78................  174.
 (million 2015$).
----------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2
  emissions.


            Table V-28--Summary of Analytical Results for UPS TSLs: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
          Category                  TSL 1 *             TSL 2 *             TSL 3 *               TSL 4 *
----------------------------------------------------------------------------------------------------------------
                                              Manufacturer Impacts
----------------------------------------------------------------------------------------------------------------
Industry NPV (million 2015$)  2,167 - 2,737.....  1,939 - 2,832.....  1,599 - 2,964.....  (691) - 7,376.
 (No-standards case INPV =
 2,575).
Industry NPV (% change).....  (15.9) - 6.3......  (24.7) - 10.0.....  (37.9) - 15.1.....  (126.8) - 186.4.
----------------------------------------------------------------------------------------------------------------
                                      Consumer Average LCC Savings (2015$)
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)..............  32................  32................  (4)...............  (12).
10b (VI UPSs)...............  12................  4.................  4.................  (396).
10c (VFI UPSs)..............  36................  36................  36................  (388).
Shipment-Weighted Average *.  25................  21................  3.................  (205).
----------------------------------------------------------------------------------------------------------------
                                           Consumer Simple PBP (years)
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)..............  0.0...............  0.0...............  2.6...............  3.8.
10b (VI UPSs)...............  3.7...............  4.6...............  4.6...............  36.
10c (VFI UPSs)..............  4.4...............  4.4...............  4.4...............  18.

[[Page 1497]]

 
Shipment-Weighted Average *.  1.9...............  2.3...............  3.6...............  18.
----------------------------------------------------------------------------------------------------------------
                                 Percent of Consumers that Experience a Net Cost
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)..............  0.................  0.................  51................  80.
10b (VI UPSs)...............  9.................  50................  50................  100.
10c (VFI UPSs)..............  2.................  2.................  2.................  99.
Shipment-Weighted Average *.  4.................  20................  45................  90.
----------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* Weighted by shares of each product class in total projected shipments in 2019.

    DOE first considered TSL 4, which represents the max-tech 
efficiency levels. TSL 4 would save an estimated 3.0 quads of energy, 
an amount DOE considers significant. Under TSL 4, the NPV of consumer 
benefit would be -$30 billion using a discount rate of 7 percent, and -
$53 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 156 Mt of 
CO2, 126 thousand tons of SO2, 201 thousand tons 
of NOX, 0.41 tons of Hg, 765 thousand tons of 
CH4, and 2.3 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 4 
ranges from $1.2 billion to $16 billion. The estimated monetary value 
of the NOX emissions reduction at TSL 4 is $174 million 
using a 7-percent discount rate and $386 million using a 3-percent 
discount rate.
    At TSL 4, the average LCC impact is a savings of -$12 for VFD UPSs, 
-$396 for VI UPSs, and -$388 for VFI UPSs. The simple payback period is 
3.8 years for VFD UPSs, 36 years for VI UPSs, and 18 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 80 
percent for VFD UPSs, 100 percent for VI UPSs, and 99 percent for VFIs.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$3,266 million to an increase of $4,801 million, which corresponds to a 
decrease of 126.8 percent to an increase of 186.4 percent.
    The Secretary concludes that at TSL 4 for UPSs, the benefits of 
energy savings, emission reductions, and the estimated monetary value 
of the emissions reductions would be outweighed by the negative NPV of 
consumer benefits, economic burden on some consumers, and the 
potentially significant reduction in INPV. Consequently, the Secretary 
has concluded that TSL 4 is not economically justified.
    DOE then considered TSL 3, which would save an estimated 1.3 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be $0.03 billion using a discount rate of 7 
percent, and $0.75 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 68 Mt of 
CO2, 54 thousand tons of SO2, 87 thousand tons of 
NOX, 0.18 tons of Hg, 329 thousand tons of CH4, 
and 1.0 thousand tons of N2O. The estimated monetary value 
of the CO2 emissions reduction at TSL 3 ranges from $0.52 
billion to $7.0 billion. The estimated monetary value of the 
NOX emissions reduction at TSL 3 is $78 million using a 7-
percent discount rate and $170 million using a 3-percent discount rate.
    At TSL 3, the average LCC impact is a savings of -$4 for VFD UPSs, 
$4 for VI UPSs, and $36 for VFI UPSs. The simple payback period is 2.6 
years for VFD UPSs, 4.6 years for VI UPSs, and 4.4 years for VFI UPSs. 
The fraction of consumers experiencing a net LCC cost is 51 percent for 
VFD UPSs, 50 percent for VI UPSs, and 2 percent for VFIs.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$976 million to an increase of $389 million, which corresponds to a 
decrease of 37.9 percent to an increase of 15.1 percent.
    The Secretary concludes that at TSL 3 for UPSs, 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 potential 
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 1.2 quads 
of energy, an amount DOE considers significant. Under TSL 2, the NPV of 
consumer benefit would be $1.0 billion using a discount rate of 7 
percent, and $2.5 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 2 are 61 Mt of 
CO2, 49 thousand tons of SO2, 78 thousand tons of 
NOX, 0.16 tons of Hg, 296 thousand tons of CH4, 
and 0.91 thousand tons of N2O. The estimated monetary value 
of the CO2 emissions reduction at TSL 2 ranges from $0.47 
billion to $6.3 billion. The estimated monetary value of the 
NOX emissions reduction at TSL 3 is $69 million using a 7-
percent discount rate and $152 million using a 3-percent discount rate.
    At TSL 2, the average LCC impact is a savings of $32 for VFD UPSs, 
$4 for VI UPSs, and $36 for VFI UPSs. The simple payback period is 0.0 
\73\ years for VFD UPSs, 4.6 years for VI UPSs, and 4.4 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 0 
percent for VFD UPSs, 50 percent for VI UPSs, and 2 percent for VFIs.
---------------------------------------------------------------------------

    \73\ The payback period is 0 due to the negative incremental 
cost at this efficiency level. More expensive and less efficient 
baseline units continue to exist in the market, likely because some 
consumers are familiar with their well-established performance. 
These consumers are reluctant to purchase newer, more efficient 
products that are just as reliable because they are unfamiliar with 
them. See section IV.C.3 for more details.
---------------------------------------------------------------------------

    At TSL 2, the projected change in INPV ranges from a decrease of 
$636 million to an increase of $257 million, which corresponds to a 
decrease of 24.7 percent to an increase of 10.0 percent.
    The Secretary concludes that at TSL 2 for UPSs, 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 potential 
reduction in manufacturer INPV. Consequently, the Secretary has 
concluded that TSL 2 is not economically justified.
    DOE then considered TSL 1, which would save an estimated 0.94 quads 
of energy, an amount DOE considers significant. Under TSL 1, the NPV of 
consumer benefit would be $1.3 billion using a discount rate of 7 
percent, and $3.0 billion using a discount rate of 3 percent.

[[Page 1498]]

    The cumulative emissions reductions at TSL 1 are 49 Mt of 
CO2, 39 thousand tons of SO2, 63 thousand tons of 
NOX, 0.13 tons of Hg, 238 thousand tons of CH4, 
and 0.73 thousand tons of N2O. The estimated monetary value 
of the CO2 emissions reduction at TSL 1 ranges from $0.37 
billion to $5.0 billion. The estimated monetary value of the 
NOX emissions reduction at TSL 1 is $55 million using a 7-
percent discount rate and $122 million using a 3-percent discount rate.
    At TSL 1, the average LCC impact is a savings of $32 for VFD UPSs, 
$12 for VI UPSs, and $36 for VFI UPSs. The simple payback period is 0.0 
\74\ years for VFD UPSs, 3.7 years for VI UPSs, and 4.4 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 0 
percent for VFD UPSs, 9 percent for VI UPSs, and 2 percent for VFIs.
---------------------------------------------------------------------------

    \74\ The payback period is 0 due to the negative incremental 
cost at this efficiency level. More expensive and less efficient 
baseline units continue to exist in the market, likely because some 
consumers are familiar with their well-established performance. 
These consumers are reluctant to purchase newer, more efficient 
products that are just as reliable because they are unfamiliar with 
them. See section IV.C.3 for more details.
---------------------------------------------------------------------------

    At TSL 1, the projected change in INPV ranges from a decrease of 
$409 million to an increase of $163 million, which corresponds to a 
decrease of 15.9 percent to an increase of 6.3 percent.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has concluded that at TSL 1 for UPSs, 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. Accordingly, the Secretary 
has concluded that TSL 1 would offer the maximum improvement in 
efficiency that is technologically feasible and economically justified, 
and would result in the significant conservation of energy.
    Therefore, based on the above considerations, DOE adopts the energy 
conservation standards for UPSs at TSL 1. The adopted energy 
conservation standards for UPSs, which are expressed in average load 
adjusted efficiency, are shown in Table V-29.

                               Table V-29--Energy Conservation Standards for UPSs
----------------------------------------------------------------------------------------------------------------
      UPS product class        Rated output power                        Minimum efficiency
----------------------------------------------------------------------------------------------------------------
Voltage and Frequency         0 W < P <=300 W.....  -1.20E-06 * P2 + 7.17E-04 * P + 0.862.
 Dependent.
                              300 W < P <=700 W...  -7.85E-08 * P2 + 1.01E-04 * P + 0.946.
                              P >700 W............  -7.23E-09 * P2 + 7.52E-06 * P + 0.977.
Voltage Independent.........  0 W < P <=300 W.....  -1.20E-06 * P2 + 7.19E-04 * P + 0.863.
                              300 W < P <=700 W...  -7.67E-08 * P2 + 1.05E-04 * P + 0.947.
                              P >700 W............  -4.62E-09 * P2 + 8.54E-06 * P + 0.979.
Voltage and Frequency         0 W < P <=300 W.....  -3.13E-06 * P2 + 1.96E-03 * P + 0.543.
 Independent.
                              300 W < P <=700 W...  -2.60E-07 * P2 + 3.65E-04 * P + 0.764.
                              P >700 W............  -1.70E-08 * P2 + 3.85E-05 * P + 0.876.
----------------------------------------------------------------------------------------------------------------

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$) of the 
benefits from operating products that meet the adopted standards 
(consisting primarily of operating cost savings from using less 
energy), minus increases in product purchase costs, and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.
    Table V-30 shows the annualized values for UPSs under TSL 2, 
expressed in 2015$. The results under the primary estimate are as 
follows.
    Using a 7-percent discount rate for benefits and costs other than 
CO2 reductions (for which DOE used a 3-percent discount rate 
along with the average SC-CO2 series corresponding to a 
value of $47.4/t in 2020 (2015$)), the estimated cost of the adopted 
standards for UPSs is $131 million per year in increased equipment 
costs, while the estimated benefits are $255 million per year in 
reduced equipment operating costs, $90 million per year in 
CO2 reductions, and $5.1 million per year in reduced 
NOX emissions. In this case, the net benefit would amount to 
$219 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SC-CO2 series corresponding to a value of $47.4/t in 
2020 (2015$), the estimated cost of the adopted standards for UPSs is 
$140 million per year in increased equipment costs, while the estimated 
annual benefits are $301 million in reduced operating costs, $90 
million in CO2 reductions, and $6.6 million in reduced 
NOX emissions. In this case, the net benefit would amount to 
$257 million per year.

                         Table V-30--Selected Categories of Annualized Benefits and Costs of Adopted Standards (TSL 1) for UPSs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Low-net- benefits        High-net- benefits
                                                 Discount rate                  Primary  estimate             estimate                  estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        (million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings....  7%...................................  255.....................  231.....................  284.
                                     3%...................................  301.....................  270.....................  341.
CO2 Reduction (using avg. SC-CO2 at  5%...................................  27......................  24......................  30.
 5% discount rate) **.
CO2 Reduction (using avg. SC-CO2 at  3%...................................  90......................  80......................  101.
 3% discount rate) **.
CO2 Reduction (using avg. SC-CO2 at  2.5%.................................  131.....................  116.....................  148.
 2.5% discount rate) **.

[[Page 1499]]

 
CO2 Reduction (using 95th            3%...................................  273.....................  242.....................  308.
 percentile SC-CO2 at 3% discount
 rate) **.
NOX Reduction [dagger].............  7%...................................  5.1.....................  4.6.....................  13.
                                     3%...................................  6.6.....................  5.9.....................  17.
    Total Benefits [Dagger]........  7% plus CO2 range....................  287 to 533..............  260 to 478..............  327 to 606.
                                     7%...................................  349.....................  316.....................  398.
                                     3% plus CO2 range....................  335 to 581..............  300 to 519..............  388 to 666.
                                     3%...................................  397.....................  356.....................  459.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs.  7%...................................  131.....................  118.....................  145.
                                     3%...................................  140.....................  124.....................  157.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [Dagger].................  7% plus CO2 range....................  156 to 402..............  142 to 361..............  182 to 460.
                                     7%...................................  219.....................  198.....................  253.
                                     3% plus CO2 range....................  195 to 441..............  176 to 394..............  231 to 509.
                                     3%...................................  257.....................  231.....................  302.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with UPSs shipped in 2019-2048. These results include benefits to consumers which
  accrue after 2048 from the UPSs purchased from 2019-2048. The incremental installed costs include incremental equipment cost as well as installation
  costs. The results 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 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 prices from the AEO 2016 No-CPP case, Low Economic Growth case, and High
  Economic Growth case, respectively. Shipment projections are also scaled based on the GDP index in the Low and High Economic Growth cases. Note that
  the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The CO2 reduction benefits are calculated using four different sets of SC-CO2 values. The first three use the average SC-CO2 calculated using 5-
  percent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SC-CO2 distribution calculated
  using a 3-percent discount rate. The SC-CO2 values are emission year specific. See section IV.L.1 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.2 for further discussion. For the
  Primary Estimate and Low Net Benefits Estimate, DOE used national benefit-per-ton estimates for NOX emitted from the Electric 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 SC-CO2 with 3-percent discount rate. In the rows
  labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those
  values are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems that the adopted standards for UPSs 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 greenhouse gases that impact human health and global 
warming. DOE attempts to qualify some of the external benefits through 
use of social cost of carbon values.
    The Administrator of the Office of Information and Regulatory 
Affairs (OIRA) in the OMB has determined that the regulatory action in 
this document is a significant regulatory action under section (3)(f) 
of Executive Order 12866. Accordingly, pursuant to section 6(a)(3)(B) 
of the Order, DOE has provided to OIRA: (i) The text of the draft 
regulatory action, together with a reasonably detailed description of 
the need for the regulatory action and an explanation of how the 
regulatory action will meet that need; and (ii) an assessment of the 
potential costs and benefits of the regulatory action, including an 
explanation of the manner in which the regulatory action is consistent 
with a statutory mandate. DOE has included these documents in the 
rulemaking record.
    In addition, the Administrator of OIRA has determined that the 
regulatory

[[Page 1500]]

action is an ``economically'' significant regulatory action under 
section (3)(f)(1) of Executive Order 12866. Accordingly, pursuant to 
section 6(a)(3)(C) of the Order, DOE has provided to OIRA an 
assessment, including the underlying analysis, of benefits and costs 
anticipated from the regulatory action, together with, to the extent 
feasible, a quantification of those costs; and an assessment, including 
the underlying analysis, of costs and benefits of potentially effective 
and reasonably feasible alternatives to the planned regulation, and an 
explanation why the planned regulatory action is preferable to the 
identified potential alternatives. These assessments can be found in 
the technical support document for this rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, 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 
Executive Order 12866. To the extent permitted by law, agencies are 
required by Executive Order 13563 to (1) propose or adopt a regulation 
only upon a reasoned determination that its benefits justify its costs 
(recognizing that some benefits and costs are difficult to quantify); 
(2) tailor regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives, taking into account, 
among other things, and to the extent practicable, the costs of 
cumulative regulations; (3) select, in choosing among alternative 
regulatory approaches, those approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity); (4) to the 
extent feasible, specify performance objectives, rather than specifying 
the behavior or manner of compliance that regulated entities must 
adopt; and (5) identify and assess available alternatives to direct 
regulation, including providing economic incentives to encourage the 
desired behavior, such as user fees or marketable permits, or providing 
information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, OIRA has emphasized that such techniques may include 
identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes. For the 
reasons stated in the preamble, DOE believes that this 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 a final regulatory flexibility analysis (FRFA) for any 
final rule where the agency was first required by law to publish a 
proposed rule for public comment, unless the agency certifies that the 
rule, if promulgated, will not have a significant economic impact on a 
substantial number of small entities. As required by Executive Order 
13272, ``Proper Consideration of Small Entities in Agency Rulemaking,'' 
67 FR 53461 (Aug. 16, 2002), DOE published procedures and policies on 
February 19, 2003, to ensure that the potential impacts of its rules on 
small entities are properly considered during the rulemaking process. 
68 FR 7990. DOE has made its procedures and policies available on the 
Office of the General Counsel's website (http://energy.gov/gc/office-general-counsel). DOE certified in the August 2016 NOPR that the 
adopted standards will not have a significant economic impact on a 
substantial number of small entities, and the preparation of an FRFA is 
not warranted. The factual basis for this certification is discussed in 
the following section.
    For manufacturers of UPSs, the Small Business Administration (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 North American Industry 
Classification System (NAICS) code and industry description and are 
available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
    UPS manufacturing is classified under NAICS 335999, ``All Other 
Miscellaneous Electrical Equipment and Component Manufacturing.'' The 
SBA sets a threshold of 500 employees or less for an entity to be 
considered as a small business manufacturer of those product classes.
    To estimate the number of companies that could be small businesses 
that manufacture UPSs covered by this rulemaking, DOE conducted a 
market survey using publicly available information. DOE first attempted 
to identify all potential UPS manufacturers by researching 
certification databases (e.g., EPA's ENERGY STAR \75\), retailer 
websites, individual company websites, and the SBA's database. DOE then 
attempted to gather information on the location and number of employees 
to determine if these companies met SBA's definition of a small 
business for each potential UPS manufacturer by reaching out directly 
to those potential small businesses and using market research tools 
(i.e., Hoover's reports), and company profiles on public websites 
(i.e., Manta, Glassdoor, and Linkedin). DOE also asked stakeholders and 
industry representatives if they were aware of any small businesses 
during manufacturer interviews. DOE used information from these sources 
to create a list of companies that potentially manufacture UPSs and 
would be impacted by this rulemaking. DOE screened out companies that 
do not offer products affected by this final rule, do not meet the 
definition of a ``small business,'' are completely foreign owned and 
operated, or do not manufacture UPSs in the United States.
---------------------------------------------------------------------------

    \75\ ENERGY STAR. Energy Star Certified Products. Last accessed 
May 4, 2015. http://www.energystar.gov/.
---------------------------------------------------------------------------

    DOE initially identified a total of 48 potential companies that 
sell UPSs in the United States. Of these, DOE estimated that 12 were 
small businesses in the August 2016 NOPR. After reviewing publicly 
available information, such as Hoovers \76\ and individual company 
websites for these potential small UPS businesses, DOE determined that 
none of these companies manufacture UPSs in the United States and 
therefore are not directly impacted by this rulemaking. All 12 small 
businesses that sell, but do not manufacturer UPSs in the United 
States, also sell products outside the scope of this rulemaking. 
Additionally, DOE estimates that 10 of the 12 small businesses selling 
UPSs receive the majority of their revenue from products not covered by 
this rulemaking. Subsequently, DOE does not believe this regulation 
will put small businesses in the U.S. that purchase UPSs from foreign 
manufacturers at a competitive disadvantage in the marketplace. These 
small UPS companies are not responsible for the conversion costs to 
comply with standards because the companies do not own the 
manufacturing facilities and tooling used to produce UPSs. DOE believes 
that these small UPS businesses may be able to pass through the 
majority of the incremental MPCs of these more

[[Page 1501]]

efficient UPSs to their customers. It is also possible that small 
businesses purchasing compliant UPSs may see an increase in costs as a 
result of the rule. See section IV.J.2.d for further discussion on the 
manufacturer markup scenarios modeled for this rulemaking and their 
impacts on manufacturer profitability.
---------------------------------------------------------------------------

    \76\ http://www.hoovers.com/.
---------------------------------------------------------------------------

    Schneider commented that compliance with adopted UPS standards 
would make it difficult for new manufacturers, especially smaller 
manufacturers, to enter the UPS market (Schneider Electric, No. 0017 at 
p. 21). The UPS industry, as covered by the scope of this rulemaking, 
presents barriers to entry for any new market participant, large or 
small. In addition to the high startup cost of producing cost-
competitive UPSs, the large number of existing UPS manufacturers limits 
opportunities for new market entrants to gain market share. As a 
result, DOE does not believe that it would be more or less feasible to 
enter the UPS market, due to this rulemaking.
    Based on DOE's determination that there are no domestic small UPS 
manufacturers, that companies making UPSs sourced from foreign 
components would not be responsible for the conversion costs, and that 
companies making UPSs would be able to pass on the potential increases 
in MPCs associated with adopted UPS standards, DOE previously certified 
in the August 2016 NOPR that the adopted standards will not have a 
significant economic impact on a substantial number of small entities. 
The factual basis for this certification has not changed.

C. Review Under the Paperwork Reduction Act

    Manufacturers of UPSs must certify to DOE that their products 
comply with any applicable energy conservation standards. In certifying 
compliance, manufacturers must test their products according to the DOE 
test procedures for UPSs, including any amendments adopted for that 
test procedure. DOE has established regulations for the certification 
and recordkeeping requirements for all covered consumer products and 
commercial equipment, including UPSs. 76 FR 12422 (March 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

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
imposes certain requirements on Federal agencies formulating and 
implementing policies or regulations that preempt State law or that 
have Federalism implications. The Executive Order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. The Executive Order 
also requires agencies to have an accountable process to ensure 
meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications. 
On March 14, 2000, DOE published a statement of policy describing the 
intergovernmental consultation process it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
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 Executive Order 13132.

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a regulatory action likely to result in a rule that may cause the 
expenditure by State, local, and Tribal governments, in

[[Page 1502]]

the aggregate, or by the private sector of $100 million or more in any 
one year (adjusted annually for inflation), section 202 of UMRA 
requires a Federal agency to publish a written statement that estimates 
the resulting costs, benefits, and other effects on the national 
economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal 
agency to develop an effective process to permit timely input by 
elected officers of State, local, and Tribal governments on a 
``significant intergovernmental mandate,'' and requires an agency plan 
for giving notice and opportunity for timely input to potentially 
affected small governments before establishing any requirements that 
might significantly or uniquely affect them. On March 18, 1997, DOE 
published a statement of policy on its process for intergovernmental 
consultation under UMRA. 62 FR 12820. DOE's policy statement is also 
available at http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    DOE has concluded that this final rule may require expenditures of 
$100 million or more in any one year by the private sector. Such 
expenditures may include (1) investment in research and development and 
in capital expenditures by UPSs 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 UPSs, 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. As required by 42 U.S.C. 6295(m), 
this final rule establishes new energy conservation standards for UPSs 
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 42 U.S.C. 6295(o)(2)(A) and 
42 U.S.C. 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 UPSs, 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.
    In response to OMB's Bulletin, DOE conducted formal peer reviews of 
the energy conservation standards development process and the analyses 
that are typically used and prepared a report describing that peer 
review.\77\ Generation of this report involved a rigorous, formal, and 
documented

[[Page 1503]]

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.
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    \77\ The 2007 ``Energy Conservation Standards Rulemaking Peer 
Review Report'' is available at the following website: http://energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0.
---------------------------------------------------------------------------

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 in 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 
uninterruptible power supplies 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 part 430 of 
chapter II, subchapter D, of title 10 of the Code of Federal 
Regulations, as set forth below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

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

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


0
2. Section 430.32 is amended by adding paragraph (z)(3) to read as 
follows:


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

* * * * *
    (z) * * *
    (3) All uninterruptible power supplies (UPS) manufactured on and 
after January 10, 2022, that utilize a NEMA 1-15P or 5-15P input plug 
and have an AC output shall have an average load adjusted efficiency 
that meets or exceeds the values shown in the table in this paragraph 
(z)(3) based on the rated output power (Prated) of the UPS.

------------------------------------------------------------------------
  Battery charger product class   Rated output power  Minimum efficiency
------------------------------------------------------------------------
10a (VFD UPSs)..................  0W 700 W..........  -7.23E-09 * P\2\ +
                                                       7.52E-06 * P +
                                                       0.977.
10b (VI UPSs)...................  0 W P <=300 W.....  -1.20E-06 * P\2\ +
                                                       7.19E-04 * P +
                                                       0.863.
                                  300 W