[Federal Register Volume 85, Number 7 (Friday, January 10, 2020)]
[Rules and Regulations]
[Pages 1592-1682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26356]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2013-BT-STD-0030]
RIN 1904-AD01
Energy Conservation Program: Energy Conservation Standards for
Commercial Packaged Boilers
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as
amended, prescribes energy
[[Page 1593]]
conservation standards for various consumer equipment and certain
commercial and industrial equipment, including commercial packaged
boilers (CPBs). EPCA also requires the U.S. Department of Energy (DOE)
to periodically review standards. In this final rule, DOE is adopting
more-stringent energy conservation standards for certain commercial
packaged boilers.
DATES: The effective date of this rule is March 10, 2020. Compliance
with the amended standards established for commercial packaged boilers
in this final rule is required on and after January 10, 2023.
ADDRESSES: The docket, which includes Federal Register notices, public,
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 www.regulations.gov/docket?D=EERE-2013-BT-STD-0030. The docket web page contains simple
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact the
Appliance and Equipment Standards Program staff at (202) 586-6636 or by
email: [email protected].
FOR FURTHER INFORMATION CONTACT:
Mr. James Raba, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Program, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 586-8654. Email: [email protected].
Mr. Peter Cochran, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-9496. Email: [email protected].
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 Commercial Packaged
Boilers
III. General Discussion
A. Compliance Dates
B. Test Procedure
1. Summary of Recent Updates
2. Timing of the Test Procedure and Energy Conservation
Standards Rulemakings
3. Impact on Efficiency Ratings
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
F. General Comments
1. Proposed Standard Levels
a. Comments on Proposed TSL 2
b. Comments on TSL 3
c. Other Comments
2. Statutory Requirements
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. General
2. Scope of Coverage
3. Equipment Classes
4. Market Assessment
5. Technology Options
B. Screening Analysis
C. Engineering Analysis
1. Methodology
a. Analysis of Large CPB Equipment Classes
2. Data Collection and Categorization
3. Baseline Efficiency
4. Intermediate and Max-Tech Efficiency Levels
5. Incremental Price and Price-Efficiency Curves
D. Markups Analysis
E. Energy Use Analysis
1. Energy Use Characterization
2. Building Sample Selection and Sizing Methodology
3. Miscellaneous Energy Use
F. Life-Cycle Cost and Payback Period Analysis
1. Equipment Costs
2. Installation Costs
a. Base Boiler Installation
b. Venting
c. Other
3. Annual Per-Unit Energy Consumption
4. Energy Prices and Energy Price Trends
5. Maintenance Costs
6. Repair Costs
7. Lifetime
8. Discount Rates
9. Market Efficiency Distribution in the No-New-Standards Case
10. Payback Period Inputs
11. General Comments
G. Shipments Analysis
H. National Impact Analysis
1. Equipment Efficiency in the No-New-Standards Case and
Standards Cases
2. National Energy Savings
3. Net Present Value of Consumer Benefit
a. Total Annual Cost
b. Total Annual Operating Cost Savings
c. Discount Rate
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model
a. Government Regulatory Impact Model Key Inputs
b. Government Regulatory Impact Model Scenarios
3. Discussion of Comments
a. Elimination of Natural Draft Equipment
b. Impacts on Direct Employment
c. Conversion Costs
d. Cumulative Regulatory Burden
K. Emissions Analysis
L. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Development of Social Cost of Carbon Values
c. Current Approaches and Key Assumptions
2. Social Cost of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Impacts on Direct Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusion
1. Benefits and Burdens of Trial Standard Levels Considered for
Commercial Packaged Boiler Standards
2. Summary of Benefits and Costs (Annualized) 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
1. Need for, Objectives of, and Legal Basis for, the Rule
2. Significant Issues Raised In Response to the IRFA
3. Description and Estimate of the Number of Small Entities
Affected
[[Page 1594]]
a. Methodology for Estimating the Number of Small Entities
4. Description and Estimate of Compliance Requirements,
Including Differences in Cost, If Any, for Different Groups of Small
Entities
5. Significant Alternatives to the Rule
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
Title III of the Energy Policy and Conservation Act of 1975 (42
U.S.C. 6291, et seq; ``EPCA''), Public Law 94-163, sets forth a variety
of provisions designed to improve energy efficiency. Part C of Title
III, which for editorial reasons was re-designated as Part A-1 upon
incorporation into the U.S. Code (42 U.S.C. 6311-6317, as codified),
establishes the ``Energy Conservation Program for Certain Industrial
Equipment,'' which includes commercial packaged boilers (CPBs), the
subject of this rulemaking.\1\ (42 U.S.C. 6311(1)(J))
EPCA requires DOE to conduct an evaluation of its standards for CPB
equipment every 6 years and to publish either a notice of determination
that such standards do not need to be amended or a notice of proposed
rulemaking (NOPR) including new proposed standards. (42 U.S.C.
6313(a)(6)(C)(i)) This final rule satisfies DOE's statutory obligation
under 42 U.S.C. 6313(a)(6)(C).
In accordance with these and other statutory requirements discussed
in this document, DOE is adopting amended energy conservation standards
for commercial packaged boilers. DOE has examined the existing CPB
standards and concludes that modifying and expanding the existing 10
CPB equipment classes to 12 equipment classes is warranted. As
discussed in detail in section IV.A.3 of this document, DOE opted to:
(1) Discontinue the use of draft type as a criterion for equipment
classes; and (2) establish separate equipment classes for ``very
large'' commercial packaged boilers. Eliminating the use of draft type
as a distinguishing feature for equipment classes consolidated the 4
existing draft-specific equipment classes into 2 non-draft-specific
equipment classes, while adding very large commercial packaged boilers
as separate equipment classes resulted in an additional 4 equipment
classes. As a result, the total number of equipment classes has
increased from 10 to 12. DOE is adopting more stringent standards for 8
of the 12 equipment classes in this final rule, which includes all
classes except for the newly adopted very large CPB classes. The
amended standards, which prescribe minimum thermal efficiencies
(ET) or combustion efficiencies (EC), as
applicable, are shown in Table I.1. These amended standards apply to
all equipment listed in Table I.1 and manufactured in, or imported
into, the United States on and after the compliance dates in Table I.1.
Table I.1--Energy Conservation Standards for Commercial Packaged Boilers
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Energy conservation
Equipment Size category (input) standard * Compliance date [dagger]
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Small Gas-Fired Hot Water >=300,000 Btu/h and 84.0% ET.............. January 10, 2023.
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Gas-Fired Hot Water >2,500,000 Btu/h and 85.0% EC.............. January 10, 2023.
Commercial Packaged Boilers. <=10,000,000 Btu/h.
Very Large Gas-Fired Hot Water >10,000,000 Btu/h.... 82.0% EC.............. March 2, 2012.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water >=300,000 Btu/h and 87.0% ET.............. January 10, 2023.
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Oil-Fired Hot Water >2,500,000 Btu/h and 88.0% EC.............. January 10, 2023.
Commercial Packaged Boilers. <=10,000,000 Btu/h.
Very Large Oil-Fired Hot Water >10,000,000 Btu/h.... 84.0% EC.............. March 2, 2012.
Commercial Packaged Boilers.
Small Gas-Fired Steam Commercial >=300,000 Btu/h and 81.0% ET.............. January 10, 2023.
Packaged Boilers. <=2,500,000 Btu/h.
Large Gas-Fired Steam Commercial >2,500,000 Btu/h and 82.0% ET.............. January 10, 2023.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Gas-Fired Steam >10,000,000 Btu/h.... 79.0% ET.............. March 2, 2012.
Commercial Packaged Boilers **.
Small Oil-Fired Steam Commercial >=300,000 Btu/h and 84.0% ET.............. January 10, 2023.
Packaged Boilers. <=2,500,000 Btu/h.
Large Oil-Fired Steam Commercial >2,500,000 Btu/h and 85.0% ET.............. January 10, 2023.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Oil-Fired Steam >10,000,000 Btu/h.... 81.0% ET.............. March 2, 2012.
Commercial Packaged Boilers.
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* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''
** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum
thermal efficiency level of 77% is permitted and meets Federal commercial packaged boiler energy conservation
standards.
[dagger] For very large CPB equipment classes DOE is not amending the existing standards, which had a compliance
date of March 2, 2012, as shown.
A. Benefits and Costs to Consumers
Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted energy conservation standards on consumers of commercial
packaged boilers, as measured by the average life-cycle cost (LCC)
savings and the simple payback period (PBP).\2\ The average LCC savings
are positive for all equipment classes, and the PBP is less than the
average lifetime of the equipment, which is estimated to be 24.8 years
for all equipment classes evaluated in this final rule.
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\1\ 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).
\2\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the no-new-standards case
efficiency distribution, which depicts the CPB market in the
compliance year in the absence of amended standard levels (see
section IV.F.9 of this document and chapter 8 of the final rule
technical support document (TSD)). The simple PBP, which is designed
to compare specific efficiency levels for commercial packaged
boilers, is measured relative to the baseline CPB equipment (see
section IV.F.10 of this document and chapter 8 of the TSD).
[[Page 1595]]
Table I.2--Impacts of Adopted Energy Conservation Standards on Consumers of Commercial Packaged Boilers
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Average LCC savings Simple payback period
Equipment class (2015$) (years)
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Small Gas-Fired Hot Water..................................... $212 10.1
Large Gas-Fired Hot Water..................................... 2,037 7.0
Small Oil-Fired Hot Water..................................... 14,421 4.1
Large Oil-Fired Hot Water..................................... 31,379 4.8
Small Gas-Fired Steam......................................... 1,002 10.1
Large Gas-fired Steam......................................... 11,188 4.2
Small Oil-fired Steam......................................... 5,839 4.0
Large Oil-Fired Steam......................................... 36,832 2.7
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DOE's analysis of the impacts of the amended standards on consumers
is described in section IV.F of this document and in chapter 8 of the
final rule technical support document (TSD).
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 to 2049). Using a real discount rate of 9.5
percent,\3\ DOE estimates that the INPV for manufacturers of commercial
packaged boilers in the case without amended standards is $277.6
million in 2015$. Under amended standards, DOE expects the change in
INPV to range from approximately -6.7 to -3.7 percent, which
corresponds to approximately -$18.5 to -$10.3 million (in 2015$). In
order to bring equipment into compliance with amended standards, DOE
expects the industry to incur $21.2 million in conversion costs.
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\3\ DOE estimated draft financial metrics, including the
industry discount rate, based on data from Securities and Exchange
Commission (SEC) filings. DOE presented the draft financial metrics
to manufacturers in MIA interviews and adjusted those values based
on feedback from industry. The complete set of financial metrics and
more detail about the methodology can be found in section 12.4.3 of
chapter 12 of the TSD.
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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 section are expressed in 2015
dollars and, where appropriate, are discounted to 2016.
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DOE's analyses indicate that the adopted standards would save a
significant amount of energy. The lifetime energy savings for
commercial packaged boilers purchased in the 30-year period that begins
in the anticipated first full year of compliance with amended standards
(2020-2049), relative to the case without amended standards (referred
to as the ``no-new-standards case''), amount to 0.27 quadrillion Btu
(quad).\5\ This represents a savings of 0.6 percent relative to the
energy use of this equipment in the no-new-standards case.\6\
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\5\ A quad is equal to 10\15\ British thermal units (Btu). The
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy
savings include the energy consumed in extracting, processing, and
transporting primary fuels (i.e., coal, natural gas, petroleum
fuels), and thus present a more complete picture of the impacts of
energy efficiency standards. For more information on the FFC metric,
see section IV.H.2 of this document.
\6\ The no-new-standards case assumptions are described in
section IV.F.9 of this document.
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The cumulative net present value (NPV) of total consumer benefits
of the amended standards for commercial packaged boilers ranges from
$0.558 billion (at a 7-percent discount rate) to $1.977 billion (at a
3-percent discount rate). This NPV expresses the estimated total value
of future operating-cost savings minus the estimated increased
equipment and installation costs for commercial packaged boilers
purchased in 2020-2049.
In addition, the adopted CPB standards are projected to yield
significant environmental benefits. The energy savings described in
this section are estimated to result in cumulative emission reductions
(over the same period as for energy savings) of 16 million metric tons
(Mt) \7\ of carbon dioxide (CO2), 139 thousand tons of
methane (CH4), 3.1 thousand tons of sulfur dioxide
(SO2), 41 thousand tons of nitrogen oxides (NOX),
0.1 thousand tons of nitrous oxide (N2O), and 0.0003 tons of
mercury (Hg).\8\ The estimated cumulative reduction in CO2
emissions through 2030 amounts to 1.58 Mt, which is equivalent to the
emissions resulting from the annual electricity use of 0.233 million
homes.
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\7\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons
(ton).
\8\ 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.
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[[Page 1596]]
The value of the CO2 reductions is calculated using a
range of values per metric ton (t) of CO2 (otherwise known
as the ``social cost of CO2,'' or SCC) developed by a
Federal interagency working group.\9\ The derivation of the SCC values
is discussed in section IV.L.1 of this document. Using discount rates
appropriate for each set of SCC values (see Table I.3), DOE estimates
the present value of the CO2 emissions reduction is between
$0.1 billion and $1.5 billion, with a value of $0.48 billion using the
central SCC case represented by $40.6 per metric ton in 2015.\10\ DOE
also estimates the present monetary value of the NOX
emissions reduction is $0.35 billion at a 7-percent discount rate and
$0.99 billion at a 3-percent discount rate.\11\ DOE is investigating
appropriate valuation of the reduction in other emissions and did not
include any such values in this rulemaking. More detailed results can
be found in chapter 14 of the final rule TSD.
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\9\ 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. (Revised July 2015). https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
\10\ The values only include CO2 emissions;
CO2 equivalent emissions from other greenhouse gases are
not included.
\11\ 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 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 national economic benefits and costs
expected to result from the adopted standards for commercial packaged
boilers.
Table I.3--Selected Categories of National Economic Benefits and Costs
of Energy Conservation Standards for Commercial Packaged Boilers
[TSL 2 *]
------------------------------------------------------------------------
Present value
Category (million Discount rate
2015$) (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Operating Cost Savings.................. 907 7
2,585 3
CO2 Reduction Monetized Value (using 100 5
mean SCC at 5% discount rate) **.......
CO2 Reduction Monetized Value (using 482 3
mean SCC at 3% discount rate) **.......
CO2 Reduction Monetized Value (using 777 2.5
mean SCC at 2.5% discount rate) **.....
CO2 Reduction Monetized Value (using 1,468 3
95th percentile SCC at 3% discount
rate) **...............................
NOX Reduction [dagger].................. 35 7
99 3
Total Benefits [Dagger]................. 1,425 7
3,166 3
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Costs
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Incremental Installed Costs............. 350 7
609 3
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Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction 1,075 7
Monetized Value [Dagger]...............
2,558 3
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* This table presents the costs and benefits associated with commercial
packaged boilers shipped in 2020-2049. These results include benefits
to consumers that accrue after 2049 from the equipment purchased in
2020-2049. The incremental installed costs include incremental
equipment cost as well as installation costs. The CO2 reduction
benefits are global benefits due to actions that occur nationally.
** The interagency group selected four sets of SCC values for use in
regulatory analyses. Three sets of values are based on the average SCC
from the integrated assessment models, at discount rates of 5 percent,
3 percent, and 2.5 percent. For example, for 2015 emissions, these
values are $12.4/t, $40.6/t, and $63.2/t, in 2015$, respectively. The
fourth set ($118/t in 2015$ for 2015 emissions), which represents the
95th percentile of the SCC distribution calculated using a 3-percent
discount rate, is included to represent higher-than-expected impacts
from temperature change further out in the tails of the SCC
distribution. The SCC values are emission year specific. See section
IV.L.1 for more details.
[dagger] 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 Unit sector based on an estimate of premature mortality
derived from the ACS study (Krewski et al. 2009). If the benefit-per-
ton estimates were based on the Six Cities study (Lepuele et al.
2011), the values would be nearly two-and-a-half times larger.
[Dagger] Total Benefits for both the 3-percent and 7-percent cases are
presented using only the average SCC with 3-percent discount rate.
The benefits and costs of the adopted energy conservation
standards, for covered commercial packaged boilers sold in 2020-2049,
can also be expressed in terms of annualized values. The monetary
values for the total annualized net benefits are the sum of (1) the
annualized national economic value of the benefits from consumer
operation of the equipment that meets the amended standards (consisting
primarily of reduced operating costs minus increases in equipment
purchase price and installation costs) and (2) the
[[Page 1597]]
annualized value of the benefits of CO2 and NOX
emission reductions.\12\
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\12\ 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.4. Using the present value, DOE then
calculated the fixed annual payment over a 30-year period starting
in the compliance year that yields the same present value.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered equipment. The national operating cost savings is measured for
the lifetime of commercial packaged boilers shipped in 2020-2049. The
CO2 reduction is a benefit that accrues globally due to
decreased domestic energy consumption that is expected to result from
this rule. Because CO2 emissions have a very long residence
time in the atmosphere,\13\ the SCC values in future years reflect
future CO2-emissions impacts that continue beyond 2100
through 2300.
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\13\ The atmospheric lifetime of CO2 is estimated to
be on the order of 30-95 years. Jacobson, MZ, ``Correction to
`Control of fossil-fuel particulate black carbon and organic matter,
possibly the most effective method of slowing global warming,' '' J.
Geophys. Res. 110. pp. D14105 (2005).
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Estimates of annualized benefits and costs of the amended 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 reductions (for which DOE used a 3-percent discount
rate along with the average SCC series corresponding to a value of
$40.6/t in 2015 (2015$)),\14\ the estimated cost of the adopted
standards for CPB equipment is $35 million per year in increased
equipment costs, while the estimated benefits are $90 million per year
in reduced equipment operating costs, $27 million per year in
CO2 reductions, and $3.5 million per year in reduced
NOX emissions. In this case, the net benefit amounts to $85
million per year.
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\14\ DOE used a 3-percent discount rate because the SCC values
for the series used in the calculation were derived using a 3-
percent discount rate (see section IV.L).
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Using a 3-percent discount rate for all benefits and costs and the
average SCC series corresponding to a value of $40.6/t in 2015 (in
2015$), the estimated cost of the adopted standards for commercial
packaged boilers is $34 million per year in increased equipment costs,
while the estimated annual benefits are $144 million in reduced
operating costs, $27 million in CO2 reductions, and $5.5
million in reduced NOX emissions. In this case, the net
benefit would amount to $143 million per year.
Table I.4--Selected Categories of Annualized Benefits and Costs of Adopted Energy Conservation Standards for Commercial Packaged Boilers
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Low net benefits High net benefits
Discount rate Primary estimate * estimate * estimate *
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *.. 7%................................... 90...................... 80...................... 98.
3%................................... 144..................... 128..................... 160.
CO2 Reduction Monetized Value 5%................................... 8....................... 7....................... 8.
(using mean SCC at 5% discount
rate) * **.
CO2 Reduction Monetized Value 3%................................... 27...................... 24...................... 29.
(using mean SCC at 3% discount
rate) * **.
CO2 Reduction Monetized Value 2.5%................................. 40...................... 36...................... 43.
(using mean SCC at 2.5% discount
rate) * **.
CO2 Reduction Monetized Value 3%................................... 82...................... 74...................... 89.
(using 95th percentile SCC at 3%
discount rate) * **.
NOX Reduction [dagger]............. 7%................................... 3....................... 3....................... 9.
3%................................... 5....................... 5....................... 12.
Total Benefits [Dagger]............ 7% plus CO2 range.................... 101 to 175.............. 90 to 158............... 115 to 196.
7%................................... 120..................... 108..................... 136.
3% plus CO2 range.................... 157 to 231.............. 140 to 208.............. 180 to 261.
3%................................... 177..................... 158..................... 201.
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Costs
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Consumer Incremental Equipment 7%................................... 35...................... 31...................... 37.
Costs.
3%................................... 34...................... 31...................... 37.
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Net Benefits
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Total [Dagger]..................... 7% plus CO2 range.................... 66 to 140............... 59 to 127............... 78 to 158.
7%................................... 85...................... 77...................... 99.
3% plus CO2 range.................... 123 to 198.............. 109 to 177.............. 144 to 224.
[[Page 1598]]
3%................................... 143..................... 127..................... 165.
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* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2020-2049. These results include benefits
to consumers that accrue after 2049 from the equipment purchased in 2020-2049. The incremental installed costs include incremental equipment cost as
well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
Benefits Estimates utilize projections of building stock and energy prices from the AEO2016 No-CPP case, a Low Economic Growth case, and a High
Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor decreases over time. Compared to a case where a reduction in equipment price over
time is applied (e.g., due to an observed price learning), a constant price assumption results in a more conservative estimate of economic benefits.
The equipment price projection is described in section IV.F.1 of this document and chapter 8 of the final rule technical support document (TSD). In
addition, DOE used estimates for equipment efficiency distribution in its analysis based on national data supplied by industry. Purchases of higher
efficiency equipment are a result of many different factors unique to each consumer including boiler heating loads, installation costs, site
environmental consideration, and others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases
in the baseline 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 rule.
** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5-percent, 3-
percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent
discount rate. The SCC 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 SCC with 3-percent discount rate. In the rows labeled
``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values
are added to the full range of CO2 values.
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
Based on the analysis culminating in this final rule, DOE finds the
benefits of the amended standards to the Nation (energy savings,
positive NPV of consumer benefits, consumer LCC savings, and emission
reductions) outweigh the burdens (loss of INPV for manufacturers and
LCC increases for some consumers). DOE also concludes that the amended
standards represent significant additional energy conservation and are
technologically feasible and economically justified. DOE further notes
that equipment achieving these standard levels is already commercially
available for all equipment classes covered by this final rule.\15\
---------------------------------------------------------------------------
\15\ See chapter 3 of the final rule TSD for information about
the efficiency ratings of equipment currently available on the
market.
---------------------------------------------------------------------------
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 commercial
packaged boilers.
A. Authority
The American Society of Heating, Refrigerating, and Air-
Conditioning Engineers (ASHRAE) Standard 90.1 (ASHRAE Standard 90.1),
``Energy Standard for Buildings Except Low-Rise Residential
Buildings,'' sets industry energy efficiency levels for small, large,
and very large commercial package air-conditioning and heating
equipment, packaged terminal air conditioners, packaged terminal heat
pumps, warm air furnaces, packaged boilers, storage water heaters,
instantaneous water heaters, and unfired hot water storage tanks
(collectively ``ASHRAE equipment''). For each type of listed equipment,
EPCA directs that if ASHRAE amends Standard 90.1, DOE must adopt
amended standards at the new ASHRAE efficiency level, unless DOE
determines, supported by clear and convincing evidence, that adoption
of a more stringent level would produce significant additional
conservation of energy and would be technologically feasible and
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)
Under EPCA, DOE must also review energy efficiency standards for
commercial packaged boilers every six years and either: (1) Issue a
notice of determination that the standards do not need to be amended as
adoption of a more stringent level is not supported by clear and
convincing evidence; or (2) issue a notice of proposed rulemaking
including new proposed standards based on certain criteria and
procedures in subparagraph (B).\16\ (42 U.S.C. 6313(a)(6)(C))
---------------------------------------------------------------------------
\16\ In relevant part, subparagraph (B) specifies that: (1) In
making a determination of economic justification, DOE must consider,
to the maximum extent practicable, the benefits and burdens of an
amended standard based on the seven criteria described in EPCA; (2)
DOE may not prescribe any standard that increases the energy use or
decreases the energy efficiency of a covered product; and (3) DOE
may not prescribe any standard that interested persons have
established by a preponderance of evidence is likely to result in
the unavailability in the United States of any 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.
6313(a)(6)(B)(ii)-(iii))
---------------------------------------------------------------------------
In deciding whether a more-stringent standard is economically
justified, under either the provisions of 42 U.S.C. 6313(a)(6)(A) or
(C), DOE must determine whether the benefits of the standard exceed its
burdens. DOE must make this determination after receiving comments on
the proposed standard, and by considering, to the maximum extent
practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and
[[Page 1599]]
consumers of products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered equipment that are likely to result from the standard;
(3) The total projected amount of energy savings likely to result
directly from the standard;
(4) Any lessening of the utility or the performance of the covered
product likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy conservation; and
(7) Other factors the Secretary of Energy considers relevant.
42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
Because ASHRAE did not update its efficiency levels for commercial
packaged boilers in any of its most recent updates to ASHRAE Standard
90.1 (i.e., ASHRAE Standard 90.1-2010, ASHRAE Standard 90.1-2013, and
ASHRAE Standard 90.1-2016), DOE is analyzing amended standards
consistent with the procedures defined under 42 U.S.C. 6313(a)(6)(C).
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents DOE from prescribing any
amended standard that either increases the maximum allowable energy use
or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Furthermore, DOE may not
prescribe an amended or new standard if interested persons have
established by a preponderance of the evidence that the standard is
likely to result in the unavailability in the United States of any
covered product type (or class) of performance characteristics
(including reliability), features, sizes, capacities, and volumes that
are substantially the same as those generally available in the United
States at the time of the Secretary's finding. (42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa))
Further, EPCA, as codified, establishes a rebuttable presumption
that an energy conservation standard is economically justified if the
Secretary finds that the additional cost to the consumer of purchasing
a product that complies with the standard will be less than three times
the value of the energy (and, as applicable, water) savings during the
first year that the consumer will receive as a result of the standard,
as calculated under the applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) However, while this rebuttable presumption analysis
applies to most commercial and industrial equipment (42 U.S.C.
6316(a)), it is not a required analysis for ASHRAE equipment, including
commercial packaged boilers (42 U.S.C. 6316(b)(1)). Nonetheless, DOE
considered the criteria for rebuttable presumption as part of its
economic justification analysis.
After carefully reviewing all CPB equipment classes, DOE has
concluded that amended energy conservation standards for 8 of the 12
CPB equipment classes adopted in this final rule (i.e., all commercial
packaged boilers with rated inputs <=10,000 kBtu/h) will result in
significant additional conservation of energy and are technologically
feasible and economically justified, as mandated by 42 U.S.C.
6313(a)(6).
For the remaining 4 equipment classes, (i.e., all commercial
packaged boilers with rated inputs >10,000 kBtu/h), DOE tentatively
decided in the March 2016 NOPR not to amend energy conservation
standards because of a lack of sufficient data to justify amended
standards. 81 FR 15836, 15851-15853 (March 24, 2016). DOE did not
receive any additional information or data that would support the
rulemaking analysis for such commercial packaged boilers. Therefore,
DOE maintains the existing standards because there is not sufficient
data to support, by clear and convincing evidence, more stringent
standards for commercial packaged boilers with rated inputs >10,000
kBtu/h. (42 U.S.C. 6313(a)(6)(C)(i)(I) For more discussion on
commercial packaged boilers with rated input greater than 10,000 kBtu/
h, see section IV.A.3 of this final rule.
B. Background
1. Current Standards
Prior to this final rule, DOE last amended its energy conservation
standards for commercial packaged boilers through a final rule
published in the Federal Register on July 22, 2009 (July 2009 final
rule). 74 FR 36312. More specifically, the July 2009 final rule updated
the energy conservation standards for commercial packaged boilers to
correspond to the levels in the 2007 revision of ASHRAE Standard 90.1
(i.e., ASHRAE Standard 90.1-2007). The July 2009 final rule established
thermal efficiency as the energy efficiency metric for all equipment
classes other than commercial packaged boilers with fuel rated input
greater than 2,500,000 Btu/h and that are designed to deliver hot
water. For such equipment classes (i.e., gas-fired and oil-fired hot
water commercial packaged boilers with rated input greater than
2,500,000 Btu/h), DOE established combustion efficiency as the energy
efficiency metric. Compliance with the standards adopted in the July
2009 final rule was required beginning on March 2, 2012. These levels
are shown in Table II.1. Also in the July 2009 final rule, DOE again
followed ASHRAE's approach in Standard 90.1-2007 and adopted a second
tier of energy conservation standards for two classes of commercial
packaged boilers, which are shown in Table II.2. Compliance with the
latter standards is required beginning on March 2, 2022.
Table II.1--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or After March
2, 2012
----------------------------------------------------------------------------------------------------------------
Size category Efficiency level-- effective
Equipment type Subcategory (input) date: March 2, 2012 *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged Gas-fired............ >=300,000 Btu/h and 80.0% ET.
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Gas-fired............ >2,500,000 Btu/h.... 82.0% EC.
Boilers.
Hot Water Commercial Packaged Oil-fired............ >=300,000 Btu/h and 82.0% ET.
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Oil-fired............ >2,500,000 Btu/h.... 84.0% EC.
Boilers.
Steam Commercial Packaged Boilers. Gas-fired--All, >=300,000 Btu/h and 79.0% ET.
Except Natural Draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Gas-fired--All, >2,500,000 Btu/h.... 79.0% ET.
Except Natural Draft.
Steam Commercial Packaged Boilers. Gas-fired--Natural >=300,000 Btu/h and 77.0% ET.
Draft. <=2,500,000 Btu/h.
[[Page 1600]]
Steam Commercial Packaged Boilers. Gas-fired--Natural >2,500,000 Btu/h.... 77.0% ET.
Draft.
Steam Commercial Packaged Boilers. Oil-fired............ >=300,000 Btu/h and 81.0% ET.
<=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Oil-fired............ >2,500,000 Btu/h.... 81.0% ET.
----------------------------------------------------------------------------------------------------------------
* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''
Table II.2--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or After March
2, 2022
----------------------------------------------------------------------------------------------------------------
Size category Efficiency level-- effective
Equipment type Subcategory (input) date: March 2, 2022
----------------------------------------------------------------------------------------------------------------
Steam Commercial Packaged Boilers. Gas-fired--Natural >=300,000 Btu/h and 79.0% ET.
Draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Gas-fired--Natural >2,500,000 Btu/h.... 79.0% ET.
Draft.
----------------------------------------------------------------------------------------------------------------
2. History of Standards Rulemaking for Commercial Packaged Boilers
DOE is conducting this rulemaking pursuant to 42 U.S.C.
6313(a)(6)(C), which requires that every 6 years, DOE must publish
either: (1) A notice of the determination that standards for the
equipment do not need to be amended, or (2) a NOPR including proposed
energy conservation standards. As noted above, DOE's last final rule
for commercial packaged boilers was published on July 22, 2009. DOE is
issuing this final rule pursuant to its statutory obligation under 42
U.S.C. 6313(a)(6)(C).
In initiating this rulemaking, DOE prepared a Framework document,
``Energy Conservation Standards Rulemaking Framework Document for
Commercial Packaged Boilers,'' which describes the procedural and
analytical approaches DOE anticipated using to evaluate energy
conservation standards for commercial packaged boilers. DOE published a
notice that announced both the availability of the Framework document
and a public meeting to discuss the proposed analytical framework for
the rulemaking. That notice also invited written comments from the
public. 78 FR 54197 (Sept. 3, 2013). The Framework document is
available at: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
DOE held a public meeting on October 1, 2013, at which it described
the various analyses DOE would conduct as part of the rulemaking, such
as the engineering analysis, the life-cycle cost (LCC) and payback
period (PBP) analyses, and the national impact analysis (NIA).
Representatives of manufacturers, trade associations, environmental and
energy efficiency advocates, and other interested parties attended the
meeting. The participants discussed the following major topics, among
others: (1) The rulemaking scope (2) test procedures for commercial
packaged boilers; and (3) various issues related to the planned
analyses of amended energy conservation standards. Interested parties
also provided comments on the Framework document, which DOE considered
and responded to in chapter 2 of the preliminary analysis TSD.
On November 20, 2014, DOE published a second notice, ``Energy
Conservation Standards for Commercial Packaged Boilers: Public Meeting
and Availability of the Preliminary Technical Support Document'' in the
Federal Register to announce the availability of the preliminary
analysis technical support document (TSD). 79 FR 69066. The preliminary
analysis TSD provided preliminary results of the analyses that DOE
conducted in support of the energy conservation standards rulemaking.
DOE invited interested parties to comment on the preliminary analysis,
and requested public comments on specific issues related to the TSD.
These issues are listed in the Executive Summary chapter of the
preliminary analysis TSD. The preliminary analysis TSD is available at:
https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
On December 9, 2014, DOE held a public meeting, at which it
described the methodology and preliminary results of the various
analyses it conducted as part of the rulemaking, such as the
engineering analysis, the LCC and PBP analyses, and the NIA.
Representatives of manufacturers, trade associations, environmental and
energy efficiency advocates, and other interested parties attended the
meeting. The public meeting provided an opportunity for the attendees
to provide feedback and comments that would help improve DOE's analysis
and results for the NOPR stage. In addition, DOE also received several
written comments from interested parties and stakeholders, in response
to the preliminary analysis TSD.
On March 24, 2016, DOE subsequently published a notice of proposed
rulemaking (NOPR) and notice of public meeting in the Federal Register
(March 2016 NOPR) that addressed all of the comments received in
response to the preliminary analysis TSD and proposed amended energy
conservation standards for commercial packaged boilers. 81 FR 15836. In
addition to amended energy conservation standards, DOE also proposed to
reorganize the equipment class structure for commercial packaged
boilers. The March 2016 NOPR also updated the rulemaking analysis based
on comments received in response to the preliminary analysis and the
most recent data sources available, and sought comments from interested
parties on specific issues listed in the March 2016 NOPR. The March
2016 NOPR and the NOPR TSD are available at: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
On April 21, 2016, DOE held a public meeting where it presented and
discussed the analyses conducted as part of this rulemaking (e.g.,
engineering analysis, LCC and PBP analysis, national impact analysis).
In the public meeting, DOE presented the results of these analyses and
requested comments
[[Page 1601]]
from stakeholders on various issues related to the rulemaking. In
response to the March 2016 NOPR, DOE received both verbal comments
(during the public meeting) and written comments from interested
parties that were considered while updating its analysis for this final
rule. The interested parties that commented on the March 2016 NOPR are
shown in Table II.3 of this final rule.
Table II.3--Parties That Provided Comments on the March 2016 NOPR
----------------------------------------------------------------------------------------------------------------
Name of party Abbreviation Source of comments Type *
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating and AHRI.......................... Public Meeting, Written.......... TA
Refrigeration Institute.
American Boiler Manufacturers ABMA.......................... Public Meeting, Written.......... TA
Association.
American Council for Energy Joint Advocates............... Written.......................... EA
Efficient Economy, Appliance
Standards Awareness Project,
Natural Resource Defense
Council, Northwest Energy
Efficiency Alliance.
American Gas Association, Gas Associations.............. Public Meeting, Written.......... UA
American Public Gas Association.
Appliance Standards Awareness ASAP.......................... Public Meeting................... EA
Project.
Bradford White Corporation...... Bradford White................ Written.......................... M
Burnham Holdings................ BHI........................... Written.......................... M
Cato Institute.................. Cato.......................... Written.......................... O
The U.S. Chamber of Commerce, The Associations.............. Written.......................... TA
the American Chemistry Council,
the American Coke and Coal
Chemicals Institute, the
American Forest & Paper
Association, the American Fuel
& Petrochemical Manufacturers,
the American Petroleum
Institute, the Brick Industry
Association, the Council of
Industrial Boiler Owners, the
National Association of
Manufacturers, the National
Mining Association, the
National Oilseed Processors
Association, and the Portland
Cement Association.
Crown Boiler.................... Crown......................... Public Meeting, Written.......... M
Industrial Energy Consumers of IECA.......................... Written.......................... TA
America.
Lochinvar, LLC.................. Lochinvar..................... Public Meeting, Written.......... M
Sidel Systems................... Sidel......................... Written.......................... M
Pacific Gas & Electric, San Joint Utilities............... Written, Public Meeting.......... U
Diego Gas & Electric.
Phoenix Energy Management....... PEM........................... Public Meeting................... C
Raypak, Inc..................... Raypak........................ Public Meeting, Written.......... M
Southern California Gas......... SoCalGas...................... Public Meeting, Written.......... U
Spire (formerly The LaClede Spire/LaClede................. Public Meeting................... U
Group, Inc.). Spire......................... Written..........................
Tom Nussbaum.................... Tom Nussbaum.................. Written.......................... I
Weil-McLain..................... Weil-McLain................... Written.......................... M
----------------------------------------------------------------------------------------------------------------
* TA: Trade Association; EA: Efficiency/Environmental Advocate; M: Manufacturer; C: Contractor; U: Utility; UA:
Utility Association; I: Individual; O: Other.
In parallel to the energy conservation standards rulemaking, DOE
published a notice of proposed determination on August 13, 2013 (August
2013 NOPD), which initiated a coverage determination to explicitly
clarify DOE's statutory authority under EPCA to cover natural draft
commercial packaged boilers. DOE initiated this coverage determination
because the existing definition of ``packaged boiler'' could have
allowed for differing interpretations as to whether natural draft
commercial packaged boilers are covered equipment. 78 FR 49202. In the
August 2013 NOPD, DOE proposed a definition for natural draft
commercial packaged boilers that would clarify its statutory authority
to cover such equipment. DOE sought public comments in response to its
proposed determination and definition for natural draft commercial
packaged boilers, and received several written comments from interested
parties. In addition, DOE also received several comments in response to
the preliminary analysis TSD that are relevant to the issue of coverage
determination of natural draft commercial packaged boilers. After
carefully reviewing all of the comments received on the issue of
coverage determination of natural draft commercial packaged boilers and
determining that the comments indicated a common and long-standing
understanding from interested parties that natural draft commercial
packaged boilers are and have been covered equipment under part A-1 of
Title III of EPCA, DOE decided to withdraw the August 2013 NOPD on
August 25, 2015 (August 2015 withdrawal notice). 80 FR 51487.
DOE also recently completed a separate test procedure rulemaking to
consider an amended test procedure for commercial packaged boilers. On
February 20, 2014, DOE initiated the test procedure rulemaking by
publishing a request for information (RFI) in the Federal Register that
sought comments and information from stakeholders on several issues
pertaining to the CPB test procedure. 79 FR 9643. On March 17, 2016,
DOE published a NOPR in the Federal Register, which proposed to update
the test procedure for determining the efficiency of commercial
packaged boilers (2016 CPB TP NOPR). 81 FR 14642. Subsequently, on
December 9, 2016, DOE published a final rule in the Federal Register,
which updated the test procedure for commercial packaged boilers. 81 FR
89276. Section III.B of this document briefly discusses the amendments
made to the test procedure.\17\ The analyses conducted for this final
rule reflect the changes adopted in the December 2016 test procedure
final rule. (2016 CPB TP final rule)
---------------------------------------------------------------------------
\17\ For detailed discussion on the test procedure including the
comments and DOE's response please see the docket #EERE-2014-BT-TP-
0006.
---------------------------------------------------------------------------
III. General Discussion
A. Compliance Dates
In 42 U.S.C. 6313(a), EPCA prescribes a number of compliance dates
for amended standards for commercial packaged boilers. These compliance
dates vary depending on the specific statutory authority under which
DOE is conducting its review (i.e., whether DOE is triggered by a
revision to ASHRAE Standard 90.1 or whether DOE is undertaking a 6-year
review), and the action taken (i.e., whether DOE is adopting ASHRAE
Standard 90.1 levels or more stringent levels). The discussion
[[Page 1602]]
that follows explains the compliance dates as they pertain to this
rulemaking.
As discussed in section II.A of this document, EPCA requires that
at least once every 6 years, DOE must review standards for commercial
packaged boilers and publish either a notice of determination that
standards for this type of equipment do not need to be amended or a
NOPR containing amended standards. (42 U.S.C. 6313(a)(6)(C)(i)) EPCA
requires that an amended standard prescribed under 42 U.S.C.
6313(a)(6)(C) must apply to products manufactured after the date that
is the later of: (1) The date 3 years after publication of the final
rule establishing a new standard or (2) the date 6 years after the
effective date of the current standard for a covered product. (42
U.S.C. 6313(a)(6)(C)(iv)) The current standards for commercial packaged
boilers went into effect in 2012. Thus, the date 3 years after
publication of this final rule is later than the date 6 years after
2012, the effective date of the current standard. As a result,
compliance with any amended energy conservation standards promulgated
in this final rule is required starting from the dates specified in
paragraph (b) of 10 CFR 431.87.
B. Test Procedure
1. Summary of Recent Updates
DOE's current test procedure for commercial packaged boilers is
found at 10 CFR 431.86.
As stated previously, on December 9, 2016, DOE published a final
rule amending the CPB test procedure. 81 FR 89276. The 2016 CPB TP
final rule adopted specific sections of American National Standards
Institute (ANSI)/AHRI Standard 1500, ``Standard for Performance Rating
of Commercial Space Heating Boilers,'' (ANSI/AHRI Standard 1500-2015)
as the basis of the test procedure for commercial packaged boilers,
replacing the previous industry test standard BTS-2000. In addition,
the 2016 CPB TP final rule incorporates the following amendments to the
DOE test procedure: (1) Clarifies the coverage for field-constructed
commercial packaged boilers and the applicability of DOE's test
procedure and standards for this category of commercial packaged
boilers, (2) provides an optional field test for commercial packaged
boilers with rated input greater than 5,000,000 Btu/h, (3) provides a
conversion method to calculate thermal efficiency based on combustion
efficiency testing for steam commercial packaged boilers with rated
input greater than 5,000,000 Btu/h, (4) modifies the inlet water
temperature requirements during tests of hot water commercial packaged
boilers, (5) establishes limits on the ambient temperature and relative
humidity conditions during testing, (6) modifies setup and
instrumentation requirements to remove ambiguity, and (7) standardizes
terminology and provisions for ``fuel input rate'' and ``rated input.''
In response to the March 2016 NOPR, DOE received several comments
that are specifically related to the CPB test procedure. Comments
related to the technical aspects of the test procedure development were
considered and addressed in the test procedure final rule.
2. Timing of the Test Procedure and Energy Conservation Standards
Rulemakings
Several stakeholders expressed legal, procedural, and practical
concerns regarding the timing of the test procedure and energy
conservation standards revisions for commercial packaged boilers, and
requested that DOE delay any further work on the rulemakings to amend
efficiency standards until after the finalization of the test
procedure. (Bradford White, No. 68 at p. 1; Gas Associations, No. 69 at
p. 2; BHI, No. 71 at p. 5; Lochinvar, No. 70 at p. 7; AHRI, No. 76 at
pp. 2-3; ABMA, No. 64 at p. 1, Crown, Public Meeting Transcript, No. 61
at p. 13; AHRI, Public Meeting Transcript, No. 61, at p. 14); \18\ AHRI
highlighted that DOE has two years from the publication of the NOPR for
energy conservation standards before it must publish a final rule for
CPB standards under 42 U.S.C. 6313(a)(6)(C)(iii), and asserted that DOE
has sufficient time to finalize the test procedure and subsequently
reopen comments on the proposed standard. (AHRI, No. 76 at p. 5)
---------------------------------------------------------------------------
\18\ DOE will identify comments received in response to the
March 2016 CPB ECS NOPR and placed in Docket No. EERE-2013-BT-STD-
0030 by the commenter, the number of the comment document as listed
in the docket maintained at www.regulations.gov, and the page number
of that document where the comment appears (for example: Bradford
White, No. 68 at p. 1). If a comment was made during the CPB ECS
NOPR public meeting, DOE will also specifically identify those as
being located in the NOPR public meeting transcript (for example:
Crown, Public Meeting Transcript, No. 61 at p. 13).
---------------------------------------------------------------------------
AHRI argued that the non-final status of the test procedure
inhibits stakeholders' fair evaluation of the proposed standards and
stressed the importance of having a known efficiency test procedure.
AHRI pointed out that DOE is required to provide stakeholders the
opportunity to submit meaningful comments (42 U.S.C. 6306(a), 42 U.S.C.
6314(b)), and opined that the joint proposal of test procedures and
standards eliminates that opportunity. (AHRI, No. 76 at pp. 2-3)
AHRI further commented that having simultaneous rulemakings creates
an unfair burden on stakeholders. (AHRI, Public Meeting Transcript, No.
61 at p. 80) Similarly, Raypak, Bradford White, and Crown commented
that the ongoing changes to the test procedure do not allow
manufacturers the opportunity to properly evaluate the effects of the
proposed standards. Bradford White noted that their resources are
focused on proposed test procedure changes. (Raypak, No. 72 at p. 1;
Bradford White, No. 68 at p. 1; Crown, Public Meeting Transcript, No.
61 at p. 13; Bradford White, No. 68 at p. 12) Several stakeholders also
contended that the timing of the test procedure and standards
rulemaking violated DOE's own procedural policies or ``the process
rule.'' (Gas Associations, No. 69 at p. 2; Bradford White, No. 68 at p.
12; Weil-McLain, No. 67 at p. 4; Spire, No. 73 at pp. 5-7; AHRI, No. 76
at p. 3; Lochinvar, No. 71 at p. 7) AHRI highlighted that the process
rule is not merely a guideline, noting it was codified in the Code of
Federal Regulations. AHRI contended that DOE must abide by its own
regulations. (AHRI, No. 76 at p. 3)
DOE provided a detailed response on this issue in the 2016 CPB TP
final rule. DOE re-iterates in this final rule that the amendments to
the Federal test procedure includes updates to the referenced industry
test standard (ANSI/AHRI Standard 1500-2015) which was developed by a
consensus-based AHRI process. In May 2015, AHRI petitioned DOE to
replace its references to BTS-2000 with ANSI/AHRI Standard 1500-2015.
In addition, DOE received insightful and detailed comments on the
proposed amendments to the test procedure in response to the 2016 CPB
TP NOPR. Considering these developments leading up to the 2016 CPB TP
final rule, the industry was involved at all stages of the test
procedure rulemaking, and DOE's amendments are largely in keeping with
the test methodology found in consensus-based industry standard ANSI/
AHRI Standard 1500-2015. Any deviations in the 2016 CPB TP final rule
from ANSI/AHRI 1500-2015 are a result of DOE's efforts to make the test
procedure better reflect the energy efficiency during a representative
average use cycle, as required by EPCA. (42 U.S.C. 6314(a)(2)). In the
2016 CPB TP final rule, as discussed in section III.B.3, DOE concluded
that the amendments to the test procedure that were ultimately adopted
would mitigate
[[Page 1603]]
concerns regarding the impact on ratings. 81 FR 89276, 89281-89282
(December 9, 2016).
Furthermore, in the energy conservation standards rulemaking, DOE
granted a 30-day extension of the comment period following the
publication of the March 2016 NOPR to ensure that stakeholders had
sufficient time to comment on the analyses and results. Therefore, DOE
believes that stakeholders have had adequate time to gauge the effect
of the standards rulemaking to enable them to provide meaningful
comments on its analysis and results.
Regarding the commenters' assertions that DOE has violated the
process rule, DOE notes that the codified procedures at 10 CFR part
430, subpart C, appendix A (7)(c), Appendix A establish procedures,
interpretations, and policies to guide DOE in the consideration and
promulgation of new or revised appliance efficiency standards under
EPCA. (See section 1 of 10 CFR part 430 subpart C, appendix A) These
procedures are a general guide to the steps DOE typically follows in
promulgating energy conservation standards. The guidance recognizes
that DOE can and will, on occasion, deviate from the typical process.
In the case of commercial packaged boilers, DOE was petitioned by the
industry to adopt the industry test standard AHRI Standard 1500-2015,
while the energy conservation standards rulemaking was in process. The
energy conservation standards rulemaking was initiated in August 2013
with the publication of the Framework document, as discussed in section
II.B.2 of this final rule, and AHRI petitioned DOE to amend the test
procedure in May 2015, as noted above. Therefore, per AHRI's request,
DOE initiated a test procedure rulemaking concurrent with the standards
rulemaking. As noted above and discussed in section III.B.3, the
changes to the test procedure that were ultimately adopted in the 2016
CPB TP final rule mitigated stakeholders' concerns about impacts to
efficiency ratings. Accordingly, DOE has concluded that there is no
basis to delay the final rule adopting standards for commercial
packaged boilers.
3. Impact on Efficiency Ratings
Several commenters indicated that they expected that the proposed
changes to the test procedure would result in changes to the rated
efficiency. Lochinvar, BHI, and AHRI questioned DOE's tentative
determination that the test procedure changes would not impact
efficiency ratings. (Lochinvar, No. 70 at p. 7; BHI, No. 71 at p. 3;
AHRI No. 76 at p. 4)
Lochinvar noted that DOE's own test summary shows that the TP
changes would reduce the rated efficiency of some boilers. Lochinvar
also stated that anti-backsliding provisions would prevent DOE from
making any changes to the standard after the fact if TP changes
negatively impact ratings. (Lochinvar, No. 70 at p. 7) AHRI noted that
DOE's conclusion that the efficiency ratings would not be impacted by
the proposed test procedure changes is based on limited testing data,
and stakeholders did not have sufficient time to provide meaningful
comments. (AHRI No. 76 at p. 4) BHI added that that the rating of some
equipment could be significantly impacted, given that the test
procedure is significantly different. (BHI, No. 71 at pp. 3, 4-5) They
suggested that the efficiency of 85-percent ET ``Category
I'' boilers in the directory will change due to the proposed water
temperature changes in the 2016 CPB TP NOPR. (BHI, No. 71 at p. 10)
Raypak provided similar comments. (Raypak, No. 72 at p. 3)
Weil-McLain and SoCalGas commented that the efficiency ratings of
non-condensing boilers will drop due to the new test procedure and that
the proposed increases in the minimum standard would combine to
significantly reduce the types of feasible non-condensing equipment.
(Weil-McLain, No. 67 at p. 2; SoCalGas, No. 77 at p. 2) AHRI commented
that the analysis must be based on finalized test procedures in order
to realistically represent the impacts of amended standards (including
energy savings, cost to consumers and manufacturers). (AHRI, No. 76 at
pp. 2-3) SoCal suggested that the benefits of TSL 1 may actually be
closer to those calculated for TSL 2, given the proposed water
temperature changes in the test procedure. (SoCalGas, No. 77 at p. 2)
In the 2016 CPB TP NOPR, DOE tentatively determined that the
proposed test procedure amendments would not result in an overall
measureable impact on equipment's measured efficiency. 81 FR 14642,
12878 (March 17, 2016). However, as discussed above, DOE received
comments from stakeholders in response to both the March 2016 NOPR and
the 2016 CPB TP NOPR suggesting that several proposals included in the
2016 CPB TP NOPR would impact efficiency ratings. In the 2016 CPB TP
final rule, DOE addressed stakeholders' concerns and ultimately revised
the proposals that could have resulted in changes to the efficiency
ratings in order to mitigate impacts on the efficiency ratings.\19\ 81
FR 89276, 89289-89290 (December 9, 2016).
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\19\ For additional discussion and DOE's detailed response to
the comments please refer to the 2016 CPB TP final rule docketed at
ID #EERE-2014-BT-TP-0006. https://www.regulations.gov/docket?D=EERE-2014-BT-TP-0006.
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C. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the equipment that is the subject of the rulemaking. As
the first step in such an analysis, DOE conducts a market and
technology assessment that develops a list of technology options for
consideration in consultation with manufacturers, design engineers, and
other interested parties. DOE then determines which of those means for
improving efficiency are technologically feasible. DOE considers
technologies incorporated in commercially available equipment 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 equipment 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, DOE notes that these screening criteria
do not directly address the proprietary status of design options. DOE
only considers efficiency levels achieved through the use of
proprietary designs in the engineering analysis if they are not part of
a unique path to achieve that efficiency level (i.e., if there are
other non-proprietary technologies capable of achieving the same
efficiency). DOE concludes that the amended standards for the equipment
covered in this final rule do not mandate the use of any proprietary
technologies, and that all manufacturers are able to achieve the
amended standard levels through the use of non-proprietary designs.
Section IV.B and IV.C of this final rule discuss the results of the
screening analysis and engineering analysis for commercial packaged
boilers. For further details on the screening analysis and engineering
[[Page 1604]]
analysis for this final rule, see chapter 4 and chapter 5 of the final
rule TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended standard for a type or class
of covered equipment, it determines the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such equipment. Accordingly, in the engineering analysis
of this final rule, DOE determined the maximum technologically feasible
(``max-tech'') improvements in energy efficiency for commercial
packaged boilers, using the design parameters for the most efficient
equipment currently available on the market. The max-tech levels that
DOE determined for this rulemaking are described in section IV.C.4 of
this document and in chapter 5 of the final rule TSD.
D. Energy Savings
1. Determination of Savings
For each trial standard level (TSL), DOE projected energy savings
from the application of the TSL to commercial packaged boilers
purchased in the 30-year period that begins in the year of compliance
with amended standards (2020-2049).\20\ The savings are measured over
the entire lifetime of commercial packaged boilers purchased in the 30-
year analysis period. DOE quantified the energy savings attributable to
each TSL as the difference in energy consumption between each standards
case and the no-new-standards-case. The no-new-standards case
represents a projection of energy consumption that reflects how the
market for equipment would likely evolve in the absence of amended
efficiency standards.
---------------------------------------------------------------------------
\20\ DOE also presents a sensitivity analysis that considers
impacts for equipment shipped in a 9-year period.
---------------------------------------------------------------------------
DOE uses its NIA spreadsheet models to estimate energy savings from
potential amended standards. The NIA spreadsheet model (described in
section IV.H of this document) calculates savings in site energy, which
is the energy directly consumed by equipment at the locations where
they are used. For electricity, DOE reports national energy savings
(NES) in terms of primary energy savings, which is the savings in the
energy that is used to generate and transmit the site electricity. For
natural gas, the primary energy savings are considered to be equal to
the site energy savings. DOE also calculates NES in terms of full-fuel-
cycle (FFC) energy savings. The FFC metric includes the energy consumed
in extracting, processing, and transporting primary fuels (i.e., coal,
natural gas, petroleum fuels), and thus presents a more complete
picture of the impacts of energy conservation standards. DOE's approach
is based on the calculation of an FFC multiplier for each of the energy
types used by covered products or equipment. For more information on
FFC energy savings, see section IV.H.2 of this document.
2. Significance of Savings
To amend standards for commercial packaged boilers, DOE must
determine that the standards would result in ``significant'' additional
energy savings. (42 U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i)) Although
the term ``significant'' is not defined in the Act, the U.S. Court of
Appeals for the District of Columbia Circuit, in Natural Resources
Defense Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985),
indicated that Congress intended ``significant'' energy savings in the
context of EPCA to be savings that were not ``genuinely trivial.'' DOE
concludes the energy savings for the amended standards (presented in
section V.B.3 of this document) are ``significant'' as required by 42
U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i).
E. Economic Justification
1. Specific Criteria
EPCA provides seven factors to be evaluated in determining whether
a potential energy conservation standard is economically justified. (42
U.S.C. 6313(a)(6)(B)(ii)(I)-(VII)) The following sections discuss how
DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
EPCA requires DOE to consider the economic impact of a standard on
manufacturers and the consumers of the products subject to the
standard. (42 U.S.C. 6313(a)(6)(B)(ii)(I)) In determining the impacts
of a potential amended standard on manufacturers, DOE conducts a
manufacturer impact analysis (MIA), as discussed in section IV.J of
this document. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include: (1) INPV, which
values the industry based on expected future cash flows; (2) cash flows
by year; (3) changes in revenue and income; and (4) other measures of
impact, as appropriate. Second, DOE analyzes and reports the impacts on
different types of manufacturers, including impacts on small
manufacturers. Third, DOE considers the impact of standards on domestic
manufacturer employment and manufacturing capacity, as well as the
potential for standards to result in plant closures and loss of capital
investment. Finally, DOE takes into account cumulative impacts of
various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and PBP associated with new or amended standards. These
measures are discussed further in the following section. For consumers
in the aggregate, DOE also calculates the national NPV of the economic
impacts applicable to a particular rulemaking. DOE also evaluates the
LCC impacts of potential standards on identifiable subgroups of
consumers that may be affected disproportionately by a national
standard.
b. Savings in Operating Costs Compared To Increase in Price
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered equipment in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered equipment
that are likely to result from an amended standard. (42 U.S.C.
6313(a)(6)(B)(ii)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of the equipment
(including installation cost and sales tax) and the operating expense
(including energy, maintenance, and repair expenditures) discounted
over the lifetime of the equipment. The LCC analysis requires a variety
of inputs, such as equipment prices, equipment energy consumption,
energy prices, maintenance and repair costs, equipment lifetime, and
discount rates appropriate for consumers. To account for uncertainty
and variability in specific inputs, such as equipment lifetime and
discount rate, DOE uses a distribution of values, with probabilities
attached to each value. For its analysis, DOE assumes that consumers
will purchase the covered equipment in the first year of compliance
with amended standards.
The PBP is the estimated amount of time (in years) it takes
consumers to
[[Page 1605]]
recover the increased purchase cost (including installation) of more-
efficient equipment through lower operating costs. DOE calculates the
PBP by dividing the change in purchase cost due to a more stringent
standard by the change in annual operating cost for the year that
standards are assumed to take effect.
The LCC savings for the considered efficiency levels are calculated
relative to a no-new-standards-case that reflects projected market
trends in the absence of amended standards. DOE identifies the
percentage of consumers estimated to receive LCC savings or experience
an LCC increase, in addition to the average LCC savings associated with
a particular standard level. DOE's LCC and PBP analysis is discussed in
further detail in section IV.F of this document.
c. Energy Savings
EPCA requires DOE, in determining the economic justification of a
standard, to consider the total projected energy savings that are
expected to result directly from the standard. (42 U.S.C.
6313(a)(6)(B)(ii)(III)) As discussed in section III.D.1 and section
IV.E of this document and chapter 10 of the final rule TSD, DOE uses
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Equipment
In determining whether amending a standard is economically
justified, DOE evaluates any lessening of the utilities or performance
of the considered equipment. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on
data available to DOE, the standards adopted in this document do not
reduce the utility or performance of the equipment under consideration
in this rulemaking. See section IV.A.3 and section IV.B for DOE's
detailed determinations that adopted standards in this final rule do
not reduce utility or performance of CBP equipment covered under this
rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General of the
United States that is likely to result from a standard. (42 U.S.C.
6313(a)(6)(B)(ii)(V)) DOE transmitted a copy of its proposed rule to
the Attorney General with a request that the Department of Justice
(DOJ) provide its determination on this issue. On October 19, 2015, DOJ
provided its determination to DOE that the amended standards for
commercial packaged boilers are unlikely to have a significant adverse
impact on competition. DOE has included this determination from DOJ at
the end of this rule.
f. Need for National Energy Conservation
In considering new or amended energy conservation standards, EPCA
also directs DOE to consider the need for the national energy
conservation. (42 U.S.C. 6313(a)(6)(B)(ii)(VI)) The adopted standards
are likely to improve the security and reliability of the Nation's
energy system. Reductions in the demand for electricity also may result
in reduced costs for maintaining the reliability of the Nation's
electricity system. DOE conducts a utility impact analysis to estimate
how standards may affect the Nation's needed power generation capacity,
as discussed in section IV.M of this document.
The adopted standards also are likely to result in environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases (GHGs) associated with energy production and use. DOE
conducts an emissions analysis to estimate how standards may affect
these emissions, as discussed in section IV.K of this document. DOE
reports the emissions impacts from each TSL it considered in section
V.B.6 of this document. DOE also estimates the economic value of
emissions reductions resulting from the considered TSLs, as discussed
in section IV.L of this document.
g. Other Factors
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. 6313(a)(6)(B)(ii)(VII)) To
the extent interested parties submit any relevant information regarding
economic justification that does not fit into the other categories
described above, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
EPCA creates a rebuttable presumption that an energy conservation
standard is economically justified if the additional cost to the
consumer of the equipment that meets the standard is less than three
times the value of the first year's energy savings resulting from the
standard, as calculated under the applicable DOE test procedure. DOE's
LCC and PBP analyses generate values used to calculate the effects that
amended energy conservation standards would have on the PBP for
consumers. These analyses include, but are not limited to, the 3-year
PBP contemplated under the rebuttable-presumption test.
In addition, DOE routinely conducts an economic analysis that
considers the full range of impacts to consumers, manufacturers, the
Nation, and the environment, as required under 42 U.S.C.
6313(a)(6)(B)(ii) and (C)(i). The results of this analysis serve as the
basis for DOE's evaluation of the economic justification for a
potential standard level (thereby supporting or rebutting the results
of any preliminary determination of economic justification). The
rebuttable presumption payback calculation is discussed in section
V.B.1.c of this document.
F. General Comments
1. Proposed Standard Levels
In response to the efficiency levels proposed in the March 2016
NOPR (NOPR TSL 2), DOE received numerous comments on the appropriate
levels for selection as the Federal standards.
a. Comments on Proposed TSL 2
The Joint Utilities expressed their support for the proposed
standard levels (i.e., NOPR TSL 2). (Joint Utilities, No. 66 at p. 1)
BHI, Weil-McLain, and Lochinvar opposed the proposed standard
levels at NOPR TSL 2, and Lochinvar encouraged DOE to make no change to
the minimum efficiency standard. (BHI, No. 71 at p. 1; Weil-McLain, No.
67 at pp. 4-5; Lochinvar, No. 70 at p. 8)
BHI expressed concern that commercial packaged boilers meeting the
efficiency levels proposed in the March 2016 NOPR for small gas-fired
hot water (SGHW) and large gas-fired hot water (LGHW) equipment classes
(85-percent ET and 85-percent EC, respectively)
cannot be safely vented using a conventional ``category I'' chimney.
(BHI, No. 71 at p. 2) Raypak added that the category I venting
commercial packaged boilers must be retained to allow replacement of
boilers from old installations. (Raypak, No. 72 at p. 3) Raypak also
expressed concern that the proposed TSL 2 is too close to condensing
and could lead to failure of B-vent pipes and leaking combustion
equipment.
Raypak suggested that DOE selected the proposed efficiency levels
because higher efficiency standards exist in Europe. Raypak noted that
the regulations governing boiler maintenance in Europe are
substantially different, and that some countries require annual boiler
inspections and service, which are not required in the United States.
Raypak argued that DOE
[[Page 1606]]
should not set standards at the levels proposed in the March 2016 NOPR
until maintenance practices in the United States are comparable to
those in other countries. Raypak further stated that the complexity of
newer technology requires installers who are skilled and experienced to
install higher efficiency commercial packaged boilers. (Raypak, No. 72
at p. 3)
Weil-McLain expressed concern that the proposed levels included in
the NOPR TSL 2 would significantly reduce the non-condensing options
available to consumers. Weil-McLain also added that DOE would erase a
future increase in efficiency that was to take effect in 2022 pursuant
to 10 CFR 431.87(c), noting that manufacturers' ability to make long-
term development plans are impacted when efficiency requirements are
obsoleted before they have even gone into effect. (Weil-McLain, No. 67
at pp. 2-3) Both Weil-McLain and BHI suggested that the proposed levels
could reduce their ability to sell non-condensing commercial packaged
boilers, and therefore would create a significant burden on
manufacturers. (Weil-McLain, No. 67 at pp. 4-5; BHI, No. 71 at p. 1)
BHI further commented that adopting NOPR TSL 2 would potentially reduce
employment at their facilities. (BHI, No. 71 at p. 1) The Gas
Associations urged DOE to revise the technical analysis and economic
justification for the 85-percent level proposed in the March 2016 NOPR.
The Gas Associations expressed concern about issues with possible
condensation in the venting system and interior heat exchanger leading
to premature failure and believe that the current standards are
sufficient and justified. (Gas Associations, No. 69 at p. 2)
SoCalGas and AHRI recommended that DOE adopt NOPR TSL 1. (SoCalGas,
No. 77 at p. 4; AHRI, No. 76 at pp. 27, 44) SoCalGas argued that the
changes to test procedure may impact efficiency ratings, and noted that
if a 1 percent decrease in ratings were to occur as a result of the
test procedure changes, the result would be effectively requiring an
86-percent ET for SGHW commercial packaged boilers. SoCalGas
cited DOE's own analysis demonstrating that there are very few
commercial packaged boilers on the market meeting the 86-percent
ET level. (SoCalGas, No. 77 at p. 3) AHRI also stated that,
based on DOE's analysis, it should not adopt a standard more stringent
than the proposed TSL 2 in all equipment classes, because the increase
in incorrect venting and other installation decisions should prohibit
consideration of near-condensing efficiency levels. (AHRI, No. 76 at p.
27) AHRI and Raypak stated that forcing consumers to buy near-
condensing and condensing boilers in circumstances where they are not
warranted for installation is a perversion of the regulatory process.
(AHRI, No. 76 at p. 27; Raypak, No. 72 at p. 2)
ABMA commented that the proposed levels included in NOPR TSL 2 for
the LGHW and LOHW equipment classes (i.e., 85-percent EC and
88-percent EC) would be unattainable for certain sizes of
commercial packaged boilers in its members' equipment lines and
recommended that DOE adopt standards at 83 percent and 86 percent,
respectively. (ABMA, No. 64 at p. 2)
Bradford White and Raypak recommended that DOE adopt a minimum
standard of 82-percent ET for the SGHW equipment class. For
the LGHW equipment class, Bradford White recommended DOE select 84-
percent EC, while, Raypak recommended 82-percent
EC. (Bradford White, No. 68 at p. 4; Raypak, No. 72 at p. 4)
Bradford White stated that the proposed level of 85-percent
EC for LGHW commercial packaged boilers forces the use of
such equipment in applications where it may not make sense. Bradford
White added that equipment with a combustion efficiency of
approximately 85 to 88 percent in use today is a result of contractors
consciously determining such equipment is appropriate for each
respective installation. Bradford White stated that the proposed level
of 85-percent EC for LGHW commercial packaged boilers forces
the use of such equipment in inappropriate applications and noted that
changing out the vent system may not be possible in these
installations. (Bradford White, No. 68 at p. 3)
In view of the preceding stakeholder comments about TSLs, DOE notes
that DOE is required to set a standard that achieves significant
additional energy savings that is determined to be technologically
feasible and economically justified. In making such a determination,
DOE must consider, to the maximum extent practicable, the benefits and
burdens based on the seven criteria described in EPCA (see 42 U.S.C.
6313(a)(6)(B)(ii)(I)-(VII)). DOE's weighing of the benefits and burdens
based on the final rule analysis and rationale for the TSL selection is
discussed in section V and in detail in appendix 10C of the final rule
TSD. DOE notes that much of the commentary regarding the selection of
TSL levels for the standards is based on more detailed comments
regarding specific portions of the final rule analysis. These comments
related to specific analyses are addressed within the specific analysis
section to which they pertain.
DOE also disagrees with Raypak's comments that the proposed
standards were based on the standards applicable in Europe. Although
DOE researches international energy efficiency regulations in the
context of its market assessment, the standard levels that were
proposed in the March 2016 NOPR, and those that are adopted in this
final rule are not determined based on international regulations.
Rather, DOE selects standard levels by weighing the benefits and
burdens of each TSL to ensure that the standards save a significant
additional amount of energy and are technologically feasible and
economically justified, as required by EPCA. (42 U.S.C.
6313(a)(6)(A)(ii)(II) and (C)(i))
In addition, Bradford White questioned the selection of TSL 2 due
the fact that it does not meet the rebuttable presumption payback of
three years, and therefore would place a significant burden on
consumers. (Bradford White, No. 68 at p. 4)
DOE notes that the 3-year payback period is contemplated under the
rebuttable presumption test. However, DOE routinely conducts a full
economic analysis that considers the full range of impacts, including
those to the consumer, manufacturer, Nation and environment, and the
results of this economic analysis are what serve as the basis for DOE
to definitively evaluate the economic justification for a standard
level. As detailed in section IV and section V of DOE's full economic
analysis for this final rule document, DOE concludes based on clear and
convincing evidence that the benefits of amended standards at TSL 2
outweigh the burdens, and the standards at TSL 2 are economically
justified.
b. Comments on TSL 3
The Joint Advocates urged DOE to adopt NOPR TSL 3, noting that TSL
3 was found to be cost effective for purchasers and would more than
double the national energy savings achieved by NOPR TSL 2. (Joint
Advocates, No. 74 at p. 1) ASAP also suggested DOE should consider
adopting NOPR TSL 3. (ASAP, Public Meeting Transcript, No. 61 at pp.
14-15) Weil-McLain, ABMA, and AHRI opposed the adoption of NOPR TSL 3.
(Weil-McLain, No. 67 at p. 9; ABMA, No. 64 at p. 3; AHRI, No. 76 at pp.
1, 27, 44) Bradford White expressed the belief that the estimated gains
of the SGHW equipment class at NOPR TSL 3 (i.e., at 95-percent
ET) were overstated in DOE's analysis, and noted that the
market is voluntarily moving towards products with efficiencies in
[[Page 1607]]
excess of 90-percent ET. (Bradford White, No. 68 at p. 3)
DOE considered the comments received in response to the
consideration for TSL 3 as proposed in the March 2016 NOPR. However,
based on DOE's updated analyses and the results presented in this final
rule (see section V), TSL 3 is no longer economically feasible.
Therefore, for the reasons discussed in section V.C.1, DOE has rejected
TSL 3.
c. Other Comments
SoCalGas expressed concerns that the results of a SoCalGas modified
LCC analysis shows a potentially significant burden to California and
SoCalGas consumers, in particular regarding the LGHW equipment class,
but acknowledged limitations to their analysis and filtering of the
CBECS dataset. (SoCalGas, No. 77 at p. 4)
Nussbaum requests clarity on whether DOE's regulations are intended
to remove enforcement from existing authorities, stating that
California Energy Commission's interpretation is that DOE has taken
over all enforcement related to efficiency. He further states that
without state and local enforcement of efficiency, it will be
sacrificed in order to achieve low NOX requirements since in
California emissions requirements are enforced. (Nussbaum, No. 60 at p.
1)
In response, DOE notes that while the SoCalGas analysis shows a
small decline in the cost effectiveness (i.e., LCC savings) of small
gas-fired hot water equipment at certain efficiency levels, it showed
an increase in the LCC savings at other levels relative to DOE's
analysis. While the analysis did show negative LCC savings for the
large gas-fired hot water equipment class at all efficiency levels, the
approach taken in modifying the model to only look at a relatively
small sample of buildings in the combined San Francisco and Los Angeles
climate regions, may allow for a substantial uncertainty in the LCC
results obtained for those regions. DOE's analysis focuses on the
national costs and benefits obtained, as befitting development of
National standards. Regarding the comment submitted by Nussbaum, under
EPCA DOE has authority to establish and regulate minimum efficiency for
commercial packaged boilers as measured under a standardized test
procedure, but DOE recognizes that performance in the field can vary
based on installation conditions, set-up, and maintenance.
2. Statutory Requirements
AHRI pointed out that EPCA's requirements in 42 U.S.C. 6295(o)(2)
for DOE to achieve the maximum improvement in energy efficiency in its
energy conservation standards rulemakings do not apply to commercial
packaged boilers. Therefore, AHRI suggested that DOE's entire analysis
is predicated on a fundamental flaw because it reflects an analysis
that blatantly disregards the crucial flexibility that DOE has to more
fully consider negative impacts on industry, particularly on small
business and job loss. (AHRI, No. 76 at p. 6)
DOE agrees that EPCA does not require DOE to select the standard
level that provides the maximum improvement in energy savings for
commercial packaged boilers. However, as discussed in section II.A, an
amended CPB standard must be designed to achieve significant additional
energy conservation and be technologically feasible and economically
justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i)) It is in DOE's
discretion to adopt amended standards at any level that meet these
legal criteria. DOE does not base its rulemaking solely on achieving
maximum energy efficiency improvements as claimed by the stakeholders.
In making the determination of economic justification of an amended
standard, DOE considers, to the maximum extent practicable, the
benefits and burdens of an amended standard based on the seven criteria
described in EPCA, which include the economic impact of the standard on
manufacturers. (See 42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII).) In
considering both the standards proposed in the March 2016 NOPR and
those being adopted in this final rule, DOE fully addressed EPCA's
requirements in 42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII), including
economic impact of the amended standards on manufacturers and small
businesses. A discussion of DOE's weighting of the benefits and burdens
based on these factors is contained in section V of this final rule.
With regard to the specific comments on impact on manufacturers and
employment impacts, DOE has considered these impacts, and they are
discussed in V.B of this final rule. The differential impacts for small
business manufacturers are discussed in section VI.B.
AHRI and Spire commented that DOE's CPB ECS rulemaking does not
meet EPCA's requirement for clear and convincing evidence prescribed in
42 U.S.C. 6313 (a)(6)(A)(ii)(II), because DOE failed to provide
reasonable basis for its analyses, such as its unsupported assumptions
for venting costs and the fundamental energy use of commercial packaged
boilers. AHRI further stated that this burden of proof is met only if
evidence ``instantly tilted the evidentiary scales'' when viewed in
light of alternative information. Colorado v. New Mexico, 467 U.S. 310,
316 (1984). By asking the stakeholders to substantiate its assumptions
and by initiating a rulemaking amending ASHRAE standards without
meeting the burden of proof requirements, AHRI argues that DOE
impermissibly shifted the agency's burden of production onto the
stakeholders. (AHRI, No. 76 at p. 7; Spire, No. 73 at pp. 6-8, 10)
DOE notes that it is adopting these standards pursuant to 42 U.S.C.
6313(a)(6)(C)(i)(II), which requires DOE to issue new standards based
on ``the criteria and procedures established under subparagraph (B).''
In relevant part, subparagraph (B) specifies that: (1) In making a
determination of economic justification, DOE must consider, to the
maximum extent practicable, the benefits and burdens of an amended
standard based on the seven criteria described in EPCA; (2) DOE may not
prescribe any standard that increases the energy use or decreases the
energy efficiency of a covered product; and (3) DOE may not prescribe
any standard that interested persons have established by a
preponderance of evidence is likely to result in the unavailability in
the United States of any 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. 6313(a)(6)(B)(ii)-(iii))
Importantly, subparagraph (B) does not mention clear and convincing
evidence. What is more, multiple features of the statutory text
indicate that a rule establishing standards under subparagraph
(C)(i)(II) need not be based on clear and convincing evidence.\21\ But
[[Page 1608]]
assuming that clear and convincing evidence is required here, DOE
believes its findings fully satisfy that threshold. To explain that
conclusion, DOE articulates how it understands the ``clear and
convincing evidence'' concept to operate in the context of DOE's
setting energy conservation standards. Commenters referred to the
context of litigation, where ``clear and convincing'' means that the
evidence must ``place in the ultimate factfinder an abiding conviction
that the truth'' of its conclusions is ``highly probable.'' \22\ At the
same time, to satisfy the ``clear and convincing'' standard of proof, a
litigant need not eliminate all possible doubt, or even all reasonable
doubt; ``clear and convincing'' is an intermediate standard that is
less stringent than the ``beyond all reasonable doubt'' threshold
required for a criminal conviction.
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\21\ To explain, the reference to ``criteria and procedures
established under subparagraph (B)'' is not best read as
encompassing a ``clear and convincing evidence'' threshold. For that
phrase appears in subparagraph (A), not subparagraph (B), and
therefore it is not a criterion or procedure ``established under
subparagraph (B).'' Subparagraph (B) does mention subparagraph (A),
but not in a manner that incorporates subparagraph (A) by reference;
rather, subparagraph (B) says the criteria and procedures it
establishes are to be used in subparagraph (A)(ii)(II). Subparagraph
(C)(i)(II) says the subparagraph (B) criteria and procedures are
also to be used in a subparagraph (C)(i)(II) decision. It does not
follow--logistically or linguistically--that such a decision must
also incorporate an evidentiary threshold that is used in a
different type of decision to which subparagraph (B) also applies.
In addition, subsection (a) includes multiple cross-references
to various paragraphs, subparagraphs, clauses, and subclauses. See,
e.g., 42 U.S.C. 6313(a)(5)(A); 6313(a)(5)(G); 6313(a)(6)(A)(ii)(I).
Consistent with the ordinary scheme of cross-references, see House
Legislative Counsel's Manual on Drafting Style, HLC No. 104-1, p. 24
(1995); Senate Office of the Legislative Counsel, Legislative
Drafting Manual 10 (1997), in each of these cross-references a
``subparagraph'' reference is to an item labeled with a capital
letter (such as ``subparagraph (B)''). Given the careful
construction of the network of cross-references in subsection (a),
it would be unusual for ``established under subparagraph (B)'' to
sweep in an evidentiary standard stated in text other than
subparagraph (B).
DOE also notes that clause (C)(i) contains two cross-references.
Subclause (I), addressing one decision DOE might make, mandates that
it be based on ``the criteria established under subparagraph (A).''
Subclause (II), addressing the decision DOE is making in this
rulemaking, refers to ``the criteria and procedures established
under subparagraph (B).'' By interpreting the latter phrase not to
encompass ``clear and convincing evidence,'' DOE appropriately gives
significance to this difference in language. Evidently ``the
criteria established under subparagraph (A)'' are different from the
``the criteria established under subparagraph (B)''; were they the
same criteria, there would have been no need to use different cross-
references. ``Clear and convincing evidence'' is in (A), not (B).To
the extent there is ambiguity in paragraph (a)(6) about whether DOE
must have clear and convincing evidence to establish an amended
standard under subparagraph (C), DOE believes its approach is
consistent with the purposes of subparagraph (C). That is to say,
the intent of paragraph (6) is to include ASHRAE in the standards-
developing process. ASHRAE maintains standards that achieve energy
conservation with respect to the products to which paragraph (6)
applies, and ASHRAE is expected to update those standards as
technology and markets evolve over time. When ASHRAE has acted in a
timely fashion, DOE is to reflect ASHRAE's standards in its own
standards, unless it has clear and convincing evidence justifying
more stringent standards (on the terms of subclause (A)(i)(II)).
However, the statute directs DOE to review its standards every six
years--in case ASHRAE has not acted. This six-year review encourages
ASHRAE to keep its standards up to date, because if it has recently
amended its standards (and triggered DOE to follow), DOE will not
need to engage in its independent standards revision. But, if ASHRAE
has not revisited its standards for some while, DOE's six-year
review provides an occasion on which DOE might adopt more stringent
standards, without being tied to the ASHRAE standards. By not
imposing the ``clear and convincing'' threshold for such a
rulemaking, the statute encourages ASHRAE to continually update its
standards. In short, a common-sense approach to the purposes of
subparagraph (C) aligns with the above careful textual reading.
\22\ Colorado v. New Mexico, 467 U.S. 310, 316 (1984).
---------------------------------------------------------------------------
DOE fully recognizes that whenever it must have ``clear and
convincing evidence'' pursuant to subclause (A)(i)(II), it needs a
higher degree of confidence in its conclusions than would be required
under the ``preponderance'' standard that ordinarily applies in an
agency rulemaking. In such matters, the administrative record, taken as
a whole, must justify DOE in a strong conviction that its conclusions
are highly likely to be correct.
However, some commenters appear to think that the ``clear and
convincing'' threshold would preclude DOE from using its expert
judgment to make predictions. That would not be the case in litigation;
a ``clear and convincing evidence'' standard of proof does not restrict
the type, quality, or nature of evidence, including expert opinions
that can be used. Moreover, a standards-setting rulemaking is not a
litigation, and the differences warrant some differences in how the
``clear and convincing evidence'' threshold operates. DOE both develops
the record and reviews it to make findings. Also, as an agency tasked
with setting policy, DOE is ordinarily expected to use its predictive
judgment. The text of paragraph (6) is consistent with that notion.
Subparagraph (B), which describes various factors that DOE is to
consider in making a subclause (A)(i)(II) decision for which it would
need clear and convincing evidence, repeatedly calls for predictive
judgments. DOE is to forecast the likely energy savings of a standard,
the economic costs and benefits of the standard, and other future
effects. By their nature, these assessments cannot be instantly
determined to be correct. Rather, DOE believes ``clear and convincing
evidence'' would mean that DOE must be strongly convinced that its
forecasts are highly likely to be reasonable forecasts given current
conditions and information.
In sum, for purposes of setting standards under paragraph (a)(6),
``clear and convincing evidence'' can include the same sorts of
evidence and analysis that DOE would use in any other standards
rulemaking. But DOE will conclude it has ``clear and convincing
evidence'' only when it is strongly convinced that it is highly likely
to have reached appropriate findings. With respect to the findings
discussed in this rulemaking, DOE does have that strong conviction,
well placed given the record as a whole.
Spire further commented that the NOPR was issued without remotely
sufficient information and analysis to justify adoption of the
standards proposed and that key information and analysis underlying it
has yet to be disclosed so that it can be exposed to potential
refutation through comment, and as such the NOPR is inadequate to
satisfy notice and comment requirements, and should therefore be
withdrawn.
Under the notice-and-comment or informal rulemaking provisions of
the Administrative Procedure Act, DOE must publish in the Federal
Register a notice of proposed rulemaking that includes: (1) A statement
of the time, place, and nature of the public rulemaking proceedings;
(2) a reference to the legal authority under which the rule is
proposed; and (3) either the terms or substance of the proposed rule or
a description of the subjects and issues involved. (5 U.S.C. 553(b))
DOE must then allow interested parties an opportunity to participate in
the rulemaking through submission of written data, views, or arguments
with or without opportunity for oral presentation. (5 U.S.C. 553(c)) On
March 24, 2016, DOE published a NOPR and notice of public meeting in
the Federal Register that met the requirements under 5 U.S.C. 553(b).
DOE also provided the public an opportunity to present oral and written
data, views, and arguments on the March 2016 CPB ECS NOPR.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to commercial packaged boilers. Separate
subsections address each component of DOE's analyses.
DOE used three analytical tools to estimate the impact of the
standards. The first tool is a spreadsheet that calculates the LCC
savings and PBP of potential amended energy conservation standards. See
section IV.F and chapter 8 of final rule TSD for details of the LCC and
PBP spreadsheet tool. The second tool is a Microsoft Excel spreadsheet
that calculates national energy savings and net present value resulting
from potential amended energy conservation standards. More details of
this spreadsheet tool can be found in section IV.H and chapter 10 of
the final rule TSD. The third spreadsheet tool, the Government
Regulatory Impact Model (GRIM), helps DOE to assess manufacturer
impacts of potential standards. See section IV.J and chapter
[[Page 1609]]
12 of the final rule TSD. In addition, these tools are available on the
DOE website for this rulemaking: http://www.regulations.gov/docket?D=EERE-2013-BT-STD-0030.
Additionally, DOE used output from the 2016 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
1. General
For the market and technology assessment, DOE develops information
that provides an overall snapshot of the market for the equipment
considered, including the nature of the equipment, market
characteristics, industry structure, and technologies that improve
energy efficiency. DOE divides the market and technology assessment
broadly into two categories: (1) Market assessment and (2) technology
assessment. The purpose of the market assessment is to develop a
qualitative and quantitative characterization of the CPB industry and
market structure, based on information that is publicly available as
well as data submitted by manufacturers and other interested parties.
Issues addressed include CPB characteristics (gathered from market
databases and literature), market share and equipment classes; existing
regulatory and non-regulatory efficiency improvement initiatives;
models currently available and their distribution with respect to
efficiency and rated input in each equipment class. The purpose of the
technology assessment is to investigate technologies currently used in
commercial packaged boilers, and identify those that will improve the
energy efficiency of commercial packaged boilers. The technology
assessment results in a preliminary list of technology options that can
improve the thermal and/or combustion efficiency of commercial packaged
boilers. Chapter 3 of the final rule TSD contains all the information
related to the market and technology assessment. The chapter also
provides additional details on the methodology used, information
gathered, and results. DOE typically uses the information gathered in
this chapter in the various downstream analyses such as engineering
analysis, shipment analysis, and manufacturer impact analyses.
For this final rule, DOE explored the market to identify
manufacturers of commercial packaged boilers. As per the definition set
forth in 10 CFR 431.82, a manufacturer of a commercial packaged boiler
is any entity that: (1) Manufactures, produces, assembles, or imports a
commercial packaged boiler in its entirety; (2) manufactures, produces,
assembles, or imports a commercial packaged boiler in part, and
specifies or approves the boiler's components, including burners or
other components produced by others, as for example by specifying such
components in a catalogue by make and model number or parts number; or
(3) is any vendor or installer who sells a commercial packaged boiler
that consists of a combination of components that is not specified or
approved by a person described in the two previous parts of this
definition.
Through extensive search of publicly available information,
including DOE's Compliance Certification Database \23\ and ABMA's and
AHRI's websites, DOE identified 46 unique parent companies that
manufacture CPB equipment. The complete list of manufacturers can be
found in chapter 3 of the final rule TSD.
---------------------------------------------------------------------------
\23\ DOE's Compliance Certification Database houses
certification reports and compliance statements submitted by
manufacturers for covered products and equipment subject to Federal
conservation standards. http://energy.gov/eere/buildings/implementation-certification-and-enforcement.
---------------------------------------------------------------------------
In the NOPR analysis, DOE relied on equipment listing data from
AHRI and other public sources and requested comment on any
manufacturers of CPB equipment that were not represented in this
analysis. Bradford White recommended that DOE review the paid research
reports, included in research from BRG Building Solutions to identify
manufacturers that are neither members of AHRI nor ABMA.\24\ (Bradford
White, No. 68 at p. 4)
---------------------------------------------------------------------------
\24\ BRG Building Solutions is a global consultancy that
provides market data for various construction, building products,
and utility industries, including heating and ventilation products.
www.brgbuildingsolutions.com/.
---------------------------------------------------------------------------
For the final rule, DOE's market analysis is primarily based on the
Compliance Certification Database. The Compliance Certification
Database houses certification reports and compliance statements
submitted by manufacturers for covered equipment and equipment subject
to Federal conservation standards. Manufacturers of all covered
equipment are required to submit a certification report before a basic
model is distributed in commerce. The Compliance Certification Database
includes only certification records of current basic models that have
been submitted to DOE in the past year. Thus, this database should
provide the most comprehensive list of manufacturers actively selling
commercial packaged boilers in the United States. However, DOE also
surveyed the market to identify manufacturers that are not included in
the Compliance Certification Database, but that appear to be actively
selling CPB models. DOE reviewed AHRI and ABMA member manufacturers,
and also searched publicly available information to identify several
manufacturers who are neither members of AHRI nor ABMA. Through these
information sources, DOE concludes it has generated a complete picture
of the CPB market and manufacturers, and, thus, did not require the
report suggested by Bradford White. The models offered by all
manufacturers that DOE identified in this rulemaking characterize the
market for commercial packaged boilers in the market and technology
assessment (chapter 3 of the final rule TSD).
2. Scope of Coverage
EPCA lists ``packaged boilers'' as a type of covered equipment. (42
U.S.C. 6311(1)) EPCA defines the term ``packaged boiler'' as ``a boiler
that is shipped complete with heating equipment, mechanical draft
equipment, and automatic controls; usually shipped in one or more
sections.'' (42 U.S.C. 6311(11)(B))
In the 2016 CPB TP final rule, DOE consolidated various definitions
related to commercial packaged boilers by revising its definitions for
``packaged boiler'' and ``commercial packaged boiler'' at 10 CFR
431.82, and removing the definitions for ``packaged low pressure
boiler'' and ``packaged high pressure boiler.'' The definition for
``packaged boiler'' adopted by DOE in the 2016 CPB TP final rule is
essentially the same as EPCA's definition, but clarifies that if the
boiler is shipped in more than one section, the sections may be
produced by more than one manufacturer, and may be originated or
shipped at different times and from more than one location. DOE updated
the definition of a ``commercial packaged boiler'' to define the term
as a packaged boiler that meets all of the following criteria: (1) Has
a rated input of 300,000 Btu/h or greater; (2) is distributed in
commerce for space conditioning and/or service water heating in
buildings but does not meet the definition of ``hot water supply
boiler''; (3) does not meet the definition of ``field-constructed'';
and (4) is designed to, or is operated at a steam pressure of at or
below 15 psig or a water pressure at or below 160 psig and water
temperature of 250 [deg]F. 81 FR 89276, 89279-89280 (December 9, 2016).
DOE also adopted a related definition for ``field-constructed.''
As noted above, the definition of ``packaged boiler'' refers to a
boiler that is shipped complete with heating
[[Page 1610]]
equipment, mechanical draft equipment, and automatic controls.
Although, the definition does not explicitly include natural draft
equipment, DOE concluded in the August 2015 withdrawal notice that
natural draft commercial packaged boilers are and have been covered
equipment subject to DOE's energy conservation standards for commercial
packaged boilers. 80 FR 51487. Accordingly, DOE proposed amended energy
conservation standards in the March 2016 NOPR that are applicable to
natural draft commercial packaged boilers, and has likewise included
natural draft commercial packaged boilers in the analysis for this
final rule and adopts standards that are applicable to this equipment.
3. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
typically divides covered equipment into equipment classes based on the
type of energy used, capacity, or performance-related features that
justify a different standard. In making a determination whether a
performance-related feature justifies a different standard, DOE
considers such factors as the utility to the consumer of the feature
and other factors DOE determines are appropriate. The current
regulations for commercial packaged boilers list 10 equipment classes
with corresponding energy efficiency standards for each.\25\ 10 CFR
431.87. These equipment classes are based on (1) size (rated input),
(2) heating media (hot water or steam), and (3) type of fuel used (oil
or gas).\26\ The gas-fired steam commercial packaged boilers are
further classified according to draft type. In the March 2016 NOPR, DOE
proposed to consolidate CPB equipment classes that are currently
divided by draft type.\27\ Specifically, DOE proposed to combine the
small (>=300,000 Btu/h and <=2,500,000 Btu/h), gas fired--all except
natural draft, steam and small (>=300,000 Btu/h and <=2,500,000 Btu/h),
gas fired--natural draft, steam classes; and the large (>2,500,000 Btu/
h and <=10,000,000 Btu/h), gas fired--all except natural draft, steam
and large (>=2,500,000 Btu/h and <=10,000,000 Btu/h), gas fired--
natural draft, steam classes from four equipment classes to two
equipment classes: (1) Small (>=300,000 Btu/h and <=2,500,000 Btu/h),
gas-fired steam; and (2) large (>2,500,000 Btu/h and <=10,000,000 Btu/
h), gas-fired steam. 81 FR 15852.
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\25\ These standard levels were adopted in the July 2009 final
rule. 74 FR 36312 (July 22, 2009).
\26\ Under subpart E of 10 CFR part 431, commercial packaged
boilers are divided into equipment classes based on rated input
(i.e., size category). Throughout this document, DOE refers to units
with a rated input of >=300,000 Btu/h and <=2,500,000 Btu/h as
``small'' and units with a rated input of >2,500,000 Btu/h as
``large.'' See 10 CFR 431.87.
\27\ Because DOE is not adopting amended standards for
commercial packaged boilers with rated inputs above 10,000,000 Btu/
h, the standards for equipment in this class will remain unchanged.
Thus, although DOE is consolidating this equipment into a single
class, an allowance will still be made for natural draft units to
have a lower minimum efficiency until March 2, 2022, as is allowed
under the current standards.
---------------------------------------------------------------------------
The Joint Advocates and Bradford White supported DOE's
reconfiguration of the equipment classes to eliminate draft type as a
distinguishing feature. (Joint Advocates, No. 74 at p. 2; Bradford
White, No. 68 at p. 4) The Joint Advocates added that natural draft
boilers provide no distinct performance-related utility. (Joint
Advocates, No. 74 at p. 2)
Weil-McLain, Spire, the Gas Associations, and BHI requested that
DOE establish separate equipment classes for natural draft and
mechanical draft commercial packaged boilers, noting that the ability
to utilize natural draft in installations provides consumers with
utility. (Weil-McLain, No. 67 at p. 6; BHI, No. 71 at pp. 14-15; Spire,
No. 73 at p. 11; Gas Associations, No. 69 at p. 4; Crown, Public
Meeting Transcript, No. 61 at p. 159) BHI stated that loss of the
ability to use Category I venting (suitable for non-condensing boilers)
is a loss in utility because the circumstances of many real world
installations offer no practical alternatives to Category I venting.
BHI argued that providing heat and hot water are not the only utility
functions, features, and performance characteristics of boilers, and
that designs that allow proper installation in a variety of cases are a
critical aspect of utility so that such equipment can be installed and
used safely. In addition, BHI stated that there is a point at which
increasing installation costs become large enough to effectively create
a ``loss of utility,'' and this situation in the real world is as
likely to ``result in the unavailability'' of appropriate Category I
boilers as a pure design issue. Further, BHI adds that DOE overstated
the availability and utility of 85-percent gas-fired hot water boilers,
particularly 85-percent atmospheric boilers in its screening analysis.
BHI suggests that the adoption of 85-percent gas-fired hot water
standard will leave many consumers with no cost effective option for
replacement boiler and could lead to safety issues due to problems in
venting system. BHI stated that this is a direct violation of the
``safe harbor rule.'' (BHI, No. 71 at pp. 4, 13-15) Spire also
suggested that easy installation to existing natural draft venting
systems should qualify as a unique utility of natural draft units and
therefore should be preserved under 42 U.S.C. 6313(a)(6)(B)(i)(IV).
Spire noted that DOE has recognized this fact in its decision to
maintain separate equipment classes for ``space-constrained'' heat
pumps and air conditions. (Spire, No. 72, at pp. 10-12) Raypak
commented that DOE should not assume that all boiler installations will
be capable of handling new installations at the amended efficiencies
proposed in the March 2016 NOPR. They add that half of the commercial
buildings were built before 1980 and when these boilers need to be
replaced, it may not be possible to install an 85-percent efficient
boiler in its place. Raypak further states that the category I boilers
must be retained for such replacement scenarios. (Raypak, No. 72 at p.
3)
DOE maintains its position explained in the March 2016 NOPR and
reiterates that the utility derived by consumers from commercial
packaged boilers is in the form of the space heating function that a
boiler performs, rather than the type of venting the boiler uses.
Boilers requiring Category I or Category IV venting are capable of
providing the same heating function to the consumer, and, thus, provide
the same utility with respect to their primary function. DOE does not
consider reduced costs associated with Category I venting in certain
installations as a utility to the consumer, and also disagrees with
BHI's assertion that there is a point at which the installation costs
get so prohibitively expensive that they create a loss of utility to
the consumer. Instead, the expenses associated with venting
requirements are considered as an economic impact on consumers in the
rulemaking's cost-benefit analysis and ultimately the analysis
determines if the cost is economically prohibitive. Details regarding
installation costs can be located in section IV.F.2. Further, DOE
maintains that this final rule is not in violation of ``safe harbor''
rule because it does not result in the unavailability of any covered
product class of performance characteristics (including reliability,
features, sizes, capacities and volumes) that are substantially the
same as those currently available. 42 U.S.C. 6313(a)(B)(iii)(II)(aa)
DOE does not consider the type of venting to be a ``feature'' that
would provide utility to consumers; instead DOE properly accounts for
the economic benefits of the venting type in the economic analysis.
Further, with regard to issues of safety in venting and incorrect
[[Page 1611]]
installation, DOE notes that there is equipment that is currently
installed in commercial buildings that meets or exceeds the amended
standards established in this final rule. Manufacturers will also have
sufficient time after the publication of this final rule and before the
compliance date to revise their installation and operation manuals of
their compliant equipment or to train contractors on installation of
equipment that requires a change of the venting system.
In the March 2016 NOPR, DOE tentatively decided to classify
commercial packaged boilers with rated input greater than 10,000 kBtu/h
into separate equipment classes and not amend energy conservation
standards for those classes because of regulatory complexities and lack
of sufficient data to justify amended standards. 81 FR 15851-15853.
Specifically, DOE noted that commercial packaged boilers with rated
input greater than 10,000 kBtu/h are generally engineered-to-order,
have very low shipment volumes as compared to other equipment classes
with lower rated input, and have limited potential for significant
additional energy savings. These factors, combined with a lack of
information on pricing, shipments, and rated efficiency, led DOE to not
propose amended energy conservation standards for very large commercial
packaged boilers; however, the current efficiency standards applicable
for the large CPB equipment classes remain applicable to the very large
CPB equipment classes.
In response to these proposed amendments, Bradford White and ABMA
expressed support for the introduction of the ``Very Large'' equipment
classes. (Bradford White, No. 68 at p. 4; ABMA, No. 64 at p. 1)
However, ABMA requested DOE to place a capacity limit on this
rulemaking. (ABMA, No. 64 at p. 1) Raypak expressed support for not
increasing the efficiency standard for very large commercial packaged
boilers. (Raypak, No. 72 at p. 4) ABMA also noted that very large
commercial packaged boilers are generally custom-built, and obtaining
realistic prices for such equipment will not be possible. (ABMA, No. 64
at p. 2)
Based on the foregoing, DOE adopts equipment classes for ``very
large'' commercial packaged boilers in this final rule. However, as
discussed in the March 2016 NOPR, an upper limit for the rated input
for commercial packaged boilers regulated by DOE's standards would
violate EPCA's anti-backsliding provisions set forth in 42 U.S.C.
6313(a)(6)(B)(iii)(I), as the existing standards apply to all equipment
meeting the definition of commercial packaged boiler regardless of the
rated input. Providing an upper limit for rated input above which
standards do not apply would essentially be repealing the existing
standards for that equipment, which is prohibited by the anti-
backsliding clause. As such, DOE maintains the existing standards for
very large commercial packaged boilers at the levels currently
applicable to all commercial packaged boilers with rated input greater
than or equal to 2,500 kBtu/h.
In summary, today's final rule adopts the following changes
proposed in the March 2016 NOPR: (1) Separating the equipment classes
for commercial packaged boilers that have rated input above 10,000
kBtu/h, and (2) consolidating the equipment classes for small and large
gas-fired steam boilers that are currently divided based on draft type
into equipment classes that are not divided based on draft type,
thereby reducing the four draft-specific classes into two classes that
are not draft specific. In addition, DOE has decided not to amend
energy conservation standards for very large commercial packaged
boilers. The current standards for large CPB equipment classes will
remain applicable to the corresponding very large CPB equipment
classes.
Thus, in total, DOE is adopting 12 equipment classes \28\ for
commercial packaged boilers. The equipment classes are categorized
based on: (1) Rated input (small (>=300,000 Btu/h to <=2,500,000 Btu/
h), large (>2,500,000 Btu/h and <=10,000,000 Btu/h) and very large
(>10,000,000 Btu/h)); (2) heating medium (hot water or steam); and (3)
fuel type (gas-fired or oil-fired). Table IV.1 shows all of the CPB
equipment classes, including the eight equipment classes for which DOE
is amending standards and four equipment classes for which DOE did not
amend standards.
---------------------------------------------------------------------------
\28\ Consolidating the 4 draft-specific classes into 2 non-
draft-specific classes reduces the number of equipment classes from
10 to 8, and creating separate equipment classes for very large CPB
equipment adds 4 equipment classes. These changes result in 12
equipment classes.
Table IV.1--Equipment Classes for Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Amended standards adopted
Equipment class Size Fuel Heating medium Acronym in this final rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-fired Hot Water....... >=300kBtu/h to Gas................... Hot Water............. SGHW Yes.
<=2,500kBtu/h.
Large Gas-fired Hot Water....... >2,500kBtu/h to Gas................... Hot Water............. LGHW Yes.
<=10,000kBtu/h.
Very Large Gas-fired Hot Water >10,000kBtu/h...... Gas................... Hot Water............. VLGHW No.
**.
Small Oil-fired Hot Water....... >=300kBtu/h to Oil................... Hot Water............. SOHW Yes.
<=2,500kBtu/h.
Large Oil-fired Hot Water....... >2,500kBtu/h to Oil................... Hot Water............. LOHW Yes.
<=10,000kBtu/h.
Very Large Oil-fired Hot Water >10,000kBtu/h...... Oil................... Hot Water............. VLOHW No.
**.
Small Gas-fired Steam *......... >=300kBtu/h to Gas................... Steam................. SGST Yes.
<=2,500kBtu/h.
Large Gas-fired Steam *......... >2,500kBtu/h to Gas................... Steam................. LGST Yes.
<=10,000kBtu/h.
Very Large Gas-fired Steam **... >10,000kBtu/h...... Gas................... Steam................. VLGST No.
Small Oil-fired Steam........... >=300kBtu/h to Oil................... Steam................. SOST Yes.
<=2,500kBtu/h.
Large Oil-fired Steam........... >2,500kBtu/h to Oil................... Steam................. LOST Yes.
<=10,000kBtu/h.
Very Large Oil-fired Steam **... >10,000kBtu/h...... Oil................... Steam................. VLOST No.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The small, gas-fired, steam, natural draft equipment classes and small, gas-fired steam, all except natural draft equipment classes prior to this
final rule are consolidated into a single small gas-fired, steam equipment class. Similarly, the large, gas-fired, steam, natural draft equipment
classes and large, gas-fired steam, all except natural draft equipment classes prior to this final rule are consolidated into a single large, gas-
fired, steam equipment class.
** DOE establishes separate equipment classes for commercial packaged boilers with rated input above 10,000kBtu/h.
[[Page 1612]]
4. Market Assessment
As discussed previously, in the market assessment DOE uses
qualitative and quantitative information to assess the past and present
industry structure and market characteristics. In carrying out this
assessment, DOE examines literature from a variety of sources,
including industry publications, trade journals, government agencies,
manufacturers, and trade organizations.
In the March 2016 NOPR, DOE compiled a database of commercial
packaged boilers that was sourced from the AHRI's Directory of
Certified Product Performance (AHRI database) for commercial packaged
boilers and information gathered from manufacturer specifications of
ABMA member manufacturers. In chapter 3 of the NOPR TSD, DOE presented
histograms showing the distribution of commercial packaged boilers by
efficiency and rated input for each equipment class. DOE used these
distributions of models as inputs to the engineering analysis to
calculate the incremental prices and identify intermediate and max-tech
efficiency levels in each equipment class.
In response to using the distribution of models in the engineering
analysis, AHRI provided comments requesting DOE to reconsider its
approach. AHRI provided histograms of the distribution of the boiler
models based on their directory of certified equipment performance and
highlighted the differences with the histograms presented in the market
and technology assessment (chapter 3 of the NOPR TSD). (AHRI, No. 76 at
p. 12) Raypak also provided comments opposing the use of the
distribution of CPB models available on the market in each equipment
class, to conduct the engineering analysis. Raypak also added that DOE
does not have equipment listings for 11 out of 45 manufacturers who are
not represented by AHRI or ABMA. (Raypak, Public Meeting Transcript,
No. 61 at pp. 57-58; Raypak, No. 72 at pp. 2-3)
In response, DOE notes that it created the equipment database for
the March 2016 NOPR using the AHRI database (that was accessed in July
2015) and models of ABMA member manufacturers. The histograms that AHRI
provided in their comments only include models from a more recent
version of AHRI's directory of equipment performance. Therefore, the
difference in the histograms is most likely due to the difference in
the versions of the AHRI database considered in the March 2016 NOPR and
in AHRI's comments; and due to the additional data from ABMA member
manufacturer literature which is not accounted for in the histograms in
AHRI's comments.
In this final rule, DOE has created an updated database, that
includes commercial packaged boilers from several sources of
information, including its own Compliance Certification Database,\29\
AHRI's Directory of Certified Product Performance \30\ (accessed in
July 2016) for commercial packaged boiler, and manufacturer literature.
In response to comments provided by Raypak, DOE has also considered
boilers that meet the definition of commercial packaged boilers and are
produced by manufacturers who are not members of ABMA or AHRI. DOE
compiled a database consisting of a total of 4,791 CPB models for the
final rule (MTA database). However, in the downstream analysis, DOE did
not use information for certain models because they either: (1) Did not
list the relevant energy efficiency metric applicable for that
commercial packaged boiler; (2) had rated efficiency lower than the
corresponding energy conservation standard; or (3) listed an efficiency
rating based on a test procedure other than DOE's test procedure for
commercial packaged boilers. While such equipment was considered as
part of the boiler models available on the market since they meet the
definition of commercial packaged boilers, they were not considered in
the downstream analysis since the relevant data was missing. Out of the
total of 4,791 CPB models in the MTA database, 2,826 models had the
necessary data for consideration in the engineering analysis. (Note,
the 2,826 model count does not include the models in the ``very large''
equipment classes.) DOE used these remaining boiler models for
selecting efficiency levels and to conduct the analysis for evaluating
the incremental prices for higher efficiency. DOE has presented the
distribution of commercial packaged boilers based on the relevant
energy-efficiency metric (i.e., ET or EC) and
rated input in chapter 3 of the final rule TSD.
---------------------------------------------------------------------------
\29\ DOE's Compliance Certification Database is located at:
https://www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A*.
\30\ AHRI's Directory of Certified Product Performance can be
found at https://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------
In response to the March 2016 NOPR, AHRI provided aggregated
shipments data for SGHW and LGHW equipment classes, broken down by
efficiencies and rated input for the years 2014 and 2015. In a separate
correspondence with DOE, AHRI has also provided aggregated annual
shipment information for different non-condensing and condensing; and
gas- and oil-fired commercial packaged boilers spanning the years from
2001 to 2015. (AHRI, No. 76 at p. 13)
DOE used the shipment data provided by AHRI in its rulemaking
analyses for this final rule.
Chapter 3 of the final rule TSD, the market and technology
assessment, contains a detailed discussion of the models in the
analysis used and the distribution of CPB models by their efficiency
and rated input, and other characteristics (e.g., material, modulating
or non-modulating). Chapter 5 of the final rule TSD, the engineering
analysis, discusses the models used for the selection of efficiency
levels and the engineering analysis.
5. Technology Options
As part of the rulemaking analysis, DOE identifies technology
options that are currently used in commercial packaged boilers at
different efficiency levels available on the market. This helps DOE to
assess the technology changes that would be required to increase the
efficiency of a commercial packaged boiler from baseline to other
higher efficiency levels. Initially, these technologies encompass all
those DOE determines are technologically feasible.
As a starting point, DOE typically uses information from existing
and past rulemakings as inputs to determine what technologies
manufacturers use to attain higher performance levels. DOE also
researches emerging technologies that have been demonstrated in
prototype designs. DOE developed its list of design options for the
considered equipment classes through consultation with manufacturers,
including manufacturers of components and systems, and from trade
publications and technical papers.
In the March 2016 NOPR, DOE presented a list of technologies for
improving the efficiency of commercial packaged boilers: (1) Jacket
insulation; (2) heat exchanger improvements (including condensing heat
exchanger); (3) burner derating; (4) improved burner technology; (5)
combustion air preheaters; (6) economizers; (7) blowdown waste heat
recovery; (8) oxygen trim systems; and (9) integrated, high efficiency
steam boiler. DOE also added in the March 2016 NOPR that it is
considering ``pulse combustion burners'' as an option to achieve
condensing operation and tentatively decided to categorize it under
condensing boiler heat exchanger design. 81 FR 15853.
[[Page 1613]]
In response to the March 2016 NOPR, Lochinvar suggested that the
benefits of the oxygen trim technology were overstated in the TSD and
requested that DOE provide more details on the 1 to 2 percent
efficiency improvement claim. Lochinvar noted that oxygen trim systems
require electronically positioned valves and other controls that
increase the cost of the boiler which must be factored into the
analysis. Lochinvar added that oxygen trim systems incorporate oxygen
sensors which require replacement every few years. (Lochinvar, No. 70
at p. 7)
In response, DOE notes that the efficiency increments specified in
the NOPR TSD for oxygen trim systems are based on a possible reduction
in combustion air and an estimated improvement in efficiency
corresponding to that reduction in excess air. These efficiency
improvements are sourced from publicly available literature.\31\ Based
on the literature, every 1-percent decrease in excess oxygen or 15-
percent decrease in excess air in the stack, could result in an
improvement in efficiency of 0.5 percent and 1 percent, respectively.
While DOE considered these technology options as opportunities to
improve the efficiency for the technology assessment, it did not use
the options directly in the engineering analysis to establish a path
for improvement in efficiency and calculate the corresponding
incremental cost. Instead, in the engineering analysis, DOE used the
price-efficiency approach to determine the increase in manufacturer
selling price of the boiler with respect to increase in efficiency (see
section IV.C.1). This approach relies on selecting efficiency levels
and collecting pricing for commercial packaged boilers at those levels,
regardless of the particular technology used to reach the level and
using that information to develop aggregate industry price estimates at
each efficiency level. Therefore, the technology options identified and
specifically the options that passed the screening analysis (discussed
in section IV.B of this final rule) do not directly impact the
engineering analysis, but rather serve an informational purpose for
options that manufacturers, researchers, and other interested parties
may consider to improve the efficiency of commercial packaged boilers.
---------------------------------------------------------------------------
\31\ For more information on ``Oxygen trim systems'' see: http://www1.eere.energy.gov/manufacturing/tech_assistance/pdfs/steam4_boiler_efficiency.pdf and http://www.pdhonline.com/courses/m166/m166content.pdf.
---------------------------------------------------------------------------
DOE also received comments from Raypak in the NOPR public meeting
recommending moving pulse combustion as a completely independent
technology option rather than enlisting it under heat exchanger
improvements. (Raypak, Public Meeting Transcript, No. 61 at p. 51)
DOE agrees with the comments and has decided to add pulse
combustion as a separate technology option different from heat
exchanger improvements or improved burner technology.
DOE did not receive any other comments on the technology options it
considered in the March 2016 NOPR. Therefore, in this final rule, DOE
has retained all the technology options that were identified in the
March 2016 NOPR and has included ``pulse combustion'' as a separate
technology option. The technology options that are identified for the
final rule analysis are described in detail in chapter 3 of the final
rule TSD.
B. Screening Analysis
After DOE identified the technologies that might improve the energy
efficiency of commercial packaged boilers, DOE conducted a screening
analysis. The goal of the screening analysis is to identify technology
options that will be considered further, and those that will be
eliminated from further consideration, in the rulemaking analyses. DOE
applied the following set of screening criteria to each of the
technologies identified in the technology assessment to determine which
technology options are unsuitable for further consideration in the
rulemaking:
Technological feasibility: DOE will consider technologies
incorporated in commercial equipment or in working prototypes to be
technologically feasible.
Practicability to manufacture, install, and service: If
mass production and reliable installation and servicing of a technology
in commercial equipment could be achieved on the scale necessary to
serve the relevant market at the time the standard comes into effect,
then DOE will consider that technology practicable to manufacture,
install, and service.
Adverse impacts on equipment utility or equipment
availability: If DOE determines a technology would have a significant
adverse impact on the utility of the equipment to significant subgroups
of consumers, or would result in the unavailability of any covered
equipment type with performance characteristics (including
reliability), features, sizes, capacities, and volumes that are
substantially the same as equipment generally available in the United
States at the time, it will not consider this technology further.
Adverse impacts on health or safety: If DOE determines
that a technology will have significant adverse impacts on health or
safety, it will not consider this technology further. 10 CFR part 430,
subpart C, appendix A, 4(a)(4) and 5(b)
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. 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.
In the March 2016 NOPR, DOE applied the screening criteria to all
technologies identified in the technology assessment (see section
IV.A.5). Based on the screening criteria described previously, DOE
removed ``burner derating'' from further consideration in the
rulemaking analysis, noting that the technology option could lower the
heating output to the consumer thereby reducing consumer utility. The
remaining technology options passed the screening analysis. Out of the
options that passed the screening analysis criteria, DOE further
identified technology options that would have negligible impact on the
efficiency as measured by DOE's test procedure set forth in 10 CFR
431.86. Specifically, DOE identified the following technologies as
having a negligible impact on the rated energy efficiency: (1) Jacket
insulation; (2) combustion air pre-heaters; (3) economizers; and (4)
blowdown waste heat recovery. These technologies were removed from
further consideration in the rulemaking analysis. The remaining
technology options were found to have an impact on the measured energy
efficiency of commercial packaged boilers: (1) Heat exchanger
improvements (including condensing heat exchangers); (2) improvements
in burner technology; and (3) oxygen trim systems. 81 FR 15853-15855.
As discussed in section IV.A.5 of this final rule, DOE has decided
to add pulse combustion as a separate technology option. Previously DOE
had included pulse combustion under heat exchanger technology options
which passed the screening analysis in the March 2016 NOPR. Therefore,
in this final rule, pulse combustion was included as a separate
technology option in the list that passed the screening analysis.
DOE did not receive any comments on the technology options that
were
[[Page 1614]]
removed from further consideration or passed the screening criteria.
Therefore, DOE continues to screen the technologies as was done for the
March 2016 NOPR and summarized immediately above. For more information
on the screening analysis see chapter 4 of the final rule TSD.
C. Engineering Analysis
The engineering analysis establishes the relationship between
manufacturer selling prices (MSP) and energy-efficiency of commercial
packaged boilers. This price-efficiency relationship serves as a basis
for subsequent cost-benefit calculations for individual consumers,
manufacturers, and the Nation.
To determine this price-efficiency relationship, DOE uses data from
the market and technology assessment, publicly available equipment
literature and research reports, and information from manufacturers,
distributors, and contractors. For this rulemaking, DOE first used
information from the market and technology assessment to identify
efficiency levels and representative equipment for analysis (see
section IV.A). In the engineering analysis, DOE collected CPB prices
primarily from manufacturers, mechanical contractors, and equipment
distributors. DOE tabulated all of the price data in a separate
database, which is referred to as the ``prices database.''
1. Methodology
DOE has identified three basic methods for developing price-
efficiency curves: (1) The design-option approach, which provides the
incremental manufacturing costs of adding design options to a baseline
model that will improve its efficiency; (2) the efficiency-level
approach, which provides the incremental price of moving to higher
efficiency levels without regard to any particular design option; (3)
the reverse-engineering (or cost-assessment) approach, which provides
``bottom-up'' manufacturing cost assessments for achieving various
levels of increased efficiency based on teardown analyses (or physical
teardowns) providing detailed data on costs for parts and material,
labor, shipping/packaging, and investment for models that operate at
particular efficiency levels.\32\
---------------------------------------------------------------------------
\32\ The term `cost' refers to the manufacturing cost, while the
term `price' refers to the manufacturer selling price. In some of
the engineering analysis approaches DOE calculates the manufacturing
cost which is multiplied with the appropriate markups to get the
manufacturer selling price.
---------------------------------------------------------------------------
For this rulemaking, DOE has decided to use the efficiency-level
approach to conduct the engineering analysis. This methodology
generally involves calculating prices of commercial packaged boilers
for a given rated input (representative capacity) for each manufacturer
at different efficiency levels spanning from the minimum allowable
standard (i.e., baseline level) to the maximum technologically feasible
efficiency level. The primary output of the analysis is a set of price-
efficiency relationships that represent the average change in
manufacturer selling price for higher efficiency equipment (i.e.,
``incremental price''). In the subsequent markups analysis (chapter 6
in the final rule TSD), DOE determines consumer prices by applying
additional distribution chain markups and sales tax to the manufacturer
selling prices developed in the engineering analysis. After applying
these markups, the data serve as inputs to the life-cycle cost and
payback period analyses (chapter 8 in the final rule TSD).
As discussed previously, DOE classified commercial packaged boilers
into twelve equipment classes based on rated input, heating medium (hot
water or steam), and fuel type (gas or oil). For all equipment classes,
except the very large CPB equipment classes (for which DOE is not
amending energy conservation standards), DOE collected pricing data
which it used to directly analyze the price-efficiency relationship of
each equipment class. DOE did not analyze very large CPB equipment
classes in this engineering analysis.
For each manufacturer selling price obtained, DOE first calculated
the ratio of the price of the commercial packaged boiler with respect
to its rated input to obtain all prices on a per-unit rated input basis
(dollars per kBtu/h). The prices obtained were at various rated inputs,
so DOE assigned weights to individual prices (on a per rated input
basis) based on the distribution of rated inputs of either CPB
shipments (where DOE had this data available) or CPB models available
on the market. DOE gave more weight to the prices for equipment at
input capacities that have higher representation in CPB shipments or
CPB models on the market. For SGHW equipment class, AHRI provided
shipment information that includes the distribution of CPB shipments by
rated input and by efficiency. Therefore, for the engineering analysis
for the SGHW equipment class, DOE used the information provided by AHRI
to calculate the weights based on the distribution of shipments by
rated input. For all other equipment classes, DOE did not have
information on distribution of shipment by rated input. As a result,
DOE used the numbers of models available on the market from the
equipment database to calculate the weights to corresponding to the
rated input of each CPB price. DOE applied these weights to calculate
the weighted average price per rated input and the weighted average
rated input for each efficiency level.
Next, DOE scaled the weighted average price (on a per rated input
basis) at each efficiency level from the weighted average rated input
(at which the price was calculated in the previous step) to the
representative rated input for the respective equipment class. DOE used
800 kBtu/h and 3,000 kBtu/h as the representative rated input for the
small and large equipment classes. To normalize the prices back to the
representative capacity, DOE used non-linear regression to determine
the equation that best represents the price on a per-unit input basis
as a function of rated input. Through the non-linear regression, DOE
noticed that for lower input capacities the price on a per input basis
is higher, and as the rated input increases, the price per input
decreases. In addition, the rate of change of the price on a per-unit
input basis with respect to rated input also decreases considerably as
the rated input increases. The result of this non-linear regression is
a scatter plot that appears to resemble a decreasing exponential curve.
This trend is expected, as CPB models will have certain fixed costs
that are present regardless of the size, and other costs that will
increase as the rated input increases. DOE applied the regression
equation to determine the weighted average price per input at the
representative rated input for each efficiency level analyzed.
Once DOE had determined the weighted average price per input at the
representative capacity for all efficiency levels, DOE performed a
regression analysis to deduce the equation that best represents the
price-efficiency relationship. Using the regression equation, DOE
calculated the predicted weighted average price per input at the
representative capacity for all efficiency levels that were analyzed in
each equipment class. DOE then multiplied the predicted weighted
average price per input at the representative capacity by the
representative capacity to get the manufacturer selling price at each
efficiency level. As a final step, DOE calculated the incremental
prices by subtracting the baseline price from the manufacturer selling
price of each efficiency level above the baseline.
DOE used the methodology described above to analyze each equipment
class (other than very large equipment classes). For the SGHW equipment
classes DOE used the same methodology
[[Page 1615]]
to conduct separate analyses for condensing and non-condensing
efficiency levels. This was done to account for difference in the
slopes of the price efficiency curves between non-condensing and
condensing efficiency levels. To carry out the separate assessment for
condensing SGHW commercial packaged boilers, DOE separated the
condensing SGHW models from the non-condensing SGHW models and used the
separate datasets to conduct the analysis as per the methodology
described in the previous paragraph. DOE did not have sufficient
pricing data to analyze each condensing efficiency level of LGHW, SOHW
and LOHW. As a result, DOE did not analyze these condensing levels
separately. Instead, DOE used the same incremental manufacturer selling
prices that were determined in the preliminary analysis TSD to evaluate
the prices for condensing efficiency levels in these equipment classes.
DOE did not receive any comments in the previous stages of the
rulemaking providing additional pricing data or suggesting that the
prices were inaccurate.
For further details on the methodology and results are provided in
the chapter 5 of the final rule TSD.
a. Analysis of Large CPB Equipment Classes
As discussed in section IV.C.2, DOE collected 584 CPB prices that
covered all CPB equipment classes that are analyzed in this final rule.
Out of the eight equipment classes analyzed, DOE received sufficient
information to analyze five equipment classes at all efficiency levels
without extrapolation of data from other equipment class. For three
large equipment classes, i.e., LOHW, LGST and LOST, DOE did not have
pricing data at several efficiency levels that are analyzed in this
final rule. The lack of data stems from the general low number of
models available in the market for such equipment classes. To address
these cases, DOE leveraged the pricing collected for the small CPB
equipment classes to estimate the price of a large commercial packaged
boiler. To extrapolate the prices, DOE first combined the price data of
each small and large equipment classes that have the same
characteristics (e.g., SHOW and LOHW). DOE then performed a regression
analysis of the entire dataset to find an equation that represents the
relationship between equipment price and rated input for the given type
of equipment. DOE then used the equation to estimate the price of a
commercial packaged boiler when its size is scaled up to 3,000 kBtu/h.
The detailed methodology for the engineering analysis including, the
plots that show the variation of CPB price with rated input are
included in chapter 5 of the final rule TSD. In the March 2016 NOPR DOE
tentatively used this approach to estimate prices for commercial
packaged boilers at certain efficiency levels for the three equipment
classes. DOE requested comments and feedback from interested parties on
various aspects of the engineering analysis performed for the NOPR
analysis, and specifically on the methodology and results.
In response to this approach, DOE received comments from ABMA
expressing concern about the extrapolation of prices from small boilers
to address the lack of data for large boilers. ABMA stated that large
boilers not only have a significantly different applications and
features but also carry an exponentially higher cost for
transportation, installation and start-up. (ABMA, No. 64 at p. 1)
Phoenix Energy Management stated in the NOPR public meeting that there
is no connection between a small and a large boiler and that there are
multiple variables that come into play in establishing the price. (PEM,
Public Meeting Transcript, No. 61 at p. 64) Raypak stated that the
price of a 3,000 kBtu/h boiler is substantially different from a 10,000
kBtu/h boiler. (Raypak, Public Meeting Transcript, No. 61 at p. 65)
In response, DOE notes that the extrapolation of prices from the
small to large equipment classes (for oil-fired hot water and steam;
and gas-fired steam equipment classes) is based on actual pricing data
that is available for commercial packaged boilers in each corresponding
small and large equipment classes. DOE obtained 163 prices for large
CPB models in the LOHW, LGST, and LOST equipment classes that were used
in developing the price trend between small and large commercial
packaged boilers in these classes. There are only a few efficiency
levels in the three large equipment classes where DOE extrapolated data
from the corresponding small classes. The trends in prices between the
small and large classes show a smooth linear trend and are devoid of
sudden changes in pricing structure. The r-squared values for the
linear equations that fit the pricing data are 0.923, 0.982 and 0.967
for oil-fired hot water, gas-fired steam and oil-fired steam equipment
classes, respectively, indicating a strong fit to the data. Considering
the r-squared value of the plots, DOE is highly confident that the
extrapolated prices used in the analysis are representative of the
prices for larger commercial packaged boilers. Therefore, in this final
rule, DOE continues to use this approach to estimate the prices at
several efficiency levels for LOHW, LGST and LOST commercial packaged
boilers.
The detailed methodology for the engineering analysis including the
plots that show the variation of CPB price with rated input are
included in chapter 5 of the final rule TSD.
2. Data Collection and Categorization
As part of the engineering analysis, DOE collected 584 CPB prices
from manufacturers, wholesalers, distributors and contractors.
A distributor or wholesaler is usually the first consumer in the
distribution chain and typically receives a discount on the list price
when purchasing equipment from the manufacturer. This discount varies
by manufacturer and the equipment being sold, and also depends on the
business relationship between the manufacturer and the purchaser (i.e.,
the discount may vary depending on the volume of units that a
distributor or contractor purchases). While collecting price data, DOE
also obtained information on typical discounts applicable on the list
prices, and applied the discount to list prices to obtain the actual
manufacturer selling price. All manufacturer selling prices used in the
engineering analysis include the appropriate discount to the list
prices. In chapter 5 of the NOPR TSD, DOE specified that the discount
rates offered by manufacturers typically lie within a range of 15 to 40
percent.
In response to this, AHRI commented that the equipment costs were
wrongly generated using estimated discounts from list prices. AHRI
highlighted that the discount factors used in the analysis had a large
range (15 to 40 percent) and were based on manufacturers or DOE's
estimates rather than actual data. AHRI stated that even small errors
in these factors would have a significant effect on the resulting
relationships established by DOE for determining actual manufacturer
selling prices. AHRI opposed DOE's use of a single price estimate for
an assumption with known variability and suggested using distribution
of the estimates. (AHRI, No. 76 at pp. 41-42)
DOE disagrees with AHRI's comment suggesting that it used its own
estimates rather than actual data to determine the discounts from list
pricing that are applicable to the pricing data. The range of discount
rates specified in the chapter 5 of the NOPR TSD and mentioned in
AHRI's comment, represent the typical rates offered by manufacturers.
DOE gathered this
[[Page 1616]]
information through consultations with manufacturers, distributors, and
contractors that provided CPB price data. While collecting pricing
data, DOE also requested and received specific information on the
discounts from list price offered by specific manufacturers and
received by specific distributors. As a result, DOE had actual data on
list price discounts for the models for which pricing was obtained, and
DOE applied those discounts directly to the corresponding CPB list
prices to calculate the manufacturer selling price that was used in the
analysis. DOE considered the comments received from AHRI with regard to
using a distribution of list price discount estimates instead of a
fixed value. DOE concludes that using actual list price discounts that
were shared by manufacturers, contractors and distributors is a more
accurate approach to estimate the actual manufacturer selling prices
than randomly assigning the discount based on a distribution through a
Monte Carlo simulation, as suggested by AHRI. As a result, DOE decided
to use the actual data for list price discounts received from
manufacturers, distributors and contractors and applied it to the list
prices received from the respective source before using the pricing
data in the engineering analysis.
DOE collected the bulk of its prices for commercial packaged
boilers from distributors and contractors. This price data was also
supplemented by information gathered through manufacturer interviews.
The prices cover a wide variety of commercial packaged boiler models.
The models for which DOE obtained pricing include mechanical draft,
natural (or atmospheric) draft, condensing boilers and non-condensing
boilers, and cover all equipment classes that are analyzed in this
rulemaking. The input capacities of boilers for which prices were
obtained ranged from 300 kBtu/h to 9,500 kBtu/h.
In the March 2016 NOPR, DOE also described the approach it used in
selecting the add-on features applicable to each commercial packaged
boiler that is included in the price books. Most of the add-on features
are related to control system that do not have an impact on the
ET or EC as measured using DOE's test procedure.
Each additional feature installed on a basic boiler model adds to the
price of the model. However, this increase in price is generally not
associated with the corresponding increase in efficiency.
In response to the engineering analysis, ABMA stated that very
large commercial packaged boilers are extremely difficult to price
because these boilers are custom built to a specific set of
requirements for a given installation. ABMA noted that the
customization is primarily in the area of controls, instrumentation,
interfacing with building energy management systems and meeting
location specific emission requirements. ABMA noted that these add-ons
carry a high price tag. However, ABMA suggested that while these units
are custom built, they are built on a standard heat exchanger design
and burner capacity and therefore energy efficiency should not be
affected by the customizing features. (ABMA, No. 64 at p. 2) Raypak
provided comments at the public meeting that DOE should be looking at
the local code requirements that vary with jurisdiction, for installing
commercial packaged boilers, stating that as the size increases the
number of applicable controls and codes also increase. (Raypak, Public
Meeting Transcript, No. 61 at pp. 62-63)
DOE agrees with ABMA that the customizing of certain optional
features do not impact the efficiency of commercial packaged boilers.
To ensure that the cost of added features (that do not improve the
efficiency of the equipment) are not included in the prices used for
the engineering analysis, DOE normalized the optional features
applicable to each boiler model by selecting the same options for all
CPB prices collected. For example, DOE noticed that in several CPB
series, prices of control and safety features are listed separately
which get added to the basic model trade price. For such cases, DOE
chose the same type of control feature for all CPB models where a
choice is offered. While selecting the prices DOE also encountered
scenarios where (1) a feature that DOE has consistently selected for
all CPB models is not offered for a particular series; and (2) a
particular feature becomes inapplicable for commercial packaged boilers
of higher capacity within the same CPB series. In such cases DOE
selected a similar feature that would offer similar functionality. This
approach helped to minimize the effects of optional auxiliary
components.
In response to the engineering analysis presented in the NOPR
public meeting, ABMA asked how much data was available and used for
large sized boilers. (ABMA, Public Meeting Transcript, No. 61 at pp.
93-94)
In response, Table IV.2 shows the number of CPB prices that DOE
used in the engineering analysis in each equipment class. This table
was also presented in the March 2016 NOPR. 81 FR 15858. DOE did not
collect additional price data for the final rule analysis.
Table IV.2--Number of Prices Collected for Engineering Analysis
------------------------------------------------------------------------
Number of
Equipment class prices used in
analysis
------------------------------------------------------------------------
SGHW.................................................... 203
LGHW.................................................... 52
SOHW.................................................... 70
LOHW.................................................... 44
SGST.................................................... 72
LGST.................................................... 76
SOST.................................................... 24
LOST.................................................... 43
---------------
Total................................................. 584
------------------------------------------------------------------------
As discussed previously, in response to DOE's requests for shipment
data for conducting the rulemaking analyses, AHRI provided actual
shipments data for SGHW and LGHW equipment classes for the years 2014
and 2015. The information received represents shipment data collected
by AHRI from AHRI-member manufacturers in an aggregated form. The
information includes distributions of shipments by rated input for the
SGHW equipment class for the years 2014 and 2015, distribution of
shipments by efficiency for SGHW and LGHW equipment classes for the
years 2014 and 2015, and shipment weighted efficiency for all equipment
classes. DOE used the information for the distribution of shipment by
rated input to conduct the analysis for SGHW condensing and non-
condensing efficiency levels. Further, this information is also used to
conduct LCC and PBP analysis.
3. Baseline Efficiency
DOE selects baseline efficiency levels as reference points for each
equipment class, against which DOE calculates potential changes in
energy use, cost, and utility that could result from an amended energy
conservation standard. Typically, a baseline unit is one that meets,
but does not exceed, the required energy conservation standard, as
applicable, and provides basic consumer utility. A CPB model that has a
rated efficiency equal to its applicable baseline efficiency is
referred to as a ``baseline model.'' DOE uses the baseline model for
comparison in several phases of the analyses, including the engineering
analysis, LCC analysis, PBP analysis and NIA. For the engineering
analysis, DOE used the current energy conservation standards that are
set forth in 10 CFR 431.87 as baseline efficiency levels.
As discussed previously in section IV.A.3 of this document, DOE has
consolidated the equipment classes that are set forth in the current
regulations
[[Page 1617]]
such that the current draft-specific classes (i.e., those identified as
being ``natural draft'' and ``all except natural draft'') are merged
into non-draft-specific classes. For the four draft-specific classes,
DOE used the natural draft equipment class efficiency standard as the
baseline efficiency level. For the remaining equipment classes, DOE
used the current standards in 10 CFR 431.87 as the baseline efficiency
levels in the engineering analysis. The baseline efficiency levels for
each equipment class are presented in Table IV.3.
Table IV.3--Baseline Efficiencies Considered in the Engineering Analysis
------------------------------------------------------------------------
Baseline
Equipment class efficiency
* (%)
------------------------------------------------------------------------
Small Gas-fired Hot Water.................................. 80
Large Gas-fired Hot Water.................................. 82
Small Oil-fired Hot Water.................................. 82
Large Oil-fired Hot Water.................................. 84
Small Gas-fired Steam...................................... ** 77
Large Gas-fired Steam...................................... ** 77
Small Oil-fired Steam...................................... 81
Large Oil-fired Steam...................................... 81
------------------------------------------------------------------------
* Efficiency levels represent thermal efficiency for all equipment
classes except for Large Gas Hot Water and Large Oil Hot Water, for
which the efficiency levels are in terms of combustion efficiency.
** Mechanical draft equipment within this class currently has a minimum
standard of 79-percent thermal efficiency. 10 CFR 431.87 All equipment
analyzed below 79 percent is natural draft equipment.
4. Intermediate and Max-Tech Efficiency Levels
As part of its engineering analysis, DOE determined the maximum
technologically feasible (``max-tech'') improvement in energy
efficiency for each equipment class of commercial packaged boilers. DOE
surveyed the CPB market and the research literature relevant to
commercial packaged boilers to determine the max-tech efficiency
levels. Additionally, for each equipment class, DOE generally
identifies several intermediate efficiency levels between the baseline
efficiency level and max-tech efficiency level. These efficiency levels
typically represent the most common efficiencies available on the
market or a major design change (e.g., switching to a condensing heat
exchanger). In the analysis, DOE uses the intermediate and max-tech
efficiency levels as target efficiencies for conducting the cost-
benefit analysis of achieving increased efficiency levels.
During the market assessment, DOE conducted an extensive review of
publicly available CPB equipment literature. DOE used the distribution
of models in the equipment database compiled during the market
assessment to identify intermediate and max-tech efficiency levels for
analysis. DOE generally selected the efficiency levels with the most
models or that represented a significant technology (e.g., condensing)
for analysis. The efficiency levels for each equipment class that DOE
considered in the final rule TSD are presented in Table IV.4.
Table IV.4--Baseline, Intermediate and Max Tech Efficiency Levels
Analyzed in the Engineering Analysis
------------------------------------------------------------------------
Efficiency * Efficiency level
Equipment class (%) identifier
------------------------------------------------------------------------
Small Gas Hot Water............... 80 EL--0 Baseline.
81 EL--1.
82 EL--2.
84 EL--3.
85 EL--4.
93 EL--5.
95 EL--6.
99 EL--7 Max Tech.
Large Gas Hot Water............... 82 EL--0 Baseline.
83 EL--1.
84 EL--2.
85 EL--3.
94 EL--4.
97 EL--5 Max Tech.
Small Oil Hot Water............... 82 EL--0 Baseline.
83 EL--1.
84 EL--2.
85 EL--3.
87 EL--4.
88 EL--5.
97 EL--6 Max Tech.
Large Oil Hot Water............... 84 EL--0 Baseline.
86 EL--1.
88 EL--2.
89 EL--3.
97 EL--4 Max Tech.
Small Gas Steam................... 77 EL--0 Baseline.
78 EL--1.
79 EL--2.
80 EL--3.
81 EL--4.
83 EL--5 Max Tech.
Large Gas Steam................... 77 EL--0 Baseline.
78 EL--1.
79 EL--2.
80 EL--3.
81 EL--4.
[[Page 1618]]
82 EL--5.
84 EL--6 Max Tech.
Small Oil Steam................... 81 EL--0 Baseline.
83 EL--1.
84 EL--2.
86 EL--3 Max Tech.
Large Oil Steam................... 81 EL--0 Baseline.
83 EL--1.
85 EL--2.
87 EL--3 Max Tech.
------------------------------------------------------------------------
* Efficiency levels represent thermal efficiency for all equipment
classes except for LGHW and LOHW, for which the efficiency levels are
in terms of combustion efficiency.
Bradford White commented that the prices of commercial packaged
boilers will increase due to the effect of the proposed CPB test
procedure changes. Bradford White noted that if DOE establishes an 85-
percent ET standard for SGHW commercial packaged boilers,
manufacturers may choose to overdesign their equipment by increasing
their efficiency to be 0.5 to 1 percent greater than the minimum to
ensure that the equipment passes any random audit test. Bradford White
stated that as a result of this increase, commercial packaged boilers
will likely be operating at temperatures that will lead to condensation
forming in the vent. Manufacturers may incorporate additional sensors
and controls, as well as more costly materials to protect the equipment
longevity. This will lead to more costly equipment. (Bradford White,
No. 63 at p. 3)
In response, DOE conducts its analysis to evaluate the increase in
manufacturer selling price or manufacturing cost to achieve the desired
efficiency level selected as part of the engineering analysis. Although
some manufacturers may choose to overdesign their equipment, DOE cannot
assume that the models on the market today and rated at a given
efficiency would not be representative of models at that efficiency
under an amended standard, as such a decision would be made by
individual manufacturers based on their business practices. Further,
DOE notes that if tests on a small sample produce a mean sample
efficiency that is lower than what a manufacturer believes to be the
true mean across manufactured units, DOE's regulations for commercial
packaged boilers at 10 CFR 429.60 would permit the manufacturer to
enlarge the sample rather than overdesign the equipment. The mean of a
larger sample would tend to have smaller departures from the population
mean. Therefore, DOE has determined it would be inappropriate to assume
that at a given standard level under consideration costs would be
incurred to achieve an efficiency greater than that being analyzed.
5. Incremental Price and Price-Efficiency Curves
The final results of the engineering analysis are a set of price-
efficiency curves that represent the manufacturer selling price for
higher efficiency models. DOE uses these results as inputs to the
downstream analyses such as the life cycle cost analysis.
DOE received several comments on the incremental price results and
the price-efficiency curves published in the NOPR analysis TSD.
Weil-McLain suggested that DOE's analysis did not adequately
account for the additional costs related to additional components,
venting materials, system engineering and design, manufacturing costs,
installation costs and operating costs of higher efficiency mechanical
draft equipment. (Weil-McLain, No. 67 at p. 2)
DOE does not agree with Weil-McLain, in that the engineering
analysis conducted in this final rule is based on list prices that
manufacturers and their representatives use to sell their equipment.
These prices include the manufacturing cost and the relevant
manufacturer markups (Markups analysis is discussed in section IV.D of
this final rule). Other costs related to installation and venting are
discussed in section IV.F of this final rule.
Table IV.5 shows the incremental manufacturer selling price results
based on prices in 2015$ for all eight equipment classes along with the
baseline prices.
Table IV.5--Manufacturer Selling Price-Efficiency Results
[2015$]
----------------------------------------------------------------------------------------------------------------
Baseline
Equipment class Efficiency level* Incremental manufacturer
prices selling price
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water........................... Baseline--80%................... $0 $7,043
81%............................. 510
82%............................. 961
84%............................. 3,112
85%............................. 4,048
93%............................. 11,076
95%............................. 11,719
Max Tech--99%................... 13,910
Large Gas Hot Water........................... Baseline--82%................... 0 22,123
83%............................. 1,983
84%............................. 4,144
[[Page 1619]]
85%............................. 6,498
94%............................. 31,917
Max Tech--97%................... 36,025
Small Oil Hot Water........................... Baseline--82%................... 0 8,626
83%............................. 689
84%............................. 1,433
85%............................. 2,236
87%............................. 4,040
88%............................. 5,051
Max Tech--97%................... 17,465
Large Oil Hot Water........................... Baseline--84%................... 0 19,128
86%............................. 4,870
88%............................. 10,980
89%............................. 14,595
Max Tech--97%................... 49,710
Small Gas Steam............................... Baseline--77%................... 0 6,630
78%............................. 568
79%............................. 1,184
80%............................. 1,853
81%............................. 2,580
Max Tech--83%................... 4,225
Large Gas Steam............................... Baseline--77%................... 0 19,365
78%............................. 1,132
79%............................. 2,329
80%............................. 3,597
81%............................. 4,939
82%............................. 6,359
Max Tech--84%................... 9,453
Small Oil Steam............................... Baseline--81%................... 0 7,617
83%............................. 1,651
84%............................. 2,607
Max Tech--86%................... 4,823
Large Oil Steam............................... Baseline--81%................... 0 18,781
83%............................. 3,236
85%............................. 7,029
Max Tech--87%................... 11,476
----------------------------------------------------------------------------------------------------------------
* Efficiency levels represent thermal efficiency for all equipment classes except for LGHW and LOHW, for which
the efficiency levels are in terms of combustion efficiency.
D. Markups Analysis
The markups analysis develops appropriate markups in the
distribution chain (e.g., retailer markups, distributer markups,
contractor markups, and sales taxes) to convert the estimates of
manufacturer selling price derived in the engineering analysis to
consumer prices (``consumer'' refers to purchasers of the equipment
being regulated), which are then used in the LCC and PBP analysis and
in the manufacturer impact analysis. DOE develops baseline and
incremental markups based on the equipment markups at each step in the
distribution chain. For this rulemaking, DOE developed distribution
chain markups in the form of multipliers that represent increases above
equipment purchase costs for key market participants, including CPB
wholesalers/distributors, and mechanical contractors and general
contractors working on behalf of CPB consumers. The baseline markup
relates the change in the manufacturer selling price of baseline models
to the change in the consumer purchase price. The incremental markup
relates the change in the manufacturer selling price of higher
efficiency models (the incremental cost increase) to the change in the
consumer purchase price.
Four different markets exist for commercial packaged boilers: (1)
New construction in the residential buildings sector, (2) new
construction in the commercial buildings sector, (3) replacements in
the residential buildings sector, and (4) replacements in the
commercial buildings sector. In this rulemaking, DOE characterized
eight distribution channels to address these four markets.
For both the residential and commercial buildings sectors, DOE
characterizes the replacement distribution channels as follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical Contractor
[rarr] Consumer
Manufacturer [rarr] Manufacturer Representative [rarr]
Mechanical Contractor [rarr] Consumer
DOE characterizes the new construction distribution channels for
both the residential and commercial buildings sectors as follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical Contractor
[rarr] General Contractor [rarr] Consumer
Manufacturer [rarr] Manufacturer Representative [rarr]
Mechanical Contractor [rarr] General Contractor [rarr] Consumer
In addition to these distribution channels, there are scenarios in
which manufacturers sell commercial packaged boilers directly to a
consumer through a national account via a manufacturer representative,
and its associated markup (assumed as 12.5 percent of sales; other
distribution channels previously discussed make up the remaining 87.5
percent of sales).
[[Page 1620]]
These scenarios occur in both new construction and replacements markets
and in both the residential and commercial sectors. The relative shares
for these are dependent on equipment class and details may be found in
chapter 6 of the final rule TSD. In these instances, installation is
typically accomplished by site personnel. These distribution channels
are depicted as follows:
Manufacturer [rarr] Manufacturer Representative [rarr]
Consumer (National Account)
To develop markups for the parties involved in the distribution of
the commercial packaged boilers, DOE utilized several sources,
including (1) the Heating, Air-Conditioning & Refrigeration
Distributors International (HARDI) 2013 Profit Report \33\ to develop
wholesaler markups; (2) the 2005 Air Conditioning Contractors of
America's (ACCA) financial analysis for the heating, ventilation, air-
conditioning, and refrigeration (HVACR) contracting industry \34\ to
develop mechanical contractor markups; and (3) U.S. Census Bureau's
2012 Economic Census data \35\ for the commercial and institutional
building construction industry to develop general contractor markups.
In addition to the markups, DOE derived State and local taxes from data
provided by the Sales Tax Clearinghouse.\36\ These data represent
weighted-average taxes that include county and city rates. DOE derived
shipment-weighted-average tax values for each region considered in the
analysis.
---------------------------------------------------------------------------
\33\ Heating, Air Conditioning & Refrigeration Distributors
International 2013 Profit Report. Available at https://web.archive.org/web/20130822231322/http://www.hardinet.org/Profit-Report.
\34\ Air Conditioning Contractors of America (ACCA), Financial
Analysis for the HVACR Contracting Industry: 2005. Available at
http://www.acca.org/store/.
\35\ Census Bureau. 2012 Economic Census Data. (2012). Available
at http://www.census.gov/econ/.
\36\ Sales Tax Clearinghouse Inc. State Sales Tax Rates Along
with Combined Average City and County Rates, (2016). Available at:
http://thestc.com/STrates.stm.
---------------------------------------------------------------------------
In the March 2016 NOPR, DOE requested information or insight that
would better inform its markups analysis. Bradford White commented that
for the CPB market most units are sold from the manufacturer to a buy/
sell representative, also known as a specialty wholesaler, before being
sold to the contractor and eventually the consumer. It is also Bradford
White's experience that sales to national accounts still go through a
wholesaler. (Bradford White, No. 68 at p. 4) Lochinvar stated that a
distributor/wholesaler as the first consumer in the distribution chain
does not adequately represent the primary commercial boiler market,
noting 80 percent of small and large commercial packaged boilers
typically follow the path of Manufacturer [rarr] Manufacturer
Representative [rarr] Mechanical Contractor [rarr] General Contractor
[rarr] Owner. (Lochinvar, No. 70 at p. 2) Raypak somewhat agreed with
the distribution model used by DOE for commercial packaged boilers,
noting that it uses manufacturer representatives almost exclusively,
but also noting that DOE's model shows wholesalers and manufacturer
representatives in the same category and that these should be handled
separately, as their functions differ. Further, Raypak commented that
DOE is underestimating the markups associated with manufacturer
representatives in the distribution formula and other downstream
analyses, and that it believes the estimated market segment and sector
weights by CPB equipment class breakouts are not appropriate and that
the assumption of 17.5 percent of commercial packaged boilers sold via
national accounts is a considerable overstatement, noting it believes
it should be closer to 5 percent. (Raypak, No. 72 at p. 4)
DOE appreciates the stakeholder inputs regarding distribution
channels for commercial packaged boilers. DOE believes that there is a
misunderstanding around the national account distribution channel. DOE
wishes to clarify that the national account considered for commercial
packaged boilers already includes a manufacturer representative tier
whose markup is the same as a wholesale distributor in the regular
channel and the equipment does not get sold to the consumers directly
from the manufacturer but through the manufacturer representative. With
respect to the estimated market segment and sector weights, while
Raypak commented that 17.5 percent is an overestimation, Lochinvar's
comment suggests that 20 percent of the market segment is handled
through the national distribution channel. DOE considered these
comments and adjusted the fraction of commercial packaged boilers sold
via the national account distribution channel to 12.5 percent.
DOE also received comments regarding its use of incremental
markups. BHI commented that DOE should eliminate the use of incremental
markups, noting the varying supply chains and tremendous number of
options, and recommends that DOE survey building owners to find out
what they are actually paying for various classes of equipment,
acknowledging that this has drawbacks but should result in more
accurate costs. (BHI, No. 71 at pp. 17-18) AHRI continues to object to
DOE's use of incremental markups, and reiterates that it has provided
ample evidence that contractors do not use incremental markups.
However, it understands that the markups in DOE's analysis are
approximately accurate as average markups, also noting manufacturer's
representatives have markups in the 10- to 15-percent range. (AHRI, No.
76 at pp. 41-42) NEEA commented that when they do similar analyses, the
focus is on the costs that change based on the efficiency of the
boiler, noting that in their experience it is when you change
technology (e.g., non-condensing to condensing) that things will
change, and that DOE's approach is similar in that it is looking for
incremental differences, not specific differences in any given
building. (NEEA, Public Meeting Transcript, No. 61 at pp. 99-101) AHRI
also commented that the markups for large and small boilers were not
different enough. Crown commented that the markup methodology being
used is probably inappropriate and that DOE should take the time to
survey the engineers who are actually installing units. AHRI commented
that they had little confidence in the incremental markups process,
despite acknowledging in written comments that the markups in DOE's
analysis are approximately accurate as average markups, and asked if
there was an intent to survey, at some level, the actual selling point
of the commercial boiler. (AHRI, Public Meeting Transcript, No. 61 at
pp. 95-96, AHRI, No. 76 at pp. 41-42, Crown, Public Meeting Transcript,
No. 61 at p. 103)
In response to these comments, DOE notes that incremental markups
relate the change in manufacturer selling price of higher efficiency
equipment to the change in the consumer purchase price. DOE develops
markups based on data on costs incurred by various entities in the
distribution chain and considers that certain costs incurred by these
entities would not be expected to increase due to merely increasing the
efficiency of equipment. For example, salaries, benefits, and operating
expenses are among those costs that would not be expected to increase
with higher costs of goods sold. With respect to BHI's and AHRI's
comment that incremental markups are not typically used by contractors
and manufacturers, DOE notes that it does not expect that an individual
manufacturer or contractor would, in its general practice,
[[Page 1621]]
differentially provide markups by efficiency level or equipment cost.
The concept of incremental markups applies to an industry as a whole
and serves the purpose in this rulemaking of differentiating industry
costs that scale up with cost of goods sold, and those that would not,
as described in the final rule TSD. DOE's intent is to accurately
estimate the price of higher efficiency equipment to the consumer under
an amended standards scenario, and as such DOE maintains that the
markups methodology accomplishes this and is consistent with the
methodology used in other rulemakings.
Chapter 6 of the final rule TSD provides details on DOE's
development of markups for commercial packaged boilers.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of commercial packaged boilers in use in the United
States and assess the energy savings potential of increases in
efficiency (thermal efficiency (ET) or combustion efficiency
(EC)). The energy use analysis for commercial packaged
boilers seeks to estimate the range of energy consumption of the
equipment in the field (i.e., as they are actually used by consumers).
DOE estimates the annual energy consumption of commercial packaged
boilers at specified energy efficiency levels across a range of climate
zones, building characteristics, and space and water heating
applications. The annual energy consumption includes natural gas,
liquid petroleum gas (LPG), oil, and/or electricity use by the
commercial packaged boiler for space and water heating. The 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.
In its March 2016 NOPR, DOE estimated the energy consumption of
commercial packaged boilers in commercial buildings and multi-family
housing units by developing building samples for each of eight
equipment classes examined based on the EIA's 2003 Commercial Building
Energy Consumption Survey \37\ (CBECS 2003) and EIA's 2009 Residential
Energy Consumption Survey (RECS 2009). Further, DOE noted that it had
used all the data available at the time from CBECS 2012 in its NOPR,
which included only the building characteristics segment, to inform its
analysis. However, the public use microdata files on consumption and
expenditure required for developing building samples used in the LCC
analysis were not yet released. During the March 2016 NOPR public
meeting, and also in written comments, DOE received feedback regarding
its continued use of CBECS 2003 data. SoCalGas and the Joint Utilities
urged DOE to utilize CBECS 2012 data in its energy use analysis and
shipments analysis, since the building energy use profile is expected
to have changed significantly from data in CBECS 2003, noting as an
example trends in commercial heating away from single large boilers and
toward smaller modular boilers. They further encouraged DOE to utilize
RECS 2015, should the data be released before the final rule is
published. (SoCalGas, No. 77 at p. 6; Joint Utilities, No. 66 at p. 2)
Raypak and AHRI also encouraged DOE to update its analysis based on
CBECS 2012 data, noting several energy use characterization metrics
that differ from those of CBECS 2003 (e.g., percent of buildings using
boilers as the main heating equipment and energy use intensity). In
addition, AHRI commented that since significant changes in results
could be expected if CBECS 2012 data are used in the analysis, DOE
should consider publishing a corresponding supplemental NOPR. (AHRI,
No. 76 at pp. 1, 2, 13, 14, 16; Raypak, No. 72 at pp. 1-2)
---------------------------------------------------------------------------
\37\ U.S. Energy Information Administration (EIA), 2003
Commercial Building Energy Consumption Survey (CBECS) Data, (2003).
(http://www.eia.gov/consumption/commercial/data/2003/.)
---------------------------------------------------------------------------
DOE understands the stakeholders' comments and requests and
recognizes there is benefit to the use of more current data that better
represents the energy use of commercial packaged boilers that would be
installed in 2020 and beyond. In this final rule DOE updated its LCC
model to use the EIA's 2012 CBECS microdata \38\ that became available
in May 2016 for developing building samples for each of the eight
equipment classes examined. While it can be expected that such a change
would impact the modeling results to some degree, this update was
performed at the request of stakeholders. Consequently, DOE concluded
that the analytical results of the final rule utilizing CBECS 2012 data
are an improvement to the analysis, consistent with stakeholder
requests, and do not warrant publication of an SNOPR. Further, DOE does
not have any opportunity to use RECS 2015 data as the ongoing survey is
currently in the data gathering stage.
---------------------------------------------------------------------------
\38\ U.S. Energy Information Administration (EIA), 2012
Commercial Building Energy Consumption Survey (CBECS) Data, (2012).
Available at https://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=microdata. Last accessed May 18, 2016.
---------------------------------------------------------------------------
1. Energy Use Characterization
DOE's energy characterization modeling approach calculates CPB
energy use based on rated thermal efficiency and building heat load
(BHL), accounting for the conversion from combustion efficiency to
thermal efficiency where applicable, part-load operation (in the case
of multi-stage equipment), and cycling losses (for single-stage
equipment), as well as return water temperature (RWT) and climate
zones. In this rulemaking, DOE analyzed CPB annual energy use based on
the building sample, equipment efficiency characteristics, and
equipment performance at part-load conditions.
In determining building heat load, DOE adjusted the building heat
load to reflect the expectation that buildings in 2020 would have a
somewhat different building heat load than buildings in the CBECS 2012
and RECS 2009 building sample. The adjustment involved multiplying the
calculated BHL for each CBECS 2012 or RECS 2009 building by the
building shell efficiency index from AEO2016. This factor differs for
commercial and residential buildings as well as new construction and
replacement buildings. Additionally, DOE also adjusted the building
heat load computed from CBECS 2012 and RECS 2009 data for each sample
building taking into account the relative ratio of heating degree days
(HDD) for the CBECS or RECS year (2012 or 2009) to the corresponding 10
year average HDD, both averaged over the specific region of the
building location. This ratio was computed using the HDD data from the
National Oceanic and Atmospheric Administration (NOAA) and applied to
the computed building heating load to reflect the heating load under
historical average climate conditions.
For this rulemaking, DOE adjusted the rated thermal efficiency of
evaluated commercial packaged boilers based on RWT, cycling losses, and
part-load operation. High RWT is applied to all non-condensing boiler
installations. For condensing boiler installations, low RWT is applied
to all commercial packaged boilers in the new construction market, 25
percent of replacement boilers in buildings built on or after 1990, and
5 percent of replacement boilers in buildings built before 1990. DOE
assumed that all other
[[Page 1622]]
condensing boiler installations are high RWT applications. The
efficiency adjustment for low and high RWT is dependent on climate,
with low RWT values resulting in the condensing CPB equipment operating
in condensing mode, on average, and high RWT values resulting in the
condensing CPB equipment operating in non-condensing mode, on average.
See appendix 7B of the final rule TSD for the adjustment factors used
for RWT, part-load operation, and cycling by climate zone. For
commercial packaged boilers rated in combustion efficiency, DOE
converted combustion efficiency to thermal efficiency. DOE used
combustion and thermal efficiency data from the AHRI database to create
a conversion factor that is representative of the range of commercial
packaged boilers on the market.
DOE received comments in the March 2016 NOPR regarding the energy
modeling approach. Regarding DOE's approach to converting combustion
efficiency to thermal efficiency in the LCC model, Lochinvar commented
that it is inappropriate to correlate combustion efficiency and thermal
efficiency, as they are derived by two totally different test methods.
(Lochinvar, Public Meeting Transcript, No. 61 at p. 127) Lochinvar
further objected to DOE's approach of removing data samples it
considered nonsensical (i.e., combustion efficiency was reported as
lower than thermal efficiency in an AHRI database entry) and suggested
using the entire set of data in determining the relationship that would
be more appropriate. (Lochinvar, Public Meeting Transcript, No. 61 at
pp. 126-128) AHRI agreed with Lochinvar regarding the fact that
combustion efficiency and thermal efficiency tests use different
methods, and further commented that for any given boiler model, there
definitely is a relationship between combustion efficiency and thermal
efficiency, but that looking at aggregated datasets is not the way to
derive a general relationship. Each model has to be looked at to sort
out that relationship. (AHRI, Public Meeting Transcript, No. 61 at pp.
129-130)
DOE appreciates the comments regarding its approach to convert
combustion efficiency to thermal efficiency. DOE notes that, as AHRI
and Lochinvar have stated, combustion and thermal efficiencies are
determined by two different methods. DOE understands the concerns of
the commenters and in the final rule has reverted to consider a
relationship utilizing the entire dataset available where both
combustion and thermal efficiencies are reported in establishing a
combustion to thermal efficiency conversion factor for the LCC
analysis, with no filtering of data applied.
DOE received various comments regarding its return water
temperature assumptions in its analysis. Lochinvar commented that it is
overly optimistic to assume 25 percent of buildings constructed after
1990 are condensing and 100 percent of new construction is low
temperature hydronic systems. (Lochinvar, Public Meeting Transcript,
No. 61 at pp. 128-129) In its written comments, however, Lochinvar
clarified that DOE's assumption that 25 percent of buildings
constructed after 1990 will allow for condensing boilers to condense
for a significant part of the season does not correlate to true market
conditions and that their experience suggests the actual percentage of
buildings with low-temperature heating systems is much lower.
(Lochinvar, No. 70 at p. 2) Similarly, Weil-McLain commented that DOE's
heat load estimation methodology overestimates true energy savings
associated with condensing boilers at high return water temperature and
overestimates the number of low temperature systems in existence.
(Weil-McLain, No. 67 at pp. 6-7) ASAP, however, questioned DOE's
assumption that in new construction a condensing boiler system would
not be capable of condensing a significant portion of the time and
whether it is more representative for new construction to assume that
the system is always operating with low enough return water
temperatures to be always in condensing mode. (ASAP, Public Meeting
Transcript, No. 61 at pp. 133-134) Crown, in response to ASAP's comment
regarding condensing boilers in new construction, commented that it
would not be assumed that, even in new construction, condensing boilers
would condense all the time, especially so, for example, on the coldest
day of the year, noting that the availability of condensing mode and
corresponding reset schedules depends on what emitters are used.
(Crown, Public Meeting Transcript, No. 61 at pp. 134-137) ASAP added
that the amount of time equipment operates in condensing mode seems
conservative. (ASAP, Public Meeting Transcript, No. 61 at p. 136)
Raypak further commented that condensing mode is dependent on user
comfort, and that a boiler may be designed for condensing mode but if
users are uncomfortable they will raise the water temperature. (Raypak,
Public Meeting Transcript, No. 61 at p. 137)
In response to the comments regarding return water temperature and
the time a commercial packaged boiler operates in condensing mode, DOE
points out that the LCC model does not establish a given amount of time
a commercial packaged boiler will condense. The model develops a
thermal efficiency adjustment that is an average based on various
factors as described in appendix 7B of the final rule TSD. For
condensing boilers, DOE does consider the fact that some commercial
packaged boilers will be operating with low return water temperatures,
and the rest will operate with high return water temperatures, in the
field. DOE notes that in the field, depending on the heat load and
system design, the commercial packaged boiler may be operating at
higher efficiencies or lower efficiencies than those established as the
average adjusted efficiency in the model, but it believes its approach
adequately reflects the energy use of the commercial packaged boiler
throughout the entire heating season. DOE does assume that all new
construction scenarios in the model (25 percent of buildings
constructed on or after 1990 and 5 percent of buildings constructed
before 1990) would be designed to allow for low return water
temperatures, on average, and that all other scenarios would operate
with high return water temperatures, on average. Regarding Lochinvar's
comment that these assumptions do not correlate to true market
conditions, DOE notes that neither Lochinvar, nor any other commenter,
provided any data regarding the actual number of installations it
expects would use low-temperature heating systems in new construction
or existing buildings, but notes that DOE received additional comment
indicating that even the use low temperature distribution may change
over the life of the building to meet occupant comfort.
Conversely, the Joint Advocates commented that DOE's return water
temperature distributions for condensing boilers represent overly
conservative scenarios. Further, they point out that the default
outdoor reset schedules from manufacturers of condensing boilers and
real-world implementations of condensing boilers replacing non-
condensing boilers suggest that condensing boilers can operate a
greater portion of the heating season in condensing mode than that
assumed in DOE's analysis, and that this would increase the savings
from condensing boilers relative to non-condensing boilers. In support
of these assertions, they cited published reports of field replacements
of boilers, manufacturer data showing defaults and the range of reset
schedules for condensing boilers, and various strategies in new and
existing buildings
[[Page 1623]]
to provide lower return water temperatures to enable condensing. These
strategies included retrofitting heating systems with high-delta-T
heating coils, lowering the design supply hot water temperature in
existing systems based on the systems being oversized for heating,
showing the impact of later building improvements in reducing heating
load, using a load-based reset schedule, and using variable circulation
pumps supplying heated water to coils to further increase temperature
drops in systems. (Joint Advocates, No. 74 at pp. 2-6)
DOE agrees with the comments from the Joint Advocates in that there
is a significant potential for system retrofits and system redesigns in
both new and in existing buildings that could provide for better use of
low return water temperatures during a larger portion of the heating
season; however, these may incur additional and unknown costs that DOE
has no ability to represent on an aggregate basis. The experiences and
input from other parties indicate that there is strong concern that
even many current condensing boiler installations do not live up to
their energy savings potential. DOE concludes that its analysis (which
presumes a smaller fraction of older existing buildings, a larger
fraction of newer existing buildings, and all new construction designs)
will be able to support, on average, low return water temperature
distribution and accurately reflects the performance of condensing
commercial packaged boilers in new construction and existing building
stock.
AHRI commented that the energy use analysis applies residential
temperature bins to estimate the loading of commercial package boilers,
which results in erroneous average annual energy use values, and AHRI
provided a comparison of a typical commercial office building load
profile and a residential load profile. (AHRI, No. 76 at pp. 14-15)
In response to AHRI's comment, DOE notes that the model assumes the
heating load for a commercial building is zero above 50 [deg]F. The
model uses the percentage of time in a year that a given climate zone
spends in each of four temperature bins that are considered for the
purposes of establishing the return water temperature condition, which
impacts the thermal efficiency of the boiler as installed. The
temperature bins in Table 7B.2.4 in appendix 7B of the final rule TSD
are only used in the development of the part-load adjustment factor for
condensing boilers and not the building thermal loads. DOE, in
addition, understands that the load profile shared by AHRI may reflect
many larger office buildings with significant internal loading and
tight thermal envelopes, such as used in the standard ASHRAE 90.1-2013
analysis for new construction. However, many existing commercial
buildings will have heating loads above the 30 [deg]F level suggested
by AHRI.
For the reasons noted in this section, DOE retained its methodology
for adjusting the thermal efficiencies of the commercial packaged
boilers, based on return water temperature conditions, in this final
rule.
During the March 2016 NOPR public meeting, Lochinvar commented that
DOE should consider boilers used for purposes other than space heating
in its analyses. (Lochinvar, No. 61 at pp. 124-125) Spire commented
that DOE, for its analysis, should use a more robust data source,
specifically referencing Jurisdiction Online \39\ and added that this
online data source provides information about fuel consumption, age and
location of installed boilers and types of entities that own commercial
boilers. (Spire, No. 73 at pp. 26-27)
---------------------------------------------------------------------------
\39\ http://www.praeses.com/jurisdiction-online.html.
---------------------------------------------------------------------------
In response to Lochinvar's request to include in its analysis
boilers that are used for purposes other than space heating, DOE
retained its NOPR approach and did not include such CPB equipment in
its final rule analysis because DOE was not able to obtain any data
needed for the analyses. Regarding Spire's suggestion to use
Jurisdiction Online, DOE investigated that data source and determined
that its content is already captured in the EPA database used to inform
shipments, and as such much of the available data are already taken
into account in that context.
A more detailed description of the energy use characterization
approach can be found in appendix 7B of the final rule TSD.
2. Building Sample Selection and Sizing Methodology
In its energy analysis for this rulemaking, DOE's estimation of the
annual energy savings of commercial packaged boilers from higher
efficiency equipment alternatives relied on building sample data from
CBECS 2012 and RECS 2009. CBECS 2012 includes energy consumption and
building characteristic data for 6,720 commercial buildings
representing 5.6 million commercial buildings. RECS 2009 includes
similar data from 12,083 housing units that represent almost 113.6
million residential households.
The subset of CBECS 2012 and RECS 2009 building records used in the
analysis met the following criteria. The CPB application has the
following characteristics:
Used commercial packaged boiler(s) as one of the main
heating equipment components in the building,
used a heating fuel that is natural gas (including propane
and LPG) or fuel oil or a dual fuel combination of natural gas and fuel
oil,
served a building with estimated design condition building
heating load exceeding the lower limit of CPB qualifying size (300,000
Btu/h),
had a non-trivial consumption of heating fuel allocable to
the commercial packaged boiler.
DOE analyzed commercial packaged boilers in the qualifying building
samples. DOE disaggregated the selected sample set of commercial
packaged boilers into subsets based on the fuel types (gas or oil),
rated input (small or large), heating medium (steam or hot water). DOE
then used these CPB subsets to group the sample buildings equipped with
the same class of equipment evaluated in this analysis. In the LCC
analysis, DOE used the ratio of the weighted floor space of the groups
of commercial and residential building samples associated with each
equipment class to determine the respective sample weights for the
commercial and residential sectors. DOE's new construction sample was
based on the same selection algorithms as the replacement sample but
included only buildings built on or after 1990, which DOE concluded
would have building characteristics more similar to the new
construction buildings in the start of the analysis period in 2020
(e.g., building insulation, regional distribution of the buildings,
etc.).
To disaggregate a selected set of commercial packaged boilers into
large and small equipment classes, DOE used a sizing methodology to
determine the sizes of the commercial packaged boilers installed in the
building. In this final rule, DOE's sizing methodology is essentially
the same as that used in the March 2016 NOPR (i.e., assigning a
stepwise increasing number of commercial packaged boilers for all
buildings within a range of boiler sizing loads). The stepwise
assignment table developed in the March 2016 NOPR used data from an EPA
boiler database \40\ last updated in 2005, CBECS 1979, and CBECS 1983.
The same table was used for allocating the number of boilers for older
buildings constructed before 1990.
[[Page 1624]]
However, for buildings of newer construction, this assignment table was
modified, as DOE received new data that show the average size of
boilers being smaller than the average size of the sample commercial
packaged boilers in the March 2016 NOPR analysis. The sizing
methodology used in this rule is described in this section.
---------------------------------------------------------------------------
\40\ Environmental Protection Agency, 13 State Boiler Inspector
Inventory Database with Projections (Area Sources), EPA-HQ-OAR-2006-
0790-0013, (April 2010). Available at https://www3.epa.gov/airtoxics/boiler/boilerpg.html.
---------------------------------------------------------------------------
First, the total sizing of the heating equipment is determined from
the heated square footage of the building, the percentage of area
heated, a uniform heating load requirement of 30 Btu/h per square foot
of heated area based on references for commercial
building,41 42 and an assumed equipment efficiency mapped to
the construction year. DOE's sizing methodology also takes outdoor
design conditions into consideration. The outdoor design condition for
the building is based on the specific weather location of the building.
The estimated total CPB sizing in million Btu per hour (MBtu/h) \43\ is
the aggregate heating equipment sizing prorated using the area fraction
heated by the commercial packaged boilers and multiplied by an oversize
factor of 1.1. For the sample of residential multi-family buildings,
the heating equipment sizing methodology for commercial buildings is
modified to calculate the heating load for each residential unit of the
multi-family buildings, and this value is multiplied by the number of
units, assuming each unit to have identical area and design heating
load. The modified methodology for residential multi-family buildings
further assumes that a centrally located single or a multiple-boiler
installation would meet the entire design heating load of the building.
---------------------------------------------------------------------------
\41\ Bell, A.A. Jr. Part 7: Heating Load Rules of Thumb. In HVAC
Equations, Data, and Rules of Thumb, McGraw-Hill: San Francisco, CA
(2000).
\42\ http://www.weil-mclain.com/sites/default/files/wm-boiler-replacement-guide.pdf.
\43\ The industry commonly uses MBtu to refer to one million
Btu.
---------------------------------------------------------------------------
DOE computed the size of each commercial packaged boiler in each
sample building by dividing the aggregate CPB sizing heating load
(MBtu/h) by an estimated number of boilers of equal capacity. To
estimate the number of commercial packaged boilers in a given sample
building, DOE assigned a variable number of commercial packaged boilers
to all the qualified sample buildings of 2012 CBECS based on a
predetermined allocation table. In the final rule analysis, buildings
constructed before 1990 were assigned a given number of boilers based
on the allocation table developed in the March 2016 NOPR analysis.
However, the remaining sample buildings, constructed on or after 1990,
were assigned a given number of boilers based on a modified version of
the allocation table where the percentage of building samples receiving
a smaller number of boilers in a given CPB sizing load range was
reduced, and the percentage of sample buildings receiving a larger
number of boilers was increased, relative to their respective shares
used at the March 2016 NOPR. Adjustments were made to this assignment
of the number of commercial packaged boilers to maximize the utility of
the sampled buildings used for this analysis with respect to the size
range of boilers being analyzed.
Several interested parties commented on DOE's usage of a parameter
value of 30 Btu/h per square foot for estimating the building heating
load under design condition. While Spire commented that this is
inappropriately high, Raypak noted that this may not be acceptable for
the sizing of heating equipment for commercial buildings, although it
is a decent metric for residential buildings. Raypak stated that they
would normally use a value of 25 Btu/h per square foot for a commercial
building in Los Angeles, California, and that they would typically use
approximately 100 Btu/h per square foot for 0 [ordm]F design outdoor
conditions. (Spire, No. 73 at p. 25; Raypak, No. 72 at pp. 3-4) AHRI
commented that the current value of this parameter at 30 Btu/h per
square foot is unverified and possibly causing the LCC model to produce
excessively high operating hours and distorting the LCC results. (AHRI,
No. 76 at pp. 26, 32, 37-40)
For commercial buildings, DOE's methodology for estimating the
design condition heating load is uniform across all outdoor conditions.
It uses a uniform heating load requirement per square foot of heated
area, assuming a 0 [deg]F design outdoor condition, and then adjusts
based on the outdoor design heating temperature for the building under
consideration. In addition, DOE applies an oversizing factor on top of
this. DOE recognizes there are simplifications in this approach;
however, DOE's estimation of building heating loads stems from design
data for commercial buildings taking into account the design climate
conditions and adequately captures heating load design variations in
the field. DOE has high confidence that its building load estimation is
representative of the building loads in the field. Therefore, DOE
retained its NOPR base heating load approach in its analysis for this
final rule.
AHRI also commented that the energy use calculations did not
incorporate the ASHRAE 90.1-2013 requirements of all boilers with an
input rate of 1,000,000 Btu/h or more needed to have a turndown ratio
of 3 to 1, and this will make the boilers more efficient. (AHRI, No. 76
at p. 15)
DOE points out that it did consider the 3:1 turndown ratio
requirement from ASHRAE 90.1-2013 for systems greater than 1 MMBtu/h
and notes that its understanding is that this requirement in ASHRAE
90.1-2013, as adopted into local building code, will not necessarily be
extended to replacement boilers, and, in addition, can be met by using
multiple boilers, which is already common in DOE's analysis for boiler
systems with 1 MBtu/h or above combined rated input. As noted in the
March 2016 NOPR, DOE assumed that all commercial packaged boilers
installed in new buildings will be part of a system with at least a 3:1
turndown ratio, and DOE calculated the adjusted thermal efficiency of
commercial packaged boilers in such systems accordingly. DOE concludes
that its adjusted cycling loss factors designed to address multiple
boiler systems will adequately represent the expected benefits to part-
load performance for multi-stage boilers, as well as the ASHRAE 90.1-
2013 requirement discussed.
The Joint Advocates further noted that DOE's energy use analysis is
likely underestimating potential energy savings when compared to
several cited studies of field installations, and that due to the
impacts of high return water temperature operation and cycling, the
operational efficiency of a non-condensing boiler is below that of its
rated efficiency. (Joint Advocates, No. 74 at pp. 1-2, 8) Crown
commented that non-condensing boilers are not only available as single-
stage and that this is especially true for large boilers. (Crown,
Public Meeting Transcript, No. 61 at pp. 130-131).
In response to the comments from the Joint Advocates regarding
performance degradation of non-condensing boilers, DOE notes that it
does consider this in its analysis by using a cycling loss adjustment
factor that takes into account the impact of multiple sequenced boilers
operation. With regard to Crown's comment, DOE understands that non-
condensing boilers are available in other than single stage equipment,
but DOE does not have data on the relative sales into the market and
has insufficient data regarding their part-load performance. DOE,
however, has accounted for reduced cycling losses in cases where
multiple boilers may be utilized.
[[Page 1625]]
In the March 2016 NOPR, DOE requested for information on the extent
to which hybrid configurations with both condensing and non-condensing
commercial packaged boilers in a single system are prevalent in
retrofit installations. Lochinvar believes that approximately 5 percent
of the installations with condensing boilers are hybrid systems and
urged DOE to consider this in its energy use analysis. (Lochinvar, No.
70 at p. 2) Weil-McLain commented that creating a baseline assumption
about the current degree of adoption of hybrid boiler configurations in
retrofit situations is unrealistic because it requires the analysis of
many variables. (Weil-McLain, No. 67 at p. 7) Bradford White commented
that hybrid configurations are difficult to implement because legacy
installation venting systems are already established, possibly in an
era before the market debut of condensing boilers. (Bradford White, No.
68 at p. 2)
In view of the uncertainty regarding the degree of adoption of
hybrid configurations in retrofit situations and the difficulty in
incorporating this in the energy use analysis due to the great number
of variables that would need to be considered as well as the lack of
data, DOE did not incorporate hybrid systems in its analysis.
Spire commented that DOE in its analysis should consider that the
Federal purchase decisions are mandated by stringent and aggressive
policy mandates and as such should not be included in the analysis as
they would meet the stringent standards even if stringent standards are
not adopted. (Spire, No. 73 at p. 13)
DOE understands that the Federal Energy Management Program (FEMP)
provides acquisition guidance for commercial packaged boilers, but also
provides exceptions to these Federal purchasing requirements where an
agency demonstrates that selecting the FEMP recommended efficiency
level may not be cost effective. DOE notes that data provided by AHRI
support that a higher percentage of the gas-fired hot water CPB market
is condensing equipment than was used in the March 2016 NOPR analysis
and DOE has modified in the final rule its projections for the
condensing boiler market into the future to show much higher adoption
rates. This higher adoption rate will include many Federal buildings.
However, for the remaining fraction of the market, DOE does not have
sufficient information that would allow it to make comparisons between
the market shares of non-condensing commercial packaged boilers
purchased for Federal buildings versus commercial buildings. In
addition, DOE notes that its analysis considers as potential standards
levels, commercial packaged boilers with efficiencies above the FEMP
guidance, and for these reasons, DOE considers Federal buildings in its
analysis.
The Gas Associations commented that the energy use analysis needs
to adjust potential energy savings and associated emissions for Federal
buildings that will not be able to have fossil fuel-generated energy
after 2030, per provisions in Section 433 of EPCA of 1975 as amended by
EISA 2007. (Gas Associations, No. 69 at pp. 2-3)
DOE notes that the legislation establishing the fossil-fuel energy
targets for Federal buildings has yet to be codified as a final rule in
the Code of Federal Regulations at the time of this analysis. A NOPR,
titled ``Fossil Fuel-Generated Energy Consumption Reduction for New
Federal Buildings and Major Renovations of Federal Buildings'' was
issued on October 15, 2010 and an SNOPR issued on October 15, 2014,
addressing comments on the NOPR and noting that DOE has identified
additional areas for clarification and consideration that would benefit
from further public comment. The SNOPR particularly sought comment on
additional approaches to the scope of the requirements in the context
of major renovations, the potential use of renewable energy
certificates for compliance, and a proposed streamlined process for
agencies to seek a downward adjustment from the required reduction
levels, particularly for major renovations. DOE notes that while
providing for significant savings of fossil-fuel derived energy
(including both on-site usage of fossil fuels and on-site usage of
electricity generated from fossil fuels) in Federal buildings, the
proposed rule will not likely provide a complete limitation of fossil
fuel use in Federal buildings even in 2030. Federal agencies can and
may be expected to petition for downward adjustments from the required
reduction levels for certain buildings and building retrofits,
particularly where other options to meet the requirements are
technically impracticable, where these options have been considered in
detail by these agencies, and where the agencies have demonstrated they
have pursued other options. In addition, the SNOPR sought input on the
use of renewable energy certificates as alternative options to meet the
required reduction levels, which could be a more cost-effective
approach to on-site fossil fuel reduction in certain situations.
Regarding regional use of commercial packaged boilers, PEM
commented that the New York City area almost entirely uses field-
constructed boilers except for new construction and schools. (PEM,
Public Meeting Transcript, No. 61 at pp. 122-123) Similarly, AHRI
commented that it could be useful to look at geographical regions
represented in RECS data and that commercial packaged boilers are not
typically used in New York's multi-family apartment buildings, and that
including New York City and surrounding areas in the analysis inflates
this rulemaking's energy savings. (AHRI, Public Meeting Transcript, No.
61 at pp. 122, 124).
In response to the comments on regional use of commercial packaged
boilers, DOE inquired with the New York City Buildings Department
regarding the prevalence of field constructed boilers used in heating
applications in New York City (NYC). DOE was informed by the Buildings
Department that based on their experience with inspections boiler
installations, only about 10 percent of the commercial packaged boilers
in NYC are field-constructed with a higher fraction of those (estimated
as high as about 33 percent) in the large boiler category. It was also
noted by the Buildings Department that a large portion of these field
constructed boilers are steam boilers. Furthermore, as was noted by
PEM, there are instances where commercial packaged boilers are used in
the NYC area. Given both of these considerations, DOE cannot discount
that commercial packaged boilers are being utilized, or newly selected,
in other types of commercial buildings including multifamily buildings
in NYC and surrounding areas. Given the shipment data that form the
basis for DOE's overall national energy savings analysis are based on
AHRI input and do not include field-constructed boilers, DOE disagrees
with AHRI that including building sample data that may have come from
NYC in its analysis inflates the energy savings calculations. For these
reasons, DOE did not attempt to further identify or exclude any
building observations specific to NYC in its analyses.
DOE has not modified the analysis to eliminate the use of
commercial packaged boilers in Federal buildings after 2030, but
understands that, presuming the establishment and implementation of a
final rule addressing fossil fuel-generated energy consumption in
Federal buildings, the likely impact of the rule will be a reduction in
overall boiler shipments to commercial buildings and a consequent
[[Page 1626]]
reduction in the projected energy savings from the CPB rule.
Building sampling methodology is detailed in chapter 7 of the final
rule TSD.
3. Miscellaneous Energy Use
The annual energy used by commercial packaged boilers, in some
cases, may include energy used for non-space heating use such as water
heating. Based on comments received in the November 20, 2014 NODA and
preliminary analysis, DOE assumed that if the CBECS data indicate that
the CPB fuel is the same as the fuel used for water heating then in 20
percent of the sample buildings, the same commercial packaged boiler is
also used for water heating in this final rule. 79 FR 69066.
Other associated energy consumption is due to electricity use by
electrical components of commercial packaged boilers including
circulating pump, draft inducer, igniter, and other auxiliary equipment
such as condensate pumps. In evaluating electricity use, DOE considered
electricity consumed by commercial packaged boilers both in active mode
as well as in standby and off modes in the preliminary analysis.
BHI commented that the energy use analysis should consider that
most condensing boiler installations require a minimum of two pumps:
One to circulate water through the system, and a second to circulate
water through the boiler itself. Further, BHI stated that if DOE were
to adopt the 85-percent efficiency level and the test procedure as it
was proposed in its NOPR, it would mean that there would be no Category
I small or large hot water boilers on the market and therefore all such
boilers would become mechanical draft and therefore require the
associated power consumption. (BHI, No. 71 at p. 17)
As clarified in the March 2016 NOPR, DOE only considered the
electricity use of pumps needed for proper operation of the commercial
packaged boiler, but not the electricity use of additional pumps that
may be necessary for distributing water throughout a system, since
these pumps are not part of the commercial packaged boiler itself and
the inclusion of distribution system pumping energy consumption would
not be appropriate to the development of the standard. With respect to
BHI's comment regarding the additional power consumption for mechanical
draft equipment, DOE notes that the March 2016 NOPR analysis and the
final rule analysis both include the additional electrical power
consumption for both draft fans/blower, condensate pump, and controls,
and that this power consumption is not included for natural draft
commercial packaged boilers. Further, as noted previously, DOE has
modified the CPB test procedure from that proposed in the 2016 CPB TP
NOPR, and it is also adopting a different set of efficiency levels than
was proposed in the March 2016 NOPR in this rulemaking. DOE's analysis
adequately addresses the concerns expressed by BHI.
In its final rule analysis, DOE maintained the electricity use
analysis method used in the March 2016 NOPR analysis.
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
commercial packaged boilers. 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.
The LCC is the total consumer cost of owning and operating an
appliance or equipment, generally over its lifetime. The LCC
calculation includes total installed cost (equipment manufacturer
selling price, distribution chain markups, sales tax, and installation
costs), operating costs (energy, repair, and maintenance costs),
equipment lifetime, and discount rate. Future operating costs are
discounted to the time of purchase and summed over the lifetime of the
appliance or equipment. The PBP is the amount of time (in years) it
takes consumers to recover the assumed higher purchase price of more
energy-efficient equipment through reduced operating costs. DOE
calculates the PBP by dividing the change in total installed cost
(normally higher) due to a standard by the change in annual operating
cost (normally lower) that result from the standard.
For any given efficiency level, DOE measures the PBP and the change
in LCC relative to an estimate of the no-new-standards case efficiency
distribution. The no-new-standards estimate reflects the market in the
absence of amended energy conservation standards, including market
trends for equipment that exceed the current energy conservation
standards.
DOE analyzed the net effect of potential amended CPB standards on
consumers by calculating the LCC and PBP for each efficiency level of
each sample building using the engineering performance data, the energy
use data, and the markups. DOE performed the LCC and PBP analyses using
a spreadsheet model combined with Crystal BallTM (a
commercially available software program used to conduct stochastic
analysis using Monte Carlo simulation and probability distributions) to
account for uncertainty and variability among the input variables
(e.g., energy prices, installation cost, and repair and maintenance
costs). The spreadsheet model uses weighting factors to account for
distributions of shipments to different building types and different
states to generate LCC savings by efficiency level. Each Monte Carlo
simulation consists of 10,000 LCC and PBP calculations using input
values that are either sampled from probability distributions and
building samples or characterized with single point values. The
analytical results include a distribution of 10,000 data points showing
the range of LCC savings and PBPs for a given efficiency level relative
to the no-new-standards case efficiency forecast. In performing an
iteration of the Monte Carlo simulation for a given consumer, equipment
efficiency is chosen based on its probability. If the chosen equipment
efficiency is greater than or equal to the efficiency of the standard
level under consideration, the LCC and PBP calculation reveals that a
consumer is not impacted by the standard level. By accounting for
consumers that already purchase more-efficient equipment, DOE avoids
overstating the potential benefits from increasing equipment
efficiency.
For each considered efficiency level, DOE determines the value of
the first year's energy savings by calculating the quantity of those
savings in accordance with the applicable DOE test procedure and then
multiplying that amount by the average energy price forecast for the
year in which compliance with the amended standards would be required.
DOE calculated the LCC and PBP for all consumers of commercial
packaged boilers as if each were to purchase new equipment in the first
year of required compliance with new or amended standards. The
projected compliance date for amended standards is late 2019.
Therefore, for purposes of its analysis, DOE used January 1, 2020 as
the beginning of compliance with potential amended energy standards for
commercial packaged boilers.
As noted in this section, DOE's LCC and PBP analysis generates
values that calculate the payback period for consumers of potential
energy conservation standards, which includes, but is not limited to,
the 3-year payback period contemplated under the rebuttable presumption
test. However, DOE routinely conducts a full economic
[[Page 1627]]
analysis that considers the full range of impacts, including those to
the consumer, manufacturer, Nation, and environment. The results of the
full economic analysis serve as the basis for DOE to definitively
evaluate the economic justification for a potential standard level
(thereby supporting or rebutting the results of any preliminary
determination of economic justification).
Inputs to the LCC and PBP analysis are categorized as (1) inputs
for establishing the purchase cost, otherwise known as the total
installed cost, and (2) inputs for calculating the operating cost
(i.e., energy, maintenance, and repair costs). The following sections
contain brief discussions of comments on the inputs and key assumptions
of DOE's LCC and PBP analysis and explain how DOE took these comments
into consideration.
1. Equipment Costs
For each distribution channel, DOE derived the consumer equipment
cost for the baseline equipment by multiplying the baseline equipment
manufacturer sale price and the baseline overall markup (including any
applicable sales tax). For each efficiency level above the baseline,
DOE derived the consumer equipment cost by adding baseline equipment
consumer cost to the equipment of incremental manufacturer sale price
and the appropriate incremental overall markup (including any
applicable sales tax). This consumer equipment cost is reflective of
the representative equipment size analyzed for each equipment class in
the engineering analysis. Since the LCC analysis considers consumers
whose CPB capacities vary from the representative equipment size, the
consumer equipment cost is adjusted to account for this.
DOE examined whether CPB equipment prices changed over time. DOE
determined that there is no clear historical price trend for CPB
equipment and used costs established in the engineering analysis
directly for determining 2020 equipment prices for the LCC and PBP
analysis.
DOE notes that it received a comment from Bradford White that the
cost to manufacture a given unit increases over time, noting the
increase in labor and overhead rates over time due to healthcare,
utility and fuel costs, etc. (Bradford White, No. 68 at p. 5) In
response, DOE wishes to clarify that its price trend analysis reflects
the real, inflation adjusted, examination of equipment price, and such
factors identified by Bradford White would already be incorporated in
the real equipment price.
2. Installation Costs
The installation cost is the cost incurred by the consumer for
installing the commercial packaged boiler. The cost of installation
covers all labor and material costs associated with the replacement of
an existing commercial packaged boiler or the installation of a
commercial packaged boiler in a new building, removal of the existing
boiler, and any applicable permit fees. DOE estimated the installation
costs of the representative capacity boiler at each considered
efficiency level using a variety of sources, including RS Means 2016
facilities construction cost data, manufacturer literature, and
information from expert consultants.\44\ DOE adjusted the basic
installation cost for a boiler of a given rated input, relative to the
installation cost of the representative capacity boiler, by using
adjustment factors developed using trends observed in the RS Means
data. Appendix 8D of the final rule TSD contains a detailed discussion
of the development of installation costs and adjustment factors.
---------------------------------------------------------------------------
\44\ RS Means, Facilities Maintenance & Repair Cost Data 2015,
73rd ed (2014).
---------------------------------------------------------------------------
With regard to installation costs, DOE received comments from
stakeholders during the March 2016 NOPR in two general areas: (1) The
general cost to install a boiler, including components, labor, and
accessories needed; and (2) the cost and impacts with regard to venting
materials and upgrades necessary. DOE addresses both groups of comments
in the following paragraphs. In addition, certain general comments
reflecting the impact of high installation costs are addressed in
section IV.F.2.c of this document.
a. Base Boiler Installation
DOE received several comments regarding installation costs. AHRI
expressed that the costing methods used by DOE are simplistic and
inaccurate, resulting in incorrect estimates of consumer economics.
AHRI commented that DOE's current process of building up costs from
assumed installation situations is incorrect, as has been demonstrated
through contractor survey data in other rulemakings, and misses much of
the subtlety in installation and venting conditions. (AHRI, No. 76 at
p. 27, 42-43)
DOE understands the comments from AHRI and notes that it has
modified its venting logic and installation costs in this final rule to
address specific concerns brought up by stakeholders. This is discussed
in detail in section IV.F.2 of this document.
PEM commented that there is no correlation between boiler cost and
installation cost. (PEM, Public Meeting Transcript, No. 61 at p. 98)
Raypak commented that there is probably no incremental cost associated
with installing a boiler at different efficiency levels, for example an
82 percent efficient boiler versus an 86 percent efficient boiler.
However, there will be cost differential for replacement parts.
(Raypak, Public Meeting Transcript, No. 61 at p. 101) ABMA commented
that larger boilers not only have significantly different applications
and features but also carry an exponentially higher cost for
transportation, installation, and start-up. ABMA also commented that in
attempting to develop installation costs, it is important that the
magnitude of work involved in installing the large and very large
boilers is greater than that for small and light weight boilers and may
involve the use of fork lifts and delivery trucks, and that these are
extra expenses and as such should not be based on extrapolating the
installation cost of smaller boilers. (ABMA, No. 64 at pp. 1-2) ABMA
expressed concerns regarding the extrapolation of RS Means data for
small boilers into large boilers, and wonders if a more appropriate set
of estimating data had been considered, noting Mechanical Contractors
Association of America (MCAA) as a potential source. (ABMA, No. 64 at
p. 1)
Regarding PEM's comment, DOE notes that the installation costs are
derived directly from RS Means 2016 Mechanical Cost Data, which
indicates a strong correlation between boiler size and its installation
cost. With respect to Raypak's comment that there is no incremental
cost for installing boilers at different efficiency levels, DOE's
estimated basic installation costs for the commercial packaged boilers
at different efficiency levels, within an equipment class, do not vary
with efficiency, except for condensing boilers where additional costs
are incurred specific to such installations. With respect to Raypak's
comment about repair costs, DOE notes that its annualized repair cost
estimates do increase with efficiency. Regarding ABMA's comment about
very large boilers, DOE reiterates that very large boiler equipment
classes (>10 MBtu/h) are not being analyzed in this rulemaking. With
regard to installation cost differences because of transportation,
magnitude of work, and use of extra equipment for large boilers, DOE
notes that RS Means captures these costs in its estimation of basic
installation costs and, as such, DOE is not changing the base
installation cost
[[Page 1628]]
approach in this final rule. However, DOE notes that, at the March 2016
NOPR stage, for each equipment class, the installation cost was
estimated only for the representative rated input. For the final rule,
DOE incorporated an adjustment factor based on trends noted in RS Means
that would scale the basic installation cost up or down, depending on
the capacity of the chosen boiler to more accurately reflect the
absolute cost for installation of the selected boiler in this analysis.
Although this is a modification to the general approach, the
incremental cost from the baseline does not change, and thus this
change does not have any impact on the LCC savings. With respect to
MCAA, DOE explored this source as a possible alternative and more
appropriate data source. Based on conversations with MCAA, DOE learned
that MCAA data is not derived from time studies, but is an empirical
approach, and that MCAA recommends utilizing one of their affiliate
companies which utilize their data to determine the time requirements
to complete a task, rather than directly referencing their data. DOE
inquired of MCAA regarding the comparison between MCAA and RS Means
data, and was informed that while methods take different approaches,
both data sets are accurate. DOE has determined that RS Means can serve
as an appropriate source of estimating data for this rulemaking and has
updated the data sources in this analysis to RS Means 2016.
BHI commented that DOE has not considered that most condensing
boilers require two pumps, an associated ``primary-secondary'' piping
system, and ``Y strainers'' to keep out system sediment. BHI noted that
only in some cases pump(s) are supplied with the boiler while the
piping system upgrade is carried out by the installer. (BHI, No. 71 at
p. 18)
In response to comments from BHI, DOE notes that such system costs
may be incurred by a consumer as part of a heating system upgrade,
which DOE understands could result in condensing commercial packaged
boilers operating at higher efficiencies, on average. DOE considers in
its analysis that many, if not most, boilers (e.g., 95% of cases for
buildings built before 1990) in a standards-case scenario may be
installed in systems that do not provide for low return water
temperature conditions, on average, and are thus assigned high return
water temperature operating conditions. As such, DOE already takes into
account the impact to the consumer, in terms of lost potential for
additional energy savings, of using an unmodified distribution system
when it assigns a high return water temperature condition in those
cases. Regarding inclusion of the Y-strainer cost in the installation
cost, DOE is aware that some CPB manufacturers, both condensing and
non-condensing, may recommend the use of a Y-strainer or dirt separator
for the purpose of dirt elimination, but did not identify requirements
for this technology. DOE observed that a large percentage of condensing
CPB equipment manuals recommend the use of Y-strainers, but also notes
that many existing CPB systems may already have one installed. As such,
DOE included in its analysis the cost of a Y-strainer in an incremental
manner for condensing commercial packaged boilers. For CPB equipment
classes that contain condensing equipment, DOE's analysis includes a 33
percent higher incidence of Y-strainer usage with condensing equipment.
b. Venting
Crown commented that proposed standard levels for some boilers rule
out Category I chimney venting and therefore make boiler installation
in certain areas not cost effective. (Crown, No. 61 at p. 13) Other
commenters noted that the proposed standards would eliminate the
possibility of cheaper Category I venting. Weil-McLain noted that
proposed standards will create the need to install new venting systems,
essentially eliminate Category III boilers, operate higher power boiler
pumps, and operate venting blowers/fans that are necessary for most
condensing and near-condensing equipment to operate and safely vent
flue gases. (Crown, No. 61 at p. 148; Raypak, No. 61 at p. 145-146;
Weil-McLain, No. 67 at pp. 2, 6) AHRI noted that the installation codes
that apply to gas and oil boilers today are significantly different
from those that existed 50 or 60 years ago. The installation codes are
currently more detailed and specific and recognize that boilers
operating at steady state efficiencies in the mid-1980s represent the
near condensing range of efficiency and that the venting requirements
are determined accordingly. (AHRI, No. 76 at p. 15-16) Weil-McLain
notes that DOE's own analysis shows very few equipment offerings at
near-condensing efficiencies, and that this is because the market has
determined that it is not economically feasible to install such
commercial packaged boilers due to higher cost of venting. (Weil-
McLain, No. 67 at p. 3) Raypak noted that even though boilers with 85-
percent ET (or 85-percent EC) are available in
the market, DOE should not assume that all boiler installations will be
capable of having these commercial packaged boilers installed and
safely operated. (Raypak, No. 72 at p. 3)
DOE understands the concerns from stakeholders and notes that the
standards being adopted in this final rule, and more particularly the
adopted standard for SGHW CPB equipment, are lower than that proposed
during the March 2016 NOPR. Further, revisions made to the proposed
test procedure (81 FR 89276, 89289-89290 (December 9, 2016)) address
significant concerns raised by stakeholders regarding potential impact
on ratings. Notwithstanding this, DOE recognizes that under the adopted
standards, there may be migration between Category I boilers and other
boiler categories. However, DOE does not believe that the standard
being adopted eliminates all Category I equipment, based on their
existence in the market at these efficiency levels. Furthermore, AHRI's
own data demonstrates that, with regard to gas-fired hot water boilers,
efficiencies between 85-percent and 86-percent ET and
EC for small and large hot water boilers, respectively,
represent a maximum in the efficiency distributions of models provided
to DOE. (AHRI, No. 76 at p. 16) DOE has determined that the efficiency
levels being adopted in this rulemaking have adequately considered
stakeholder comments. DOE has subsequently refined its analysis and
considers that the standards being adopted in this final rule are
justified.
DOE received multiple comments regarding its handling of venting
costs, in particular those associated with 85-percent efficient boiler
systems. Raypak commented that replacing existing boilers lower than
85-percent efficiency will require new venting and that DOE should take
the associated costs into account. (Raypak, No. 61 at p. 153, 155)
Crown commented that every commercial install at 85-percent efficiency
will get a different venting system. (Crown, No. 61 at p. 152) NEEA
noted that some existing boilers that have greater than 85-percent
efficiency would already have venting that would not need replacing,
and that the DOE's analysis takes that into account, to which Raypak
agreed that systems with boilers of 85-percent efficiency and above
would not require venting upgrades in such cases. (NEEA, No. 61 at p.
154; Raypak, No. 61 at p. 155) BHI commented that the costs of vent
systems will increase far more than reflected in the cost estimates in
the DOE models, as a result of a shift away from Category I vent
systems. (BHI, No. 71 at p. 2, 7, 10, and 11) Weil-McLain
[[Page 1629]]
noted that qualified contractors will want to make sure that a
replacement boiler is safely installed and should require the
additional steps needed for those installations that are on the near-
condensing/condensing efficiency borderline, and that this imposes
significant costs. (Weil-McLain, No. 67 at p. 2)
Relative to the March 2016 NOPR public meeting comments, DOE notes
that in its analysis it does consider the potential for a boiler to be
replaced that is already at or above the 85-percent efficiency level,
and that the venting costs would be lower in such a scenario when
compared with a similar scenario where the existing boiler being
replaced is below 85-percent efficiency. Further, DOE has considered
venting costs that would result in safe installation of commercial
packaged boilers at all efficiency levels in its analysis, refining the
LCC model to select materials for venting that represent the concerns
of stakeholders.
BHI and AHRI commented on DOE's venting logic that allowed lower
cost Category-I/III venting options for SGHW commercial packaged
boilers at the 85-percent efficiency level proposed by DOE in the NOPR.
BHI also noted that 85-percent efficiency non-condensing boilers may
result in operation in the Category II/IV regime instead of Category I/
III assumed by DOE. (BHI, No. 71 at p. 8-10; AHRI, No. 76 at p. 16)
AHRI expressed similar concerns that a Category II/IV vent may be
needed for gas boilers in the 83.5-percent to 85-percent efficiency
levels. (AHRI, No. 76 at p. 16) BHI further commented that even some
Category III boilers must be vented with expensive stainless steel
option (i.e., AL29-4C), particularly for small commercial packaged
boilers. (BHI, No. 71 at p. 18). Lochinvar commented that venting at
85-percent efficiency level should be assumed to be corrosion
resistant, a position they say is shared by Raypak and Crown Boiler.
(Lochinvar, No. 70 at p. 3) Crown also noted that anything above 85-
percent thermal efficiency would not be an option for Category I
venting. (Crown, No. 61 at p. 148). Crown commented that even if newer
high-efficiency boilers do not need their full vent system replaced,
they are going to need terminals, vent adaptors, and gaskets replaced.
(Crown, No. 61 at p. 158) AHRI questioned whether 8-inch PVC venting
was available on the market. (AHRI, No. 61 at p. 150-151)
In response to comments received, DOE included upgrades to
stainless steel venting materials, in some cases selecting AL29-4C, for
non-condensing boilers at the 85-percent efficiency level and included,
in the case of small gas-fired commercial packaged boilers, a cost
transition at 84% efficiency which reflects the cost of mechanically
vented CPB equipment where natural draft equipment remains available on
the market. This latter approach is conservative with regard to overall
installation costs. Analysis of the market efficiencies continues to
show that there are Category I small gas-fired commercial packaged
boilers at the 85-percent efficiency level, and not all equipment will
transition to mechanically vented equipment. As noted previously,
however, DOE is adopting in this final rule an 84-percent ET
level for SGHW and 85-percent EC level for LGHW, and this,
in conjunction with the aforementioned modifications to DOE's test
procedure final rule (81 FR 89276, (December 9, 2016)), will address
many of the concerns of stakeholders regarding the standard levels that
were being proposed in the NOPR. In response to Lochinvar's comment
about costs incurred even when a full vent system is not replaced, DOE
does consider partial costs for venting in its final rule analysis in
cases where a vent is determined to be re-usable by replacing a portion
of the existing venting system. The details of these costs may be found
in appendix 8D of the final rule TSD. With respect to AHRI's question
about 8-inch PVC venting availability, DOE notes that at the time the
March 2016 NOPR model was developed, DOE was aware of manufacturers
that specified 8-inch PVC venting for commercial packaged boilers.
However, DOE has revised the venting logic in its final rule to not
consider plastic venting on or above 8-inch diameter in order to better
reflect typical industry venting practices.
DOE received several comments regarding special situations that
require consideration in DOE's venting logic. AHRI commented that the
vent systems in older buildings may be of excessive length and
convoluted configuration to properly vent by natural draft an 85-
percent efficient gas fired commercial packaged boiler, or oil-fired
hot water boiler at the 86-percent and 87-percent efficiency levels.
(AHRI, No. 76 at p. 1, 15-16, and 26-27) Weil-McLain commented that
retrofitting an existing building with a condensing commercial packaged
boiler usually involves running venting over extended lengths and
usually becomes prohibitively expensive. Weil-McLain further expressed
doubts whether DOE's installation cost model has captured all costs,
including additional components, venting materials and system
engineering/design costs. (Weil-McLain, No. 67 at p. 2, 7) BHI noted
that multiple-boiler installations requiring Category III or IV venting
are required to have dedicated venting for each boiler, effectively
multiplying the cost several times. (BHI, No. 71 at p. 13) In the same
note, Lochinvar commented that CPB installations with condensing
boilers often require the vent system to be engineered and noted that
DOE in its cost model should include custom engineering fees for these
systems. (Lochinvar, No. 70 at p. 3) Crown commented that there are
terra-cotta lined chimneys that are allowed to use Category I
equipment, but the modeling assumption assumes they will need a B-vent.
(Crown, No. 61 at p. 148) Spire commented that the effect of the
proposed standard would be to eliminate natural vent gas-fired boilers,
which can impose substantial additional costs. (Spire, No. 73 at p. 24)
BHI cites various requirements and restrictions regarding horizontal
venting that may make it difficult to horizontally vent Category III or
IV gas-fired commercial packaged boilers in many cases. (BHI, No. 71 at
p. 12-13)
In response to comments about common venting, DOE notes that, while
model does not explicitly address common venting, DOE has not received
any data on the relative prevalence of common vented Category I boilers
on the market. In addition, DOE notes that its analysis, which presumes
individually vented boilers, also presumes that in the case of boiler
replacements, where needed a venting replacement is done for each
boiler in the building individually--a cost which may, in effect,
exceed that of replacing a single common vent in a multiple boiler
installation. Given the lack of detail in the relative frequency of
common venting and the potential additional costs that DOE's method
incurs, DOE feels that its approach is adequate for its analysis. With
respect to the comments about terra-cotta lined chimneys, DOE concludes
that due to the relative costs of lining chimney with terra-cotta
liners, as opposed to metal liners, the latter would be much more
reflective of the option selected in the current replacement boiler
market. More broadly, the general comments noted herein have been
mitigated by DOE's adoption of an 84-percent level for SGHW CPB
equipment, which is lower than that presented at the March 2016 NOPR.
BHI commented that DOE needs to include the additional installation
costs associated with complete replacement
[[Page 1630]]
of ``orphan water heaters'' \45\ (i.e., not just vent modifications) on
a fraction of installations. (BHI, No. 71 at p. 18)
---------------------------------------------------------------------------
\45\ A service hot water heater that shared a vent with a boiler
is said to be ``orphaned'' when a high efficiency boiler is
installed with which it can no longer share such vent.
---------------------------------------------------------------------------
DOE notes that it does not have data on the relevant frequency of
boiler vent systems that are also used to vent water heaters, but
received comment at the preliminary analysis stage on this issue. DOE
notes that the primary application of common venting is with category I
equipment. Comments on the frequency were inconsistent; however, AHRI
stated that they believed that common venting of commercial boilers and
commercial water heaters may in fact be relatively rare given the size
mismatch between commercial boilers and commercial water heaters, such
that common venting would be more than problematic because the common
vent size would be so large that when the boiler wasn't firing there
would be venting problems on the water heater. (AHRI, Public Meeting
Transcript, No. 39 at pp. 140-141). Based on input from AHRI, common
venting with water heaters would be negligible for large CPB equipment
and would be uncommon for small CPB equipment. For small CPB equipment,
to the extent that common venting with water heaters does occur, the
standards adopted in this final rule and the revisions made to and
adopted in DOE's CPB test procedure final rule will allow the continued
use of Category I commercial packaged boilers in many commonly vented
systems and thus remove concerns with orphaned water heaters in common
vented systems.
DOE received various comments regarding the safety of venting
options used in the NOPR analysis. AHRI commented that a variety of
venting installation issues arise as potential standards are at, or
near, condensing levels and noted that both manufacturers and
installers use caution in their venting installation (AHRI, No. 76 at
p. 42-43) BHI commented that DOE's proposed standards for SGHW and LGHW
boilers demonstrates insufficient consideration for the safety
consequences of attempting to vent gas-fired boilers at this efficiency
level into some chimneys in full compliance with nationally recognized
safety standards, such as the National Fuel Gas Code. Further, BHI
commented that DOE needs to weigh carefully the levels at which it sets
minimum efficiency standards so that it does not inadvertently tip
across a technology divide, creating: Serious increased costs to the
consumer, the application of marginal technology (which is beyond the
control of the manufacturer), utility issues, and even safety issues.
(BHI, No. 71 at p. 2, 7, 10, and 11) BHI posits that many of the same
issues regarding venting of gas-fired boilers apply to oil-fired
boilers at the efficiency levels proposed, and that it is unaware of
any analysis performed by DOE to evaluate the effect of the proposed
levels for oil-fired hot water and steam commercial packaged boilers to
safely and cost-effectively vent oil boilers into existing chimneys.
(BHI, No. 71 at p. 16) BHI commented that with an 85-percent gas-fired
hot water boiler standard there are too many potential installations
which breach acceptable safety levels (e.g., reduction in flue gas
buoyancy, operation closer to flue gas dew point, flue gas leakage into
the structure as a result of inadequate draft and/or vent system
deterioration), and responsible manufacturers and installers will not
install 85-percent boilers in these situations and will force consumers
into condensing equipment. (BHI, No. 71 at p. 7, 10)
With respect to the comments from AHRI, DOE concludes that CPB
equipment manufacturers will provide adequate guidance for installers
to ensure that the venting system is safe, and that the installers used
to install commercial packaged boilers and their associated vent
systems will follow such guidance, and leverage their expertise, to
mitigate the dangers of potential corrosion issues. With respect to
venting costs, DOE notes that it reviewed and updated the venting costs
in the LCC model based on comments and data received from stakeholders
and believes that its analysis is now more representative of the costs
associated with near-condensing and condensing CPB equipment. Regarding
BHI's comments that DOE needs to weigh carefully the levels at which it
sets its minimum efficiency standards, DOE's analysis weighs carefully
the costs and other issues associated with setting a minimum efficiency
standard in this rulemaking, and has been conducted in an open and
transparent manner, incorporating input from interested parties
throughout this rulemaking. Furthermore, because there are
manufacturers actively manufacturing and marketing equipment within the
efficiency range in question, both natural draft and mechanical draft,
DOE must evaluate and consider such efficiency levels as options within
the analysis. Manufacturers are not required to provide equipment at
any specific efficiency level, only that equipment must meet or exceed
the minimum efficiency level for the equipment class under
consideration. Relative to BHI's comment about oil-fired boilers having
similar venting issues as gas boilers at the efficiency levels proposed
and not being aware of any analysis by DOE to ensure safe and cost-
effective venting of oil boilers into existing chimneys, DOE points out
that it has considered the cost to remove and replace a chimney with
adequate venting for both gas-fired and oil-fired boilers when
necessary. As such, it has considered the economic cost to the consumer
to ensure safe venting of the commercial packaged boilers.
Several commenters noted the impact of building codes on type of
venting allowed in the installation of condensing units. Bradford White
expressed reservation that DOE's installation cost model may not
address strict installation codes for CPB installations of high rise
buildings in New York, Boston and Chicago. (Bradford White, No. 68 at
p. 3) BHI commented that many manufacturers and installers do not view
practices that are technically possible and may meet the letter of some
building codes as safe. While these margins of safety can evolve as
manufacturers and installers gain more experience, there will always be
a point where a manufacturer will set installation requirements or
installers will set practices such that a ``technically compliant''
installation will not be allowed. (BHI, No. 71 at p. 7) In addition,
DOE received comment from Raypak that until regulations regarding
boiler maintenance in the United States achieve a level of
sophistication and stringency similar to those in Europe to ensure that
the boilers will operate properly, safely and efficiently, the minimum
efficiency levels proposed could result in unsafe and dangerous
installations. (Raypak, No. 72 at p. 3) Lochinvar noted that some
jurisdictions have enacted rules that prevent installation of non-
metallic vents and estimates that the installation costs for
approximately 5 percent of installations nationwide that would have
selected PVC venting should be recalculated to needing to select AL29-
4C instead, as a result. (Lochinvar, No. 70 at p. 3)
With regard to the impact of building codes on the installation of
new and replacement boilers, DOE understands that local building codes
can have specific and unique requirements regarding termination of
venting, both for condensing and for non-condensing CPB equipment that
can affect costs. However, due to the localized and building-specific
aspects of these
[[Page 1631]]
requirements, DOE has no ability to quantify their impact on its
analysis. DOE notes, however, that it is not adopting any condensing
levels in this final rule that would precipitate these costs. DOE
notes, with regard to boiler maintenance, that while commercial
packaged boilers in the United States may not have national regulations
requiring annual boiler inspections and service, many local
jurisdictions require safety inspections. Furthermore, it is in the
interest of commercial entities using CPB equipment to continue to
operate equipment in a safe manner. DOE concludes that equipment at the
efficiency levels in its final rule can be installed and operated
safely over the life of the equipment. Regarding Lochinvar's comment
that approximately 5 percent of installations that would have selected
PVC venting should be recalculated as having needed to select AL29-4C
due to jurisdictions that may not permit the use of non-metallic vents,
DOE notes that its analysis already assigns a 50 percent probability,
for vent sizes in the 4-inch to less than 8-inch range, that venting
materials for condensing boiler installations will be using AL29-4C.
DOE understands that for the smallest boilers, it did not include a
probability, however small (i.e., 5 percent), that a consumer might be
required to utilize AL29-4C, but as noted above DOE is not adopting a
condensing level in this final rule and the marginal incremental cost
that would have been associated with this factor would not have
impacted the standard levels adopted.
c. Other
AHRI urged DOE to avoid standards that would require difficult and
costly installations, or that would remove equipment technologies that
are used in the market place to meet consumer requirements, until it
has a clear understanding of installation issues via a survey of
buildings. (AHRI, No. 76 at p. 44). Spire stated that the end result of
the proposed standards would skew the market in favor of electrical
equipment over gas-fired equipment based on what Spire referred to as
``an apparent and unrealistic theory'' that these electric boilers will
be powered by renewable energy in the distant future. Spire added that
``this does not just lessen competition; it eliminates competition by
eliminating the main alternative to electricity.'' (Spire, No. 73 at p.
30)
Regarding AHRI's comment, DOE understands the potential for
difficult and costly installations at all efficiency levels, and
accounts for a wide variation in costs in installations through
consideration of varying vent lengths and base case conditions in its
Monte Carlo analysis. DOE disagrees with Spire's contention that
revised standards, such as those proposed during the March 2016 NOPR,
eliminate competition by eliminating use of the main alternative to
electricity. The standards adopted in this final rule are readily
available on the market through most, if not all, CPB manufacturers,
and higher efficiency levels are in fact being readily incorporated in
the existing market. This standard will not eliminate the use of gas in
commercial buildings.
See chapter 8 and appendix 8D of the final rule TSD for details on
DOE's analysis of installation costs including venting costs.
3. Annual Per-Unit Energy Consumption
DOE estimated annual natural gas, fuel oil, and electricity
consumed by each class of CPB equipment, at each considered efficiency
level, based on the energy use analysis described in section IV.E of
this document and in chapter 7 of the final rule TSD.
DOE conducted a literature review on the direct rebound effect in
commercial buildings, and found very few studies, especially with
regard to space heating and cooling. In a paper from 1993, Nadel
describes several studies on takeback in the wake of utility lighting
efficiency programs in the commercial and industrial sectors.\46\ The
findings suggest that in general the rebound associated with lighting
efficiency programs in the commercial and industrial sectors is very
small.\47\ In a 1995 paper, Eto et al.\48\ state that changes in energy
service levels after efficiency programs have been implemented have not
been studied systematically for the commercial sector. They state that
while pre-/post-billing analyses can implicitly pick up the energy use
impacts of amenity changes resulting from program participation, the
effect is usually impossible to isolate. A number of programs attempted
to identify changes in energy service levels through consumer surveys.
Five concluded that there was no evidence of takeback, while two
estimated small amounts of takeback for specific end uses, usually less
than 10-percent. A recent paper by Qiu,\49\ which describes a model of
technology adoption and subsequent energy demand in the commercial
building sector, does not present specific rebound percentages, but the
author notes that compared with the residential sector, rebound effects
are smaller in the commercial building sector. An important reason for
this is that in contrast to residential heating and cooling, HVAC
operation adjustment in commercial buildings is driven primarily by
building managers or owners. The comfort conditions are already
established in order to satisfy the occupants, and they are unlikely to
change due to installation of higher-efficiency equipment. While it is
possible that a small degree of rebound could occur for higher-
efficiency commercial packaged boilers, e.g., building managers may
choose to increase the operation time of these heating units, there is
no basis to select a specific value. Because the available information
suggests that any rebound would be small to negligible, DOE did not
include a rebound effect for this rule.
---------------------------------------------------------------------------
\46\ S. Nadel, The Take-back Effect: Fact or Fiction? Conference
paper: American Council for an Energy-Efficient Economy, (1993).
\47\ The rebound effect accounts for increased usage of
equipment by consumers after the implementation of a standard,
reducing the energy savings attributed to a standard. That is, the
savings from energy-efficient equipment may lead to additional use
of that equipment. However, the take-back in energy consumption
associated with the rebound effect generally provides consumers with
increased value.
\48\ Eto et al., Where Did the Money Go? The Cost and
Performance of the Largest Commercial Sector DSM Programs. LBL-
38201, Lawrence Berkeley National Laboratory, Berkeley, CA (1995).
\49\ Y. Qui, Energy Efficiency and Rebound Effects: An
Econometric Analysis of Energy Demand in the Commercial Building
Sector, Environmental and Resource Economics, 59(2): 295-335 (2014).
---------------------------------------------------------------------------
During the March 2016 NOPR, DOE requested comments and data on the
assumption that a rebound effect is unlikely to occur for these
commercial applications. ASAP, Bradford White, Lochinvar, the Joint
Utilities, SoCalGas, and Weil-McLain agreed with DOE's findings that a
rebound effect is unlikely to occur for commercial packaged boilers.
Weil-McLain added that even if it did occur, it would be at
insignificant levels. (ASAP, Public Meeting Transcript, No. 61 at p.
178; Bradford White, No. 68 at p. 2; Lochinvar, No. 70 at p. 3; Joint
Utilities, No. 65 at p. 2; SoCalGas, No. 77 at pp. 5-6; Weil-McLain,
No. 67 at p. 8)
DOE appreciates the comments provided by stakeholders with respect
to rebound effect for CPB equipment, and notes that it has not applied
a rebound effect in this final rule.
4. Energy Prices and Energy Price Trends
DOE derived average monthly energy prices for a number of
geographic areas in the United States using the latest data from EIA
and monthly energy price factors that it develops. The process then
assigned an appropriate energy
[[Page 1632]]
price to each commercial and residential building in the sample based
on its location. DOE derived 2015 annual electricity prices from EIA
Form 826 data.\50\ DOE obtained the data for natural gas prices from
EIA's Natural Gas Navigator, which includes monthly natural gas prices
by state for residential, commercial, and industrial consumers.\51\ DOE
collected 2014 average commercial fuel oil prices from the consumption,
price, and expenditure estimates from the EIA's State Energy Data
System (SEDS) and adjusts it using GDP Implicit Price Deflator factors
to reflect 2015 prices.\52\ DOE developed the LCC analysis using a
marginal fuel price approach to convert fuel savings into corresponding
financial benefits for the different equipment classes. This approach
was based on the development of marginal price factors for gas and
electric fuels based on historical data relating monthly expenditures
and consumption. For details of DOE's marginal fuel price approach, see
chapter 8 of the final rule TSD.
---------------------------------------------------------------------------
\50\ U.S. Energy Information Administration, Form EIA-826
Monthly Electric Utility Sales and Revenue Report with State
Distributions (EIA-826 Sales and Revenue Spreadsheets). Available at
http://www.eia.gov/electricity/data/eia826/.
\51\ U.S. Energy Information Administration, Natural Gas Prices.
Available at: http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm.
\52\ Source: GDP Implicit Price Deflator factors derived from
U.S. Department of Commerce, Bureau of Economic Analysis. Available
at http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1.
---------------------------------------------------------------------------
To arrive at prices in future years, DOE multiplied the marginal
fuel prices by the projection of annual average price changes in
AEO2016, which has an end year of 2040. To estimate the trend after
2040, DOE uses the average rate of change during 2030-2040.
DOE received comments on marginal prices and, in particular, on the
accuracy of the tariff rates paid by larger load consumers. The Gas
Associations commented that the analysis should adjust the energy price
calculation methodology using marginal prices to a use a tariff-based
approach to make the analysis more robust. (Gas Associations, No. 69 at
p. 3) Spire commented that DOE used erroneous utility marginal energy
pricing and forecasts in its analysis resulting in overstated benefits.
(Spire, No. 73 at pp. 17-19) AHRI asked if consumers with large loads
pay the same marginal rates as an average commercial consumer, and
Spire responded that they do not and referenced their comment
submission in the Residential Furnaces NOPR. (AHRI, Public Meeting
Transcript, No. 61 at p. 171; Spire/Laclede, Public Meeting Transcript,
No. 61 at p. 171) PG&E agreed with Spire that larger consumers pay less
for utilities. (PG&E, Public Meeting Transcript, No. 61 at p. 172) AHRI
commented that the marginal gas rates do not accurately reflect what
larger consumers pay. (AHRI, Public Meeting Transcript, No. 61 at p.
172) Spire commented that EIA data is completely inaccurate for its
largest consumers and that transport rates are typically used. (Spire/
Laclede, Public Meeting Transcript, No. 61 at p. 172) PEM commented
that the largest consumers also hedge gas prices by buying and selling
futures and noted that it is extremely difficult to figure out what the
true cost of the energy is, also pointing out that there are consumers
utilizing interruptible service accounts. (PEM, Public Meeting
Transcript, No. 61 at p. 173) Spire commented that DOE could accurately
reflect the marginal prices large consumers pay by looking at the
incremental cost per therm \53\ in hedge contracts. (Spire/Laclede,
Public Meeting Transcript, No. 61 at p. 173)
---------------------------------------------------------------------------
\53\ A therm is a unit of heat equivalent to 100,000 Btu or
1.055 x 10\8\ joules.
---------------------------------------------------------------------------
DOE appreciates the stakeholders comments on the energy prices used
in the economic analysis. EIA historical energy prices and AEO price
trends are the best aggregate sources for energy prices currently
available to DOE. DOE understands the importance of accurately
representing the energy prices for the consumers in the economic
analysis and incorporates many adjustment factors to the average price
data and the price trend data to account for the price differences due
to variations in locations, seasons, and market sectors and to ensure
that the energy prices are properly accounted for in the economic
analysis.
Lastly, AHRI commented that the exclusion of dual-fuel capable
boilers overstates the effective prices for natural gas since consumers
can make use of interruptible natural gas rates. (AHRI, No. 76 at p.
42)
With regard to consumers who may be on interruptible rates, DOE
examined CBECS 2012 ``consumption and expenditure'' data and observed
that the weighted average cost of natural gas for buildings with
commercial packaged boilers using both natural gas and fuel oil is
lower by about 6.5 percent compared to the average natural gas price
for ``gas only'' buildings. This compares well with a similar statistic
referenced by AHRI, who posited that the use of ``interruptible
supply'' contracts by consumers would result in rates that result in a
7-percent savings versus ``uninterruptible supply'' rates. Since 95
percent of these observations had gas as the principal fuel, and given
that no separate equipment class exists for dual fuel boilers, DOE
counted them as gas boilers. However these boilers contribute only 3.5
percent to the total gas boiler sample weights used in the LCC
analysis. DOE also noted that nearly 67 percent of the sample buildings
using both gas and oil continue to use significant quantities of the
higher cost fuel oil, which more than offsets a 7-percent reduction in
the natural gas price paid. Further, DOE used gas price data from EIA
in its LCC analysis and notes that these prices are based on aggregate
revenue and sales, which already include sales for both interruptible
and uninterruptible supply. In view of the above, DOE did not pursue
development of separate gas price estimates for consumers using dual
fuel boilers.
Appendix 8C of the final rule TSD includes more details on energy
prices and trends.
5. Maintenance Costs
The maintenance cost is the routine cost incurred by the consumer
for maintaining equipment operation. The maintenance cost depends on
CPB capacity and heating medium (hot water or steam). DOE used the most
recent RS Means Facility Maintenance and Repair Cost Data to determine
labor and materials costs and maintenance frequency associated with
each maintenance task for each CPB equipment class analyzed.\54\ Within
an equipment class, DOE assumed that the maintenance cost is the same
at all non-condensing efficiency levels, and that the maintenance cost
at condensing efficiency levels is slightly higher.
---------------------------------------------------------------------------
\54\ RS Means, 2016 Facilities Maintenance & Repair Cost Data.
Available at: http://rsmeans.com/60305.aspx.
---------------------------------------------------------------------------
Raypak commented that their Service Department has estimated that
approximately 5 percent of current technicians are capable of servicing
new technology, higher efficiency equipment, and that DOE should
account for this in its rulemaking process. (Raypak, No. 72 at p. 3)
DOE notes that in comments received in the November 20, 2014 NODA and
preliminary analysis, Raypak commented that although they do not have
specific data, they believe that the vast majority of maintenance/
service is performed by manufacturer factory-trained personnel due to
the specialized equipment and expertise required to properly diagnose
and repair current commercial packaged boilers. (Raypak,
[[Page 1633]]
No. 35 at p. 5) AHRI similarly noted that the industry trend for boiler
maintenance is toward using external contractors who specialize in
servicing advanced design boilers or boiler systems. (AHRI, No. 37 at
p. 5)
DOE understands that with any change in technology, there will be
an adjustment time needed to develop the skills and expertise within
the workforce to adequately service and maintain such technology.
However, the comments received at preliminary analysis indicated that
the maintenance and service markets were already in transition and DOE
does not believe that there is basis for presuming that the service
market would not adapt under a new standard scenario at any of the
efficiency levels considered.
ABMA commented that the maintenance tasks for large boilers may be
more involved and may need to be performed from a ladder or catwalk and
as such, the maintenance cost should not be based on extrapolating the
maintenance cost for smaller boilers. (ABMA, No. 64 at pp. 2-3)
DOE's LCC model does attempt to develop a maintenance cost for
large boilers using data for multiple size categories found in the RS
Means Facilities Maintenance and Repair Data manual, recognizing that
some tasks may be more involved for larger boilers, as noted by ABMA.
The largest size category referenced did not have an upper size limit,
but DOE believes that the DOE developed costs, which extrapolates costs
for commercial packaged boilers beyond the largest size category
available from RS Means, are likely more appropriate for the large CPB
equipment classes. However, DOE notes that there is no difference in
maintenance cost for a given size boiler based on its efficiency, with
the exception that condensing boilers have a slight incremental cost
due to condensate neutralizer replacement and thus the magnitude of the
maintenance cost would not play a significant role in the LCC savings
analysis. DOE concludes that its maintenance approach and costs for
larger boilers is appropriate for this rulemaking.
Appendix 8E of the final rule TSD includes more details on
maintenance costs.
6. Repair Costs
The repair cost is the cost to the commercial consumer for
replacing or repairing components that have failed in the commercial
packaged boiler (such as the ignition, controls, heat exchanger,
mechanical vent damper, or power vent blower). DOE used the latest
version of the RS Means Facility Maintenance and Repair Cost Data to
determine labor and materials costs associated with repairing each CPB
equipment class analyzed.
DOE sought input from manufacturers regarding the
representativeness of using 1-year as warranty for parts and labor and
10-years as warranty for the heat exchanger and received comments from
interested parties. Crown commented that manufacturer warranties are a
good metric for equipment lifetime and suggested condensing and non-
condensing boilers have very different warranties. Further, Crown noted
that many warranties are prorated so that a 10-year warranty might
actually be a 5-year warranty with 5 years of pro-rated warranty
coverage. (Crown, Public Meeting Transcript, No. 61 at pp. 165-166)
Raypak commented that many manufacturers do not include labor as part
of their warranties, and that a 1-year warranty on the heat-exchanger
might be more appropriate. (Raypak, Public Meeting Transcript, No. 61
at p. 163) However, ABMA commented that 5-years may be a better
warranty period for heat exchangers especially for larger sizes (ABMA,
Public Meeting Transcript, No. 61 at pp. 162-163) and both Bradford
White and Lochinvar agreed with DOE's assumptions regarding warranties,
adding that the heat exchanger warranty can be prorated for a period of
time beyond the non-prorated warranty period. (Bradford White, No. 68
at p. 2, Lochinvar, No. 70 at p. 3)
DOE reviewed the warranty terms of various manufacturers and
determined that the vast majority of manufacturers offer at least ten
years of coverage for heat exchangers and that both condensing and non-
condensing warranties may use prorating as part of their terms. Based
on this observation and comments received, DOE determined a 10-year
warranty is representative for parts coverage. This review also found
that labor is generally called out as not being covered by manufacturer
warranties. However, DOE considered that other players in the
distribution chain may provide such labor cost coverage within the
first year of operation. DOE performed a sensitivity analysis of the
LCC model where the consumer would cover labor costs for any instances
of heat exchanger failure within the first year and determined that
there is no impact to the results and has retained the assumption of
parts and labor coverage within one year of installation. With respect
to the comments suggesting warranties as an indicator of lifetime, DOE
encountered similar warranty terms for condensing and non-condensing
boilers and did not attempt to extrapolate lifetime differences from
warranty terms. Further, as noted during the CPB NODA and availability
of Preliminary Analysis TSD, DOE agreed with commenters that it is
difficult to estimate lifetime of a technology that has only been
broadly available on the market for about 15 years, and DOE concludes
that the values captured in survey results may be more representative
of early experience based on new technology or installation issues. DOE
expects that, as condensing boiler technology matures and installers
become better trained at installing and maintaining condensing boilers,
lifetime of condensing commercial packaged boilers sold and installed
in 2020 and beyond would be expected to be similar to their non-
condensing counterparts.
Crown commented that condensing boilers would be more susceptible
to poor water-quality related failures due to their smaller piping, and
that warranties take that into account. (Crown, Public Meeting
Transcript, No. 61 at pp. 166-167) ASAP and the Joint Advocates
commented that DOE is overestimating the repair costs for condensing
boilers and that DOE should assume the same heat exchanger failure
rates for condensing and non-condensing boilers in the absence of data
to the contrary. (ASAP, Public Meeting Transcript, No. 61 at p. 164,
Joint Advocates, No. 74 at p. 1, 7)
DOE notes that it considered the potential failures and failure
probabilities particular to condensing commercial package boilers in
the estimates of repair and maintenance costs, in particular assigning
the heat exchanger, a major component of the boiler system, a higher
probability of failure than for a non-condensing commercial packaged
boiler. DOE appreciates ASAP's and the Joint Advocates' comment
positing that DOE should use the same heat exchanger failure rates for
condensing and non-condensing boilers in the absence of data to the
contrary. However, DOE concludes it is a reasonable assumption given
the level of maturity of condensing CPB technology relative to non-
condensing commercial packaged boilers and the level of exposure a
condensing heat exchanger has to potentially damaging condensate. DOE's
assumption provides for a more conservative approach to the calculation
of benefits relative to the proposed method suggested by ASAP and the
Joint Advocates.
DOE used the latest RS Means Facility Maintenance and Repair Cost
Data to determine labor and materials costs associated with repairing
each CPB equipment class analyzed. DOE
[[Page 1634]]
assumed that all commercial packaged boilers have a 1-year warranty for
parts and labor and a 10-year warranty on the heat exchanger. For a
detailed discussion of repair costs, see appendix 8E of the final rule
TSD.
7. Lifetime
Equipment lifetime is defined as the age at which equipment is
retired from service. DOE used national survey data, published studies,
and projections based on manufacturer shipment data to calculate the
distribution of CPB lifetimes. DOE based equipment lifetime on a
retirement function, which was based on the use of a Weibull
probability distribution, with a resulting mean lifetime of 24.8 years.
DOE assumed that the lifetime of a commercial packaged boiler is the
same across the different equipment classes and efficiency levels. For
a detailed discussion of CPB lifetime, see appendix 8F of the final
rule TSD. In its March 2016 NOPR, DOE considered the potential impact
of condensate on heat exchangers in commercial packaged boilers that
operate in condensing mode and established a higher likelihood and
sooner time-to-failure for CPB heat exchangers that are exposed to such
condensate.
DOE received various comments regarding CPB equipment lifetime.
Bradford White commented that while 24.8 years is a fair estimate for
copper and cast iron commercial packaged boilers, it was unsure if it
is also a fair estimate for newer, high efficiency condensing models,
noting that this equipment has not been around long enough to
understand what is typical versus where local adverse conditions may
have prematurely caused the boiler to fail. (Bradford White, No. 68 at
p. 4) PEM commented that the average life of the New York City field
constructed boiler is about 25 years with a maximum of 30 years. (PEM,
Public Meeting Transcript, No. 61 at p. 123) ABMA expressed concern
regarding the use of EPA-DEFRA reference in the analysis that states
that with proper maintenance condensing and non-condensing boilers
should have similar life expectancy, and inquired whether the
difference in maintenance standards between the two countries was ever
considered. (ABMA, No. 64 at p. 1) BHI commented that the life
expectancy of condensing and non-condensing boilers is different and
that DOE needs to look at warranty information for different commercial
boilers to get some evidence in this regard. (BHI, No. 71 at p. 17)
Similarly, Crown noted that manufacturer warranties are a good,
impartial metric of boiler lifetimes, and that DOE will find there are
pretty stark differences between those warranties for condensing and
non-condensing boilers. (Crown, Public Meeting Transcript, No. 61 at p.
165) Also commenting on warranties, ABMA commented that a 10-year
warranty on the heat exchanger for steam boilers would be foolhardy
since the equipment is usually poorly maintained and the life of the
boilers are highly dependent upon prevailing operating and maintenance
conditions. (ABMA, No. 64 at p. 3)
After carefully considering these comments, DOE has concluded that
there is not enough data available to accurately distinguish the
lifetime of condensing boilers because, as Bradford White stated, they
have not been around long enough to understand what is typical versus
where local adverse conditions may cause premature boiler failure. In
addition, condensing boiler technologies have been improving since
their introduction to the U.S. market; therefore, the lifetime of the
earliest condensing boilers, and thus the perception by those surveyed,
may not be representative of current or future condensing boiler
designs. However, DOE did retain its additional repair costs for
condensing boilers by assuming different service lifetimes for heat
exchangers for condensing boilers and non-condensing boilers, and this
is intended to capture all factors that may lead to shorter heat
exchanger life for condensing boilers. Regarding ABMA's comment about
10-year warranties on heat exchangers for steam boilers, DOE reviewed
manufacturer warranties and determined that some steam boilers
warranties cover the heat exchanger for 10 years.
Details on how DOE adjusted the repair costs for heat exchangers
may be found in appendix 8E of the final rule TSD. For more details on
how DOE derived the CPB lifetime, see appendix 8F of the final rule
TSD.
8. Discount Rates
The discount rate is the rate at which future expenditures and
savings are discounted to establish their present value. DOE estimated
discount rates separately for commercial and residential end users.
For residential consumers, DOE applies weighted average discount
rates calculated from consumer debt and asset data, rather than
marginal or implicit discount rates.\55\ 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 equipment, 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.
---------------------------------------------------------------------------
\55\ 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 \56\ (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 4.4
percent.
---------------------------------------------------------------------------
\56\ The Federal Reserve Board, Survey of Consumer Finances,
(1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010, 2013). Available at
http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
---------------------------------------------------------------------------
For commercial end users, DOE calculated commercial discount rates
as the weighted average cost of capital (WACC), using the Capital Asset
Pricing Model (CAPM). DOE derived the discount rates by estimating the
cost of capital of individual companies that purchase commercial
packaged boilers. Damodaran Online is a widely used source of
information about company debt and equity financing for most types of
firms and was the primary source of
[[Page 1635]]
data for the commercial discount rate analysis.\57\ After DOE estimated
WACC values for individual companies, the results were condensed into
distributions by building type and the LCC model selects discount rates
from the distributions corresponding to the building types being
modeled.
---------------------------------------------------------------------------
\57\ Damodaran Online. Data page: Cost of Capital by Industry
Sector. (2004-2013). Available at: http://pages.stern.nyu.edu/
~adamodar/.
---------------------------------------------------------------------------
See chapter 8 of the final rule TSD for further details on the
development of consumer discount rates.
DOE received several comments regarding its use of discount rates
in this rulemaking. Raypak and Spire commented that residential
discount rates should not be used and that using commercial discount
rates would be better for the residential sector, noting that the
discount rate that should apply is that of the debt and equity of the
owner of the buildings, not of the people that live in them. (Raypak,
Public Meeting Transcript, No. 61 at pp. 176-177; Spire/Laclede, Public
Meeting Transcript, No. 61 at p. 176; Spire, No. 73 at p. 27) AHRI
agreed with comments from Raypak and Spire, and added that commercial
packaged boilers used in residential settings are typically used in
large apartment buildings or complexes where heating costs are included
in the rent and associated fees. (AHRI, No. 76 at p. 41) However, AHRI
commented that consumer discount rates used in the LCC analysis are
incorrectly computed and used due to the use of average rather than
marginal discount rates, while also noting that previous rulemaking
comments that DOE should use marginal discount rates for consumers have
little actual relevance in this rulemaking, since AHRI finds that the
average and marginal discount rates may be approximately the same.
(AHRI, No. 76 at p. 40) NEEA commented that energy bills have no
influence on rent prices for multi-family housing, reflecting a similar
concern in how costs are transferred in the multi-family housing
market. (NEEA, Public Meeting Transcript, No. 61 at pp. 182-183)
With respect to the use of residential discount rates in its
analysis, DOE considered the question whether a commercial discount
rate should be used for residential, multi-family buildings. DOE
understands that a commercial discount rate might apply in some cases,
but in other cases, while the upfront purchase is funded by a building
owner or entity, ultimately income from the renters pay for the CPB
equipment through rent paid to the owner or entity and additionally
ultimately pay for the operating and maintenance cost of the CPB
equipment. Further, the discount rate is not used in conjunction with
the purchase of the equipment, but is used to determine a present value
for a future stream of ongoing operating and maintenance costs and
benefits. DOE understands that the principal time a commercial discount
rate would apply is when an owner or entity can exert market power and
claim the financial benefits as excess profits. Such rental markets do
exist, but not for the long run. Either new rental units get built
until supply and demand are in balance, or some external shock upsets
the owner's or entity's ability to reap excess profits. As such, for
this final rule analysis, DOE is using updated residential discount
rates for the CPB equipment used in the residential sector.
More details regarding DOE's estimates of consumer discount rates
are provided in chapter 8 of the final rule TSD.
9. Market 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 analyzed the considered efficiency levels
relative to a no-new-standards case (i.e., the case without amended
energy efficiency standards). This analysis requires an estimate of the
distribution of equipment efficiencies in the no-new-standards case
(i.e., what consumers would have purchased in the compliance year in
the absence of amended standards). DOE refers to this distribution of
equipment energy efficiencies as the no-new-standards-case efficiency
distribution.
Regarding DOE's use of the AHRI database to establish the no-new-
standards case efficiency distribution in its NOPR analysis, AHRI
commented that the analysis should consider the number of basic models
and their distribution by efficiency level, which differs from the
number of listings, for its economic analysis. (AHRI, No. 76 at pp. 12,
17-24) In written and oral comments, manufacturers stated that the
distribution of CPB equipment models, based on efficiency, is not a
fair assessment on how the market shipments are distributed.
(Lochinvar, No. 70 at p. 6; BHI, No. 71 at p. 17; Raypak, No. 72 at p.
2) Manufacturers expressed that the scope of available equipment is
covered by the AHRI database, however, the distribution of equipment is
not representative of the volume of sales as actual shipments will be
more biased toward high efficiency equipment than is indicated by
available models.
DOE requested shipment information from stakeholders at the NOPR
phase. In response, AHRI submitted shipment information for SGHW and
LGHW equipment classes that was broken down by efficiency and rated
input (for SGHW only). AHRI also submitted historical annual shipment
information for gas-fired hot water (including condensing boilers),
gas-fired steam, oil-fired hot water and oil-fired steam equipment
classes. DOE used the AHRI database and equipment shipment data by
efficiency provided by AHRI to analyze trends within equipment classes,
as it relates to efficiency levels, to determine the anticipated no-
new-standards case efficiency distribution in 2020, the assumed
compliance year for amended standards. The trends show the market
moving toward higher efficiency commercial packaged boilers, as noted
by stakeholders, and DOE accounted for these trends in its no-new-
standards case projection. DOE used this information for updating the
final rule analysis. For equipment classes that lacked shipment
information, DOE used publicly available modeling listing and
efficiency information in its analysis. In the absence of shipment
information, the distribution of model listings provides a reasonable
proxy for shipments for each equipment class. In general, manufacturers
are likely to offer models with rated inputs and efficiencies where
demand is highest, therefore DOE assumed modeling listing and
efficiency information would hold as a proxy for efficiency
distribution of shipments.
Regarding AHRI's comment that DOE use basic models only in its
analysis, as opposed to the entire database, DOE does not filter the
AHRI directory to capture only basic models and notes that the AHRI
database does not facilitate the differentiation between basic models
within their model listings. DOE is concerned with attempting to infer
which models in the database represent basic models, using only the
data available in the AHRI database. However, DOE did perform an
analysis of the distribution of efficiency levels, and it showed only a
minimal difference between DOE's distributions, as captured in 2016
(i.e., an updated dataset obtained since that used during the March
2016 NOPR), and those provided by AHRI. Further, DOE understands that
some models may have more equipment units listed than the others,
correlating to a demand in the market for variations from basic models,
which may reflect consumer demand for such equipment. Since DOE uses
[[Page 1636]]
historical versions of the AHRI database to develop projected
distributions for 2020, it would be impractical to attempt to reassess
these distributions in terms of basic models, with little to no
improvement in the accuracy of the actual distribution. Lastly, DOE
notes that stakeholders have expressed concerns historically regarding
the ability to infer a distribution of shipments by efficiency based on
a distribution of available models and/or listing. As noted in this
section, DOE received and considered historical shipment data by
efficiency for the gas-fired hot water CPB equipment classes in its
determination of the no-new-standards efficiency distributions. However
it did retain its methodology from the NOPR, of using the AHRI database
on the other six equipment classes analyzed, as it did not have data on
shipments by efficiency to inform its analysis. For the purpose of this
final rule, DOE did a general data update to capture AHRI 2016
equipment models data and adjusted the gas-fired hot water CPB
equipment condensing market share approach and its projection of the
no-new-standards case efficiency distributions for the year 2020 based
on the availability of historical shipments data. For all other
equipment classes analyzed, and for portions of the SGHW and LGHW CPB
equipment classes (not including the year 2020 and its condensing
market share approach for which shipment data was used), DOE retained
its NOPR methodology for developing the no-new-standards case
efficiency distribution, and considered all the equipment listed in the
AHRI database.
Also providing comment, Spire stated that there is no basis to
assume that purchases of higher-efficiency commercial packaged boilers
that would provide net economic benefits to the purchaser would not
occur even in the absence of the proposed standard. (Spire, No. 73 at
p. 15) DOE makes no such assertion, but notes that its analysis
assesses the impact of standards on consumers, but does not further
assess the net economic impacts on consumers who voluntarily select
higher efficiency equipment in the absence of standards.
Table IV.6 presents the estimated no-new-standards case efficiency
market shares for each analyzed CPB equipment class in 2020. Appendix
8H of the final rule TSD contains more information regarding DOE's
development of the efficiency distributions in the no-new-standards
case.
Table IV.6--Estimated No-New-Standards Case Boiler Efficiency Distribution * of Analyzed Commercial Packaged Boiler Equipment Classes ** in 2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency SGHW (%) LGHW (%) SOHW (%) LOHW (%) SGST (%) LGST (%) SOST (%) LOST (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
77.............................................. ........... ........... ........... ........... 46 13 ........... ...........
78.............................................. ........... ........... ........... ........... 6 31 ........... ...........
79.............................................. ........... ........... ........... ........... 15 13 ........... ...........
80.............................................. 9 ........... ........... ........... 16 21 ........... ...........
81.............................................. 4 ........... ........... ........... 12 5 27 35
82.............................................. 5 1 32 ........... ........... 11 ........... ...........
83.............................................. ........... 1 24 ........... 5 ........... 53 38
84.............................................. 4 4 12 40 ........... 7 14 ...........
85.............................................. 8 15 17 ........... ........... ........... ........... 26
86.............................................. ........... ........... ........... 45 ........... ........... 6 ...........
87.............................................. ........... ........... 10 ........... ........... ........... ........... 1
88.............................................. ........... ........... 3 10 ........... ........... ........... ...........
89.............................................. ........... ........... ........... 1 ........... ........... ........... ...........
90.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
91.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
92.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
93.............................................. 36 ........... ........... ........... ........... ........... ........... ...........
94.............................................. ........... 77 ........... ........... ........... ........... ........... ...........
95.............................................. 28 ........... ........... ........... ........... ........... ........... ...........
96.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
97.............................................. ........... 2 3 3 ........... ........... ........... ...........
98.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
99.............................................. 5 ........... ........... ........... ........... ........... ........... ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Results may not add up to 100% due to rounding.
** SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.
DOE calculated the LCC and PBP for all consumers as if each were to
purchase new equipment in the year that compliance with amended
standards is required. EPCA directs DOE to publish a final rule
amending the standard for the equipment not later than 2 years after a
notice of proposed rulemaking is issued. (42 U.S.C. 6313(a)(6)(C)(iii))
As discussed previously in section III.A of this document, for purposes
of its analysis, DOE used 2020 as the first year of compliance with
amended standards.
10. Payback Period Inputs
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more-efficient equipment,
compared to baseline equipment, through energy cost savings. Payback
periods are expressed in years. Payback periods that exceed the life of
the equipment mean that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation are the total installed cost of
the equipment to the consumer for each efficiency level and the average
annual operating expenditures for each efficiency level. The PBP
calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed.
Lochinvar commented that DOE should not consider a payback period
over 7 years as acceptable in this
[[Page 1637]]
rulemaking, noting that commercial buildings are sold just like
consumer property and owners will not accept a payback period longer
than their expected length of ownership. (Lochinvar, No. 70 at p. 6)
DOE notes that, in general, rulemakings have selected levels with
payback periods within the lifetime of the equipment. However, DOE's
LCC analysis and development of full life-cycle-cost and life-cycle-
cost savings values considers additional detail and economic factors
and DOE considers it a more robust assessment of the economic impact on
consumers.
11. General Comments
DOE received several comments regarding complexity of the LCC
Model. AHRI, through its consultant Shorey Consulting, Inc., commented
that the use of distributions, and not single point values, makes the
model more complex and less transparent and suggested that DOE should
have a dialogue with key stakeholders to determine whether the apparent
sophistication that comes from the Monte Carlo process is worth the
loss in transparency. In addition, they suggest that DOE should also
engage stakeholders to determine whether the assumptions inside the LCC
model are either necessary or correct. (AHRI, No. 76 at pp. 28-29) In
particular, AHRI expressed concern that the random no-new-standards
case assignment of efficiencies is thoroughly embedded in DOE's model
logic and is not reflective of a functioning marketplace. (AHRI, No. 76
at p. 31 and 45) Spire similarly commented that DOE overstated benefits
by assuming purchasing decisions that do not make economic sense will
occur. (Spire, No. 73 at p. 16) AHRI suggested a need for a more
straightforward, less complex and more understandable approach to
modeling. They assert that a core issue is the use of the Monte Carlo
simulation approach, and while recognizing that many inputs are
distributions rather than single point values, assert that gaining the
ability to use distributions has come at the cost of clarity and
traceability and the ability to audit the model. (AHRI, No. 76 at p 28)
AHRI, through its consultant, provides an example as an illustrative
modeling approach that is deterministic, as opposed to using Monte
Carlo analysis, utilizes a narrower set of assumptions, and whose
implementation resulted in substantively different economic results.
Specific aspects of these results are presented in AHRI's comment. AHRI
emphasizes that this model is an alternative working model, but states
it is in no way suggested as a direct substitute for DOE's LCC, but
rather represents a pathway towards a more effective model. (AHRI, No.
76 at pp. 2-3). Spire also commented that DOE's spreadsheets and Monte
Carlo software were unreasonably complicated and prone to errors and
lacks transparency. (Spire, No. 73 at p. 26).
In response to the comments on the LCC model complexity, DOE
welcomes feedback and data supporting modeling changes in its analysis,
but, in general believes that it is valuable to capture variation in
inputs to help establish variation in LCC and LCC savings in the
output. DOE has found that the examination of the fraction of a user
base which is negatively impacted by possible standards is an important
consideration in setting new standards. DOE notes that the LCC model
using the Crystal Ball software can output the assumed values and
results of each assumption and provide forecasted results for each
iteration in the Monte Carlo simulation if desired by stakeholders to
review or trace the output. In addition, it is possible to modify
directly the assumption cells in the model to examine impacts of
changes to assumptions on the LCC and in fact DOE relies both of these
techniques for model testing. DOE notes that the model provided as an
example by AHRI limited in many important ways the scope of the market
being examined, including omission of any use of RECS data, ignoring
new construction, assumes all condensing boilers operate in the high
return water temperature scenario, ordering the efficiency distribution
in the no-new-standards case as a function of calculated payback, and
excluding the incremental costs of venting or maintenance and repair.
In addition, a fundamental difference was in the base case assumption
where the AHRI model presumed that where the analysis showed the
shortest paybacks, consumers were presumed to purchase the highest
efficiency boilers in the no-new-standards case distribution. (AHRI,
No. 76 at p. 31) This reflects an overly optimistic and unrealistic
working market, presumes information that may not be available to all
purchasers and, while informative, may unreasonably bias the results as
presented by AHRI. While DOE appreciates the feedback from AHRI and
recognizes the value of clarity and traceability, it has not deviated
from the use of the Monte Carlo approach for the final rule. DOE
addresses specific modeling assumptions in the discussion surrounding
those variables in the LCC inputs discussion that follows.
AHRI posited that either due to DOE's sizing assumption and/or due
to the use of the CBECS energy use data in the sample itself, the
energy use model produced excessively high operating hours in some
instances and that these distort the economic results. (AHRI, No. 76 at
pp. 37-40) AHRI's consultant suggest that a more logical approach for
estimating may be to use directly measured data or estimated load data
(AHRI, No. 76 at p. 40). DOE has not identified a source of
comprehensive burner operating hour (BOH) data for commercial boilers
that could be used for such an analysis nor was such identified to DOE
by stakeholders. Estimated BOH data from other sources, such as whole
building simulation modeling of commercial buildings is another
approach that has been considered by DOE, but could result in the need
to resolve an even larger number of building-level modeling details and
assumptions. DOE received no early guidance from stakeholders and
accordingly did not propose the use of whole building simulation at the
November 2014 NODA and preliminary analysis or March 2016 NOPR stages.
Consequently, DOE has updated the model to use the most recent CBECS
2012 data and made other adjustments, but has not abandoned the use of
CBECS energy data nor its sizing methodology. DOE also notes that
certain results that are presented by AHRI for the SGHW class reflect
the removal of the upper 10 percent of the calculated BOH. DOE
concludes that while there is value in reviewing the BOH results, there
is no basis to assume that the very highest level of BOH seen in the
buildings examined should be simply removed from the LCC analysis.
AHRI also commented that combining the results for natural and
mechanical draft commercial packaged boilers, particularly for SGHW
boilers, disguises the effects of market adoption of higher efficiency
equipment and demonstrates this with the results obtained with their
modeling approach and assumptions. (AHRI, No. 76 at pp. 32-33) DOE,
however, notes that it considers that there is variation in equipment
design, including draft type, in the market. However, as has been noted
by DOE in this rulemaking, draft type does not define a unique utility
for commercial packaged boilers and consequently there is only one
equipment class for the SGHW CPB equipment class. Thus, DOE's LCC
analysis aggregates sample selection both for consumers using natural
draft equipment and mechanical draft equipment.
AHRI and BHI commented that the random assignment of no-new-
standards case efficiencies in the LCC model is not correct, as this
inherently assumes that
[[Page 1638]]
the purchasers do not pay attention to costs and benefits in a world
without standards. AHRI further stated that approximately 75 percent of
commercial buildings which use boilers are buildings where the end user
either pays, or has significant control, over the decision to purchase
a new boiler. (AHRI, No. 76 at p. 26, 29, 30; BHI, No. 71 at p. 16)
In response, DOE notes that development of a complete consumer
choice model, to support an alternative to random assignment in the no-
new-standards case, for boiler efficiency would require data that are
not currently available, as well as recognition of the various factors
that impact the purchasing decision, such as incentives, the value that
some consumers place on efficiency apart from economics (i.e., ``green
behavior''), and whether the purchaser is a building owner/occupier or
landlord. For the final rule, DOE used the same general method to
assign boiler efficiency in the no-new-standards case.
G. Shipments Analysis
In its shipments analysis, DOE developed shipment projections for
commercial packaged boilers and, in turn, calculated equipment stock
over the course of the analysis period. DOE used the shipments
projection and the equipment stock to calculate the national impacts of
potential amended or new energy conservation standards on energy use,
NPV, and future manufacturer cash flows. DOE developed shipment
projections based on estimated historical shipment and an analysis of
key market drivers for each kind of equipment. DOE did not find any
evidence nor was provided any data during the public comment period
that indicates fuel switching from oil or gas-fired commercial packaged
boilers to electric commercial packaged boilers occurred in the market
for these products. Therefore DOE did not modify the shipments analysis
to include fuel switching beyond what the historical shipments trend
might imply. Furthermore, CBECS 2012 data indicate that 7 percent of
commercial buildings use electric boilers (not necessarily packaged
boilers) for primary space heating.
In the final rule DOE revised its estimates of historical shipments
and shipment projections as additional data became available. The
additional data include public use microdata files on the ``Consumption
and Expenditure'' segment of EIA's CBECS 2012. AHRI also provided
confidential historical shipment data to DOE's contractors under
confidentiality arrangement. DOE estimated historical shipments from
stock estimates based on the CBECS data series from 1979 to 2012. Since
no CBECS survey was conducted prior to 1979, DOE used the trends in
historical shipment data for residential boilers to estimate the
historical shipments for the 1960-1978 time period. For estimation of
stocks of gas and oil boilers, DOE used the data on growth of
commercial building floor space for nine building types from AEO
reports, percent floor space heated by CPB data from CBECS for these
building types, and estimated saturations of commercial packaged
boilers in these building types. From these stock estimates, DOE
derived the shipments of gas-fired and oil-fired commercial packaged
boilers using correlations between stock and shipment for gas and oil
boilers. As noted in section IV.E.2 of this document, to obtain
individual equipment class shipments from the aggregate values, DOE
used the steam to hot water shift trends from the EPA database for
space heating boilers. The oil to gas shift trends were derived from
CBECS data for historical shipments and from AEO2016 for projected
shipments. The equipment class shipments were further disaggregated
between shipment to new construction and replacement/switch shipments.
To project equipment class shipments for new construction, DOE
relied on building stock and floor space data obtained from the
AEO2016. DOE assumed that CPB equipment is used in both commercial and
residential multi-family dwellings. DOE estimated a total saturation
rate for each equipment class based on prior CBECS data and a modeled
size distribution of commercial packaged boilers in commercial
buildings with a given design heating load. As new data from CBECS 2012
became available, DOE modified its approach to calculate the saturation
rates for new construction used in the March 2016 NOPR stage. For
estimation of saturation rates in the new commercial construction, DOE
calculated saturation rates averaged over a period of 9 years from 2004
through 2012 from the estimated CPB stock for buildings constructed
during the reference period. The new construction saturation rates were
projected from 2013 till the end of the analysis period considering
currently observed trends from CBECS 2012 and AEO2016 (for oil to gas
shifts). For residential multi-family units, DOE used RECS 2009 data
and considered multi-family buildings constructed in the 9 year period
from 2001 to 2009 as new construction for calculating the new
construction saturation. DOE assumed that the new construction
saturation in multi-family buildings are nearing their minimum
threshold values and would remain unchanged during the analysis period.
DOE applied these new construction saturation rates to new building
additions in each year over the analysis period (2020-2049), yielding
shipments to new buildings. The building stock and additions
projections from the AEO2016 are shown in Table IV.7.
DOE estimated the percent share of different efficiency bins across
the equipment classes as detailed in chapter 9 of the final rule TSD.
Table IV.7--Building Stock Projections
----------------------------------------------------------------------------------------------------------------
Total commercial Commercial building
building floor floor space Total residential Residential
Year space (million sq. additions (million building stock building additions
ft.) sq. ft.) (millions of units) (millions of units)
----------------------------------------------------------------------------------------------------------------
2015........................ 82,176 1,659 115.39 1.18
2020........................ 86,661 2,079 120.41 1.74
2025........................ 91,888 2,149 126.03 1.71
2030........................ 97,148 2,210 131.39 1.67
2035........................ 102,364 2,266 136.35 1.64
2040........................ 107,552 2,337 141.35 1.65
2045........................ 113,164 2,403 146.66 1.74
2049........................ 117,864 2,458 151.06 1.79
----------------------------------------------------------------------------------------------------------------
Source: EIA AEO2016.
[[Page 1639]]
Commercial consumer purchase decisions are influenced by the
purchase price and operating cost of the equipment, and therefore may
be different across standards levels. To estimate the impact of the
increase in relative price from a particular standard level on CPB
shipments, DOE assumed that a portion of affected consumers are more
price-sensitive and would repair equipment purchased prior to enactment
of the standard rather than replace it, extending the life of the
equipment by 6 years. DOE modeled this impact using a relative price
elasticity approach. When the extended repaired units fail after 6 more
years, DOE assumed they will be replaced with new ones. A detailed
description of the extended repair calculations is provided in chapter
9 of the final rule TSD.
In the March 2016 NOPR, DOE sought feedback on the assumptions used
to develop historical and projected shipments of commercial packaged
boilers and the representativeness of its estimates of projected
shipments. DOE also requested information on historical shipments of
commercial packaged boilers including shipments by equipment class for
small, large, and very large commercial packaged boilers. In the March
2016 NOPR analysis, as a required input to the NIA model, DOE had
estimated historical shipments of commercial packaged boilers for over
50 years through 2012. AHRI commented that DOE's estimates of
historical shipments are lower than the actual historical shipments and
furnished confidential historical shipment data for a limited period to
DOE's contractors in support of its assertion. (AHRI, No. 76 at p. 13)
DOE appreciates the efforts of AHRI and its members to help better
inform this rulemaking. The data provided were used to calibrate and
refine DOE's shipments model for estimation of historical shipments.
Several commenters further pointed out that the projected shipments
of commercial packaged boilers show an unrealistic growth trend that
could not be observed in DOE's historical shipment estimates from 1960
through 2012. (AHRI, Public Meeting Transcript, No. 61 at p. 191;
Raypak, Public Meeting Transcript, No. 61 at p. 193; Raypak, No. 72 at
p. 2; Lochinvar, No. 70 at p. 4; Crown, Public Meeting Transcript, No.
61 at pp. 191-192) NEEA, however, pointed out that the growth in DOE's
projected shipments could be attributed to replacements of existing
boiler stock and growth in commercial building stock, which should
track the trends of new construction of commercial floor space captured
in the economic models of the EIA. (NEEA, Public Meeting Transcript,
No. 61 at pp. 192-194)
In response to the comments received on projected shipments, DOE
updated its shipments model, the results of which display lower growth
of projected shipments. In particular, for the March 2016 NOPR, DOE
used constant values for percent floor space heated by boiler and CPB
saturation (i.e., number of units per million square feet of floor
space heated) during the entire analysis period for estimating the
projected shipments. In the final rule, DOE used a declining trend in
area heated by boiler (0.25 percent per year) but constant saturation
resulting in only a more modest growth in shipments.
Lochinvar commented that DOE should consider publishing all the
data and model parameters of the shipment model. (Lochinvar, No. 70 at
p. 4)
In light of shipment data having been received under
confidentiality agreement, DOE is unable to publish the shipment data
furnished by AHRI. However, DOE has provided an updated version of the
shipments model description and the model parameters in chapter 9 and
appendix 9A of the TSD, and shipments data from DOE's calibrated model
may be found in the NIA model.
DOE also received various general comments regarding its March 2016
NOPR shipments approach and shipments by efficiency level. BHI
commented that DOE should rely on models sold, and not model
availability, in its analyses. (BHI, No. 71 at p. 17) Similarly,
Lochinvar commented that equipment databases are not representative of
the distribution of sales. (Lochinvar, Public Meeting Transcript, No.
61 at p. 208) Bradford White noted that distribution of models based on
efficiency is not a fair assessment of how CPB shipments are
distributed, and further questions whether standards are truly
necessary if, as DOE's own shipments projections show for condensing
boilers, the market is already moving towards these higher efficiency
equipment on its own. (Bradford White, No. 68 at p. 2) Weil-McLain
commented that DOE should look at actual shipments to get a realistic
idea of the distribution of boilers installed today based on efficiency
levels, rather than total number of models available in each category.
(Weil-McLain, No. 67 at p. 8) Raypak commented that it takes exception
with the DOE's use of the number of models listed in the AHRI directory
as representing the actual shipments of commercial packaged boilers as
no such correlation existed and recommended that DOE use data that is
more reflective of the marketplace. (Raypak, No. 72 at p. 2) Lochinvar
commented that DOE has consistently projected shipments that exceed
industry expectations and seem unjustified by existing market data, and
that DOE underestimated market trends toward condensing boilers.
(Lochinvar, No. 70 at pp. 4, 8) Weil-McLain expressed their belief that
the impact of the proposed efficiency standards on natural draft and
steam boiler shipments could be significant and that consumers will
often decide to repair the existing boiler and delay replacement,
creating an unintended consequent reduction in energy savings. (Weil-
McLain, No. 67 at pp. 4, 8)
DOE notes that while models throughout most of this rulemaking had
relied to some degree on indirect methods to estimate historical and
projected shipments, in this final rule the shipments model has been
calibrated utilizing shipments data provided to inform the analysis.
Based on the availability of these shipments data and the calibration
of the shipments model to better reflect the marketplace, DOE concludes
that it has adequately addressed the stakeholders' concerns in this
final rule. Regarding Bradford White's comments whether standards are
truly necessary, DOE notes that the shipments data it received allowed
DOE to better inform its analysis and to make that determination based
on a more accurate assessment of the national energy savings potential,
among other factors it considered. With regard to Weil-McLain's comment
about repair versus replace under new standards, DOE assumed that a
portion of affected consumers are more price-sensitive and would repair
equipment purchased prior to enactment of the standard (in 2019) rather
than replace it, extending the life of the equipment by 6 years. DOE
modeled this impact using a relative price elasticity approach. When
the extended repaired units fail after 6 more years, DOE assumed they
will be replaced with new ones. Regarding Weil-McLain's specific
comment about natural draft boilers, DOE notes that the standards for
small gas-fired hot water commercial packaged boilers in the final rule
are lower than proposed at March 2016 NOPR and should alleviate the
impact on natural draft shipments. Regarding steam boilers, while DOE
understands the observation voiced by Weil-McLain, no new data was
provided as to the driving force or likely significance of the impact
on the overall steam boiler shipments. Consequently, DOE was not able
to further calibrate the shipments
[[Page 1640]]
model for the impact of standard levels analyzed for steam boilers.
The projected shipments at 5 year intervals during the analysis
period starting from 2020 and a few key years are shown in Table IV.8.
Table IV.8--Shipments of Commercial Packaged Boiler Equipment
[Thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year SGHW CPB * LGHW CPB SOHW CPB LOHW CPB SGST CPB LGST CPB SOST CPB LOST CPB
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015............................................ 25,634 2,112 4,156 298 2,313 260 1,240 93
2020............................................ 24,582 2,025 2,238 161 1,927 216 1,189 89
2025............................................ 23,979 1,976 2,159 155 1,551 174 1,140 85
2030............................................ 26,734 2,203 2,061 148 1,143 128 1,093 82
2035............................................ 28,524 2,350 1,945 140 685 77 1,045 78
2040............................................ 27,918 2,300 1,827 131 432 49 981 73
2045............................................ 28,874 2,379 1,718 123 415 47 922 69
2049............................................ 29,980 2,470 1,627 117 401 45 874 65
--------------------------------------------------------------------------------------------------------------------------------------------------------
* SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.
Given the comments regarding the impact of increased repairs on
shipments, DOE determined that use of price elasticity to model the
extended repair option should be maintained in this final rule. DOE
used the price elasticity from a residential product study to use sales
and price data for commercial unitary air conditioners \58\ to more
closely approximate an elasticity for commercial equipment (data
specific to commercial packaged boilers were not available). DOE notes
that it performed two sensitivity analyses--one without the use of the
price elasticity, and one in which the price elasticity was increased
ten-fold. The results of the sensitivity analyses are presented in
appendix 10D of the final rule TSD.
---------------------------------------------------------------------------
\58\ U.S. Department of Energy. Technical Support Document:
Energy Efficiency Program for Consumer Products and Commercial and
Industrial Equipment: Distribution Transformers, Chapter 9 Shipments
Analysis. April 2013.
---------------------------------------------------------------------------
Because the estimated energy usage of CPB equipment differs by
commercial and residential setting, the NIA employed the same fractions
of shipments (or sales) to consumers as is used in the LCC analysis.
The fraction of shipments by type of commercial consumer is shown in
Table IV.9.
Table IV.9--Shipment Shares by Type of Commercial Consumer
------------------------------------------------------------------------
Residential
Equipment class Commercial (%) (%)
------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial 89 11
Packaged Boiler........................
Large Gas-Fired Hot Water Commercial 99 1
Packaged Boiler........................
Small Oil-Fired Hot Water Commercial 74 26
Packaged Boiler........................
Large Oil-Fired Hot Water Commercial 96 4
Packaged Boiler........................
Small Gas-Fired Steam Commercial 90 10
Packaged Boiler........................
Large Gas-Fired Steam Commercial 99 1
Packaged Boiler........................
Small Oil-Fired Steam Commercial 90 10
Packaged Boiler........................
Large Oil-Fired Steam Commercial 99 1
Packaged Boiler........................
------------------------------------------------------------------------
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.\59\ The NES and NPV were
analyzed at specific efficiency levels (i.e., TSLs) for each equipment
class of CPB equipment. DOE calculated the NES and NPV based on
projections of annual equipment shipments, along with the annual energy
consumption and total installed cost data from the LCC analysis. In
this rulemaking, DOE projected the energy savings, operating cost
savings, equipment costs, and NPV of commercial consumer benefits for
equipment sold from 2020 through 2049--the year in which the last
standards-compliant equipment would be shipped during the 30-year
analysis period.
---------------------------------------------------------------------------
\59\ The NIA accounts for impacts in the 50 states and U.S.
territories.
---------------------------------------------------------------------------
To make the analysis more accessible and transparent to all
interested parties, DOE uses a computer spreadsheet model to calculate
the energy savings and the national consumer costs and savings from
each TSL.\60\ Chapter 10 and appendix 10A of the final rule TSD explain
the model and provide instructions. Interested parties can review DOE's
analyses by interacting with this spreadsheet. The model and
documentation are available on DOE's website.\61\ The NIA calculations
are based on the annual energy consumption and total installed cost
data from the energy use analysis and the LCC analysis.
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\60\ DOE understands that Microsoft Excel is the most widely
used spreadsheet calculation tool in the United States and there is
general familiarity with its basic features. Thus, DOE's use of
Excel as the basis for the spreadsheet models provides interested
parties with access to the models within a familiar context.
\61\ DOE's webpage on commercial packaged boiler equipment is
available at https://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=8.
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DOE evaluates the impacts of new or amended standards for
commercial packaged boilers by comparing no-new-standards-case
projections with standards-case projections. The no-new-standards-case
projections characterize energy use and consumer costs for each
equipment class in the absence of new
[[Page 1641]]
and amended energy conservation standards. DOE compared these
projections with those characterizing the market for each equipment
class if DOE were to adopt amended standards at specific energy
efficiency levels (i.e., the standards cases) for that class. For the
standards cases, DOE used a ``roll-up'' scenario in which equipment at
efficiency levels that do not meet the standard level under
consideration would ``roll up'' to the efficiency level that just meets
the amended standard level, and equipment already being purchased at
efficiency levels at or above the amended standard level would remain
unaffected.
Unlike the LCC analysis, the NIA analysis does not use
distributions for inputs or outputs, but relies on national average
equipment costs and energy costs. DOE used the NES spreadsheet to
perform calculations of energy savings and NPV using the annual energy
consumption, maintenance and repair costs, and total installed cost
data from the LCC analysis. The NIA also uses projections of energy
prices and building stock and additions consistent with various AEO2016
Economic Growth cases. NIA results based on these cases are presented
in chapter 10 and appendix 10D of the final rule TSD.
Table IV.10 summarizes the inputs and methods DOE used for the NIA
for the final rule. Discussion of these inputs and methods follows the
table. See chapter 10 of the final rule TSD for further details.
Table IV.10--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments.................... Annual shipments from shipments model.
First Year of Analysis Period 2020.
No-New-Standards Case Efficiency distributions are forecasted
Forecasted Efficiencies. based on historical efficiency data.
Standards Case Forecasted Used a ``roll[dash]up'' scenario.
Efficiencies.
Annual Energy Consumption per Annual weighted[dash]average values are a
Unit. function of energy use at each TSL.
Total Installed Cost per Unit Annual weighted[dash]average values are a
function of cost at each TSL.
Incorporates forecast of future
equipment prices based on historical
data.
Annual Energy Cost per Unit.. Annual weighted[dash]average values as a
function of the annual energy
consumption per unit, and energy prices.
Energy Prices................ AEO2016 no-CPP case prices projections
(to 2040) and extrapolation through
2100.
Energy A time-series conversion factor based on
Site[dash]to[dash]Source AEO2016.
Conversion Factors.
Discount Rate................ 3- and 7-percent real.
Present Year................. Future expenses discounted to 2016, when
the final rule will be published.
------------------------------------------------------------------------
1. Equipment Efficiency in the No-New-Standards Case and Standards
Cases
As described in section IV.F.9 of this document, DOE used a no-new-
standards-case distribution of efficiency levels to project what the
CPB equipment market would look like in the absence of amended
standards. DOE applied the percentages of models within each efficiency
range to the total unit shipments for a given equipment class to
estimate the distribution of shipments for the no-new-standards case.
Then, from those market shares and projections of shipments by
equipment class, DOE extrapolated future equipment efficiency trends
both for a no-new-standards-case scenario and for standards-case
scenarios.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the shipment-weighted efficiency for the year that standards
are assumed to require compliance (2020). In this scenario, the market
of equipment in the no-new-standards case that do not meet the standard
under consideration would ``roll up'' to meet the new standard level,
and the market share of equipment above the standard would remain
unchanged.
Lochinvar commented that Tables 10.3.1 and 10.3.2 in the March 2016
NOPR TSD contain clerical errors and provided corrections in written
comments. (Lochinvar, No. 70 at p. 4) Furthermore, Lochinvar commented
that the roll-up analysis does not show any reduction in the sales of
commercial packaged boilers as the minimum efficiency levels are
increased, and that reduced sales would be expected since as the price
of baseline boilers increase, some projects will no longer be
affordable and that would impact the number of boilers shipped.
(Lochinvar, No. 70 at pp. 5-6) BHI expressed concern that DOE's roll-up
assumption that shipments of equipment at efficiencies above the
proposed standard would be unaffected is inconsistent with how SGHW
boilers are used. Further, BHI noted that if DOE were to adopt the 85-
percent level for SGHW commercial packaged boilers, there is reason to
believe that most of the ``substandard'' SGHW sales would move to the
condensing level due to the inability to use Category I venting and the
added cost of venting materials, citing the disappearance of sales of
SGHW models at efficiencies between 85 percent and 90 percent. (BHI,
No. 71 at p. 14)
After reviewing the tables identified by Lochinvar, DOE determined
that those tables were a close match to the tables from the preliminary
analysis TSD, and not the March 2016 NOPR TSD. The March 2016 NOPR TSD
does not contain Table 10.3.1 or Table 10.3.2, nor does it have no-new-
standards case and standards case efficiency distribution tables for
equipment classes separated by draft type as noted in comments from
Lochinvar. However, DOE carefully examined the tables that were the
closest match in the March 2016 NOPR TSD, and it was unable to identify
any discrepancies. With respect to Lochinvar's comments regarding the
roll-up scenario and accounting for reductions in boiler sales, DOE
notes that the roll-up tables represent percentages of the market for
each efficiency level, with the entire market for a given equipment
class defined as 100 percent. DOE does account for reductions in boiler
sales that may result from amended standards by considering a price
elasticity factor, hence already accounting for shipment impacts due to
increased equipment prices. Regarding BHI's comments on roll-up, DOE
appreciates the insight into BHI's experience regarding historical
sales of SGHW commercial packaged boilers in the 85 percent to 90
percent ET. While DOE's roll-up approach does assume that
sale shares of lower efficiency equipment would roll-up to the 85
percent ET level, as proposed at the March 2016 NOPR, the
SGHW level adopted in this final rule is 84 percent ET.
The estimated efficiency trends in the no-new-standards case and
standards
[[Page 1642]]
cases are described in chapter 10 of the final rule TSD.
2. National Energy Savings
The national energy savings analysis involves a comparison of
national energy consumption of the considered equipment between each
potential standards case also known as Trial Standard Level (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 equipment (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 \62\ 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 emissions) and additional energy used
to produce and deliver the various fuels used by power plants. The
approach used for deriving FFC measures of energy use and emissions is
described in appendix 10B of the final rule TSD.
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\62\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581(October 2009).
Available at http://www.eia.gov/forecasts/aeo/index.cfm.
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3. Net Present Value of Consumer Benefit
The inputs for determining the NPV of the total costs and benefits
experienced by consumers of the considered equipment are (1) total
annual installed cost, (2) total annual savings in operating costs
(energy costs and repair and maintenance costs), and (3) a discount
factor. DOE calculates the lifetime net savings for equipment shipped
each year as the difference between the no-new-standards case and each
standards case in terms of total operating cost savings and increases
in total installed costs. DOE calculates lifetime operating cost
savings over the life of each commercial packaged boiler shipped during
the projection period.
a. Total Annual Cost
DOE determined the difference between the equipment costs under the
standard-level case and the no-new-standards case in order to obtain
the net equipment cost increase resulting from the higher standard
level. As noted in section IV.F.1 of this document, DOE used a constant
real price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor
decreases over time.
b. Total Annual Operating Cost Savings
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of the appropriate form of energy. To estimate energy
prices in future years, DOE multiplied the average regional energy
prices by the projection of annual national-average commercial energy
price changes consistent with the projections found on page E-8 in AEO
2016.\63\ AEO2016 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 case that have lower and
higher economic growth. Those cases have lower and higher energy price
trends and the NIA results based on these cases are presented in
appendix 10B of the final rule TSD.
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\63\ 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 AEO2016 case that incorporates the CPP.
Consequently, DOE used the energy price projections found in the
AEO2016 No-CPP case as these energy price projections are expected
to be lower, yielding more conservative estimates for consumer
savings due to the energy efficiency standards.
---------------------------------------------------------------------------
c. Discount Rate
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.\64\ 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.
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\64\ 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 impacts of new or amended standards on
consumers, DOE evaluates impacts on identifiable groups (i.e.,
subgroups) that may be disproportionately affected by a new or amended
national standard. For this final rule, DOE analyzed the impacts of the
considered standard levels on ``low-income households for residential''
and ``small businesses for commercial sectors''.
With regard to its subgroup analysis, DOE received comments
regarding the appropriateness of the use of residential discount rates
to analyze the impact of the amended standard on the ``low income
households for residential'' subgroup. Raypak commented that the LCC
results in the subgroup analysis and the National level results are
being significantly overstated due to the use of residential discount
rates for the residential installations, since the equipment under
consideration is installed in a commercial setting. (Raypak, Public
Meeting Transcript, No. 61 at p. 188) Spire commented that some
subgroups would be
[[Page 1643]]
disproportionately burdened. (Spire, No. 73 at p. 24)
With respect to Raypak's comment, DOE has addressed the
appropriateness of the use of residential discount rates for the
residential sector in the national level LCC analysis in this final
rule, and notes that the same reasoning for use of residential discount
rates applies to the subgroup analysis as well. As such, DOE is
retaining the same residential sector discount rate methodology used
during the March 2016 NOPR in this final rule. With respect to the
comment from Spire, DOE undertook this analysis to evaluate the impacts
to subgroups that may be disproportionately affected by a new or
amended national standard, and sought comments from stakeholders
throughout this rulemaking to help identify potential subgroups. DOE
has concluded that the identified subgroups will not be significantly
impacted by the new standards.
The consumer subgroup analysis is discussed in detail in chapter 11
of the final rule TSD.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on manufacturers of CPB equipment and to
estimate the potential impacts of such standards on employment and
manufacturing capacity. The MIA has both quantitative and qualitative
aspects and includes analyses of projected industry cash flows, the
INPV, investments in research and development (R&D) and manufacturing
capital, and domestic manufacturing employment. Additionally, the MIA
seeks to determine how amended energy conservation standards might
affect manufacturing employment, capacity, and competition, as well as
how standards contribute to overall regulatory burden. Finally, the MIA
serves to identify any disproportionate impacts on manufacturer
subgroups, including small business manufacturers.
The quantitative part of the MIA primarily relies on the Government
Regulatory Impact Model (GRIM), an industry cash flow model with inputs
specific to this rulemaking. The key GRIM inputs include data on the
industry cost structure, unit production costs, equipment shipments,
manufacturer markups, and investments in R&D and manufacturing capital
required to produce compliant equipment. The key GRIM outputs are the
INPV, which is the sum of industry annual cash flows over the analysis
period, discounted using the industry-weighted average cost of capital,
and the impact to domestic manufacturing employment. The model uses
standard accounting principles to estimate the impacts of more-
stringent energy conservation standards on a given industry by
comparing changes in INPV and domestic manufacturing employment between
a no-new-standards case and the various trial standards cases (TSLs).
To capture the uncertainty relating to manufacturer pricing strategies
following amended standards, the GRIM estimates a range of possible
impacts under different markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as a potential standard's impact on manufacturing capacity,
competition within the industry, the cumulative impact of equipment-
specific Federal regulations, and impacts on manufacturer subgroups.
The complete MIA is outlined in chapter 12 of the final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the CPB manufacturing industry
based on the market and technology assessment, preliminary manufacturer
interviews, and publicly available information. This included a top-
down analysis of CPB manufacturers that DOE used to derive preliminary
financial inputs for the GRIM (e.g., revenues; materials, labor,
overhead, and depreciation expenses; selling, general, and
administrative expenses (SG&A); and R&D expenses). DOE also used public
sources of information to further calibrate its initial
characterization of the CPB manufacturing industry, including company
filings of form 10-K from the SEC,\65\ corporate annual reports, and
the U.S. Census Bureau's ``Economic Census'',\66\ and Hoover's reports
\67\ to conduct this analysis.
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\65\ U.S. Securities and Exchange Commission, Annual 10-K
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html).
\66\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Group and Industries (2014)
(Available at http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
\67\ Hoovers Inc. Company Profiles, Various Companies (Available
at: http://www.hoovers.com).
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In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of amended energy conservation
standards. The GRIM uses several factors to determine a series of
annual cash flows starting with the announcement of the standard and
extending over a 30-year period following the compliance date of the
standard. These factors include annual expected revenues, costs of
sales, SG&A and R&D expenses, taxes, and capital expenditures. In
general, energy conservation standards can affect manufacturer cash
flow in three distinct ways: (1) Creating a need for increased
investment, (2) raising production costs per unit, and (3) altering
revenue due to higher per-unit prices and changes in sales volumes.
In addition, during Phase 2, DOE developed interview guides to
distribute to manufacturers of commercial packaged boilers in order to
develop other key GRIM inputs, including product and capital conversion
costs, and to gather additional information on the anticipated effects
of energy conservation standards on revenues, direct employment,
capital assets, industry competitiveness, and subgroup impacts.
In Phase 3, DOE evaluated subgroups of manufacturers that may be
disproportionately impacted by energy conservation standards or that
may not be represented accurately by the average cost assumptions used
to develop the industry cash-flow analysis. For example, small
manufacturers, niche players, or manufacturers exhibiting a cost
structure that largely differs from the industry average could be more
negatively affected. DOE identified one subgroup for a separate impact
analysis: Small business manufacturers. The Small business subgroup is
discussed in section VI.B, ``Review under the Regulatory Flexibility
Act,'' and in chapter 12 of the final rule TSD.
2. Government Regulatory Impact Model
DOE uses the GRIM to analyze the financial impacts of amended
energy conservation standards on the CPB industry. Standards will
potentially require additional investments, raise production costs, and
affect revenue through higher prices and, possibly, lower sales. The
GRIM is designed to take into account several factors as it calculates
a series of annual cash flows for the year standards take effect and
for several years after implementation. These factors include annual
expected revenues, costs of sales, increases in labor and assembly
expenditures, selling and general administration costs, and taxes, as
well as capital expenditures, depreciation and maintenance related to
new standards. Inputs to the GRIM include manufacturing costs,
shipments forecasts, and price forecasts developed in other analyses.
DOE also uses industry financial parameters as inputs
[[Page 1644]]
for the GRIM analysis, which it develops by collecting and analyzing
publicly available industry financial information. The GRIM spreadsheet
uses the inputs to arrive at a series of annual cash flows, beginning
in 2016 (the reference year of the manufacturer impact analysis) and
continuing to 2049 (the end of the analysis period). DOE calculated
INPVs by summing the stream of annual discounted cash flows during this
period. For CPB manufacturers, DOE used a real discount rate of 9.5
percent, which was derived from industry financials and then modified
according to feedback received during manufacturer interviews. DOE also
used the GRIM to model changes in costs, shipments, investments, and
manufacturer margins that could result from amended energy conservation
standards.
After calculating industry cash flows and INPV, DOE compared
changes in INPV between the no-new-standards case and each standard
level. The difference in INPV between the no-new-standards case and a
standards case represents the financial impact of the amended energy
conservation standard on manufacturers at a particular TSL. As
discussed previously, DOE collected this information on GRIM inputs
from a number of sources, including publicly available data and
confidential interviews with a number of manufacturers. GRIM inputs are
discussed in more detail in the next section. The GRIM results are
discussed in section V.B.2. Additional details about the GRIM, discount
rate, and other financial parameters can be found in chapter 12 of the
final rule TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
Manufacturing higher-efficiency equipment is typically more
expensive than manufacturing baseline equipment due to the use of more
complex components, which are typically more costly than baseline
components. The changes in the manufacturer production cost (MPC) of
the analyzed equipment can affect the revenues, gross margins, and cash
flow of the industry, making the equipment cost data key GRIM inputs
for DOE's analysis.
In the MIA, DOE used the MSPs for each considered efficiency level
that were calculated in the engineering analysis, (section IV.C.5 of
this final rule) and further detailed in chapter 5 of the final rule
TSD. To determine the manufacturer selling price-efficiency
relationship, DOE used the equipment database from the market and
technology assessment, and pricing data received from manufacturers,
distributors, and contractors. Using these inputs, DOE used the
methodology described in section IV.C.1 of this final rule, to
calculate manufacturer selling prices of commercial packaged boilers
for a given rated input (representative capacity) for each equipment
class at different efficiency levels spanning from the minimum
allowable standard (i.e., baseline) to the maximum technologically
feasible efficiency level. DOE then used equipment markups along with
the equipment pricing to determine MPCs for each efficiency level.
These cost breakdowns and equipment markups were validated and revised
with input from manufacturers during manufacturer interviews.
Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of these values by efficiency
level. Changes in sales volumes and efficiency mix over time can
significantly affect manufacturer finances. For this analysis, the GRIM
uses the NIA's annual shipment projections derived from the shipments
analysis from 2016 to 2049. The shipments model divides the shipments
of commercial packaged boilers into specific market segments. The model
starts from a historical reference year and calculates retirements and
shipments by market segment for each year of the analysis period. This
approach produces an estimate of the total equipment stock, broken down
by age or vintage, in each year of the analysis period. In addition,
the equipment stock efficiency distribution is calculated for the no-
new-standards case and for each standards case for each equipment
class. The NIA shipments forecasts are, in part, based on a roll-up
scenario. The forecast assumes that equipment in the no-new-standards
case that does not meet the standard under consideration would ``roll
up'' to meet the amended standard beginning in the compliance year of
2020. In this scenario, the market share of equipment above the
standard would remain unchanged. See section VI.G of this document and
chapter 9 of the final rule TSD for additional details.
Product and Capital Conversion Costs
Amended energy conservation standards would cause manufacturers to
incur one-time conversion costs to bring their production facilities
and equipment designs into compliance. DOE evaluated the level of
conversion-related expenditures that would be needed to comply with
each considered efficiency level in each equipment class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
Capital conversion costs; and (2) product conversion costs. Capital
conversion costs are one-time investments in property, plant, and
equipment necessary to adapt or change existing production facilities
such that new compliant product designs can be fabricated and
assembled. Product conversion costs are one-time investments in
research, development, testing, marketing, and other non-capitalized
costs necessary to make product designs comply with amended energy
conservation standards.
To evaluate the level of capital conversion expenditures,
manufacturers would likely incur to comply with amended energy
conservation standards, DOE used manufacturer interviews to gather data
on the anticipated level of capital investment that would be required
at each efficiency level. Based on equipment listings, provided by the
engineering analysis, DOE developed industry average capital
expenditure by weighting manufacturer feedback based on model offerings
as a proxy for market share. DOE supplemented manufacturer comments and
tailored its analyses with information obtained during engineering
analysis described in chapter 5 of the final rule TSD.
DOE assessed the product conversion costs at each considered
efficiency level by integrating data from quantitative and qualitative
sources. DOE received feedback regarding the potential costs of each
efficiency level from multiple manufacturers to estimate product
conversion costs (e.g., research & development (R&D) expenditures,
certification costs). DOE combined this information with product
listings to estimate how much manufacturers would have to spend on
product development and product testing at each efficiency level.
Manufacturer data was aggregated to better reflect the industry as a
whole and to protect confidential information.
In general, DOE assumes that all conversion-related investments
occur between the year of publication of the final rule and the year by
which manufacturers must comply with the amended standards. The
conversion cost figures used in the GRIM can be found in section V.B.2
of this document. DOE received limited information on the conversion
costs for oil-fired equipment in interviews. Using equipment listing
counts, DOE scaled the feedback on gas-fired equipment to estimate the
conversion cost for oil-fired
[[Page 1645]]
equipment. For additional information on the estimated product and
capital conversion costs, see chapter 12 of the final rule TSD.
b. Government Regulatory Impact Model Scenarios
Manufacturer Markup Scenarios
As discussed in the previous section, MSPs include direct
manufacturing production costs (i.e., labor, materials, and overhead
estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D,
and interest), along with profit. To calculate the MSPs in the GRIM,
DOE applied manufacturer markups to the MPCs estimated in the
engineering analysis for each equipment class and efficiency level.
Modifying these markups in the standards case yields different sets of
impacts on manufacturers. For the MIA, DOE modeled two standards-case
manufacturer markup scenarios to represent the uncertainty regarding
the potential impacts on prices and profitability for manufacturers
following the implementation of amended energy conservation standards:
(1) A preservation of gross margin percentage markup scenario; and (2)
a preservation of per-unit operating profit markup scenario. These
scenarios lead to different manufacturer markup values that, when
applied to the inputted MPCs, result in varying revenue and cash-flow
impacts.
Under the preservation of gross margin percentage markup scenario,
DOE applied a single uniform ``gross margin percentage'' manufacturer
markup across all efficiency levels, which assumes that following
amended standards, manufacturers would be able to maintain the same
amount of profit as a percentage of revenue at all efficiency levels
within an equipment class. As production costs increase with
efficiency, this scenario implies that the absolute dollar markup will
increase as well. Based on publicly available financial information for
manufacturers of commercial packaged boilers, as well as comments from
manufacturer interviews, DOE assumed the average manufacturer markup--
which includes SG&A expenses, R&D expenses, interest, and profit--to be
1.41 for small gas-fired hot water, small gas-fired steam boilers,
large gas-fired hot water boilers, and large oil-fired hot water
boilers; 1.40 for small oil-fired hot water boilers; 1.38 for small
oil-fired steam boilers; and 1.37 for large gas-fired and oil-fired
steam boilers. During manufacturer interviews, manufacturers noted that
they would not expect to maintain their current margins under a
stringent energy conservation standard. Thus, this manufacturer markup
scenario represents the upper bound of the CPB industry's profitability
in the standards case.
DOE includes the preservation of per-unit operating profit scenario
in its analysis to reflect manufacturer concern that would not be able
to maintain current markups in the standards case, given the highly
competitive nature of the CPB market. In this scenario, manufacturer
markups are set so that operating profit one year after the compliance
date of amended energy conservation standards is the same as in the no-
new-standards case on a per-unit basis. In other words, manufacturers
are not able to garner additional operating profit from the higher
production costs and the investments that are required to comply with
the amended standards; however, they are able to maintain the same per-
unit operating profit in the standards case that was earned in the no-
new-standards case. Therefore, operating margin in percentage terms is
reduced between the no-new-standards case and standards case. DOE
adjusted the manufacturer markups in the GRIM at each TSL to yield
approximately the same earnings before interest and taxes in the
standards case as in the no-new-standards case. The preservation of
per-unit operating profit markup scenario represents the lower bound of
industry profitability in the standards case. In this scenario, similar
to the preservation of gross margin percentage markup scenario,
manufacturers are not able to fully pass through to consumers the
additional costs necessitated by CPB standards.
3. Discussion of Comments
During the notice of proposed rulemaking public meetings, and in
written comments in the response to the March 2016 NOPR, interested
parties commented on the assumptions and results of the manufacturer
impact analysis. Oral and written comments addressed several topics,
including concerns regarding the elimination of natural draft
equipment, impacts on employment, conversion costs, cumulative
regulatory burden, impacts on small businesses, equipment distribution,
and the lessening of competition. Comments regarding the impacts on
small businesses are discussed in section V.B.2, all other MIA-related
comments are discussed below.
a. Elimination of Natural Draft Equipment
Several stakeholders expressed concern that setting a standard at
or near condensing levels would force the obsolescence of certain types
of commercial packaged boilers. One manufacturer commented that if a
condensing level is adopted by DOE, it is possible that natural draft
boilers and steam boilers will become obsolete in the CPB industry.
(Spire, No. 73, at pp. 23-24) Spire stated that purchasers would be
limited to mechanical draft boilers using condensing combustion
technology, which are significantly more costly to purchase, maintain
and install. BHI commented that in the small gas hot water equipment
class in particular, it is possible that a stringent standard will
result in large scale obsolescence of existing cast iron boilers since
there are many technical constraints for marginal gains in efficiency,
such as venting restrictions. (BHI, No. 71 at p. 20) To limit
significantly negative industry impacts on manufacturers and equipment
offerings, Lochinvar recommended that DOE does not set a standard that
requires condensing technology. (Lochinvar, No. 31 at p. 6)
Additionally, during the preliminary stage, Lochinvar stated that a
majority of heat exchangers for condensing technology are imported.
Lochinvar believes overhead and equipment used to produce non-
condensing heat exchangers may become obsolete if condensing technology
is effectively mandated. (Lochinvar, Public Meeting Transcript, No. 39
at p. 205)
DOE understands that a stringent standard, specifically condensing
technology, may negatively impact INPV and limit industry equipment
offerings. The adopted standards do not mandate condensing technology
for any equipment class. This final rule adopts a standard lower than
the proposed levels in the NOPR for small gas hot water, in part to
mitigate the potential for negative impacts on manufacturers and end-
users.
b. Impacts on Direct Employment
AHRI and ABMA asserted concerns about DOE's direct employment
estimates being too low. Two stakeholders, representing industry trade
associations, representing industry trade associations, stated that the
amended rule will decrease employment, contrary to DOE's analysis.
(AHRI, Public Meeting Transcript, No. 61 at p. 220) (ABMA, Public
Meeting Transcript, No. 61 at p. 222) In written comments, AHRI
submitted estimates for HVAC manufacturing employment but did not
present employment impacts specific to the covered equipment,
commercial packaged boilers. (AHRI, No. 78 at p. 12)
[[Page 1646]]
At the NOPR stage, DOE estimated production employment to be 464
production workers in the no-new-standards case for the CPB industry in
2019. For the final rule, DOE updated its analysis based on 2014 U.S.
Census data, the updated engineering analysis, and the updated
shipments analysis. DOE's revised final rule analysis forecasts that
the industry will employ 594 production and 360 non-production workers
in the no-new-standards case in 2020. The final rule analysis presents
an updated set of direct employment impacts that range from a potential
net loss of 484 jobs to a potential net gain of 7 at the amended level.
Therefore, DOE's analysis agrees with statements from the industry that
there is a risk of decreasing the number of manufacturing jobs related
to the covered equipment.
In terms of estimating manufacturing jobs, DOE's direct employment
analysis is based on three primary inputs: CPB shipments in the
standards year from the shipments analysis, labor content of the
covered equipment from the engineering analysis, and an average
production worker wage level based on U.S. Census Bureau's 2014 Annual
Survey of Manufacturers (ASM) \68\ data for NAICS Code 333414.\69\ In
the final rule analysis, DOE estimates there are 32,416 unit shipments
in 2020 at the amended standard level. The engineering analysis shows
that labor content can range from 6 percent to 20 percent of the MPC,
depending on the equipment class and model. Combining unit shipments
and labor content, DOE estimates industry production labor expenditures
of $21.2 million. Based on 2014 ASM data, DOE estimates average
production workers wages of $21.06 an hour, with an average of 1,880
production hours worked in a year. Combining these inputs, DOE
estimates 954 domestic workers supporting the manufacture and assembly
of covered equipment in the CPB industry in 2020 in the no-new-
standards case.
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\68\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Groups and Industries (2014)
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
\69\ At the March 2016 NOPR stage, DOE used NAICS code 333415.
For the final rule, DOE determined that NAICS Code, 333414 ``Heating
Equipment (except Warm Air Furnaces) Manufacturing Industry,'' is
more appropriate and relied on U.S. Census data from this code for
its analyses.
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This estimated number of domestic production workers only accounts
for the labor required to manufacture the most basic equipment that
meets the applicable standard--it does not take into account additional
features that manufacturers use to differentiate premium equipment,
add-ons, or components that do not contribute to heating function.
Additional detail on the direct employment analysis can be found in
chapter 12 of the final rule TSD.
Furthermore, AHRI stated, ``DOE notes that `if a CPB manufacturer
chose to keep their current production in the U.S., domestic employment
could increase at each TSL.' 81 FR 15899. Given the current issues with
outsourcing, including that DOE in past rules has concluded
manufacturers may move production abroad in response to increased
production costs, this is a huge assumption for which DOE provides no
basis in fact.'' (AHRI, No. 78 at p. 7)
DOE presents a range of results for direct employment. At the upper
bound, DOE presents direct employment based on current production
locations, estimated sales figures from the shipments analysis, labor
expenditures from the GRIM, and production labor wage rates from the
U.S. Census Annual Survey of Manufacturers. Currently, the vast
majority of CPB equipment sold into the domestic market is manufactured
in the United States and Canada. While some components are imported,
the CPB industry has not seen the dramatic shift to overseas
manufacturing associated with many consumer appliances. At the adopted
level, the production worker skills and the capital equipment necessary
to produce minimally compliant equipment does not vary significantly
from the no-new-standards case. At the lower bound, DOE presents a loss
of employment where job losses scale with the portion of equipment that
does not meet the standard. Additional information and full
calculations are presented in section V.B.2 of this document.
Additionally, BHI stated in a written comment that the standard
will shift the market away from cast iron commercial boilers, which
will ultimately reduce the production volume at Casting Solutions, a
cast iron foundry and subsidiary of BHI. The amended standard would
result in job losses, including eliminating 80 union manufacturing jobs
and 20 managerial jobs at Casting Solutions. (BHI, No. 71 at p. 20)
In response, DOE's direct employment analysis presents a range of
potential impacts and includes the potential for job loss. The lower
bound shows a loss of 484 jobs, including both production and non-
production workers, at TSL 2 for manufacturers of the covered
equipment. However, these job impacts do not include employment from
suppliers or distributors. DOE's production worker analysis focuses on
direct employment, as defined in section V.B.2.b of this document and
chapter 12 of the final rule TSD.
c. Conversion Costs
AHRI notes that while it supports the use of alternative efficiency
determination methods (AEDMs) for certification, the creation,
validation, and maintenance of AEDMs is an additional burden and cost
to manufacturers. They believe the additional burden and cost should be
included in DOE's analysis. (AHRI, No. 76 at p. 8)
At this time, DOE does not include AEDMs as an additional
cumulative burden or cost to manufacturers in its analysis. For certain
consumer products and commercial equipment, DOE's existing testing
regulations include allowing the use of an AEDM, in lieu of action
testing, to simulate the energy consumption or efficiency of certain
basic models of covered equipment under DOE's test procedure
conditions. The use of AEDMs is optional and, for compliance
certification purposes, reduces the need for sample units and the
overall testing burden for manufacturers of expensive or highly custom
basic models.
>d. Cumulative Regulatory Burden
With regard to the rulemakings DOE identified under cumulative
regulatory burden, AHRI states that five of the nine identified
rulemakings do not have known expected conversion costs. (AHRI, No. 76
at p. 8) Furthermore Weil-McLain commented that DOE's simultaneous and
cumulative rulemaking creates a significant burden for consumers and
the industry. (Weil-McLain, No. 67 at p. 4)
In response, DOE has performed an analysis of cumulative regulatory
burden (CRB) in section V.B.2.e of this document. Cumulative burden is
a factor DOE considers in its weighting of costs and benefits. The five
rules identified by AHRI do not yet have a published NOPR. Any
estimation of burdens before a standard level is proposed would be
speculative. Consumer burden is discussed in section IV.H.3.
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
[[Page 1647]]
emissions of two additional greenhouse gases, CH4 and
N2O, as well as the reductions to emissions of all species
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion. The associated emissions are referred
to as upstream emissions.
The analysis of power sector emissions uses marginal emissions
factors that were derived from data in AEO2016, as described in section
IV.M of this document. The methodology is described in chapter 13 and
chapter 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.\70\ The FFC upstream emissions are estimated
based on the methodology described in appendix 10D 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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\70\ 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 MBtu of site energy savings. Total emissions
reductions are estimated using the energy savings calculated in the
national impact analysis.
For CH4 and N2O, DOE calculated emissions
reduction in tons and also in terms of units of carbon dioxide
equivalent (CO2eq). Gases are converted to CO2eq
by multiplying each ton of gas by the global warming potential (GWP) of
the gas over a 100-year time horizon. Based on the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change,\71\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
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\71\ Intergovernmental Panel on Climate Change. Anthropogenic
and Natural Radiative Forcing. Chapter 8 in Climate Change 2013: The
Physical Science Basis. Contribution of Working Group I to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change.
Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J.
Boschung, A. Nauels, Y. Xia, V. Bex, and P.M. Midgley, Editors.
2013. Cambridge University Press: Cambridge, United Kingdom and New
York, NY, USA.
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Because the on-site operation of commercial packaged boilers
requires combustion of fossil fuels and results in emissions of
CO2, NOX, and SO2 at the sites where
these appliances are used, DOE also accounted for the reduction in
these site emissions and the associated upstream emissions due to
potential standards. Site emissions of the above gases were estimated
using emissions intensity factors from an EPA publication.\72\
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\72\ U.S. Environmental Protection Agency, External Combustion
Sources, In Compilation of Air Pollutant Emission Factors, AP-42,
Fifth Edition, Volume I: Stationary Point and Area Sources, Chapter
1. Available at www3.epa.gov/ttn/chief/ap42/index.html.
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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
October 31, 2015. DOE's estimation of impacts accounts for the presence
of the emissions control programs discussed in the following
paragraphs.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous states and the
District of Columbia (D.C.). (42 U.S.C. 7651 et seq.) SO2
emissions from 28 eastern states and D.C. were also limited under the
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR
created an allowance-based trading program that operates along with the
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court
of Appeals for the D.C. Circuit, but it remained in effect.\73\ 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,\74\ 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.\75\ On October 23, 2014, the D.C. Circuit lifted the stay of
CSAPR.\76\ Pursuant to this action, CSAPR went into effect (and CAIR
ceased to be in effect) as of January 1, 2015.\77\ AEO2016 incorporates
implementation of CSAPR.
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\73\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008);
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
\74\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696,
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
\75\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610
(U.S. 2014). The Supreme Court held in part that EPA's methodology
for quantifying emissions that must be eliminated in certain States
due to their impacts in other downwind States was based on a
permissible, workable, and equitable interpretation of the Clean Air
Act provision that provides statutory authority for CSAPR.
\76\ See Georgia v. EPA, Order (D.C. Cir. filed October 23,
2014) (No. 11-1302).
\77\ On July 28, 2015, the D.C. Circuit issued its opinion
regarding the remaining issues raised with respect to CSAPR that
were remanded by the Supreme Court. The D.C. Circuit largely upheld
CSAPR but remanded to EPA without vacatur certain States' emission
budgets for reconsideration. EME Homer City Generation, LP v. EPA,
795 F.3d 118 (D.C. Cir. 2015).
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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.\78\ Therefore, DOE
[[Page 1648]]
concludes that energy conservation standards that decrease electricity
generation will generally reduce SO2 emissions in 2016 and
beyond.
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\78\ 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. 79 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 document 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.
The AEO2016 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.\79\ DOE used the AEO2016 No-CPP case as a basis for
developing emissions factors for the electric power sector to be
consistent with its use of the No-CPP case in the NIA.\80\
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\79\ U.S. Environmental Protection Agency, ``Carbon Pollution
Emission Guidelines for Existing Stationary Sources: Electric
Utility Generating Units'' (Washington, DC: October 23, 2015).
https://www.federalregister.gov/articles/2015/10/23/2015-22842/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating.
\80\ 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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Spire questioned DOE's benefit analyses period and argues that DOE
calculates benefits over an unreasonably long period of time. Spire
asserts that DOE's approach assumes that the proposed standard--once
adopted--would remain unaltered once it is adopted, and believes that
this assumption is not credible, and further states that DOE assumes
that there will be no material advance in efficiency over the next 30
years, and that DOE will not be triggered to review the standard in the
future due to a 6-year review or an ASHRAE 90.1 update trigger over the
next 30 years. Further, Spire questions DOE's ability to make
predictions regarding items such as energy prices or equipment sales 30
years from now, and thus it believes the analysis cannot be described
as clear and convincing evidence of the benefits of the proposed
standards. Spire states that DOE should focus not just on the projected
life of the equipment, but on the projected life of the standard it
proposes. (Spire, No. 73 at pp. 19-21) AHRI commented that DOE violates
EPCA requirements for the benefits of a proposed standard to exceed its
burden by giving emissions savings disproportionate weight over other
factors, noting that there is nothing in the statute that indicates
that Congress indicated that this be anything other than an equal
weighting of factors, and that the global indirect emissions and SCC
reductions extend well beyond the life of the equipment and the
relevant period for measuring benefits relative to costs, thus implying
disproportionate weighting for these benefits. (AHRI, No. 76 at pp. 11-
12) AHRI specifically points out that the benefits from SCC extend
through 2300, and that benefits to consumers accrue after 2050 for
equipment purchased in 2019-2048, and that incremental variable and
fixed costs incurred by manufacturers are included in earlier years in
preparation for the rule. AHRI states that DOE provides no
justification for the exclusion of many costs that manufacturers might
incur after 2050, in harmony with the time period DOE uses to measure
benefits. (AHRI, No. 76 at p. 11)
In response, DOE considers the impacts over the life of the
commercial packaged boiler equipment units shipped in the 30-year
analysis period. With respect to energy cost savings, impacts continue
to be accumulated until all of the equipment shipped in the 30-year
analysis period is retired from service. Regarding the statement that
there would be no material advance over the next 30 years, DOE's no-
new-standards case assumptions shows a continued improvement in
efficiency over the analysis period. In addition, if DOE is triggered
to review, and if it ultimately amends standards, the benefits
calculated are based only on the additional improvements in efficiency
since the previous standards were established. Hence, DOE does not
over-estimate the benefits as implied by Spire in this regard. DOE
understands the difficulty in projecting energy prices or markets and
relies on the best available information, as well as the input of
stakeholders, during the rulemaking process. As noted in this response
to Spire's comments, DOE already does consider the projected life of
the standard within its 30-year analysis period, and any further
increases in future rulemakings are dealt with and accounted for
correctly in those rulemakings, in essence using the efficiency
standards established in this rule as the baseline levels for any new
no-new-standards case analysis for those rulemakings. With regard to
AHRI's comments, emissions impacts from purchased equipment continue
until the emissions produced by the boilers shipped during the analysis
period are essentially eliminated from the atmosphere. CO2
that is emitted during the lifetime of the equipment has a long
residence time in the atmosphere, and, thus, contributes to radiative
forcing, which affects global climate, for a long time. In the case of
both manufacturer economic costs and benefits and the value of
CO2 emissions reductions, DOE is accounting for the lifetime
impacts of equipment shipped in the same analysis period.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this final 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 equipment
shipped in the projection period for each TSL. This section summarizes
the basis for the values used for each of these emissions and presents
the values considered in this document.
For this final rule, DOE relied on a set of values for the social
cost of carbon
[[Page 1649]]
(SCC) that was developed by a Federal interagency process. The basis
for these values is summarized in the next section, and a more detailed
description of the methodologies used is provided as an appendix to
chapter 14 of the final rule TSD.
1. Social Cost of Carbon
The SCC is an estimate of the monetized damages associated with an
incremental increase in carbon emissions in a given year. It is
intended to include (but is not limited to) climate-change-related
changes in net agricultural productivity, human health, property
damages from increased flood risk, and the value of ecosystem services.
Estimates of the SCC are provided in dollars per metric ton of
CO2. A domestic SCC value is meant to reflect the value of
damages in the United States resulting from a unit change in
CO2 emissions, while a global SCC value is meant to reflect
the value of damages worldwide.
Under section 1(b)(6) of Executive Order 12866, ``Regulatory
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to
the extent permitted by law, assess both the costs and the benefits of
the intended regulation and, recognizing that some costs and benefits
are difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs. The purpose of the SCC estimates presented here is
to allow agencies to incorporate the monetized social benefits of
reducing CO2 emissions into cost-benefit analyses of
regulatory actions. The estimates are presented with an acknowledgement
of the many uncertainties involved and with a clear understanding that
they should be updated over time to reflect increasing knowledge of the
science and economics of climate impacts.
As part of the interagency process that developed the SCC
estimates, technical experts from numerous agencies met on a regular
basis to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. The main
objective of this process was to develop a range of SCC values using a
defensible set of input assumptions grounded in the existing scientific
and economic literatures. In this way, key uncertainties and model
differences transparently and consistently inform the range of SCC
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
When attempting to assess the incremental economic impacts of
CO2 emissions, the analyst faces a number of challenges. A
report from the National Research Council \81\ points out that any
assessment will suffer from uncertainty, speculation, and lack of
information about (1) future emissions of greenhouse gases, (2) the
effects of past and future emissions on the climate system, (3) the
impact of changes in climate on the physical and biological
environment, and (4) the translation of these environmental impacts
into economic damages. As a result, any effort to quantify and monetize
the harms associated with climate change will raise questions of
science, economics, and ethics and should be viewed as provisional.
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\81\ National Research Council. 2009. Hidden Costs of Energy:
Unpriced Consequences of Energy Production and Use. National
Academies Press: Washington, DC.
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Despite the limits of both quantification and monetization, SCC
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) SCC estimates are well supported by the
existing scientific and economic literature. As a result, DOE has
relied on the IWG SCC estimates in quantifying the social benefits of
reducing CO2 emissions. DOE estimates the benefits from
reduced (or costs from increased) emissions in any future year by
multiplying the change in emissions in that year by the SCC values
appropriate for that year. The NPV of the benefits can then be
calculated by multiplying each of these future benefits by an
appropriate discount factor and summing across all affected years.
It is important to emphasize that the current SCC 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.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing CO2 emissions. To ensure consistency in how
benefits are evaluated across agencies, the Administration sought to
develop a transparent and defensible method, specifically designed for
the rulemaking process, to quantify avoided climate change damages from
reduced CO2 emissions. The interagency group did not
undertake any original analysis. Instead, it combined SCC estimates
from the existing literature to use as interim values until a more
comprehensive analysis could be conducted. The outcome of the
preliminary assessment by the interagency group was a set of five
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33,
$19, $10, and $5 per metric ton of CO2. These interim values
represented the first sustained interagency effort within the U.S.
government to develop an SCC for use in regulatory analysis. The
results of this preliminary effort were presented in several proposed
and final rules.
c. Current Approaches and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to generate improved SCC estimates.
Specifically, the group considered public comments and further explored
the technical literature in relevant fields. The interagency group
relied on three integrated assessment models commonly used to estimate
the SCC--the FUND, DICE, and PAGE models.\82\ These models are
frequently cited in the peer-reviewed literature and were used in the
last assessment of the Intergovernmental Panel on Climate Change
(IPCC). Each model was given equal weight in the SCC values that were
developed.
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\82\ The DICE (Dynamic Integrated Climate and Economy) model by
William Nordhaus evolved from a series of energy models and was
first presented in 1990 (Nordhaus and Boyer 2000, Nordhaus 2008).
The PAGE (Policy Analysis of the Greenhouse Effect) model was
developed by Chris Hope in 1991 for use by European decision-makers
in assessing the marginal impact of carbon emissions (Hope 2006,
Hope 2008). The FUND (Climate Framework for Uncertainty,
Negotiation, and Distribution) model, developed by Richard Tol in
the early 1990s, originally to study international capital transfers
in climate policy is now widely used to study climate impacts (e.g.,
Tol 2002a, Tol 2002b, Anthoff et al. 2009, Tol 2009).
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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
[[Page 1650]]
was conducted to select three sets of input parameters for these
models--climate sensitivity, socio-economic and emissions trajectories,
and discount rates. A probability distribution for climate sensitivity
was specified as an input into all three models. In addition, the
interagency group used a range of scenarios for the socio-economic
parameters and a range of values for the discount rate. All other model
features were left unchanged, relying on the model developers' best
estimates and judgments.
In 2010, the interagency group selected four sets of SCC values for
use in regulatory analyses. Three sets of values are based on the
average SCC from the three integrated assessment models, at discount
rates of 2.5, 3, and 5 percent. The fourth set, which represents the
95th-percentile SCC estimate across all three models at a 3-percent
discount rate, was included to represent higher than expected impacts
from climate change further out in the tails of the SCC distribution.
The values grow in real terms over time. Additionally, the interagency
group determined that a range of values from 7 percent to 23 percent
should be used to adjust the global SCC to calculate domestic effects,
\83\ although preference is given to consideration of the global
benefits of reducing CO2 emissions. Table IV.11 presents the
values in the 2010 interagency group report, \84\ which is reproduced
in appendix 14A of the final rule TSD.
---------------------------------------------------------------------------
\83\ 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.
\84\ 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.11--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate and statistic
------------------------------------------------------------------
Year 5% 3% 2.5% 3%
------------------------------------------------------------------
Average Average Average 95th Percentile
----------------------------------------------------------------------------------------------------------------
2010......................................... 4.7 21.4 35.1 64.9
2015......................................... 5.7 23.8 38.4 72.8
2020......................................... 6.8 26.3 41.7 80.7
2025......................................... 8.2 29.6 45.9 90.4
2030......................................... 9.7 32.8 50.0 100.0
2035......................................... 11.2 36.0 54.2 109.7
2040......................................... 12.7 39.2 58.4 119.3
2045......................................... 14.2 42.1 61.7 127.8
2050......................................... 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
In 2013 the IWG released an update (which was revised in July 2015)
that contained SCC values that were generated using the most recent
versions of the three integrated assessment models that have been
published in the peer-reviewed literature.\85\ DOE used these values
for this final rule.
---------------------------------------------------------------------------
\85\ 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.12 shows the updated sets of SCC estimates from the latest
interagency update in 5-year increments from 2010 through 2050. The
full set of annual SCC estimates from 2010 through 2050 is reported in
appendix 14B of the final rule TSD. The central value that emerges is
the average SCC across models at a 3-percent discount rate. However,
for purposes of capturing the uncertainties involved in regulatory
impact analysis, the interagency group emphasizes the importance of
including all four sets of SCC values.
Regarding the use of discount rates in the development of SCC, AHRI
commented that DOE should use discount rates in the analysis
consistently, noting that DOE groups results from its analysis of
different factors using different discount rates into one overall
result that does not portray an accurate representation of true cost to
manufacturers and to consumers. Further, AHRI asserts that DOE is
deviating from the guidance of OMB Circular No. A-94 to utilize a 7-
percent discount rate, but goes on to say that if a different discount
rate is appropriate, DOE should clearly present its reasoning so that
stakeholders can understand the basis and provide comment. (AHRI, No.
76 at p. 8)
For the purposes of the development of the National NPV, DOE uses
the guidance provided by OMB Circular No. A-94; however, in response to
the concern raised regarding the use of different discount rates in
different portions of the analysis, DOE notes that it used the specific
discount rates as recommended by the interagency group that developed
the SCC values for the monetization of emissions. A full discussion of
these discount rates is provided in Appendix 14A of the final rule TSD.
[[Page 1651]]
Table IV.12--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate and statistic
------------------------------------------------------------------
Year 5% 3% 2.5% 3%
------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010......................................... 10 31 50 86
2015......................................... 11 36 56 105
2020......................................... 12 42 62 123
2025......................................... 14 46 68 138
2030......................................... 16 50 73 152
2035......................................... 18 55 78 168
2040......................................... 21 60 84 183
2045......................................... 23 64 89 197
2050......................................... 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable since they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The National Research
Council report mentioned 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 analytic
challenges that are being addressed by the research community,
including research programs housed in many of the Federal agencies
participating in the interagency process to estimate the SCC. The
interagency group intends to periodically review and reconsider those
estimates to reflect increasing knowledge of the science and economics
of climate impacts, as well as improvements in modeling.\86\
---------------------------------------------------------------------------
\86\ In November 2013, OMB announced a new opportunity for
public comment on the interagency technical support document
underlying the revised SCC estimates. 78 FR 70586. In July 2015 OMB
published a detailed summary and formal response to the many
comments that were received: 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.
---------------------------------------------------------------------------
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report (revised July 2015), adjusted to 2015$ using
the implicit price deflator for gross domestic product (GDP) from the
Bureau of Economic Analysis. For each of the four SCC cases specified,
the values used for emissions in 2015 were $12.4, $40.6, $63.2, and
$118 per metric ton avoided (values expressed in 2015$). DOE derived
values after 2050 based on the trend in 2010 through 2050 in each of
the four cases in the interagency update.
DOE multiplied the CO2 emissions reduction estimated for
each year by the SCC value for that year in each of the four cases. To
calculate a present value of the stream of monetary values, DOE
discounted the values in each of the four cases using the specific
discount rate that had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
As noted previously, DOE has estimated how the considered energy
conservation standards would reduce site NOX emissions
nationwide and decrease power sector NOX emissions in those
22 states not affected by the CAIR.
DOE estimated the monetized value of NOX emissions
reductions 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.\87\ 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 14C of the final rule TSD. DOE primarily relied on the low
estimates to be conservative.\88\ 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
end-use category for commercial packaged boilers using a method
described in appendix 14C 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.
---------------------------------------------------------------------------
\87\ 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.
\88\ 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 estimated the monetized value of NOX emissions
reductions from gas commercial packaged boilers using benefit per ton
estimates from the EPA's ``Technical Support Document Estimating the
Benefit per Ton of Reducing PM2.5 Precursors from 17
Sectors.'' \89\ Although none of the sectors refers specifically to
residential and commercial buildings, DOE determined that the sector
called ``Area sources'' is a reasonable proxy for residential and
commercial buildings. ``Area sources'' represents all emission sources
for which states do not have exact (point) locations in their emissions
inventories. Since exact locations would tend to be associated with
larger sources, ``area sources'' would be fairly representative of
small dispersed sources like homes and businesses. The EPA Technical
Support Document provides high and low estimates for 2016, 2020, 2025,
and 2030 at 3- and 7-percent discount rates. As with the benefit per
ton estimates for NOX emissions reductions from
[[Page 1652]]
electricity generation, DOE primarily relied on the low estimates to be
conservative.
---------------------------------------------------------------------------
\89\ www.epa.gov/sites/production/files/2014-10/documents/sourceapportionmentbpttsd.pdf.
---------------------------------------------------------------------------
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 received various comments regarding its use of SCC in this
rulemaking.
AHRI disputed DOE's assumption that SCC values will increase over
time, because AHRI reasons that the more economic development that
occurs, the more adaptation and mitigation efforts that will be
undertaken. (AHRI, No. 76 at p. 11) In response, the SCC increases over
time because future emissions are expected to produce larger
incremental damages as physical and economic systems become more
stressed in response to greater climatic change (see appendix 14A of
the final rule TSD). The approach used by the Interagency Working Group
allowed estimation of the growth rate of the SCC directly using the
three integrated assessment models (IAMs), which help to ensure that
the estimates are internally consistent with other modeling
assumptions. Adaptation and mitigation efforts, while necessary and
important, are not without cost, particularly if their implementation
is delayed.
AHRI, IECA, Spire, and the Cato Institute (Cato) criticized DOE's
use of SCC estimates that DOE has acknowledged are subject to
considerable uncertainty. (AHRI, No. 76 at p. 9; IECA, No. 63 at p. 3;
Spire, No. 73 at p. 21; Cato, No. 62 at pp. 1-27) Cato stated that
until the IAMs are made consistent with mainstream climate science, the
SCC should be barred from use in this and all other Federal
rulemakings. Cato criticized several aspects of the determination of
the SCC values by the Interagency Working Group as being discordant
with the best climate science and not reflective of climate change
impacts. (Cato, No. 62 at pp. 1-2, 4-22) AHRI, IECA, and The
Associations also criticized the determination of the SCC values.
(AHRI, No.76 at p. 12; IECA, No. 63 at pp. 4-5; The Associations, No.
65 at p. 4)
In conducting the interagency process that developed the SCC
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 SCC estimates. These uncertainties and model
differences are discussed in the interagency working group's reports,
which are reproduced in appendices 14A and 14B of the final rule TSD,
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 IAMs used to estimate the SCC 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 SCC values were published in
the peer-reviewed literature (see appendix 14B of the final rule TSD
for discussion). 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 SCC have been developed over many years, using the
best science available, and with input from the public. In November
2013, OMB announced a new opportunity for public comment on the
interagency technical support document underlying the revised SCC
estimates. 78 FR 70586 (Nov. 26, 2013). In July 2015, OMB published a
detailed summary and formal response to the many comments that were
received. OMB also stated its intention to seek independent expert
advice on opportunities to improve the estimates, including many of the
approaches suggested by commenters. DOE stands ready to work with OMB
and the other members of the Interagency Working Group on further
review and revision of the SCC estimates as appropriate.
AHRI, IECA, The Associations, and Cato criticized DOE's use of
global rather than domestic SCC values, pointing out that EPCA
references weighing of the need for national energy conservation. Cato
recommended reporting the results of the domestic SCC calculation in
the main body of the proposed regulation. (AHRI, No. 76 at pp. 10-12;
IECA, No. 63 at pp. 1-3; The Associations, No. 65 at p. 4; Cato, No. 62
at pp. 2-3)
In response, DOE's analysis estimates both global and domestic
benefits of CO2 emissions reductions. The domestic benefits
are reported in chapter 14 of the final rule TSD. Following the
recommendation of the Interagency Working Group, DOE places more focus
on a global measure of SCC. As discussed in appendix 14A of the final
rule TSD, 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 SCC 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. Therefore, 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 commented that the economic models used to determine the SCC
did not consider industrial GHG and economic leakage. Furthermore, IECA
commented that the higher SCC cost drives manufacturing companies
offshore and increases imports of more carbon-intensive manufactured
goods, thereby increasing global GHG emissions and that the SCC does
not consider this. (IECA, No. 63 at p. 2)
The SCC, as developed in the referenced three models, represents
damage assessment and expresses this in terms of dollars per ton of
emissions. DOE agrees that the industrial GHG and economic leakage
discussed by the commenters is not desirable, but disagrees that it
should be part of the SCC calculations. Rather, it reflects the impact
of potential offshore production of manufactured goods. The commenter's
concern appears to be that the use of the SCC in a regulatory context
may increase economic leakage and result in additional carbon emissions
not captured in the analysis. DOE understands that this is a
possibility, but does not have a tool to confidently assess the amount
of production that may move overseas,
[[Page 1653]]
where that production may move, and the associated carbon intensity of
that production. As such, DOE only recognizes the potential for some
reduction in carbon savings from what it has assessed in this rule.
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
AEO2016 and various side cases. Details of the methodology are provided
in the appendices to chapters 13 and 15 of the final rule TSD.
The output of this analysis is a set of time-dependent coefficients
that capture the change in electricity generation, primary fuel
consumption, installed capacity, and power sector emissions due to a
unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of potential new or
amended energy conservation standards.
DOE received comments on its utility impact analysis. The Gas
Associations commented that DOE only assessed the impacts on the
electric power industry in its utility impact analysis, and that
Process Rule requires it to ``[estimate] marginal impacts on electric
and gas utility costs and revenues.'' (Gas Associations, No. 69 at p.
3)
Historically, DOE's approach to the utility impact analysis, based
on NEMS, has been to evaluate the impact of standards only on utility
energy sales. NEMS is not suited to characterizing impacts of standards
on gas utilities other than those measured by sales, and DOE is unaware
of any analytical tools that would enable an analysis of financial
impacts on utilities' costs and revenues at a national level. Thus, DOE
was not able to perform any further evaluation of the gas utility
impacts for the commercial packaged boiler standards rulemaking beyond
what is described in this section.
See chapter 15 of the final rule TSD for further details regarding
the utility impact analysis.
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 equipment 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 equipment. Indirect employment impacts
from standards consist of the jobs created or eliminated in the
national economy, other than in the manufacturing sector being
regulated, 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 purchase of new equipment 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).\90\ 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.\91\ There are many reasons for these differences,
including wage differences and the fact that the utility sector is more
capital-intensive and less labor-intensive than other sectors. Energy
conservation standards have the effect of reducing consumer utility
bills. Because reduced consumer expenditures for energy likely lead to
increased expenditures in other sectors of the economy, the general
effect of efficiency standards is to shift economic activity from a
less labor-intensive sector (e.g., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, the BLS
data suggest that net national employment may increase due to shifts in
economic activity resulting from energy conservation standards.
---------------------------------------------------------------------------
\90\ Data on industry employment, hours, labor compensation,
value of production, and the implicit price deflator for output for
these industries are available upon request by calling the Division
of Industry Productivity Studies (202-691-5618) or by sending a
request by email to [email protected].
\91\ 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 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 3.1.1
(ImSET).\92\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model, which was designed to estimate the
national employment and income effects of energy-saving technologies.
The ImSET software includes a computer-based I-O model having
structural coefficients that characterize economic flows among the 187
sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\92\ J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact
of Sector Energy Technologies, PNNL-18412, Pacific Northwest
National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------
DOE notes that ImSET is not a general equilibrium forecasting model
and understands the uncertainties involved in projecting employment
impacts, especially changes in the later years of the analysis. Because
ImSET does not incorporate price changes, the employment effects
predicted by ImSET may over-estimate actual job impacts over the long
run. Therefore, DOE used ImSET only to generate results for near-term
timeframes (i.e., through 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
commercial packaged boilers. It addresses the TSLs examined by DOE, the
projected
[[Page 1654]]
impacts of each of these levels if adopted as energy conservation
standards for CPB equipment, and the standard 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 five TSLs for CPB
equipment. These TSLs were developed by combining specific efficiency
levels for each of the equipment 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 and Table V.2 present the TSLs analyzed and the
corresponding efficiency levels that DOE identified for potential
amended energy conservation standards for each equipment class. The
efficiency levels in each TSL can be characterized as follows:
TSL 5 corresponds to the max-tech efficiency level for
each equipment class.
TSL 4 is composed of the efficiency levels corresponding
to the maximum NPV at a 7-percent discount rate for each equipment
class.
TSL 3 is composed of a mixture of condensing and non-
condensing efficiency levels.
TSL 2 and TSL 1 are each composed of a mixture of non-
condensing efficiency levels only.
A more detailed description of TSLs may be found in appendix 10C of
the final rule TSD.
Table V.1--Trial Standard Levels for Commercial Packaged Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
Trial standard level
--------------------------------------------
Equipment class 1 2 3 4 5
--------------------------------------------
EL EL EL EL EL
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged Boilers.............. 3 3 6 6 7
Large Gas-Fired Hot Water Commercial Packaged Boilers.............. 2 3 3 5 5
Small Oil-Fired Hot Water Commercial Packaged Boilers.............. 4 4 4 6 6
Large Oil-Fired Hot Water Commercial Packaged Boilers.............. 1 2 2 3 4
Small Gas-Fired Steam Commercial Packaged Boilers.................. 3 4 4 5 5
Large Gas-Fired Steam Commercial Packaged Boilers.................. 4 5 5 6 6
Small Oil-Fired Steam Commercial Packaged Boilers.................. 1 2 2 3 3
Large Oil-Fired Steam Commercial Packaged Boilers.................. 1 2 2 3 3
----------------------------------------------------------------------------------------------------------------
Table V.2--Trial Standard Levels for Commercial Packaged Boilers by Thermal Efficiency and Combustion Efficiency
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
-----------------------------------------------------------------------------------------
1 2 3 4 5
Equipment class -----------------------------------------------------------------------------------------
ET (%) EC (%) ET (%) EC (%) ET (%) EC (%) ET (%) EC (%) ET (%) EC (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged Boilers......... 84 n/a 84 n/a 95 n/a 95 n/a 99 n/a
Large Gas-Fired Hot Water Commercial Packaged Boilers......... n/a 84 n/a 85 n/a 85 n/a 97 n/a 97
Small Oil-Fired Hot Water Commercial Packaged Boilers......... 87 n/a 87 n/a 87 n/a 97 n/a 97 n/a
Large Oil-Fired Hot Water Commercial Packaged Boilers......... n/a 86 n/a 88 n/a 88 n/a 89 n/a 97
Small Gas-Fired Steam Commercial Packaged Boilers............. 80 n/a 81 n/a 81 n/a 83 n/a 83 n/a
Large Gas-Fired Steam Commercial Packaged Boilers............. 81 n/a 82 n/a 82 n/a 84 n/a 84 n/a
Small Oil-Fired Steam Commercial Packaged Boilers............. 83 n/a 84 n/a 84 n/a 86 n/a 86 n/a
Large Oil-Fired Steam Commercial Packaged Boilers............. 83 n/a 85 n/a 85 n/a 87 n/a 87 n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
* ET stands for thermal efficiency, and EC stands for combustion efficiency.
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on CPB consumers by looking at
the effects potential amended standards at each TSL will 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 equipment will affect consumers in
two ways: (1) Purchase price increases, and (2) annual operating costs
decrease. LCC and PBP include total installed costs (i.e., equipment
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 equipment lifetime
and a discount rate. Chapter 8 of the final rule TSD and section IV.F
of this document provide detailed information on the LCC and PBP
analysis.
[[Page 1655]]
Table V.3 through Table V.18 show the LCC and PBP results for the
TSLs considered for each equipment class. In the first of each pair of
tables, the simple payback is measured relative to the baseline
equipment. In the second table, the impacts are measured relative to
the efficiency distribution in the no-new-standards case in the
compliance year (see section IV.H.1 of this document). Because some
consumers purchase equipment with higher efficiency in the no-new-
standards case, the average savings are less than the difference
between the average LCC of EL 0 (efficiency level 0) and the average
LCC at each TSL. The savings refer only to consumers who are affected
by a standard at a given TSL. Those who already purchase equipment 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.3--Average LCC and Simple PBP Results by Efficiency Level for Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
Thermal ---------------------------------------------------------------- Simple Average
TSL efficiency First year's Lifetime payback lifetime
(ET) level Installed cost operating operating LCC period (years)
cost cost (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $25,050 $10,621 $167,232 $192,282 .............. 24.8
1 25,915 10,512 165,525 191,440 7.9 24.8
2 26,857 10,406 163,862 190,718 8.4 24.8
1, 2.................................... 3 29,302 10,201 160,665 189,967 10.1 24.8
4 31,505 10,103 159,125 190,630 12.5 24.8
5 41,440 9,802 155,196 196,636 20.0 24.8
3, 4.................................... 6 42,337 9,626 152,449 194,786 17.4 24.8
5....................................... 7 45,399 9,297 147,356 192,755 15.4 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.4--Average LCC Savings Relative to the No-New-Standards-Case for Small Gas-Fired Hot Water Commercial
Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1 $65 3
2 164 5
1, 2............................................................ 3 212 14
4 -208 20
5 -2,267 28
3, 4............................................................ 6 -993 35
5............................................................... 7 945 52
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.5--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Combustion ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(EC) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $96,319 $61,654 $931,329 $1,027,648 .............. 24.8
1 100,141 60,911 920,158 1,020,299 5.1 24.8
1....................................... 2 104,306 60,188 909,281 1,013,587 5.4 24.8
2,3..................................... 3 111,547 59,483 898,689 1,010,236 7.0 24.8
4 167,178 56,437 856,643 1,023,821 13.6 24.8
4,5..................................... 5 175,096 54,643 829,842 1,004,938 11.2 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
[[Page 1656]]
Table V.6--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-Fired
Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Combustion Average life- % of
TSL efficiency cycle cost consumers that
(EC) Level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1 $588 3
1............................................................... 2 1,307 4
2, 3............................................................ 3 2,037 6
4 -1,537 16
4, 5............................................................ 5 16,952 33
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.7--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Thermal ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(ET) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $27,204 $26,706 $514,805 $542,009 .............. 24.8
1 28,121 26,406 508,914 537,036 3.1 24.8
2 29,112 26,114 503,167 532,279 3.2 24.8
3 30,607 25,828 497,558 528,165 3.9 24.8
1, 2, 3................................. 4 33,009 25,278 486,738 519,747 4.1 24.8
5 34,355 25,012 481,517 515,873 4.2 24.8
4, 5.................................... 6 51,713 23,819 459,234 510,947 8.5 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
Table V.8--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-Fired
Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1 $1,745 3
2 4,445 6
3 7,264 10
1, 2, 3......................................................... 4 14,421 14
5 18,127 17
4, 5............................................................ 6 22,934 42
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.9--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Combustion ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(EC) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $67,485 $92,682 $1,730,005 $1,797,490 .............. 24.8
1....................................... 1 75,964 90,644 1,691,719 1,767,683 4.2 24.8
2, 3.................................... 2 86,757 88,697 1,655,180 1,741,937 4.8 24.8
4....................................... 3 93,198 87,756 1,637,533 1,730,731 5.2 24.8
5....................................... 4 159,246 85,255 1,590,539 1,749,785 12.4 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
[[Page 1657]]
Table V.10--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
Fired Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Combustion Average life- % of
TSL efficiency cycle cost consumers that
(EC) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1............................................................... 1 $10,193 1
2, 3............................................................ 2 31,379 7
4............................................................... 3 41,902 10
5............................................................... 4 23,643 57
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.11--Average LCC and PBP Results by Efficiency Level for Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Thermal ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(ET) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $22,734 $10,116 $159,682 $182,416 .............. 24.8
1 23,553 10,020 158,140 181,693 8.5 24.8
2 24,443 9,926 156,638 181,080 9.0 24.8
1....................................... 3 25,408 9,835 155,175 180,584 9.5 24.8
2, 3.................................... 4 26,457 9,746 153,751 180,208 10.1 24.8
4, 5.................................... 5 28,831 9,574 151,013 179,844 11.3 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
Table V.12--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Gas-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1 $241 17
2 465 19
1............................................................... 3 720 27
2, 3............................................................ 4 1,002 41
4, 5............................................................ 5 1,341 54
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.13--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Thermal ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(ET) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $75,672 $51,229 $773,831 $849,504 .............. 24.8
1 77,684 50,623 764,684 842,368 3.3 24.8
2 79,813 50,032 755,775 835,588 3.5 24.8
3 82,066 49,456 747,095 829,162 3.6 24.8
1....................................... 4 84,452 48,895 738,636 823,088 3.8 24.8
2, 3.................................... 5 87,665 48,347 730,390 818,056 4.2 24.8
4, 5.................................... 6 93,166 47,292 714,506 807,672 4.4 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
[[Page 1658]]
Table V.14--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1 $498 1
2 2,066 4
3 4,239 6
1............................................................... 4 7,959 11
2, 3............................................................ 5 11,188 15
4, 5............................................................ 6 20,291 21
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.15--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Thermal ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(ET) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $24,481 $27,361 $519,200 $543,680 .............. 24.8
1....................................... 1 26,747 26,760 507,521 534,268 3.8 24.8
2, 3.................................... 2 28,058 26,471 501,897 529,955 4.0 24.8
4, 5.................................... 3 31,580 25,913 491,053 522,633 4.9 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
Table V.16--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1............................................................... 1 $2,409 2
2, 3............................................................ 2 5,839 8
4, 5............................................................ 3 12,779 14
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.17--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$) Simple
Thermal ---------------------------------------------------------------- payback Average
TSL efficiency First year's Lifetime period lifetime
(ET) level Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................... 0 $70,522 $108,788 $1,990,314 $2,060,836 .............. 24.8
1....................................... 1 76,661 106,219 1,943,027 2,019,688 2.4 24.8
2, 3.................................... 2 83,859 103,773 1,898,016 1,981,874 2.7 24.8
4, 5.................................... 3 92,296 101,441 1,855,125 1,947,421 3.0 24.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline (EL 0) equipment.
[[Page 1659]]
Table V.18--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal Average life- % of
TSL efficiency cycle cost consumers that
(ET) level savings * experience a
(2015$) net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 .............. 0
1............................................................... 1 12,563 0
2, 3............................................................ 2 36,832 1
4, 5............................................................ 3 70,909 3
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impacts of the
considered TSLs on low-income (i.e., multi-family) residential and
small business consumers. Given the magnitude of the installation and
operating expenditures in question for each equipment class, the LCC
savings and corresponding payback periods for low-income residential
and small business consumers are generally similar to the impacts for
all consumers with, for example, the residential low-income subgroup
showing somewhat higher than average benefits and the small business
consumers showing slightly lower benefits when compared to the overall
CPB consumer population for the SGHW CPB equipment class. DOE estimated
the average LCC savings and PBP for the low-income residential subgroup
compared with average CPB consumers, as shown in Table V.19 through
Table V.26. DOE also estimated LCC savings and PBP for small
businesses, and presented the results in Table V.19 through Table V.26.
Chapter 11 of the final rule TSD presents the complete LCC and PBP
results for the subgroups.
Table V.19--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $108 $52 $65 5.9 8.2 7.9
2 272 133 164 6.2 8.6 8.4
1, 2.................................... 3 602 101 212 7.5 10.4 10.1
4 287 -354 -208 9.9 12.7 12.5
5 -771 -2,610 -2,267 15.9 20.5 20.0
3, 4.................................... 6 1,021 -1,526 -993 13.5 17.8 17.4
5....................................... 7 4,667 -86 945 11.7 15.8 15.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.20--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Combustion -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(EC) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $334 $487 $588 6.9 5.1 5.1
1....................................... 2 724 1,077 1,307 7.3 5.4 5.4
2, 3.................................... 3 856 1,654 2,037 10.5 7.0 7.0
4 -4,219 -2,921 -1,537 22.5 13.5 13.6
4, 5.................................... 5 6,339 12,524 16,952 17.6 11.2 11.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1660]]
Table V.21--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $2,741 $1,236 $1,745 2.1 3.8 3.1
2 7,050 3,116 4,445 2.2 4.0 3.2
3 11,490 5,112 7,264 3.0 4.6 3.9
1, 2, 3................................. 4 23,280 9,984 14,421 3.0 4.9 4.1
5 29,489 12,451 18,127 3.0 5.1 4.2
4,5..................................... 6 47,470 11,101 22,934 5.8 10.5 8.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.22--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Combustion -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(EC) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $24,584 $7,705 $10,193 2.0 4.5 4.2
2, 3.................................... 2 79,156 23,115 31,379 2.3 5.3 4.8
4....................................... 3 108,008 30,418 41,902 2.5 5.7 5.2
5....................................... 4 141,883 3,718 23,643 5.9 13.4 12.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.23--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $428 $211 $241 6.0 8.7 8.5
2 855 403 465 6.3 9.2 9.0
1....................................... 3 1,387 608 720 6.7 9.7 9.5
2, 3.................................... 4 2,083 812 1,002 7.1 10.3 10.1
4, 5.................................... 5 3,461 963 1,341 7.9 11.5 11.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.24--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $357 $444 $498 4.0 3.3 3.3
2 1,449 1,791 2,066 4.2 3.5 3.5
3 2,938 3,658 4,239 4.4 3.6 3.6
1....................................... 4 5,465 6,846 7,959 4.6 3.8 3.8
2, 3.................................... 5 6,683 9,504 11,188 5.6 4.2 4.2
4, 5.................................... 6 12,975 17,223 20,291 5.8 4.4 4.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1661]]
Table V.25--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Small Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $3,848 $2,039 $2,409 2.5 4.0 3.8
2, 3.................................... 2 9,349 4,908 5,839 2.7 4.2 4.0
4, 5.................................... 3 20,877 10,572 12,779 3.3 5.1 4.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.26--Comparison of LCC Savings and PBP for Consumer Subgroups and the Nation, Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2015$) Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Commercial Commercial
(ET) level Residential small Nation Residential small Nation
low-income business low-income business
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $24,494 $10,960 $12,563 1.2 2.4 2.4
2, 3.................................... 2 72,382 31,813 36,832 1.4 2.7 2.7
4, 5.................................... 3 141,678 61,065 70,909 1.5 3.0 3.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
c. Rebuttable Presumption Payback
As discussed in section III.E.2 of this document, EPCA establishes
a rebuttable presumption that an energy conservation standard is
economically justified if the increased purchase cost for equipment
that meets the standard is less than three times the value of the
first-year energy savings resulting from the standard. 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 commercial packaged
boilers. In contrast, the PBPs presented in section V.B.1 were
calculated using distributions that reflect the range of energy use in
the field.
Table V.27 presents the rebuttable-presumption PBPs for the
considered TSLs. 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. 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.27--Rebuttable Presumption Payback Periods for Commercial Packaged Boiler Equipment Classes
----------------------------------------------------------------------------------------------------------------
Rebuttable presumption payback (years)
Equipment class -------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 9.2 9.2 15.3 15.3 15.3
Commercial Packaged Boilers....
Large Gas-Fired Hot Water 4.9 5.9 5.9 10.0 10.0
Commercial Packaged Boilers....
Small Oil-Fired Hot Water 12.1 12.1 12.1 12.6 24.5
Commercial Packaged Boilers....
Large Oil-Fired Hot Water 12.0 13.6 13.6 14.6 34.3
Commercial Packaged Boilers....
Small Gas-Fired Steam Commercial 8.5 9.0 9.0 10.1 10.1
Packaged Boilers...............
Large Gas-Fired Steam Commercial 3.4 3.9 3.9 4.1 4.1
Packaged Boilers...............
Small Oil-Fired Steam Commercial 10.5 11.2 11.2 13.9 13.9
Packaged Boilers...............
Large Oil-Fired Steam Commercial 6.5 7.2 7.2 8.0 8.0
Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on manufacturers of commercial packaged boilers.
The next section describes the expected impacts on manufacturers at
each TSL. Chapter 12 of the final rule TSD explains the analysis in
further detail.
a. Industry Cash-Flow Analysis Results
In this section, DOE provides GRIM results from the analysis, which
examines changes in the industry that would result from a standard.
Table V.28 and Table V.29 depict the estimated financial impacts
(represented by changes in INPV) of potential amended energy
conservation standards on manufacturers of commercial packaged boilers,
as well as the conversion costs that DOE expects manufacturers of
commercial packaged boilers will incur for all equipment classes at
each TSL. As discussed in
[[Page 1662]]
section IV.J.2.b, DOE modeled two different markup scenarios using
different assumptions that correspond to the range of anticipated
market responses to amended energy conservation standards: (1) The
preservation of gross margin percentage scenario and (2) the
preservation of per-unit operating profit scenario. Each of these
scenarios is discussed immediately below.
To assess the less severe end of the range of potential impacts on
industry profitability, DOE modeled a preservation of gross margin
percentage markup scenario, in which a uniform ``gross margin
percentage'' markup is applied across all potential efficiency levels.
In this scenario, DOE assumed that a manufacturer's absolute dollar
markup will increase as production costs increase in the standards
case.
To assess the more severe end of the range of potential impacts on
industry profitability, DOE modeled the preservation of operating
profit markup scenario, which assumes that manufacturers will not be
able to generate greater operating profit on a per-unit basis in the
standards case as compared to the no-new-standards case. Rather, as
manufacturers make the necessary investments required to convert their
facilities to produce new standards-compliant equipment and incur
higher costs of goods sold, their percentage markup decreases.
Operating profit does not change in absolute dollars and decreases as a
percentage of revenue.
Each of the markup scenarios results in a unique set of cash flows
and corresponding industry values at each TSL. In the following
discussion, the INPV results refer to the difference in industry value
between the no-new-standards case and each standards case that result
from the sum of discounted cash flows from the reference year (2016)
through the end of the analysis period (2049). To provide perspective
on the short-run cash flow impact, DOE includes in the discussion of
results a comparison of free cash flow between the no-new-standards
case and the standards case at each TSL in the year before amended
standards would take effect. This figure provides an understanding of
the magnitude of required conversion costs relative to cash flows
calculated by the industry in the no-new-standards case.
The results in Table V.28 and Table V.29 show potential INPV
impacts for CPB manufacturers; Table V.28 reflects the upper bound of
impacts and Table V.29 represents the lower bound.
Table V.28--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards -------------------------------------------------------------------------------
case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................... 2015$ M 277.6 272.4 267.3 252.1 235.3 235.3
Change in INPV.......................... 2015$ M .............. (5.2) (10.3) (25.5) (42.3) (42.3)
% .............. (1.9) (3.7) (9.2) (15.2) (15.2)
Product Conversion Costs................ 2015$ M .............. 8.2 13.4 17.7 19.4 19.8
Capital Conversion Costs................ 2015$ M .............. 5.3 7.8 22.8 35.8 36.5
Total Conversion Costs.................. 2015$ M .............. 13.5 21.2 40.5 55.2 56.4
Free Cash Flow (2019)................... 2015$ M 19.3 14.2 11.4 3.2 (3.2) (3.7)
Change in Free Cash Flow................ 2015$ M .............. (5.1) (8.0) (16.1) (22.5) (23.0)
% .............. (26.3) (41.2) (83.4) (116.6) (119.0)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.
Table V.29--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards -------------------------------------------------------------------------------
case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................... 2015$ M 277.6 265.4 259.1 227.6 160.9 159.1
Change in INPV.......................... 2015$ M .............. (12.2) (18.5) (50.0) (116.7) (118.5)
% .............. (4.4) (6.7) (18.0) (42.0) (42.7)
Product Conversion Costs................ 2015$ M .............. 8.2 13.4 17.7 19.4 19.8
Capital Conversion Costs................ 2015$ M .............. 5.3 7.8 22.8 35.8 36.5
Total Conversion Costs.................. 2015$ M .............. 13.5 21.2 40.5 55.2 56.4
Free Cash Flow (2019)................... 2015$ M 19.3 14.2 11.4 3.2 (3.2) (3.7)
Change in Free Cash Flow................ 2015$ M .............. (5.1) (8.0) (16.1) (22.5) (23.0)
% .............. (26.3) (41.2) (83.4) (116.6) (119.0)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.
TSL 1 represents EL 3 (84 percent) for small gas-fired hot water
boilers, EL 2 (84 percent) for large gas-fired hot water boilers, EL 4
(87 percent) for small oil-fired hot water boilers, EL 1 (86 percent)
for large oil-fired hot water boilers, EL 3 (80 percent) for small gas-
fired steam boilers, EL 4 (81 percent) for large gas-fired steam
boilers, EL 1 (83 percent) for small oil-fired steam boilers, and EL 1
(83 percent) for large oil-fired steam boilers. At TSL 1, DOE estimates
[[Page 1663]]
impacts on INPV for CPB manufacturers to range from -4.4 percent to -
1.9 percent, or a change in INPV of -$12.2 million to -$5.2 million. At
this potential standard level, industry free cash flow will be
estimated to decrease by approximately 26.3 percent to $14.2 million,
compared to the no-new-standards case value of $19.3 million in 2019,
the year before the compliance date. Overall, DOE expects industry to
incur product conversion costs of $8.2 million and capital conversion
costs of $5.3 million to reach this standard level. At TSL 1, DOE also
projects higher unit prices will result in a slight decrease in total
shipments in the compliance year (2020). DOE estimates a change in
shipments of -0.03 percent relative to the no-new-standards case.
At TSL 1, under the preservation of gross margin percentage markup
scenario, the shipment-weighted average price per unit increases by 4.6
percent relative to the no-new-standards case price per unit in the
year of compliance (2020). This slight price increase would mitigate a
portion of the $13.5 million in conversion costs estimated at TSL 1,
resulting in slightly negative INPV impacts under this scenario. Under
the preservation of operating profit markup scenario, products at
higher efficiency levels command a lower markup to maintain the same
operating profit per unit in the no-new-standards case. At TSL 1, this
markup scenario results in a weighted average price increase of 4.2
percent. This relatively modest price increase in outweighed by the
expected conversion costs and slight decrease in total shipments,
resulting in more severe INPV impacts.
TSL 2 sets the efficiency level at EL 3 (84 percent) for small gas-
fired hot water boilers, EL 3 (85 percent) for large gas-fired hot
water boilers, EL 4 (87 percent) for small oil-fired hot water boilers,
EL 2 (88 percent) for large oil-fired hot water, EL 4 (81 percent) for
small gas-fired steam boilers, EL 5 (82 percent) for large gas-fired
steam boilers, EL 2 (84 percent) for small oil-fired steam boilers, and
EL 2 (85 percent) for large oil-fired steam boilers. At TSL 2, DOE
estimates impacts on INPV for CPB manufacturers to range from -6.7
percent to -3.7 percent, or a change in INPV of -$18.5 million to -
$10.3 million. At this potential standard level, industry free cash
flow will be estimated to decrease by approximately 41.2 percent to
$11.4 million, compared to the no-new-standards case value of $19.3
million in 2019, the year before the compliance date. Overall, DOE
estimates manufactures will incur product conversion costs of $13.4
million and capital conversion costs of $7.8 million at this standard
level. At TSL 2, DOE also projects higher unit prices will result in a
slight decrease in total shipments in the compliance year (2020). DOE
estimates a change in shipments of -0.03 percent relative to the no-
new-standards case.
At TSL 2, under the preservation of gross margin percentage markup
scenario, the shipment-weighted average price per unit increases by 5.3
percent relative to the no-new-standards case price per unit in the
year of compliance (2020). In this scenario, manufacturers are able to
fully pass on the increase in MPC to consumers. However, this price
increase in outweighed by the $21.2 million in conversion costs
estimated at TSL 2, resulting in slightly negative INPV impacts under
this scenario. Under the preservation of operating profit markup
scenario, the weighted average price per unit increases by 4.9 percent.
This price increase is offset by the expected conversion costs and
slight decrease in total shipments, resulting in more severe INPV
impacts.
TSL 3 represents EL 6 (95 percent) for small gas-fired hot water
boilers, EL 3 (85 percent) for large gas-fired hot water boilers, EL 4
(87 percent) for small oil-fired hot water boilers, EL 2 (88 percent)
for large oil-fired hot water boilers, EL 4 (81 percent) for small gas-
fired steam boilers, EL 5 (82 percent) for large gas-fired steam
boilers, EL 2 (84 percent) for small oil-fired steam boilers, and EL 2
(85 percent) for large oil-fired steam boilers. At TSL 3, DOE estimates
impacts on INPV for CPB manufacturers to range from -18.0 percent to -
9.2 percent, or a change in INPV of -$50.0 million to -$25.5 million.
At this potential standard level, industry free cash flow will be
estimated to decrease by approximately 83.4 percent in 2019, the year
before compliance to $3.2 million compared to the no-new-standards case
value of $19.3 million. DOE estimates manufactures will incur product
conversion costs of $17.7 million and capital conversion costs of $22.8
million to reach this standard level. At TSL 3, DOE also projects
higher unit prices will result in a slight decrease in total shipments
in the compliance year (2020). DOE estimates a change in shipments of -
0.12 percent relative to the no-new-standards case.
At TSL 3, under the preservation of gross margin percentage markup
scenario, the shipment-weighted average price per unit increases by
19.1 percent relative to the no-new-standards case price per unit in
the year of compliance (2020). In this scenario, manufacturers are able
to fully pass on the increase in MPC to consumers. However, this price
increase in outweighed by the $40.5 million in conversion costs
estimated at TSL 3, resulting in slightly negative INPV impacts under
this scenario. Under the preservation of operating profit markup
scenario, the weighted average price per unit increases by 18.0
percent. This price increase is offset by the expected conversion costs
and slight decrease in total shipments, resulting in more severe INPV
impacts.
TSL 4 represents EL 7 (99 percent) for small gas-fired hot water
boilers, EL 5 (97 percent) for large gas-fired hot water boilers, EL 6
(97 percent) for small oil-fired hot water boilers, EL 3 (89 percent)
for large oil-fired hot water boilers, EL 5 (83 percent) for small gas-
fired steam boilers, EL 6 (84 percent) for large gas-fired steam
boilers, EL 3 (86 percent) for small oil-fired steam boilers, and EL 3
(87 percent) for large oil-fired steam boilers. At TSL 4, DOE estimates
impacts on INPV for CPB manufacturers to range from -42.0 percent to -
15.2 percent, or a change in INPV of -$116.7 million to -$42.3 million.
At this potential standard level, industry free cash flow will be
estimated to decrease by approximately 116.6 percent in the year before
compliance (2019) to -$3.2 million relative to the no-new-standards
case value of $19.3 million. DOE estimates that manufacturers will
incur product conversion costs of $19.4 million and capital conversion
costs of $35.8 million to reach this standard level. At TSL 4, DOE also
projects higher unit prices will result in a slight decrease in total
shipments in the compliance year (2020). DOE estimates a change in
shipments of -0. 24 percent relative to the no-new-standards case.
At TSL 4, under the preservation of gross margin percentage markup
scenario, the shipment-weighted average price per unit increases by
39.3 percent relative to the no-new-standards case price per unit in
the year of compliance (2020). In this scenario, manufacturers are able
to fully pass on the increase in MPC to consumers. However, this price
increase in outweighed by the $55.2 million in conversion costs
estimated at TSL 4, resulting in slightly negative INPV impacts under
this scenario. Under the preservation of operating profit markup
scenario, the weighted average price per unit increases by 36.1
percent. This price increase is offset by the expected conversion costs
and slight decrease in total shipments, resulting in more severe INPV
impacts.
TSL 5 represents EL 7 (99 percent) for small gas-fired hot water
boilers, EL 5 (97 percent) for large gas-fired hot water
[[Page 1664]]
boilers, EL 6 (97 percent) for small oil-fired hot water boilers, EL 4
(97 percent) for large oil-fired hot water boilers, EL 5 (83 percent)
for small gas-fired steam boilers, EL 6 (84 percent) for large gas-
fired steam boilers, EL 3 (86 percent) for small oil-fired steam
boilers, and EL 3 (87 percent) for large oil-fired steam boilers. TSL 5
represents max-tech for all equipment classes. At TSL 5, DOE estimates
impacts on INPV for CPB manufacturers to range from -42.7 percent to -
15.2 percent, or a change in INPV of -$118.5 million to -$42.3 million.
At this potential standard level, industry free cash flow will be
estimated to decrease by approximately 119.0 percent in the year before
compliance (2019) to -$3.7 million relative to the no-new-standards
case value of $19.3 million. DOE estimates manufacturers will incur
product conversion costs of $19.8 million and capital conversion costs
of $36.5 million to reach this standard level. At TSL 5, DOE also
projects higher unit prices will result in a slight decrease in total
shipments in the compliance year (2020). DOE estimates a change in
shipments of -0.24 percent relative to the no-new-standards case.
At TSL 5, under the preservation of gross margin percentage markup
scenario, the shipment-weighted average price per unit increases by
40.3 percent relative to the no-new-standards case price per unit in
the year of compliance (2020). In this scenario, manufacturers are able
to fully pass on the increase in MPC to consumers. However, this price
increase in outweighed by the $56.4 million in conversion costs
estimated at TSL 5, resulting in slightly negative INPV impacts under
this scenario. Under the preservation of operating profit markup
scenario, the weighted average price per unit increases by 37.0
percent. This price increase is offset by the expected conversion costs
and slight decrease in total shipments, resulting in more severe INPV
impacts.
b. Impacts on Direct Employment
To quantitatively assess the impacts of amended energy conservation
standards on direct employment in the CPB industry, DOE used the GRIM
to estimate the domestic labor expenditures and number of direct
employees in the no-new-standards case and in each of the standards
cases in 2020. In its analysis, DOE assumed that the ratio of
production workers to non-production workers remains constant. The sum
of domestic production and non-production workers represent total
domestic direct employment. DOE used statistical data from the U.S.
Census Bureau's 2014 ASM, the results of the engineering analysis, and
interviews with manufacturers to determine the inputs necessary to
calculate industry-wide labor expenditures and domestic employment
levels. Labor expenditures related to manufacturing of the product are
a function of the labor intensity of the product, the sales volume, and
an assumption that wages remain fixed in real terms over time. The
total labor expenditures in each year are calculated by multiplying the
MPCs by the labor percentage of MPCs.
The total labor expenditures in the GRIM are converted to domestic
production employment levels by dividing production labor expenditures
by the annual payment per production worker (production worker hours
times the labor rate found in the U.S. Census Bureau's 2014 ASM). The
estimates of production workers in this section cover workers,
including line-supervisors who are directly involved in fabricating and
assembling a unit within the manufacturing facility. Workers performing
services that are closely associated with production operations, such
as materials handling tasks using forklifts, are also included as
production labor.
To calculate non-production workers, the GRIM assumed non-
production workers account for 38 percent of total direct employment,
which is a ratio derived from 2014 ASM Census data. The total direct
employment impacts calculated in the GRIM are the sum of the changes in
the number of domestic production and non-production workers resulting
from the amended energy conservation standards for CPBs, as compared to
the no-new-standards case. In general, more-efficient CPBs are more
complex and more labor intensive. Per-unit labor requirements and
production time requirements increase with higher energy conservation
standards.
DOE estimates that in the absence of amended energy conservation
standards, there will be 954 domestic production and non-production
workers in the CPB industry in 2020, the year of compliance. DOE
estimates that approximately 80 percent of commercial packaged boilers
sold in the United States are manufactured domestically. Table V.30
shows the range of the impacts of potential amended energy conservation
standards on U.S. production and non-production workers of commercial
packaged boilers.
Table V.30--Potential Changes in the Total Number of Commercial Packaged Boilers Direct Employment in 2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level \*\
-------------------------------------------------------------------------------------------------------------------------
No-new-
standards case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic 594 364 to 624.......... 323 to 628......... 175 to 645......... 8 to 730........... 8 to 739.
Production Workers in 2020
(without changes in
production locations).
Potential Changes in Domestic .............. (230) to 30......... (301) to 4......... (453) to 17........ (637) to 85........ (722) to 9.
Production Workers in 2020.
Total Number of Domestic 954 585 to 1,002........ 518 to 1,009....... 281 to 1,036....... 13 to 1,173........ 13 to 1,187.
Direct Employment in 2020 **.
Potential Changes in Domestic .............. (369) to 48......... (484) to 7......... (728) to 27........ (1,023) to 137..... (1,160) to 14.
Direct Employment in 2020.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.
** This field presents impacts on total domestic direct employment, which aggregates production and non-production workers. Based on ASM census data, we
assumed the ratio of production to non-production employees stays consistent across all analyzed TSLs, which is 38 percent non-production workers.
[[Page 1665]]
At the upper end of the range, all examined TSLs show positive
impacts on domestic employment levels. Producing more-efficient CPBs
tends to require more labor, and DOE estimates that if CPB
manufacturers chose to keep their current production in the U.S.,
domestic employment could increase at each TSL. In interviews, some
manufacturers who produce high-efficiency boiler equipment stated that
a standard that went to condensing levels could cause them to hire more
employees to increase their production capacity.
To establish a lower bound end of production worker employment, DOE
assumes no manufacturer chooses to invest in redesign of equipment that
does not meet the standard. Production worker employment drops in
proportion with the percentage of equipment that is retired. Since this
is a lower bound, DOE does not account for additional production labor
needed for higher efficiency equipment. During interviews, several
manufacturers expressed that they could lose a significant number of
employees at TSL 3, TSL 4 and TSL 5, due to the fact that these TSLs
contain condensing efficiency levels for the gas-fired hot water boiler
equipment classes and oil-fired hot water boiler equipment classes.
These manufacturers have employees who work on production lines that
produce cast iron sections and carbon steel or copper heat exchangers
for lower to mid-efficiency equipment. If amended energy conservation
standards were to require condensing efficiency levels, these employees
will no longer be needed for that function, and manufacturers will have
to decide whether to develop their own condensing heat exchanger
production, source heat exchangers from Asia or Europe and assemble
higher efficiency equipment, or leave the market entirely.
DOE notes that the employment impacts discussed here are
independent of the indirect employment impacts to the broader U.S.
economy, which are documented in chapter 15 of the final rule TSD.
c. Impacts on Manufacturing Capacity
In manufacturer interviews, most CPB manufacturers stated that
their current production is only running at 50-percent to 75-percent
capacity and that any standard that does not propose efficiency levels
where manufacturers will use condensing technology for hot water
boilers will not have a large effect on capacity. The impacts of a
condensing standard on manufacturer capacity are difficult to quantify.
Some manufacturers who are already making condensing equipment with a
sourced heat exchanger said they will likely be able to increase
production using the equipment they already have by utilizing a second
shift. Others said a condensing standard will idle a large portion of
their business, causing stranded assets and decreased capacity. These
manufacturers will have to determine how to best increase their
condensing boiler production capacity. DOE believes that some larger
domestic manufacturers may choose to add production capacity for a
condensing heat exchanger production line.
Manufacturers stated that in a scenario where a potential standard
would require efficiency levels at which manufacturers would use
condensing technology, there is concern about the level of technical
resources required to redesign and test all equipment. The engineering
analysis shows that increasingly complex components and control
strategies are required as standard levels increase. Manufacturers
commented in interviews that the industry would need to add electrical
engineering and control systems engineering talent beyond current
staffing to meet the redesign requirements of higher TSLs. Additional
training might be needed for manufacturing engineers, laboratory
technicians, and service personnel if condensing equipment was broadly
adopted. However, because TSL 2 (the adopted level) will not require
condensing standards, DOE does not expect manufacturers to face long-
term capacity constraints due to the standard levels adopted in this
final rule.
d. Impacts on Subgroups of Manufacturers
Small manufacturers, niche equipment manufacturers, and
manufacturers exhibiting a cost structure substantially different from
the industry average could be affected disproportionately. Using
average cost assumptions developed for an industry cash-flow estimate
is inadequate to assess differential impacts among manufacturer
subgroups.
For the CPB industry, DOE identified and evaluated the impact of
amended energy conservation standards on one subgroup--small
manufacturers. The SBA defines a ``small business'' as having 500
employees or less for NAICS 333414, ``Heating Equipment (except Warm
Air Furnaces) Manufacturing.'' Based on this definition, DOE identified
33 manufacturers in the CPB industry that qualify as small businesses.
For a discussion of the impacts on the small manufacturer subgroup, see
the regulatory flexibility analysis in section VI.B of this document
and chapter 12 of the final rule TSD.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the regulatory actions
of other Federal agencies and States that affect the manufacturers of a
covered product or equipment. 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.
Multiple regulations affecting the same manufacturer can strain profits
and lead companies to abandon equipment lines or markets with lower
expected future returns than competing equipment. For these reasons,
DOE conducts an analysis of cumulative regulatory burden as part of its
rulemakings pertaining to equipment efficiency.
For the cumulative regulatory burden analysis, DOE looks at other
regulations that could affect CPB manufacturers during the compliance
period, from 2017 to 2020, or those that take effect within three years
of the 2020 compliance date of amended energy conservation standards
for this equipment. In interviews, manufacturers cited Federal
regulations on equipment other than commercial packaged boilers that
contribute to their cumulative regulatory burden. The compliance years
and expected industry conversion costs of relevant amended energy
conservation standards are indicated in Table V.31. Included in the
table are Federal regulations that have compliance dates beyond the six
year range of DOE's analysis.
[[Page 1666]]
Table V.31--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Commercial Packaged Boilers
Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Federal energy conservation Number of manufacturers Industry conversion costs Industry conversion
standard manufacturers * affected from Approx. standards year (millions $) costs/revenue ***
today's rule **
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Packaged Air 13 2 2018 and 2023............ 520.8 (2014$)................. 4.4%.
Conditioners and Heat Pumps
(Air-Cooled) 81 FR 2420
(January 15, 2016).
Residential Furnace Fans, 79 38 2 2019..................... 40.6 (2014$).................. 1.6%.
FR 38129 (July 3, 2014).
Commercial Water Heaters 25 17 2019..................... 29.8 (2014$).................. 3.0%.
[dagger] 81 FR 34440 (May 31,
2016).
Residential Boilers 81 FR 2320 36 22 2020..................... 2.5 (2014$)................... Less than 1%.
(January 15, 2016).
Residential Furnaces [dagger] 12 2 2021..................... 55.0 (2013$).................. 1.0%.
80 FR 13120 (March 12, 2015).
Central Air Conditioners and 30 4 2023..................... 342.6 (2015$)................. Less than 1%.
Heat Pumps Sec. (December
5, 2016).
Commercial Warm Air Furnaces 14 3 2023..................... 7.5 to 22.2 (2014$) [Dagger].. 1.7% to 5.2% [Dagger].
81 FR 2420 (January 15, 2016).
Residential Water Heaters 75 39 6 2015..................... 17.5 (2009$).................. 4.9%.
FR 20112 (April 2016, 2010) +.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory
burden.
** This column presents the number of manufacturers producing CPB equipment that are also listed as manufacturers in the listed energy conservation
standard contributing to cumulative regulatory burden.
*** This column presents conversion costs as a percentage of cumulative revenue for the industry during the conversion period. The conversion period is
the timeframe over which manufacturers must make conversion costs investments and lasts from the announcement year of the final rule to the standards
year of the final rule. This period typically ranges from 3 to 5 years, depending on the energy conservation standard.
[dagger] The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs have not been
finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the March 2016 NOPR.)
[Dagger] Low and high conversion cost scenarios were analyzed as part of this Direct Final Rule. The range of estimated conversion expenses presented
here reflects those two scenarios.
Sec. DOE has issued a pre-publication Federal Register direct final rule on December 5, 2016. The document can be found at: http://energy.gov/eere/buildings/downloads/issuance-2016-12-05-energy-conservation-program-energy-conservation-0.
+ 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 another rule 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.
In addition to the Federal energy conservation standards listed in
Table V.31, there are multiple appliance standards that do not have
published NOPRs, including residential water heaters and residential
pool heaters. DOE also identified other regulatory burdens that will
affect manufacturers of commercial packaged boilers:
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 equipment classes.
DOE Certification, Compliance, and Enforcement (CC&E) Rule
The amended standard that DOE adopted will also impose accompanying
CC&E requirements for manufacturers of CPB equipment. DOE conducted a
rulemaking to expand AEDM coverage to commercial HVAC, including
commercial packaged boilers and issued a final rule on December 31,
2013. (78 FR 79579). An AEDM is a computer modeling or mathematical
tool that predicts the performance of non-tested basic models. For this
final rule, DOE permits manufacturers of commercial packaged boilers to
rate basic models using AEDMs for compliance certification purposes,
reducing the need for sample units and reducing burden on
manufacturers. The final rule establishes revised verification
tolerances CPB manufacturers. More information can be found at http://energy.gov/eere/buildings/implementation-certification-and-enforcement.
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 amended
standards for commercial packaged boilers, 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 equipment purchased in the 30-year period that begins in
the year of anticipated compliance with amended standards (2020-2049).
Table V.32 presents DOE's projections of the national energy savings
for each TSL
[[Page 1667]]
considered for commercial packaged boilers. The savings were calculated
using the approach described in section IV.H.2 of this final rule.
Table V.32--Cumulative National Energy Savings for Commercial Packaged Boilers; 30 Years of Shipments
[2020-2049]
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(quads)
----------------------------------------------------------------------------------------------------------------
Primary Energy.................. 0.202 0.242 0.721 1.885 1.894
FFC Energy...................... 0.227 0.272 0.803 2.096 2.107
----------------------------------------------------------------------------------------------------------------
Circular A-4 requires agencies to present analytical results,
including separate schedules of the monetized benefits and costs that
show the type and timing of benefits and costs.\93\ Circular A-4 also
directs agencies to consider the variability of key elements underlying
the estimates of benefits and costs. For this rulemaking, DOE undertook
a sensitivity analysis using 9 years, rather than 30 years, of
equipment shipments. The choice of a 9-year period is a proxy for the
timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\94\ The review timeframe established in EPCA is generally
not synchronized with the equipment lifetime, equipment manufacturing
cycles, or other factors specific to commercial packaged boilers. Thus,
such results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology. The NES
sensitivity analysis results based on a 9-year analytical period are
presented in Table V.33. The impacts are counted over the lifetime of
equipment purchased in 2020-2028.
---------------------------------------------------------------------------
\93\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/.
\94\ EPCA requires DOE to review its standards at least once
every 6 years, and requires, for certain equipment, a 3-year period
after any new standard is promulgated before compliance is required,
except that in no case may any new standards be required within 6
years of the compliance date of the previous standards. (42 U.S.C.
6313(a)(6)(C)) While adding a 6-year review to the 3-year compliance
period adds up to 9 years, DOE notes that it may undertake reviews
at any time within the 6-year period and that the 3-year compliance
date may yield to the 6-year backstop. A 9-year analysis period may
not be appropriate given the variability that occurs in the timing
of standards reviews and the fact that for some commercial
equipment, the compliance period is 5 years rather than 3 years.
Table V.33--Cumulative National Energy Savings for Commercial Packaged Boilers; 9 Years of Shipments
[2020-2028]
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(quads)
----------------------------------------------------------------------------------------------------------------
Primary Energy.................. 0.065 0.079 0.218 0.550 0.553
FFC Energy...................... 0.073 0.089 0.243 0.611 0.615
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that will result from the TSLs considered for commercial
packaged boilers. In accordance with OMB's guidelines on regulatory
analysis,\95\ DOE calculated NPV using both a 7-percent and a 3-percent
real discount rate.
---------------------------------------------------------------------------
\95\ Office of Management and Budget. OMB Circular A-4,
Regulatory Analysis. Section E. 2003. Washington, DC. September 17,
2003. https://www.whitehouse.gov/omb/circulars_a004_a-4/.
---------------------------------------------------------------------------
Table V.34 shows the consumer NPV results at 3-percent and 7-
percent discount rates respectively for each TSL considered for
commercial packaged boilers covered in this rulemaking. In each case,
the impacts cover the lifetime of equipment purchased in 2020-2049.
Table V.34--Cumulative Net Present Value of Consumer Benefits for Commercial Packaged Boiler Equipment; 30 Years
of Shipments
[2020-2049]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
3 percent....................... 1.607 1.977 3.323 9.347 9.361
7 percent....................... 0.451 0.558 0.606 1.997 1.966
----------------------------------------------------------------------------------------------------------------
[[Page 1668]]
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.35. The impacts are counted over the
lifetime of commercial packaged boilers purchased in 2020-2028. 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.35--Cumulative Net Present Value of Consumer Benefits for Commercial Packaged Boiler Equipment; 9 Years
of Shipments
[2020-2028]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
3 percent....................... 0.545 0.675 0.952 2.665 2.663
7 percent....................... 0.204 0.254 0.197 0.705 0.685
----------------------------------------------------------------------------------------------------------------
c. Indirect Impacts on Employment
DOE expects that amended energy conservation standards for
commercial packaged boilers would reduce energy expenditures for
consumers of the equipment, with the resulting net savings being
redirected to other forms of economic activity. These expected shifts
in spending and economic activity could affect the demand for labor. As
described in section IV.N of this document, DOE used an input/output
model of the U.S. economy to estimate indirect employment impacts of
the TSLs that DOE considered in this rulemaking. DOE 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 (2020-2025), where these
uncertainties are reduced.
The results suggest that the adopted standards are likely to have
negligible impact on the net demand for labor in the economy. The net
change in jobs is so small that it will 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
As discussed in section III.E.1.d of this final rule, DOE has
concluded that the standards adopted in this final rule will not reduce
the utility or performance of commercial packaged boilers under
consideration in this rulemaking. Manufacturers of the equipment
currently offer units that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
DOE considered any lessening of competition that would be likely to
result from new or amended standards. As discussed in section
III.E.1.e, the Attorney General of the United States (Attorney General)
determines the impact, if any, of any lessening of competition likely
to result from an adopted standard and transmits 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
such impact.
To assist the Attorney General in making this determination, DOE
provided the Department of Justice (DOJ) with copies of the 2016 CPB
NOPR and the NOPR TSD for review. In its assessment letter responding
to DOE, DOJ concluded that the proposed energy conservation standards
for commercial packaged boilers 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 amended standards for commercial
packaged boilers is expected to yield environmental benefits in the
form of reduced emissions of certain air pollutants and greenhouse
gases. Table V.36 provides DOE's estimate of cumulative emissions
reductions expected to result from the TSLs considered in this
rulemaking. The table includes both power sector emissions and upstream
emissions. The emissions were calculated using the multipliers
discussed in section IV.K of this document. DOE reports annual
emissions reductions for each TSL in chapter 13 of the final rule TSD.
Table V.36--Cumulative Emissions Reduction for Commercial Packaged Boilers Shipped in 2020-2049
----------------------------------------------------------------------------------------------------------------
TSL
-------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 11.99 14.48 40.01 104.03 104.73
NOX (thousand tons)............. 10.57 12.77 35.35 91.61 92.24
Hg (tons)....................... 0.00 0.00 (0.00) (0.00) (0.00)
N2O (thousand tons)............. 0.10 0.13 0.18 0.44 0.46
[[Page 1669]]
CH4 (thousand tons)............. 0.30 0.37 0.85 2.28 2.30
SO2 (thousand tons)............. 2.26 2.93 2.54 6.66 7.03
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 1.65 2.01 5.32 13.72 13.83
NOX (thousand tons)............. 23.32 28.11 79.79 206.51 207.85
Hg (tons)....................... 0.00 0.00 0.00 0.00 0.00
N2O (thousand tons)............. 0.01 0.01 0.02 0.04 0.04
CH4 (thousand tons)............. 118.36 138.58 492.36 1,289.41 1,290.98
SO2 (thousand tons)............. 0.14 0.19 0.20 0.47 0.49
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 13.65 16.49 45.33 117.75 118.57
NOX (thousand tons)............. 33.90 40.88 115.15 298.12 300.09
Hg (tons)....................... 0.00 0.00 (0.00) (0.00) (0.00)
N2O (thousand tons)............. 0.11 0.14 0.19 0.48 0.49
N2O (thousand tons COeq) *...... 29.11 37.20 50.61 126.68 130.98
CH4 (thousand tons)............. 118.66 138.95 493.21 1,291.69 1,293.28
CH4 (thousand tons COeq) *...... 3,322.44 3,890.66 13,809.78 36,167.26 36,211.79
SO2 (thousand tons)............. 2.40 3.11 2.74 7.13 7.52
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
Note: Parentheses indicate negative values. Negative values refer to an increase in emissions.
As part of the analysis for this final rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX estimated for each of the TSLs considered for
commercial packaged boilers. As discussed in section IV.L of this
document, for CO2, DOE used the most recent values for the
SCC developed by an interagency process. The four sets of SCC values
for CO2 emissions reductions correspond to the average
values from a distribution that uses a 5-percent discount rate, the
average values from a distribution that uses a 3-percent discount rate,
the average values from a distribution that uses a 2.5-percent discount
rate, and the 95th-percentile values from a distribution that uses a 3-
percent discount rate. For emissions in 2015, the SCC values (expressed
in 2015$) are represented by $12.4/t, $40.6/t, $63.2/t, and $118/t,
respectively. The values for later years are higher due to increasing
damages (public health, economic and environmental) as the projected
magnitude of climate change increases.
Table V.37 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate as was used in the studies upon which the dollar-per-ton values
are based. DOE calculated domestic values as a range from 7 percent to
23 percent of the global values, and these results are presented in
chapter 14 of the final rule TSD.
Table V.37--Estimate of Global Present Value of CO2 Emissions Reduction for Commercial Packaged Boilers Shipped
in 2020-2049
----------------------------------------------------------------------------------------------------------------
SCC scenario *
---------------------------------------------------------------
TSL 3% Discount
5% Discount 3% Discount 2.5% Discount rate, 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
(million 2015$)
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 73 350 565 1,066
2............................................... 88 424 683 1,289
3............................................... 240 1,161 1,874 3,533
4............................................... 621 3,010 4,860 9,160
5............................................... 625 3,031 4,893 9,223
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 10 48 78 147
2............................................... 12 59 95 179
3............................................... 32 154 249 470
4............................................... 82 397 641 1,208
[[Page 1670]]
5............................................... 83 400 646 1,218
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 83 399 643 1,213
2............................................... 100 482 777 1,468
3............................................... 272 1,316 2,123 4,003
4............................................... 703 3,407 5,501 10,368
5............................................... 708 3,431 5,539 10,441
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2 and $118
per metric ton (2015$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
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. However, consistent with DOE's
legal obligations, and taking into account the uncertainty involved
with this particular issue, DOE has included in this final rule the
most recent values and analyses resulting from the interagency review
process.
DOE also estimated the cumulative monetary value of the economic
benefits associated with NOX emissions reductions
anticipated to result from the considered TSLs for commercial packaged
boilers. The dollar-per-ton value that DOE used is discussed in section
IV.L of this document. Table V.38 presents the cumulative present
values for NOX emissions reductions for each TSL calculated
using 7-percent and 3-percent discount rates. This table presents
values that use the low dollar-per-ton values, which reflect DOE's
primary estimate. Results that reflect the range of NOX
dollar-per-ton values are presented in Table V.40. Detailed discussions
on NOX emissions reductions are available in chapter 14 of
the final rule TSD.
Table V.38--Estimates of Present Value of NOX Emissions Reduction for
Commercial Packaged Boilers Shipped in 2020-2049
------------------------------------------------------------------------
TSL 3% Discount rate 7% Discount rate
------------------------------------------------------------------------
(million 2015$)
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1............................... 44 15
2............................... 53 19
3............................... 146 51
4............................... 376 129
5............................... 379 130
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1............................... 37 13
2............................... 45 16
3............................... 126 45
4............................... 325 114
5............................... 327 114
------------------------------------------------------------------------
Total FFC Emissions
------------------------------------------------------------------------
1............................... 81 29
2............................... 99 35
3............................... 273 95
4............................... 701 243
5............................... 706 245
------------------------------------------------------------------------
[[Page 1671]]
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No
other factors were considered in this analysis.
8. Summary of National Economic Impacts
The NPV of the monetized benefits associated with emissions
reductions can be viewed as a complement to the NPV of the consumer
savings calculated for each TSL considered in this rulemaking. Table
V.39 presents the NPV values that result from adding the estimates of
the potential economic benefits resulting from reduced CO2
and NOX emissions in each of four valuation scenarios to the
NPV of consumer savings calculated for each TSL considered in this
rulemaking, at both a 7-percent and 3-percent discount rate. The
CO2 label values used in the columns correspond to the 2015
values in the four sets of SCC values discussed in section IV.L.1 of
this document. The dollar-per-ton values that DOE used for
NOX emissions are presented in the final rule TSD chapter 14
of the final rule TSD.
Table V.39--Commercial Packaged Boilers TSLs: Net Present Value of Consumer Savings Combined With Net Present
Value of Monetized Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% discount rate added with:
---------------------------------------------------------------------------
SCC value of SCC value of SCC value of
TSL $12.4/t CO2* and $40.6/t CO2* and $63.2/t CO2* and SCC value of $118/
3% low NOX value 3% low NOX value 3% low NOX value t CO2* and 3% low
NOX value
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
1................................... 1.772 2.088 2.331 2.902
2................................... 2.176 2.558 2.853 3.543
3................................... 3.867 4.911 5.718 7.599
4................................... 10.751 13.455 15.549 20.416
5................................... 10.776 13.499 15.607 20.509
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% discount rate added with:
---------------------------------------------------------------------------
SCC value of SCC value of SCC value of
TSL $12.4/t CO2* and $40.6/t CO2* and $63.2/t CO2* and SCC value of $118/
7% low NOX value 7% low NOX value 7% low NOX value t CO2* and 7% low
NOX value
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
1................................... 0.563 0.879 1.123 1.693
2................................... 0.693 1.075 1.370 2.060
3................................... 0.973 2.017 2.824 4.705
4................................... 2.943 5.647 7.741 12.608
5................................... 2.918 5.641 7.749 12.651
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2015$. The present values have been calculated with
scenario-consistent discount rates.
In considering the results in Table V.39, two issues are relevant.
First, the national operating cost savings are domestic U.S. monetary
savings that occur as a result of purchasing the covered commercial
packaged boilers. The national operating cost savings is measured for
the lifetime of units shipped in 2020-2049. The CO2
reduction is a benefit that accrues globally due to decreased domestic
energy consumption that is expected to result from this rule. Because
CO2 emissions have a very long residence time in the
atmosphere, the SCC values in future years reflect future climate-
related impacts that continue beyond 2100 through 2300.
C. Conclusion
When considering new or amended energy conservation standards for
commercial packaged boilers, the standards that DOE adopts must be
designed to achieve significant improvement in energy efficiency and be
technologically feasible and economically justified. (42 U.S.C.
6313(a)(6)(A)(ii) and (C)(i)) In determining whether a standard is
economically justified, the Secretary must determine whether the
benefits of the standard exceed its burdens by, to the greatest extent
practicable, considering the seven statutory factors discussed
previously. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i))
For this final rule, DOE considered the impacts of amended
standards for commercial packaged boilers at each TSL, beginning with
the maximum technologically feasible level, to determine whether that
level was economically justified. Where the max-tech level was not
justified, DOE then considered the next most efficient level and
undertook the same evaluation until it reached the highest TSL that is
both technologically feasible and economically justified and saves a
significant amount of energy.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, tables 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.
1. Benefits and Burdens of Trial Standard Levels Considered for
Commercial Packaged Boiler Standards
Table V.40, Table V.41, and Table V.42 summarize the quantitative
impacts estimated for each TSL for commercial packaged boilers. The
national impacts are measured over the lifetime of commercial packaged
boilers
[[Page 1672]]
purchased in the 30-year period that begins in the anticipated year of
compliance with amended standards (2020-2049). 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.40--Summary of Analytical Results for Commercial Packaged Boiler TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy 0.227.................. 0.272.................. 0.803................. 2.096................. 2.107.
Savings (quads).
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Commercial consumer Benefits (billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate.............. 1.607.................. 1.977.................. 3.323................. 9.347................. 9.361.
7% discount rate.............. 0.451.................. 0.558.................. 0.606................. 1.997................. 1.966.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)..... 13.65.................. 16.49.................. 45.33................. 117.75................ 118.57.
NOX (thousand tons)........... 33.90.................. 40.88.................. 115.15................ 298.12................ 300.09.
Hg (tons)..................... 0.000.................. 0.00................... 0.00.................. 0.00.................. 0.00.
N2O (thousand tons)........... 0.11................... 0.14................... 0.19.................. 0.48.................. 0.49.
N2O (thousand tons CO2eq) *... 29.11.................. 37.20.................. 50.61................. 126.68................ 130.98.
CH4 (thousand tons)........... 118.66................. 138.95................. 493.21................ 1,291.69.............. 1,293.28.
CH4 (thousand tons CO2eq) *... 3,322.44............... 3,890.66............... 13,809.78............. 36,167.26............. 36,211.79.
SO2 (thousand tons)........... 2.40................... 3.11................... 2.74.................. 7.13.................. 7.52.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million 2015$) **........ 83 to 1,213............ 100 to 1,468........... 272 to 4,003.......... 703 to 10,368......... 708 to 10,441.
NOX--3% discount rate (million 81 to 168.............. 99 to 201.............. 273 to 595............ 701 to 1,535.......... 706 to 1,543.
2015$).
NOX--7% discount rate (million 29 to 66............... 35 to 80............... 95 to 215............. 243 to 549............ 245 to 553.
2015$).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Table V.41--NPV of Commercial Consumer Benefits by Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level
Equipment class Discount ------------------------------------------------------
rate (%) 1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water..................... 3 0.527 0.527 1.873 4.986 4.986
Commercial Packaged Boilers................... 7 0.114 0.114 0.163 0.898 0.898
Large Gas-Fired Hot Water..................... 3 0.115 0.183 0.183 2.009 2.009
Commercial Packaged Boilers................... 7 0.032 0.047 0.047 0.491 0.491
Small Oil-Fired Hot Water..................... 3 0.770 0.770 0.770 1.405 1.405
Commercial Packaged Boilers................... 7 0.242 0.242 0.242 0.324 0.324
Large Oil-Fired Hot Water..................... 3 0.044 0.140 0.140 0.190 0.205
Commercial Packaged Boilers................... 7 0.014 0.042 0.042 0.056 0.025
Small Gas-Fired Steam......................... 3 0.019 0.040 0.040 0.082 0.082
Commercial Packaged Boilers................... 7 0.005 0.010 0.010 0.017 0.017
Large Gas-Fired Steam......................... 3 0.027 0.043 0.043 0.084 0.084
Commercial Packaged Boilers................... 7 0.010 0.015 0.015 0.029 0.029
Small Oil-Fired Steam......................... 3 0.075 0.184 0.184 0.415 0.415
Commercial Packaged Boilers................... 7 0.024 0.058 0.058 0.125 0.125
Large Oil-Fired Steam......................... 3 0.030 0.089 0.089 0.174 0.174
Commercial Packaged Boilers................... 7 0.010 0.029 0.029 0.057 0.057
-----------------------------------------------------------------
Total--All Classes........................ 3 1.607 1.977 3.323 9.347 9.361
7 0.451 0.558 0.606 1.997 1.966
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values.
Table V.42--Summary of Analytical Results for Commercial Packaged Boiler TSLs: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 * TSL 5 *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (million 2015$) 265.4 to 272.4......... 259.1 to 267.3......... 227.6 to 252.1........ 160.9 to 235.3........ 159.1 to 235.3.
(No-new-standards case INPV =
277.6).
Industry NPV (% change)....... (4.4) to (1.9)......... (6.7) to (3.7)......... (18.0) to (9.2)....... (42.0) to (15.2)...... (42.7) to (15.2).
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1673]]
Consumer Average LCC Savings (2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water $212................... $212................... ($2,267).............. ($2,267).............. $945.
Commercial Packaged Boilers.
Large Gas-Fired Hot Water $1,307................. $2,037................. $2,037................ $16,952............... $16,952.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water $14,421................ $14,421................ $14,421............... $22,934............... $22,934.
Commercial Packaged Boilers.
Large Oil-Fired Hot Water $10,193................ $31,379................ $31,379............... $41,902............... $23,643.
Commercial Packaged Boilers.
Small Gas-Fired Steam $720................... $1,002................. $1,002................ $1,341................ $1,341.
Commercial Packaged Boilers.
Large Gas-Fired Steam $7,959................. $11,188................ $11,188............... $20,291............... $20,291.
Commercial Packaged Boilers.
Small Oil-Fired Steam $2,409................. $5,839................. $5,839................ $12,779............... $12,779.
Commercial Packaged Boilers.
Large Oil-Fired Steam $12,563................ $36,832................ $36,832............... $70,909............... $70,909.
Commercial Packaged Boilers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 10.1................... 10.1................... 17.4.................. 17.4.................. 15.4.
Commercial Packaged Boilers.
Large Gas-Fired Hot Water 5.4.................... 7.0.................... 7.0................... 11.2.................. 11.2.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water 4.1.................... 4.1.................... 4.1................... 8.5................... 8.5.
Commercial Packaged Boilers.
Large Oil-Fired Hot Water 4.2.................... 4.8.................... 4.8................... 5.2................... 12.4.
Commercial Packaged Boilers.
Small Gas-Fired Steam 9.5.................... 10.1................... 10.1.................. 11.3.................. 11.3.
Commercial Packaged Boilers.
Large Gas-Fired Steam 3.8.................... 4.2.................... 4.2................... 4.4................... 4.4.
Commercial Packaged Boilers.
Small Oil-Fired Steam 3.8.................... 4.0.................... 4.0................... 4.9................... 4.9.
Commercial Packaged Boilers.
Large Oil-Fired Steam 2.4.................... 2.7.................... 2.7................... 3.0................... 3.0.
Commercial Packaged Boilers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
% of Consumers that Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 14%.................... 14%.................... 35%................... 35%................... 52%.
Commercial Packaged Boilers.
Large Gas-Fired Hot Water 4%..................... 6%..................... 6%.................... 33%................... 33%.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water 14%.................... 14%.................... 14%................... 42%................... 42%.
Commercial Packaged Boilers.
Large Oil-Fired Hot Water 1%..................... 7%..................... 7%.................... 10%................... 57%.
Commercial Packaged Boilers.
Small Gas-Fired Steam 27%.................... 41%.................... 41%................... 54%................... 54%.
Commercial Packaged Boilers.
Large Gas-Fired Steam 11%.................... 15%.................... 15%................... 21%................... 21%.
Commercial Packaged Boilers.
Small Oil-Fired Steam 2%..................... 8%..................... 8%.................... 14%................... 14%.
Commercial Packaged Boilers.
Large Oil-Fired Steam 0%..................... 1%..................... 1%.................... 3%.................... 3%.
Commercial Packaged Boilers.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values.
DOE first considered TSL 5, which represents the max-tech level for
all the equipment classes and offers the potential for the highest
cumulative energy savings through the analysis period from 2020 through
2049. The estimated energy savings from TSL 5 are 2.11 quads of energy.
TSL 5 has an estimated NPV of consumer benefit of $1.966 billion using
a 7-percent discount rate, and $9.36 billion using a 3-percent discount
rate.
The cumulative emissions reductions at TSL 5 are 119 million metric
tons of CO2, 7.52 thousand tons of SO2, 300
thousand tons of NOX, 1,293 thousand tons of CH4,
0.49 thousand ton of N2O, and an emissions increase of
0.0008 ton of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 5 ranges from $708 million to $10,441
million.
At TSL 5, the average LCC savings range from $945 to $70,909
depending on equipment class. The fraction of consumers incurring a net
cost ranges from 3 percent for the large oil-fired steam CPB equipment
class to 57 percent for the large oil-fired hot water CPB equipment
class.
At TSL 5, the projected change in INPV ranges from a decrease of
$118.5 million to a decrease of $42.3 million, which corresponds to a
change in INPV of -42.7 percent to -15.2 percent, respectively. The
industry is expected to incur $56.4 million in total conversion costs
at this level. Approximately 98.6 percent of industry equipment
listings require redesign to meet this standard level today. At this
level, manufacturers stated they will require additional engineering
expertise and production lines, or possibly source parts from other
manufacturers.
Accordingly, the Secretary concludes that at TSL 5 for commercial
packaged boilers, the benefits of energy savings, NPV of consumer
benefits, emission reductions, and the estimated monetary value of the
CO2 emissions reductions will be outweighed by the negative
LCC savings for consumers of small gas-fired hot water commercial
packaged boilers, the large number of consumers of small gas-fired hot
water commercial packaged boilers, large oil-fired hot water commercial
packaged boilers, and small gas-fired steam commercial packaged boilers
incurring a net cost, and the large negative change in INPV for
manufacturers. Consequently, DOE
[[Page 1674]]
has concluded that TSL 5 is not economically justified.
DOE then considered TSL 4, which corresponds to the efficiency
level within each equipment class that provides the highest consumer
NPV at a 7-percent discount rate over the analysis period from 2020
through 2049. The estimated energy savings from TSL 4 are 2.096 quad of
energy. TSL 4 has an estimated NPV of consumer benefit of $2.0 billion
using a 7-percent discount rate, and $9.35 billion using a 3-percent
discount rate.
The cumulative emissions reductions at TSL 4 are 118 million metric
tons of CO2, 7.1 thousand tons of SO2, 298
thousand tons of NOX, 1,292 thousand tons of CH4,
0.48 thousand ton of N2O, and an emissions increase of
0.0008 ton of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 4 ranges from $703 million to $10,368
million.
At TSL 4, the average LCC savings range from -$2,267 to $70,909
depending on equipment class. The fraction of consumers incurring a net
cost ranges from 3 percent for the large oil-fired steam CPB equipment
class to 54 percent for the small gas-fired steam CPB equipment class.
At TSL 4, the projected change in INPV ranges from a decrease of
$116.7 million to a decrease in $42.3 million, which corresponds to a
change of -42.0 percent to -15.2 percent, respectively. The industry is
expected to incur $55.2 million in total conversion costs at this
level. Approximately 88.3 percent of industry equipment listings
require redesign to meet this standard level today.
Accordingly, the Secretary concludes that at TSL 4 for commercial
packaged boilers, the benefits of energy savings, NPV of consumer
benefits, emission reductions, and the estimated monetary value of the
CO2 emissions reductions will be outweighed by the negative
LCC savings for consumers of small gas-fired hot water commercial
packaged boilers, the large percentage of small gas-fired steam and
small gas-fired hot water CPB consumers incurring a net cost, and the
reduction in INPV for manufacturers. Consequently, DOE has concluded
that TSL 4 is not economically justified.
DOE then considered TSL 3, which corresponds to the intermediate
level with both condensing and high efficiency non-condensing standard
levels, depending on equipment class, and offers the potential for
significant cumulative energy savings over the analysis period from
2020 through 2049. The estimated energy savings from TSL 3 are 0.80
quad of energy. TSL 3 has an estimated NPV of consumer benefit of $0.61
billion using a 7-percent discount rate, and $3.32 billion using a 3-
percent discount rate.
The cumulative emissions reductions at TSL 3 are 45 million metric
tons of CO2, 2.74 thousand tons of SO2, 115
thousand tons of NOX, 493 thousand tons of CH4,
and 0.19 thousand ton of N2O, and an emissions increase of
0.0014 ton of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 3 ranges from $272 million to $4,003
million.
At TSL 3, the average LCC savings range from -$2,267 to $36,832,
depending on equipment class. The fraction of consumers incurring a net
cost ranges from 1 percent for the large oil-fired steam CPB equipment
class to 41 percent for the small gas-fired steam CPB equipment class.
At TSL 3, the projected INPV ranges from a decrease of $50.0
million to a decrease of $25.5 million, which corresponds to a change
of -18.0 percent to -9.2 percent, respectively. The industry is
expected to incur $40.5 million in total conversion costs at this
level. Approximately 70.5 percent of industry equipment listings
require redesign to meet this standard level today.
Accordingly, the Secretary concludes that at TSL 3 for commercial
packaged boilers, the benefits of energy savings, NPV of consumer
benefits, emission reductions, and the estimated monetary value of the
CO2 emissions reductions will be outweighed by the large
negative average life-cycle-cost savings (i.e., costs to the consumer)
of the small gas-fired hot water CPB equipment class consumers and the
large percentage of industry listings requiring redesign to meet this
standard level today. Consequently, DOE has concluded that TSL 3 is not
economically justified.
TSL 2 corresponds to the intermediate level with only non-
condensing standard levels and offers the potential for significant
cumulative energy savings over the analysis period from 2020 through
2049. The estimated energy savings from TSL 2 are 0.27 quad of energy.
TSL 2 has an estimated NPV of consumer benefit of $0.56 billion using a
7-percent discount rate, and $1.98 billion using a 3-percent discount
rate.
The cumulative emissions reductions at TSL 2 are 16 million metric
tons of CO2, 3.1 thousand tons of SO2, 41
thousand tons of NOX, 0.0003 ton of Hg, 139 thousand tons of
CH4, and 0.14 thousand ton of N2O. The estimated
monetary value of the CO2 emissions reductions at TSL 2
ranges from $100 million to $1,468 million.
At TSL 2, the average LCC savings range from $212 to $36,832,
depending on equipment class. The fraction of consumers incurring a net
cost ranges from 1 percent for the large oil-fired steam CPB equipment
class to 41 percent for the small gas-fired steam CPB equipment class.
At TSL 2, the projected INPV ranges from a decrease of $18.5
million to a decrease of $10.3 million, which corresponds to a change
of -6.7 percent to -3.7 percent, respectively. The industry is expected
to incur $21.2 million in total conversion costs at this level.
Approximately 45.7 percent of industry equipment listings require
redesign to meet this standard level today.
Accordingly, the Secretary concludes that at TSL 2 for commercial
packaged boilers, the benefits of energy savings, NPV of consumer
benefits, emission reductions, and the estimated monetary value of the
CO2 emissions reductions will outweigh the negative change
in INPV for manufacturers. Consequently, DOE has concluded that TSL 2
is economically justified.
After carefully considering the analysis results and weighing the
benefits and burdens of TSL 2, and based on clear and convincing
evidence, setting the standards for commercial packaged boilers at TSL
2 represents a significant improvement in energy efficiency that is
technologically feasible and economically justified, as defined under
EPCA at 42 U.S.C. 6313(a). TSL 2 is technologically feasible because
the technologies required to achieve these levels already exist in the
current market and are available from multiple manufacturers. TSL 2 is
economically justified because the benefits to the Nation in the form
of energy savings, consumer NPV at 3-percent and 7-percent discount
rates, and emissions reductions outweigh the costs associated with
reduced INPV. This is the case for each of the low, primary and high
economic cases examined, indicating even under the conservative
estimations used in the low economic case the standards are still
economically justified. Therefore, DOE adopts amended energy
conservation standards for commercial packaged boilers at the levels
established by TSL 2 and presented in Table V.43.
[[Page 1675]]
Table V.43--Amended Energy Conservation Standards for Commercial Packaged Boilers (Compliance Required Starting
[Date Three Years After Publication of Final Rule])
----------------------------------------------------------------------------------------------------------------
Energy conservation standards
-------------------------------------
Equipment Minimum
Minimum thermal combustion
efficiency (%) efficiency (%)
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged Boilers..................... 84 n/a
Large Gas-Fired Hot Water Commercial Packaged Boilers..................... n/a 85
Small Oil-Fired Hot Water Commercial Packaged Boilers..................... 87 n/a
Large Oil-Fired Hot Water Commercial Packaged Boilers..................... n/a 88
Small Gas-Fired Steam Commercial Packaged Boilers......................... 81 n/a
Large Gas-Fired Steam Commercial Packaged Boilers......................... 82 n/a
Small Oil-Fired Steam Commercial Packaged Boilers......................... 84 n/a
Large Oil-Fired Steam Commercial Packaged Boilers......................... 85 n/a
----------------------------------------------------------------------------------------------------------------
2. Summary of Benefits and Costs (Annualized) of the Adopted Standards
The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The annualized net benefit is
the sum of (1) the annualized national economic value (expressed in
2015$) of the benefits from consumer operation of equipment that meets
the adopted standards (consisting primarily of operating cost savings
from using less energy, minus increases in equipment purchase and
installation costs), and (2) the annualized monetary value of the
CO2 and NOX emission reductions.\96\
---------------------------------------------------------------------------
\96\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2016, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(2020, 2030, etc.), and then discounted the present value from each
year to 2016. The calculation uses discount rates of 3 and 7 percent
for all costs and benefits except for the value of CO2
reductions, for which DOE used case-specific discount rates. Using
the present value, DOE then calculated the fixed annual payment over
a 30-year period, starting in the compliance year that yields the
same present value.
---------------------------------------------------------------------------
Table V.44 shows the annualized values for commercial packaged
boilers 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 SCC series corresponding
to a value of $40.6/t in 2015 (2015$)), the estimated cost of the
adopted standards for CPB equipment is $35 million per year in
increased equipment costs, while the estimated benefits are $90 million
per year in reduced equipment operating costs, $27 million per year in
CO2 reductions, and $3.5 million per year in reduced
NOX emissions. In this case, the net benefit amounts to $85
million per year.
Using a 3-percent discount rate for all benefits and costs and the
average SCC series corresponding to a value of $40.6/t in 2015 (in
2015$), the estimated cost of the adopted standards for commercial
packaged boilers is $34 million per year in increased equipment costs,
while the estimated annual benefits are $144 million in reduced
operating costs, $27 million in CO2 reductions, and $5.5
million in reduced NOX emissions. In this case, the net
benefit would amount to $143 million per year.
Table V.44--Selected Categories of Annualized Benefits and Costs of Adopted Standards (TSL 2) for Commercial Packaged Boilers *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low net benefits High net benefits
Discount rate Primary estimate estimate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
(million 2015$/year)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *.. 7%................................... 90...................... 80...................... 98.
3%................................... 144..................... 128..................... 160.
CO2 Reduction Monetized Value 5%................................... 8....................... 7....................... 8.
(using mean SCC at 5% discount
rate) * **.
CO2 Reduction Monetized Value 3%................................... 27...................... 24...................... 29.
(using mean SCC at 3% discount
rate) * **.
CO2 Reduction Monetized Value 2.5%................................. 40...................... 36...................... 43.
(using mean SCC at 2.5% discount
rate) * **.
CO2 Reduction Monetized Value 3%................................... 82...................... 74...................... 89.
(using 95th percentile SCC at 3%
discount rate) * **.
NOX Reduction Value [dagger]....... 7%................................... 3....................... 3....................... 9.
3%................................... 5....................... 5....................... 12.
Total Benefits [Dagger]............ 7% plus CO2 range.................... 101 to 175.............. 90 to 158............... 115 to 196.
7%................................... 120..................... 108..................... 136.
3% plus CO2 range.................... 157 to 231.............. 140 to 208.............. 180 to 261.
3%................................... 177..................... 158..................... 201.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1676]]
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental............... 7%................................... 35...................... 31...................... 37.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment Costs 3%................................... 34...................... 31...................... 37.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [Dagger]................. 7% plus CO2 range.................... 66 to 140............... 59 to 127............... 78 to 158.
7%................................... 85...................... 77...................... 99.
3% plus CO2 range.................... 123 to 198.............. 109 to 177.............. 144 to 224.
3%................................... 143..................... 127..................... 165.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2020-2049. These results include benefits
to consumers that accrue after 2049 from the equipment purchased in 2020-2049. The incremental installed costs include incremental equipment cost as
well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
Benefits Estimates utilize projections of building stock and energy prices from the AEO2016 No-CPP case, a Low Economic Growth case, and a High
Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1
of this document and chapter 8 of the NOPR technical support document (TSD). In addition, DOE used estimates for equipment efficiency distribution in
its analysis based on national data supplied by industry. Purchases of higher efficiency equipment are a result of many different factors unique to
each consumer including boiler heating loads, installation costs, site environmental consideration, and others. For each consumer, all other factors
being the same, it would be anticipated that higher efficiency purchases in the baseline 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 rule.
** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5-percent, 3-
percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent
discount rate. The SCC 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 only the average SCC with 3-percent discount rate.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify
the problem that it intends to address, including, where applicable,
the failures of private markets or public institutions that warrant new
agency action, as well as to assess the significance of that problem.
The problems that this standards address are as follows:
(1) Insufficient information and the high costs of gathering and
analyzing relevant information leads some consumers to miss
opportunities to make cost-effective investments in energy efficiency.
(2) In some cases the benefits of more efficient equipment are not
realized due to misaligned incentives between purchasers and users. An
example of such a case is when the equipment purchase decision is made
by a building contractor or building owner who does not pay the energy
costs.
(3) There are external benefits resulting from improved energy
efficiency of commercial packaged boilers 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 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 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
[[Page 1677]]
to the identified potential alternatives. These assessments can be
found in chapter 17 of the technical support document for this
rulemaking.\97\
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\97\ See https://www.regulations.gov/document?D=EERE-2013-BT-STD-0030-0044.
---------------------------------------------------------------------------
DOE has also reviewed this regulation pursuant to Executive Order
13563. 76 FR 3281 (Jan. 21, 2011). Executive Order 13563 is
supplemental to and explicitly reaffirms the principles, structures,
and definitions governing regulatory review established in Executive
Order 12866. To the extent permitted by law, agencies are required by
Executive Order 13563 to: (1) Propose or adopt a regulation only upon a
reasoned determination that its benefits justify its costs (recognizing
that some benefits and costs are difficult to quantify); (2) tailor
regulations to impose the least burden on society, consistent with
obtaining regulatory objectives, taking into account, among other
things, and to the extent practicable, the costs of cumulative
regulations; (3) select, in choosing among alternative regulatory
approaches, those approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity); (4) to the extent
feasible, specify performance objectives, rather than specifying the
behavior or manner of compliance that regulated entities must adopt;
and (5) identify and assess available alternatives to direct
regulation, including providing economic incentives to encourage the
desired behavior, such as user fees or marketable permits, or providing
information upon which choices can be made by the public.
DOE emphasizes as well that Executive Order 13563 requires agencies
to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible. In its
guidance, the OIRA has emphasized that such techniques may include
identifying changing future compliance costs that might result from
technological innovation or anticipated behavioral changes. For the
reasons stated in the preamble, DOE concludes that this final rule is
consistent with these principles, including the requirement that, to
the extent permitted by law, benefits justify costs.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) and a
final regulatory flexibility analysis (FRFA) for any rule that by law
must be proposed for public comment, unless the agency certifies that
the rule, if promulgated, will not have a significant economic impact
on a substantial number of small entities. As required by Executive
Order 13272, ``Proper Consideration of Small Entities in Agency
Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published procedures
and policies on February 19, 2003, to ensure that the potential impacts
of its rules on domestic 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 published an IRFA in
a notice of proposed rule published on March 24, 2016. 81 FR 15836. The
Department requested comment on the IRFA and has prepared the following
FRFA:
1. Need for, Objectives of, and Legal Basis for, the Rule
A statement of the need for, objectives of, and legal basis for,
the rule is stated in section II.A and not repeated here.
2. Significant Issues Raised In Response to the IRFA
As part of the IRFA, DOE requested comment on financial, sales, and
market share data from small manufacturers. In response to the request
for comment, ABMA stated that it believes that the proposed standards
included in the March 2016 NOPR, if adopted, will have an adverse
effect on the financial well-being of all boiler manufacturing
companies, with a proportionally greater impact on the smaller
companies, operating in what is a very competitive marketplace. (ABMA,
No. 64 at p. 3) However, ABMA did not provide any additional data
regarding the finances, sales, or market share of small manufacturers
that would allow DOE to refine its analysis. Lochinvar recommended DOE
consult with AHRI on whether or not small manufacturers are accurately
covered by its directory or other available sources. (Lochinvar, No. 70
at p. 6) DOE used AHRI's equipment directory and discussions with the
manufacturers of the equipment as a resources to compile its small
manufacturer list for the IRFA. Additionally, DOE asked all
participants at the NOPR public meeting, including AHRI, for additional
information on small manufacturers. Raypak noted that the 11 small
manufacturers that are not part of AHRI or ABMA comprise 25 percent of
the total marketplace. (Raypak, No. 72 at p. 3)
During the NOPR stage DOE used equipment listings from AHRI,
information from the ABMA trade association website, company websites,
and market research tools to identify small manufacturers. For the
final rule analysis, DOE did not rely on AHRI data for the quantitative
analysis behind this FRFA. Rather, DOE based its analysis on listings
in the Compliance Certification Database,\98\ which is the database
that houses certified values submitted by manufacturers of covered
equipment subject to Federal energy conservation standards. The
equipment information in the Compliance Certification Database
represents the entire market of covered equipment that is legally sold
in the United States.
---------------------------------------------------------------------------
\98\ DOE Compliance Certification Database. https://www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A*.
---------------------------------------------------------------------------
AHRI commented that utility data on rebate programs would be useful
for the Regulatory Impact Analysis (RIA). (AHRI, Public Meeting
Transcript, No. 61 at p. 215) PG&E commented that they could provide
data on the effectiveness of utility rebate programs. (PG&E, Public
Meeting Transcript, No. 61 at p. 215) Raypak noted that rebates on high
efficiency boilers might encourage people to use them even in
applications where such boilers are not operating at the high
efficiency. (Raypak, Public Meeting Transcript, No. 61 at pp. 216-217)
DOE notes that it does consider rebate programs as an alternative
to amended standards in its RIA. While it did not receive data on the
effectiveness of utility rebates programs, rebates are still considered
in this final rule among other alternatives evaluated. More information
regarding the RIA may be found in chapter 17 of the final rule TSD. DOE
also notes that the method of evaluating the impact of these non-
regulatory alternatives considers that certain purchases of high
efficiency/condensing boilers may not operate at, or near, their rated
efficiencies.
3. Description and Estimate of the Number of Small Entities Affected
a. Methodology for Estimating the Number of Small Entities
For manufacturers of CPB equipment, 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
[[Page 1678]]
available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Manufacturing of commercial packaged boilers
is classified under NAICS 333414, ``Heating Equipment (except Warm Air
Furnaces) Manufacturing.'' The SBA sets a threshold of 500 employees or
fewer for an entity to be considered as a small business for this
category.
To identify and estimate the total number of companies that could
be small business manufacturers of equipment covered by this
rulemaking, DOE conducted a market survey using publicly available
information to identify potential small manufacturers. DOE's research
involved its Compliance Certification Database, the AHRI Directory,\99\
individual company and trade association websites, and market research
tools (e.g., Hoovers reports) to create a list of companies that
manufacture or sell equipment covered by this rulemaking. DOE also
asked stakeholders and industry representatives if they were aware of
any other small manufacturers during manufacturer interviews and at DOE
public meetings. DOE screened out companies that do not offer equipment
covered by this rulemaking, do not meet the definition of a ``small
business,'' or do not manufacture the covered equipment in the United
States.
DOE identified 45 manufacturers of CPBs affected by this
rulemaking. Of these, DOE identified 21 as small manufacturers that met
the screening requirements.
DOE attempted to contact all the small business manufacturers of
CPB equipment it had identified. Five of the 21 identified small
businesses agreed to take part in an MIA interview. DOE also obtained
information about small business impacts while interviewing large
manufacturers.
4. Description and Estimate of Compliance Requirements, Including
Differences in Cost, If Any, for Different Groups of Small Entities
The Compliance Certification Database, which provided quantitative
data for the basis of this FRFA, contained equipment information for
only 8 small manufacturers of CPBs in the market. The equipment
distribution in the Compliance Certification Database is representative
of the all CPB equipment legally sold in the United States and is the
basis for the quantitative analysis of small businesses.
At higher trial standard levels, an increasing number of small
manufacturer have no models that are able to meet the evaluated levels.
Table VI.1 shows the number of small business manufacturers that have
equipment on the market today that could meet the trial standard
levels. Table VI.1 illustrates that as the standard level increases,
smaller manufacturers, as a group, may have a harder time meeting the
energy conservation standard.
Table VI.1--Number of Small Manufacturers With Compliant Model Listings
------------------------------------------------------------------------
Number of
Standard level small
manufacturers
------------------------------------------------------------------------
No-New STD.............................................. 8
TSL 1................................................... 8
TSL 2................................................... 8
TSL 3................................................... 8
TSL 4................................................... 7
TSL 5................................................... 2
------------------------------------------------------------------------
Additionally, DOE performed a more detail examination of impacts by
equipment class. Table VI.2 shows the number of manufacturers in each
equipment class able to meet trial standard levels with existing
equipment offerings.
Table VI.2--Number of Small Manufacturers With Listings Compliant at the Analyzed Standard Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of small business manufacturers with compliant equipment
Standard level -------------------------------------------------------------------------------------------------------
SGHW LGHW SOHW LOHW SGST LGST SOST LOST
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-New STD...................................... 8 4 3 3 4 1 3 2
TSL 1........................................... 8 2 1 1 2 1 3 2
TSL 2........................................... 8 2 1 1 2 1 3 2
TSL 3........................................... 7 2 1 1 2 1 3 2
TSL 4........................................... 7 0 0 1 1 0 0 0
TSL 5........................................... 0 0 0 1 1 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
At TSL 5, there are multiple equipment classes where no small
manufacturers currently offer equipment that meets the efficiency
level. Specifically, no small manufacturers have designs that could
meet TSL in the small gas hot water, large gas hot water, small oil hot
water, large gas steam, small oil steam, or large oil steam equipment
classes. Similarly at TSL 4, small manufacturers do not currently have
product offerings meeting the levels for most equipment classes. At TSL
3, TSL 2, and TSL 1, the number of small manufacturers that currently
have compliant listings is reduced, but there are small manufacturers
with existing equipment offerings meeting the efficiency level for
every equipment class analyzed.
---------------------------------------------------------------------------
\99\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
---------------------------------------------------------------------------
To estimate the maximum potential costs to the industry, DOE's
conversion cost model assumes manufacturers will choose to redesign all
non-compliant models. Manufacturers, including small manufacturers,
with no equipment compliant with the amended standard would redesign
all models to offer a full suite of equipment. DOE used model counts to
disaggregate conversion costs for the small manufacturers in the
Compliance Certification Database. Small manufacturers accounted for 21
percent of models. At the adopted standard, small manufacturers in the
Compliance Certification Database would have conversion costs totaling
$4.5 million. This averages out to $0.56 million in conversion costs
per small manufacturer. Using publicly available information from
Hoovers, Manta, and Glassdoor, DOE estimated revenues for small
manufacturers listed in the Compliance Certification Database. The
average annual revenue was $29.6 million. Based on this information,
DOE estimated conversion costs to be 0.63 percent of revenue over the
three-year conversion period.
For gas-fired commercial packaged boilers, DOE's engineering
analysis concludes that no proprietary technology is required to meet
today's amended standard level. Manufacturers would likely need to
adopt one or a combination of different technology options: (1) Heat
exchanger
[[Page 1679]]
improvements (including upgrading mechanical draft or condensing heat
exchangers); (2) improvements in burner technology; or (3) using oxygen
trim systems.
DOE notes that the market for oil-fired commercial packaged boilers
is shrinking. Some manufacturers, both small and large, may choose not
to invest in equipment redesign given the small market size and
projected decline in shipments. For manufacturers that do stay in the
oil-fired market, DOE's analysis indicates that there are no
proprietary technologies required to meet TSL 2. Manufacturers would
likely need to adopt one or a combination of different technology
options: (1) Heat exchanger improvements (including upgrading to
mechanical draft heat exchangers); (2) improvements in burner
technology; or (3) using oxygen trim systems.
5. Significant Alternatives to the Rule
The discussion above analyzes impacts on small businesses that
would result from the adopted standards. In addition to considering
other TSLs in this rulemaking, DOE considered several policy
alternatives in lieu of standards that could potentially result in
energy savings while reducing burdens on small businesses. DOE
considered the following policy alternatives: (1) No change in
standard; (2) commercial consumer rebates; (3) commercial consumer tax
credits; (4) voluntary energy efficiency targets; and (5) early
replacement. While these alternatives may mitigate to some varying
extent the economic impacts on small entities compared to the
standards, DOE determined that the energy savings of these alternatives
are significantly smaller than those that would be expected to result
from the adopted standard levels. Accordingly, DOE is declining to
adopt any of these alternatives and is adopting the standards set forth
in this rulemaking. (See chapter 17 of the final rule TSD for further
detail on the policy alternatives DOE considered.)
In reviewing alternatives to the final rule, DOE examined energy
conservation standards set at other trial standard levels. At levels
above TSL 2, the impacts to small manufacturers would be more severe.
While TSL 1 would reduce the impacts on small business manufacturers,
it would come at the expense of a reduction in energy savings. DOE
concludes that establishing standards at TSL 2 balances the benefits of
the energy savings at TSL 2 with the potential burdens placed on
commercial packaged boiler manufacturers, including small business
manufacturers.
Additional compliance flexibilities may be available through other
means. EPCA provides that a manufacturer whose annual gross revenue
from all of its operations does not exceed $8 million may apply for an
exemption from all or part of an energy conservation standard for a
period not longer than 24 months after the effective date of a final
rule establishing the standard. Additionally, section 504 of the
Department of Energy Organization Act, 42 U.S.C. 7194, provides
authority for the Secretary to adjust a rule issued under EPCA in order
to prevent ``special hardship, inequity, or unfair distribution of
burdens'' that may be imposed on that manufacturer as a result of such
rule. Manufacturers should refer to 10 CFR part 430, subpart E, and 10
CFR part 1003 for additional details.
C. Review Under the Paperwork Reduction Act
Manufacturers of commercial packaged boilers must certify to DOE
that their equipment comply with any applicable energy conservation
standards. In certifying compliance, manufacturers must test their
equipment according to the DOE test procedures for commercial packaged
boilers, including any amendments adopted for those test procedures.
DOE has established regulations for the certification and recordkeeping
requirements for all covered consumer equipment and commercial
equipment, including commercial packaged boilers. 76 FR 12422 (March 7,
2011). The collection-of-information requirement for the certification
and recordkeeping is subject to review and approval by OMB under the
Paperwork Reduction Act (PRA). This requirement has been approved by
OMB under OMB control number 1910-1400. DOE requested OMB approval of
an extension of this information collection for three years,
specifically including the collection of information proposed in the
present rulemaking, and estimated that the annual number of burden
hours under this extension is 30 hours per company. In response to
DOE's request, OMB approved DOE's information collection requirements
covered under OMB control number 1910-1400 through November 30, 2017.
80 FR 5099 (January 30, 2015).
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act (NEPA) of 1969,
DOE has determined that this rule fits within the category of actions
included in Categorical Exclusion (CX) B5.1 and otherwise meets the
requirements for application of a CX. (See 10 CFR part 1021, App. B,
B5.1(b); 1021.410(b) and Appendix B, B(1)-(5).) The rule fits within
the category of actions because it is a rulemaking that establishes
energy conservation standards for consumer equipment or industrial
equipment, and for which none of the exceptions identified in CX
B5.1(b) apply. Therefore, DOE has made a CX determination for this
rulemaking, and DOE does not need to prepare an Environmental
Assessment or Environmental Impact Statement for this 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 equipment that is 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
[[Page 1680]]
EPCA. (42 U.S.C. 6297) No further action is required by Executive Order
13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' imposes on Federal agencies the general duty
to adhere to the following requirements: (1) Eliminate drafting errors
and ambiguity, (2) write regulations to minimize litigation, and (3)
provide a clear legal standard for affected conduct rather than a
general standard and promote simplification and burden reduction. 61 FR
4729 (Feb. 7, 1996). Section 3(b) of Executive Order 12988 specifically
requires that Executive agencies make every reasonable effort to ensure
that the regulation (1) clearly specifies the preemptive effect, if
any, (2) clearly specifies any effect on existing Federal law or
regulation, (3) provides a clear legal standard for affected conduct
while promoting simplification and burden reduction, (4) specifies the
retroactive effect, if any, (5) adequately defines key terms, and (6)
addresses other important issues affecting clarity and general
draftsmanship under any guidelines issued by the Attorney General.
Section 3(c) of Executive Order 12988 requires Executive agencies to
review regulations in light of applicable standards in section 3(a) and
section 3(b) to determine whether they are met or it is unreasonable to
meet one or more of them. DOE has completed the required review and
determined that, to the extent permitted by law, this final rule meets
the relevant standards of Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them. On March 18, 1997, DOE published
a statement of policy on its process for intergovernmental consultation
under UMRA. 62 FR 12820. DOE's policy statement is also available at
http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
DOE has concluded that this final rule may require expenditures of
$100 million or more by the private sector. Such expenditures may
include (1) investment in research and development and in capital
expenditures by commercial packaged boilers manufacturers in the years
between the final rule and the compliance date for the new standards,
and (2) incremental additional expenditures by consumers to purchase
higher-efficiency commercial packaged boilers, starting at the
compliance date for the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the 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 the final rule and TSD for this
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 EPCA in 42 U.S.C.
6313(a), this final rule establishes amended energy conservation
standards for commercial packaged boilers that are designed to achieve
a significant improvement in energy efficiency that DOE has determined
to be both technologically feasible and economically justified. A full
discussion of the alternatives considered by DOE is presented in
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
DOE has determined, under Executive Order 12630, ``Governmental
Actions and Interference with Constitutionally Protected Property
Rights,'' 53 FR 8859 (Mar. 15, 1988), that this regulation would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
guidelines established by each agency pursuant to general guidelines
issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22,
2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7,
2002). DOE has reviewed this 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
[[Page 1681]]
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
amended energy conservation standards for commercial packaged boilers,
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 the 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. 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.\100\ Generation of this report involved a rigorous, formal, and
documented evaluation using objective criteria and qualified and
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the
productivity and management effectiveness of programs and/or projects.
DOJ has determined that the peer-reviewed analytical process continues
to reflect current practice, and the Department followed that process
for developing energy conservation standards in the case of the present
rulemaking.
---------------------------------------------------------------------------
\100\ 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 Subject in 10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation, Test procedures, and Reporting and
recordkeeping requirements.
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 commercial
packaged boilers 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. In response to an error correction request,
DOE revised two tables in the document that inadvertently listed the
lower bound of several equipment classes as >300,000 Btu/h, instead
of >=300,000 Btu/h. The document has also 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 431 of
chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, to read as set forth below:
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
1. The authority citation for Part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
0
2. Section 431.87 is revised to read as follows:
Sec. 431.87 Energy and water conservation standards and their
effective dates.
(a) Each commercial packaged boiler listed in Table 1 to Sec.
431.87 and manufactured on or after March 2, 2012 and prior to January
10, 2023, must meet the applicable energy conservation standard levels
as follows:
Table 1 to Sec. 431.87--Commercial Packaged Boiler Energy Conservations Standards
----------------------------------------------------------------------------------------------------------------
Efficiency level--
Equipment Subcategory Size category (input) effective date: March 2,
2012 *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged Gas-fired............. >=300,000 Btu/h and 80.0% ET.
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Gas-fired............. >2,500,000 Btu/h...... 82.0% EC.
Boilers.
Hot Water Commercial Packaged Oil-fired............. >=300,000 Btu/h and 82.0% ET.
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Oil-fired............. >2,500,000 Btu/h...... 84.0% EC.
Boilers.
Steam Commercial Packaged Boilers.. Gas-fired--all, except >=300,000 Btu/h and 79.0% ET.
natural draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.. Gas-fired--all, except >2,500,000 Btu/h...... 79.0% ET.
natural draft.
Steam Commercial Packaged Boilers.. Gas-fired--natural >=300,000 Btu/h and 77.0% ET.
draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.. Gas-fired--natural >2,500,000 Btu/h...... 77.0% ET.
draft.
Steam Commercial Packaged Boilers.. Oil-fired............. >=300,000 Btu/h and 81.0% ET.
<=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.. Oil-fired............. >2,500,000 Btu/h...... 81.0% ET.
----------------------------------------------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion efficiency'' as defined in 10 CFR 431.82.
[[Page 1682]]
(b) Each commercial packaged boiler listed in Table 2 to Sec.
431.87 and manufactured on or after January 10, 2023, must meet the
applicable energy conservation standard levels as follows:
Table 2 to Sec. 431.87--Commercial Packaged Boiler Energy Conservations Standards
----------------------------------------------------------------------------------------------------------------
Equipment Size category (rated input) Energy conservation standard
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial >=300,000 Btu/h and <=2,500,000 84.0% ET.
Packaged Boilers. Btu/h.
Large Gas-Fired Hot Water Commercial >2,500,000 Btu/h and 85.0% EC.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Gas-Fired Hot Water >10,000,000 Btu/h............... 82.0% EC.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water Commercial >=300,000 Btu/h and <=2,500,000 87.0% ET.
Packaged Boilers. Btu/h.
Large Oil-Fired Hot Water Commercial >2,500,000 Btu/h and 88.0% EC.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Oil-Fired Hot Water >10,000,000 Btu/h............... 84.0% EC.
Commercial Packaged Boilers.
Small Gas-Fired Steam Commercial >=300,000 Btu/h and <=2,500,000 81.0% ET.
Packaged Boilers. Btu/h.
Large Gas-Fired Steam Commercial >2,500,000 Btu/h and 82.0% ET.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Gas-Fired Steam Commercial >10,000,000 Btu/h............... 79.0% ET.
Packaged Boilers **.
Small Oil-Fired Steam Commercial >=300,000 Btu/h and <=2,500,000 84.0% ET.
Packaged Boilers. Btu/h.
Large Oil-Fired Steam Commercial >2,500,000 Btu/h and 85.0% ET.
Packaged Boilers. <=10,000,000 Btu/h.
Very Large Oil-Fired Steam Commercial >10,000,000 Btu/h............... 81.0% ET.
Packaged Boilers.
----------------------------------------------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion efficiency'' as defined in 10 CFR 431.82.
** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum
thermal efficiency level of 77 percent is permitted and meets Federal commercial packaged boiler energy
conservation standards.
[FR Doc. 2019-26356 Filed 1-9-20; 8:45 am]
BILLING CODE 6450-01-P