[Federal Register Volume 88, Number 155 (Monday, August 14, 2023)]
[Proposed Rules]
[Pages 55128-55217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16476]



[[Page 55127]]

Vol. 88

Monday,

No. 155

August 14, 2023

Part II





Department of Energy





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10 CFR Part 430





Energy Conservation Program: Energy Conservation Standards for Consumer 
Boilers; Proposed Rule

  Federal Register / Vol. 88 , No. 155 / Monday, August 14, 2023 / 
Proposed Rules  

[[Page 55128]]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2019-BT-STD-0036]
RIN 1904-AE82


Energy Conservation Program: Energy Conservation Standards for 
Consumer Boilers

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

ACTION: Notice of proposed rulemaking and announcement of public 
meeting.

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SUMMARY: The Energy Policy and Conservation Act, as amended (EPCA), 
prescribes energy conservation standards for various consumer products 
and certain commercial and industrial equipment, including consumer 
boilers. EPCA also requires the U.S. Department of Energy (DOE or the 
Department) to periodically determine whether more-stringent standards 
would be technologically feasible and economically justified and would 
result in significant energy savings. In this notice of proposed 
rulemaking (NOPR), DOE proposes amended energy conservation standards 
for consumer boilers, and also announces a public meeting to receive 
comment on these proposed standards and associated analyses and 
results.

DATES: 
    Comments: DOE will accept comments, data, and information regarding 
this NOPR no later than October 13, 2023.
    Meeting: DOE will hold a public meeting via webinar on Tuesday, 
September 12, 2023 from 1:00 p.m. to 4:00 p.m. See section VII, 
``Public Participation,'' for webinar registration information, 
participant instructions and information about the capabilities 
available to webinar participants.
    Comments regarding the likely competitive impact of the proposed 
standard should be sent to the Department of Justice contact listed in 
the ADDRESSES section on or before September 13, 2023.

ADDRESSES: Interested persons are encouraged to submit comments using 
the Federal eRulemaking Portal at www.regulations.gov under docket 
number EERE-2019-BT-STD-0036. Follow the instructions for submitting 
comments. Alternatively, interested persons may submit comments, 
identified by docket number EERE-2019-BT-STD-0036 and/or RIN 1904-AE82, 
by any of the following methods:
    Email: [email protected]. Include the docket 
number EERE-2019-BT-STD-0036 and/or RIN 1904-AE82 in the subject line 
of the message.
    Postal Mail: Appliance and Equipment Standards Program, U.S. 
Department of Energy, Building Technologies Office, Mailstop EE-5B, 
1000 Independence Avenue SW, Washington, DC 20585-0121. If possible, 
please submit all items on a compact disc (CD), in which case it is not 
necessary to include printed copies.
    Hand Delivery/Courier: Appliance and Equipment Standards Program, 
U.S. Department of Energy, Building Technologies Office, 950 L'Enfant 
Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202) 287-1445. 
If possible, please submit all items on a CD, in which case it is not 
necessary to include printed copies.
    No telefacsimiles (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on this 
process, see section VII (Public Participation) of this document.
    Docket: The docket for this activity, which includes Federal 
Register notices, 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/EERE-2019-BT-STD-0036. The docket web page contains instructions on how 
to access all documents, including public comments, in the docket. See 
section VII (Public Participation) of this document for information on 
how to submit comments through www.regulations.gov.
    EPCA requires the Attorney General to provide DOE a written 
determination of whether the proposed standard is likely to lessen 
competition. The U.S. Department of Justice Antitrust Division invites 
input from market participants and other interested persons with views 
on the likely competitive impact of the proposed standard for consumer 
boilers. Interested persons may contact the Division at 
[email protected] on or before the date specified in the DATES 
section. Please indicate in the ``Subject'' line of your email the 
title and Docket Number of this proposed rulemaking.

FOR FURTHER INFORMATION CONTACT: 
    Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: 
(240) 597-6737. Email: [email protected].
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-5827. Email: [email protected].
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting 
webinar, contact the Appliance and Equipment Standards Program staff at 
(202) 287-1445 or by email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Synopsis of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits and Costs
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Consumer Boilers
    C. Deviation From Appendix A
III. General Discussion
    A. General Comments
    B. Scope of Coverage
    C. Test Procedure
    D. Boilers Not Requiring Electricity
    E. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    F. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    G. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price (LCC 
and PBP)
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Product Classes
    a. Fossil Fuel-Fired Hot Water Boilers
    b. Hydronic Heat Pump Boilers
    2. Market Assessment
    3. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies

[[Page 55129]]

    C. Engineering Analysis
    1. Efficiency Analysis
    a. Baseline Efficiency
    b. Higher Efficiency Levels
    2. Cost Analysis
    3. Manufacturer Markup and Shipping Costs
    4. Cost-Efficiency Results
    D. Markups Analysis
    E. Energy Use Analysis
    1. Building Sample
    2. Space Heating Energy Use
    a. Heating Load Calculation
    b. Impact of Return Water Temperature on Efficiency
    c. Impact of Jacket Losses on Energy Use
    d. Impact of Excess Air Adjustments
    3. Water Heating Use
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model and Key Inputs
    a. Manufacturer Production Costs
    b. Shipments Projections
    c. Product and Capital Conversion Costs
    d. Manufacturer Markup Scenarios
    3. Manufacturer Interviews
    a. The Replacement Market
    4. Discussion of MIA Comments
    K. Emissions Analysis
    1. Air Quality Regulations Incorporated in DOE's Analysis
    L. Monetizing Emissions Impacts
    1. Monetization of Greenhouse Gas Emissions
    a. Social Cost of Carbon
    b. Social Cost of Methane and Nitrous Oxide
    2. Monetization of Other Emissions Impacts
    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. Direct Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    8. Summary of Economic Impacts
    C. Conclusion
    1. Benefits and Burdens of TSLs Considered for Consumer Boiler 
Standards
    2. Annualized Benefits and Costs of the Proposed Standards
    D. Reporting, Certification, and Sampling Plan
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act of 1995
    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
VII. Public Participation
    A. Participation in the Public Meeting Webinar
    B. Procedure for Submitting Prepared General Statements for 
Distribution
    C. Conduct of the Webinar
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

    The Energy Policy and Conservation Act, as amended (EPCA),\1\ 
Public Law 94-163 (codified at 42 U.S.C. 6291-6317), authorizes DOE to 
regulate the energy efficiency of a number of consumer products and 
certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part B 
\2\ of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products 
include consumer boilers, the subject of this rulemaking. (42 U.S.C. 
6292(a)(5)) \3\
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    \1\ All references to EPCA in this document refer to the statute 
as amended through the Energy Act of 2020, Public Law 116-260 (Dec. 
27, 2020), which reflect the last statutory amendments that impact 
Parts A and A-1 of EPCA.
    \2\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \3\ DOE notes that consumer boilers are defined as a subcategory 
of covered consumer furnaces (see 42 U.S.C. 6291(23)).
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    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in a significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later 
than six years after issuance of any final rule establishing or 
amending a standard, DOE must publish either a notice of determination 
that standards for the product do not need to be amended, or a notice 
of proposed rulemaking including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m)(1))
    In accordance with these and other statutory provisions discussed 
in this document, DOE analyzed the benefits and burdens of four trial 
standard levels (TSLs) for consumer boilers. The TSLs and their 
associated benefits and burdens are discussed in detail in sections 
V.A-C of this document. As discussed in section V.C of this document, 
DOE has tentatively determined that TSL 3 represents the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified. The proposed standards at TSL 3, which are 
expressed in minimum annual fuel utilization efficiency (AFUE), standby 
mode power consumption (PW,SB) and off mode power 
consumption (PW,OFF), are shown in Table I.1. These proposed 
standards, if adopted, would apply to all consumer boilers listed in 
Table I.1 manufactured in, or imported into, the United States starting 
on the date five years after the date of publication of the final rule 
for this rulemaking. Specifically, DOE is proposing more-stringent AFUE 
standards for gas-fired and oil-fired boilers while maintaining the 
current standards for electric steam and hot water boilers. 
Additionally, DOE is proposing to maintain the design requirements and 
exceptions to the minimum AFUE requirements established by statute and 
currently codified at 10 CFR 430.32(e)(2). (See 42 U.S.C. 
6295(f)(3)(A)-(C))

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                     Table I.1--Proposed Energy Conservation Standards for Consumer Boilers
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                                                       PW,SB (W) *   PW,OFF (W)
              Product class                AFUE (%) *                    *            Design requirements *
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Gas-fired Hot Water.....................           95            9            9  Constant-burning pilot not
                                                                                  permitted. Automatic means for
                                                                                  adjusting water temperature
                                                                                  required (except for boilers
                                                                                  equipped with tankless
                                                                                  domestic water heating coils).
Gas-Fired Steam.........................           82            8            8  Constant-burning pilot not
                                                                                  permitted.
Oil-fired Hot Water.....................           88           11           11  Automatic means for adjusting
                                                                                  temperature required (except
                                                                                  for boilers equipped with
                                                                                  tankless domestic water
                                                                                  heating coils).
Oil-fired Steam.........................           86           11           11  None.
Electric Hot Water......................         None            8            8  Automatic means for adjusting
                                                                                  temperature required (except
                                                                                  for boilers equipped with
                                                                                  tankless domestic water
                                                                                  heating coils).
Electric Steam..........................         None            8            8  None.
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* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric
  gauges, electric pumps, electric wires, or electric devices is not required to meet the AFUE, PW,SB, PW,OFF,
  or design requirements, but must meet the requirements of 10 CFR 430.32(e)(2)(i) which include a minimum AFUE
  of 75 percent for gas-fired steam boilers and a minimum AFUE of 80 percent for all other boilers.

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on consumers of consumer boilers, as measured by the 
average life-cycle cost (LCC) savings and the simple payback period 
(PBP).\4\ The average LCC savings are positive for all product classes, 
and the PBP is less than the average lifetime of consumer boilers, 
which is estimated to be 26.9 years for gas-fired hot water boilers, 
23.7 years for gas-fired steam boilers, 25.6 years for oil-fired hot 
water boilers, and 19.6 years for oil-fired steam boilers (see section 
IV.F.6 of this document for further details).
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    \4\ The average LCC savings refer to consumers that are affected 
by a standard and are measured relative to the distribution of 
purchased boilers, and their associated energy efficiency, in the 
no-new-standards case, which depicts the market in the compliance 
year in the absence of new or amended standards (see section IV.F.8 
of this document). The simple PBP, which is designed to compare 
specific efficiency levels, is measured relative to the baseline 
product (see section IV.C of this document).

     Table I.2--Impacts of Proposed Energy Conservation Standards on
                      Consumers of Consumer Boilers
------------------------------------------------------------------------
                                            Average LCC
              Product class                   savings     Simple payback
                                              (2022$)     period (years)
------------------------------------------------------------------------
Gas-fired Hot Water.....................             768             2.7
Gas-fired Steam.........................  ..............  ..............
Oil-fired Hot Water.....................             666             3.3
Oil-fired Steam.........................             310             5.5
------------------------------------------------------------------------

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

B. Impact on Manufacturers 5
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    \5\ All monetary values in this document are expressed in 2022 
dollars.
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    The industry net present value (INPV) is the sum of the discounted 
cash flows starting from the publication year (2023) of the NOPR and 
continuing through the 30-year period following the expected compliance 
date of the standards (2023-2059). Using a real discount rate of 9.7 
percent, DOE estimates that the INPV for manufacturers of consumer 
boilers in the case without amended standards is $532.0 million. Under 
the proposed standards, the change in INPV is estimated to range from -
11.7 percent to -7.7 percent, which is approximately -$62.2 million to 
-$40.7 million. In order to bring products into compliance with amended 
standards, it is estimated that the industry would incur total 
conversion costs of $98.0 million.
    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this document. The 
analytic results of the manufacturer impact analysis (MIA) are 
presented in section V.B.2 of this document.

C. National Benefits and Costs

    DOE's analyses indicate that the proposed energy conservation 
standards for consumer boilers would save a significant amount of 
energy. Relative to the case without amended standards, the lifetime 
energy savings for consumer boilers purchased in the 30-year period 
that begins in the anticipated year of compliance with the amended 
standards (2030-2059) amount to 0.7 quadrillion British thermal units 
(Btu), or quads.\6\ This represents a savings of 2.3 percent relative 
to the energy use of these products in the case without amended 
standards (referred to as the ``no-new-standards case'' or as the 
baseline).
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    \6\ The quantity refers to full-fuel-cycle (FFC) energy savings. 
FFC energy savings includes the energy consumed in extracting, 
processing, and transporting primary fuels (i.e., coal, natural gas, 
petroleum fuels), and, thus, presents a more complete picture of the 
impacts of energy efficiency standards. For more information on the 
FFC metric, see section IV.H.1 of this document.
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    The cumulative net present value (NPV) of total consumer benefits 
of the proposed standards for consumer boilers ranges from $0.72 
billion (at a 7-percent discount rate) to $2.27 billion (at a 3-percent 
discount rate). This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product and 
installation costs for consumer boilers purchased in 2030-2059 relative 
to the baseline.
    In addition, the proposed standards for consumer boilers are 
projected to yield significant environmental benefits. DOE estimates 
that the proposed standards would result in cumulative emission 
reductions (over the same period as for energy savings) of 39 million 
metric tons (Mt) \7\ of carbon dioxide (CO2), 438 thousand 
tons of

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methane (CH4), 0.17 thousand tons of nitrous oxide 
(N2O), 105 thousand tons of nitrogen oxides 
(NOX), and 2.7 thousand tons of sulfur dioxide 
(SO2), and an increase of 0.001 tons of mercury (Hg) due to 
slightly higher electricity consumption.\8\
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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.
    \8\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy 
Outlook 2023 (AEO 2023). AEO 2023 represents current Federal and 
State legislation and final implementation of regulations as of the 
time of its preparation. See section IV.K of this document for 
further discussion of AEO2023 assumptions that effect air pollutant 
emissions.
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    DOE estimates the value of climate benefits from a reduction in 
greenhouse gases (GHG) using four different estimates of the social 
cost of CO2 (SC-CO2), the social cost of methane 
(SC-CH4), and the social cost of nitrous oxide (SC-
N2O). Together these represent the social cost of GHG (SC-
GHG). DOE used interim SC-GHG values developed by an Interagency 
Working Group on the Social Cost of Greenhouse Gases (IWG).\9\ The 
derivation of these values is discussed in section IV.L of this 
document. For presentational purposes, the climate benefits associated 
with the average SC-GHG at a 3-percent discount rate over the period of 
analysis are estimated to be $2.0 billion. DOE does not have a single 
central SC-GHG point estimate, and it emphasizes the importance and 
value of considering the benefits calculated using all four sets of SC-
GHG estimates.
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    \9\ To monetize the benefits of reducing GHG emissions this 
analysis uses the interim estimates presented in the Technical 
Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide 
Interim Estimates Under Executive Order 13990 published in February 
2021 by the IWG. (``February 2021 SC-GHG TSD''). www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf.
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    DOE estimated the monetary health benefits of SO2 and 
NOX emissions reductions using benefit per ton estimates 
from the scientific literature, as discussed in section IV.L of this 
document. DOE estimated the present value of the health benefits would 
be $1.1 billion using a 7-percent discount rate, and $3.3 billion using 
a 3-percent discount rate.\10\ DOE is currently only monetizing (for 
SO2 and NOX) health benefits from changes in fine 
particulate matter (PM2.5) precursors (SO2 and 
NOX) and for changes in an ozone precursor (NOX), 
but will continue to assess the ability to monetize other effects such 
as health benefits from reductions in direct PM2.5 
emissions.
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    \10\ DOE estimates the economic value of these emissions 
reductions resulting from the considered trial standard levels 
(TSLs) for the purpose of complying with the requirements of 
Executive Order 12866.
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    Table I.3 summarizes the monetized benefits and costs expected to 
result from the proposed standards for consumer boilers. There are 
other important unquantified effects, including certain unquantified 
climate benefits, unquantified public health benefits from the 
reduction of toxic air pollutants and other emissions, unquantified 
energy security benefits, and distributional effects, among others.

  Table I.3--Present Value of Monetized Benefits and Costs of Proposed
           Energy Conservation Standards for Consumer Boilers
                                 [TSL 3]
------------------------------------------------------------------------
                                                           Billion 2022$
------------------------------------------------------------------------
                            3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.........................             3.1
Climate Benefits *......................................             2.0
Health Benefits **......................................             3.3
Total Monetized Benefits [dagger].......................             8.5
Consumer Incremental Product Costs [Dagger].............             0.8
Net Monetized Benefits..................................             7.6
Change in Producer Cashflow (INPV [Dagger][Dagger]).....   (0.06)-(0.04)
------------------------------------------------------------------------
                            7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.........................             1.1
Climate Benefits * (3% discount rate)...................             2.0
Health Benefits **......................................             1.1
Total Monetized Benefits [dagger].......................             4.3
Consumer Incremental Product Costs [Dagger].............             0.4
Net Monetized Benefits..................................             3.9
Change in Producer Cashflow (INPV [Dagger][Dagger]).....   (0.06)-(0.04)
------------------------------------------------------------------------
Note: This table presents present value (in 2022$) of the costs and
  benefits associated with consumer boilers shipped in 2030-2059. These
  results include benefits which accrue after 2059 from the products
  shipped in 2030-2059.
* Climate benefits are calculated using four different estimates of the
  social cost of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide
  (SC-N2O) (model average at 2.5-percent, 3-percent, and 5-percent
  discount rates; 95th percentile at 3-percent discount rate) (see
  section IV.L of this document). Together these represent the global SC-
  GHG. For presentational purposes of this table, the climate benefits
  associated with the average SC-GHG at a 3-percent discount rate are
  shown; however, DOE emphasizes the importance and value of considering
  the benefits calculated using all four sets of SC-GHG estimates. To
  monetize the benefits of reducing GHG emissions, this analysis uses
  the interim estimates presented in the Technical Support Document:
  Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates
  Under Executive Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX
  and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
  precursor health benefits and (for NOX) ozone precursor health
  benefits, but will continue to assess the ability to monetize other
  effects such as health benefits from reductions in direct PM2.5
  emissions. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
  health benefits that can be quantified and monetized. For presentation
  purposes, total and net benefits for both the 3-percent and 7-percent
  cases are presented using the average SC-GHG with 3-percent discount
  rate, but DOE does not have a single central SC-GHG point estimate.
  DOE emphasizes the importance and value of considering the benefits
  calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
  installation costs.

[[Page 55132]]

 
[Dagger][Dagger] Operating Cost Savings are calculated based on the life
  cycle costs analysis and national impact analysis as discussed in
  detail below. See sections IV.F and IV.H of this document. DOE's NIA
  includes all impacts (both costs and benefits) along the distribution
  chain beginning with the increased costs to the manufacturer to
  manufacture the product and ending with the increase in price
  experienced by the consumer. DOE also separately conducts a detailed
  analysis on the impacts on manufacturers (the MIA). See section IV.J
  of this document. In the detailed MIA, DOE models manufacturers'
  pricing decisions based on assumptions regarding investments,
  conversion costs, cashflow, and margins. The MIA produces a range of
  impacts, which is the rule's expected impact on the INPV. The change
  in INPV is the present value of all changes in industry cash flow,
  including changes in production costs, capital expenditures, and
  manufacturer profit margins. Change in INPV is calculated using the
  industry weighted average cost of capital value of 9.7 percent that is
  estimated in the manufacturer impact analysis (see chapter 12 of the
  NOPR TSD for a complete description of the industry weighted average
  cost of capital). For consumer boilers, those values are -$62 million
  and -$41 million. DOE accounts for that range of likely impacts in
  analyzing whether a TSL is economically justified. See section V.C of
  this document. DOE is presenting the range of impacts to the INPV
  under two markup scenarios: the Preservation of Gross Margin scenario,
  which is the manufacturer markup scenario used in the calculation of
  Consumer Operating Cost Savings in this table, and the Preservation of
  Operating Profit Markup scenario, where DOE assumed manufacturers
  would not be able to increase per-unit operating profit in proportion
  to increases in manufacturer production costs. DOE includes the range
  of estimated INPV in the above table, drawing on the MIA explained
  further in section IV.J, to provide additional context for assessing
  the estimated impacts of this proposal to society, including potential
  changes in production and consumption, which is consistent with OMB's
  Circular A-4 and E.O. 12866. If DOE were to include the INPV into the
  net benefit calculation for this proposed rule, the net benefits would
  range from $7.54 billion to $7.56 billion at 3-percent discount rate
  and would range from $3.84 billion to $3.86 billion at 7-percent
  discount rate. DOE seeks comment on this approach.

    The benefits and costs of the proposed standards can also be 
expressed in terms of annualized values. The monetary values for the 
total annualized net benefits are: (1) the reduced consumer operating 
costs, minus (2) the increase in product purchase prices and 
installation costs, plus (3) the monetized value of climate and health 
benefits of emission reductions, all annualized.\11\
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    \11\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2023, 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., 2030), and then discounted the present value from each year 
to 2023. Using the present value, DOE then calculated the fixed 
annual payment over a 30-year period, starting in the compliance 
year, that yields the same present value.
---------------------------------------------------------------------------

    The national operating cost savings are domestic private U.S. 
consumer monetary savings that occur as a result of purchasing the 
covered products and are measured for the lifetime of consumer boilers 
shipped in 2030-2059. The benefits associated with reduced emissions 
achieved as a result of the proposed standards are also calculated 
based on the lifetime of consumer boilers shipped in 2030-2059. Total 
benefits for both the 3-percent and 7-percent cases are presented using 
the average GHG social costs with 3-percent discount rate. Estimates of 
SC-GHG values are presented for all four discount rates in section 
IV.L.1 of this document.
    Table I.4 presents the total estimated monetized benefits and costs 
associated with the proposed standard, expressed in terms of annualized 
values. The results under the primary estimate are as follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced NOX and SO2 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated monetized cost of the 
standards proposed in this rule is $52 million per year in increased 
equipment costs, while the estimated annual benefits are $139 million 
in reduced equipment operating costs, $124 million in monetized climate 
benefits, and $137 million in monetized health benefits. In this case, 
the net monetized benefit would amount to $348 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated monetized cost of the proposed standards is $50 million per 
year in increased equipment costs, while the estimated annual monetized 
benefits are $188 million in reduced operating costs, $124 million in 
monetized climate benefits, and $204 million in in monetized air 
pollutant health benefits. In this case, the net benefit would amount 
to $466 million per year.

  Table I.4--Annualized Monetized Benefits and Costs of Proposed Energy
               Conservation Standards for Consumer Boilers
                                 [TSL 3]
------------------------------------------------------------------------
                                             Million 2022$/year
                                  --------------------------------------
                                                  Low-net-    High-net-
                                     Primary      benefits     benefits
                                     estimate     estimate     estimate
------------------------------------------------------------------------
                            3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings..          188          175          233
Climate Benefits *...............          124          121          144
Health Benefits **...............          204          200          237
Total Monetized Benefits [dagger]          516          496          613
Consumer Incremental Product                50           58           38
 Costs [Dagger]..................
Net Monetized Benefits...........          466          438          575
Change in Producer Cashflow (INPV      (6)-(4)      (6)-(4)      (6)-(4)
 [Dagger][Dagger])...............
------------------------------------------------------------------------
                            7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings..          139          129          169
Climate Benefits * (3% discount            124          121          144
 rate)...........................
Health Benefits **...............          137          135          158
Total Monetized Benefits [dagger]          400          385          470
Consumer Incremental Product                52           59           41
 Costs [Dagger]..................
Net Monetized Benefits...........          348          326          430

[[Page 55133]]

 
Change in Producer Cashflow (INPV      (6)-(4)      (6)-(4)      (6)-(4)
 [Dagger][Dagger])...............
------------------------------------------------------------------------
Note: This table presents the present value (in 2022$) of the costs and
  benefits associated with consumer boilers shipped in 2030-2059. These
  results include benefits which accrue after 2059 from the products
  shipped in 2030-2059. The Primary, Low-Net-Benefits, and High-Net-
  Benefits Estimates utilize projections of energy prices from the AEO
  2023 Reference case, Low-Economic-Growth case, and High-Economic-
  Growth case, respectively. In addition, incremental equipment costs
  reflect a constant trend in the Primary Estimate, an increasing rate
  in the Low-Net-Benefits Estimate, and a decreasing rate in the High-
  Net-Benefits Estimate. The methods used to derive projected price
  trends are explained in sections IV.F.1 and IV.H.3 of this document.
  Note that the Benefits and Costs may not sum to the Net Benefits due
  to rounding.
* Climate benefits are calculated using four different estimates of the
  global SC-GHG (see section IV.L of this document). For presentational
  purposes of this table, the climate benefits associated with the
  average SC-GHG at a 3-percent discount rate are shown; however, DOE
  emphasizes the importance and value of considering the benefits
  calculated using all four sets of SC-GHG estimates. To monetize the
  benefits of reducing GHG emissions, this analysis uses the interim
  estimates presented in the Technical Support Document: Social Cost of
  Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive
  Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX
  and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
  precursor health benefits and (for NOX) ozone precursor health
  benefits, but will continue to assess the ability to monetize other
  effects such as health benefits from reductions in direct PM2.5
  emissions. See section IV.L of this document for more details.
[dagger] Total benefits for both the 3-percent and 7-percent cases are
  presented using the average SC-GHG with 3-percent discount rate, but
  the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as
  installation costs.
[Dagger][Dagger] Operating Cost Savings are calculated based on the life
  cycle costs analysis and national impact analysis as discussed in
  detail below. See sections IV.F and IV.H of this document. DOE's NIA
  includes all impacts (both costs and benefits) along the distribution
  chain beginning with the increased costs to the manufacturer to
  manufacture the product and ending with the increase in price
  experienced by the consumer. DOE also separately conducts a detailed
  analysis on the impacts on manufacturers (the MIA). See section IV.J
  of this document. In the detailed MIA, DOE models manufacturers'
  pricing decisions based on assumptions regarding investments,
  conversion costs, cashflow, and margins. The MIA produces a range of
  impacts, which is the rule's expected impact on the INPV. The change
  in INPV is the present value of all changes in industry cash flow,
  including changes in production costs, capital expenditures, and
  manufacturer profit margins. The annualized change in INPV is
  calculated using the industry weighted average cost of capital value
  of 9.7 percent that is estimated in the manufacturer impact analysis
  (see chapter 12 of the NOPR TSD for a complete description of the
  industry weighted average cost of capital). For consumer boilers,
  those values are -$6 million and -$4 million. DOE accounts for that
  range of likely impacts in analyzing whether a TSL is economically
  justified. See section V.C of this document. DOE is presenting the
  range of impacts to the INPV under two markup scenarios: the
  Preservation of Gross Margin scenario, which is the manufacturer
  markup scenario used in the calculation of Consumer Operating Cost
  Savings in this table, and the Preservation of Operating Profit Markup
  scenario, where DOE assumed manufacturers would not be able to
  increase per-unit operating profit in proportion to increases in
  manufacturer production costs. DOE includes the range of estimated
  annualized change in INPV in the above table, drawing on the MIA
  explained further in section IV.J of this document, to provide
  additional context for assessing the estimated impacts of this
  proposal to society, including potential changes in production and
  consumption, which is consistent with OMB's Circular A-4 and E.O.
  12866. If DOE were to include the INPV into the annualized net benefit
  calculation for this proposed rule, the annualized net benefits would
  range from $460 million to $462 million at 3-percent discount rate and
  would range from $342 million to $344 million at 7-percent discount
  rate. DOE seeks comment on this approach.

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

D. Conclusion

    DOE has tentatively concluded that the proposed standards represent 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified, and would result in the 
significant conservation of energy. Specifically, with regards to 
technological feasibility, products achieving these standard levels are 
already commercially available for all product classes covered by this 
proposal. As for economic justification, DOE's analysis shows that the 
benefits of the proposed standard exceed, to a great extent, the 
burdens of the proposed standards.
    Using a 7-percent discount rate for consumer benefits and costs and 
NOX and SO2 reduction benefits, and a 3-percent 
discount rate case for GHG social costs, the estimated monetized cost 
of the proposed standards for consumer boilers is $52 million per year 
from increased consumer boiler costs, while the estimated annual 
monetized benefits are $139 million in reduced consumer boiler 
operating costs, $124 million in monetized climate benefits, and $137 
million in monetized air pollutant health benefits. The net monetized 
benefit amounts to $348 million per year.
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a given rulemaking.\12\ For 
example, some covered products and equipment have substantial energy 
consumption occur during periods of peak energy demand. The impacts of 
these products on the energy infrastructure can be more pronounced than 
products with relatively constant demand. Accordingly, DOE evaluates 
the significance of energy savings on a case-by-case basis.
---------------------------------------------------------------------------

    \12\ Procedures, Interpretations, and Policies for Consideration 
in New or Revised Energy Conservation Standards and Test Procedures 
for Consumer Products and Commercial/Industrial Equipment, 86 FR 
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------

    As previously mentioned, the proposed standards are projected to 
result in estimated national energy savings of 0.7 quads full-fuel-
cycle (FFC), the equivalent of the primary annual energy use of 6.5 
million homes, and NPV of total consumer benefits from $0.72 billion 
(at a 7-percent discount rate) to $2.27 billion (at a 3-percent 
discount rate) over the 30-year analysis period beginning with the 
expected compliance year (2030-2059). In addition, they are projected 
to reduce CO2 emissions by 44 Mt. Based on these findings, 
DOE has initially determined the energy savings from the proposed 
standard levels are ``significant'' within the meaning of 42 U.S.C. 
6295(o)(3)(B). A more detailed discussion of the basis for these 
tentative conclusions is contained in the remainder of this

[[Page 55134]]

document and the accompanying technical support document (TSD).\13\
---------------------------------------------------------------------------

    \13\ The TSD is available in the docket for this rulemaking at: 
www.regulations.gov/docket/EERE-2019-BT-STD-0036.
---------------------------------------------------------------------------

    DOE also considered more-stringent energy efficiency levels as 
potential standards, and is still considering them in this rulemaking. 
However, DOE has tentatively concluded that the potential burdens of 
the more-stringent energy efficiency levels would outweigh the 
projected benefits.
    Based on consideration of the public comments DOE receives in 
response to this document and related information collected and 
analyzed during the course of this rulemaking effort, DOE may adopt 
energy efficiency levels presented in this document that are either 
higher or lower than the proposed standards, or some combination of 
level(s) that incorporate the proposed standards in part.

II. Introduction

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

A. Authority

    EPCA, Public Law 94-163 (codified at 42 U.S.C. 6291-6317) 
authorizes DOE to regulate the energy efficiency of a number of 
consumer products and certain industrial equipment. Title III, Part B 
of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products 
include consumer boilers, the subject of this document. (42 U.S.C. 
6292(a)(5))
    EPCA prescribed energy conservation standards for these products 
(42 U.S.C. 6295(f)(3)), and the statute directed DOE to conduct future 
rulemakings to determine whether to amend these standards. (42 U.S.C. 
6295(f)(4)(C)) EPCA further provides that, not later than six years 
after the issuance of any final rule establishing or amending a 
standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a NOPR 
including new proposed energy conservation standards (proceeding to a 
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
    Under EPCA, the energy conservation program consists essentially of 
four parts: (1) testing, (2) labeling, (3) Federal energy conservation 
standards, and (4) certification and enforcement procedures. Relevant 
provisions of EPCA specifically include definitions (42 U.S.C. 6291), 
test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), 
energy conservation standards (42 U.S.C. 6295), and the authority to 
require information and reports from manufacturers (42 U.S.C. 6296).
    Federal energy efficiency requirements for covered products 
established under EPCA generally supersede State laws and regulations 
concerning energy conservation testing, labeling, and standards. (42 
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal 
preemption in limited circumstances for particular State laws or 
regulations, in accordance with the procedures and other provisions set 
forth under EPCA. (See 42 U.S.C. 6297(d))
    Subject to certain criteria and conditions, DOE is required to 
develop test procedures to measure the energy efficiency, energy use, 
or estimated annual operating cost of each covered product. (42 U.S.C. 
6295(o)(3)(A) and 6295(r)) Manufacturers of covered products must use 
the prescribed DOE test procedure as the basis for certifying to DOE 
that their products comply with the applicable energy conservation 
standards adopted under EPCA and when making representations to the 
public regarding the energy use or efficiency of those products. (42 
U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these 
test procedures to determine whether the products comply with standards 
adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures 
for consumer boilers appear at title 10 of the Code of Federal 
Regulations (CFR) part 430, subpart B, appendix EE.\14\
---------------------------------------------------------------------------

    \14\ On March 13, 2023, DOE published a final rule in the 
Federal Register amending the test procedure for consumer boilers 
and moving this test procedure to a new appendix EE effective on 
April 12, 2023. 88 FR 15510.
---------------------------------------------------------------------------

    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including consumer boilers. 
EPCA requires that any new or amended energy conservation standard for 
a covered product must be designed to achieve the maximum improvement 
in energy efficiency that the Secretary of Energy determines is 
technologically feasible and economically justified. (42 U.S.C. 
6295(o)(2)(A) and (o)(3)(B)) DOE may not adopt any standard that would 
not result in the significant conservation of energy. (42 U.S.C. 
6295(o)(3))
    Moreover, DOE may not prescribe a standard: (1) for certain 
products, including consumer boilers, if no test procedure has been 
established for the product, or (2) if DOE determines by rule that the 
standard is not technologically feasible or economically justified. (42 
U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make 
this determination after receiving comments on the proposed standard, 
and by considering, to the greatest extent practicable, the following 
seven statutory factors:

    (1) The economic impact of the standard on manufacturer and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price of, initial charges for, or maintenance 
expenses for the covered products that are likely to result from the 
standard;
    (3) The total projected amount of energy (or as applicable, 
water) savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the 
covered products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary of Energy (Secretary) considers 
relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
    Further, EPCA establishes a rebuttable presumption that a standard 
is economically justified if the Secretary finds that the additional 
cost to the consumer of purchasing a product complying with an energy 
conservation standard level will be less than three times the value of 
the energy savings during the first year that the consumer will receive 
as a result of the standard, as calculated under the applicable test 
procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    EPCA also contains what is known as an ``anti-backsliding'' 
provision, which prevents the Secretary from prescribing any amended 
standard that either increases the maximum allowable energy use or 
decreases the minimum required energy efficiency of a covered product. 
(42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended 
or new standard if interested persons have established by a 
preponderance of the evidence that the standard is likely to result in 
the unavailability in the United States in any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))

[[Page 55135]]

    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of product that has the same function or intended use, if DOE 
determines that products within such group: (A) consume a different 
kind of energy from that consumed by other covered products within such 
type (or class); or (B) have a capacity or other performance-related 
feature which other products within such type (or class) do not have 
and such feature justifies a higher or lower standard. (42 U.S.C. 
6295(q)(1)) In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE must 
consider such factors as the utility to the consumer of the feature and 
other factors DOE deems appropriate. Id. Any rule prescribing such a 
standard must include an explanation of the basis on which such higher 
or lower level was established. (42 U.S.C. 6295(q)(2))
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Pub. L. 110-140, any 
final rule for new or amended energy conservation standards promulgated 
after July 1, 2010, is required to address standby mode and off mode 
energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a 
standard for a covered product after that date, it must, if justified 
by the criteria for adoption of standards under EPCA (42 U.S.C. 
6295(o)), incorporate standby mode and off mode energy use into a 
single standard, or, if that is not feasible, adopt a separate standard 
for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) 
DOE's current test procedures for consumer boilers address standby mode 
and off mode energy use in separate metrics (PW,SB and 
PW,OFF, respectively). In this proposed rulemaking, DOE 
intends to consider these metrics in addition to the active mode 
metric, AFUE.

B. Background

1. Current Standards
    In a final rule published in the Federal Register on January 15, 
2016 (January 2016 Final Rule), DOE prescribed the current energy 
conservation standards for consumer boilers manufactured on and after 
January 15, 2021. 81 FR 2320, 2416-2417. These standards are set forth 
in DOE's regulations at 10 CFR 430.32(e)(2)(iii) and are repeated in 
Table II.1.

                    Table II.1--Federal Energy Conservation Standards for Consumer Boilers *
----------------------------------------------------------------------------------------------------------------
                                              AFUE        PW,SB        PW,OFF
              Product class                (percent)     (watts)      (watts)          Design requirements
                                               **        [dagger]     [dagger]
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water.....................           84            9            9  Constant-burning pilot not
                                                                                  permitted. Automatic means for
                                                                                  adjusting water temperature
                                                                                  required (except for boilers
                                                                                  equipped with tankless
                                                                                  domestic water heating coils).
Gas-fired Steam.........................           82            8            8  Constant-burning pilot not
                                                                                  permitted.
Oil-fired Hot Water.....................           86           11           11  Automatic means for adjusting
                                                                                  temperature required (except
                                                                                  for boilers equipped with
                                                                                  tankless domestic water
                                                                                  heating coils).
Oil-fired Steam.........................           85           11           11  None.
Electric Hot Water......................         None            8            8  Automatic means for adjusting
                                                                                  temperature required (except
                                                                                  for boilers equipped with
                                                                                  tankless domestic water
                                                                                  heating coils).
Electric Steam..........................         None            8            8  None.
----------------------------------------------------------------------------------------------------------------
* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric
  gauges, electric pumps, electric wires, or electric devices is not required to meet the AFUE or design
  requirements. Instead, such boilers must meet a minimum AFUE of 80 percent (for all classes except gas-fired
  steam), and 75 percent for gas-fired steam.
** AFUE stands for Annual Fuel Utilization Efficiency, as determined in 10 CFR 430.23(n)(2).
[dagger] PW,SB and PW,OFF stand for standby mode power consumption and off mode power consumption, respectively.

2. History of Standards Rulemaking for Consumer Boilers
    DOE initiated this rulemaking pursuant to its six-year-lookback 
authority under 42 U.S.C. 6295(m)(1). On March 25, 2021, DOE published 
in the Federal Register a request for information (RFI) that initiated 
an early assessment review to determine whether any new or amended 
standards would satisfy the relevant requirements of EPCA for a new or 
amended energy conservation standard for consumer boilers (March 2021 
RFI). 86 FR 15804. Specifically, through the March 2021 RFI, DOE sought 
data and information that could enable the agency to determine whether 
DOE should propose a ``no new standard'' determination because a more-
stringent standard: (1) would not result in a significant savings of 
energy; (2) is not technologically feasible; (3) is not economically 
justified; or (4) any combination of foregoing. Id. Additionally, DOE 
granted a 30-day comment extension for the March 2021 RFI (for a total 
of a 60-day comment period) in a notice published in the Federal 
Register on April 9, 2021. 86 FR 18478, 18479.
    Subsequently, on May 4, 2022, DOE published in the Federal Register 
a preliminary analysis and TSD for purposes of evaluating the need for 
amended energy conservation standards for consumer boilers (May 2022 
Preliminary Analysis). 87 FR 26304. The May 2022 Preliminary Analysis 
and TSD discussed the analytical framework, models, and tools used to 
evaluate potential standards, and the results of the preliminary 
analyses performed. Id. DOE held a public meeting webinar on June 16, 
2022, to receive comments on its May 2022 Preliminary Analysis for 
consumer boilers.
    DOE received comments in response to the May 2022 Preliminary 
Analysis from the interested parties listed in Table II.2.

[[Page 55136]]



                          Table II.2--May 2022 Preliminary Analysis Written Comments *
----------------------------------------------------------------------------------------------------------------
                                                                      Comment No. in
              Commenter(s)                       Abbreviation           the docket          Commenter type
----------------------------------------------------------------------------------------------------------------
American Gas Association, American        AGA, APGA, and NPGA.......              38  Utility Trade
 Public Gas Association, National                                                      Associations.
 Propane Gas Association.
Air-Conditioning, Heating, and            AHRI......................          40, 42  Manufacturer Trade
 Refrigeration Institute.                                                              Association.
Bradford White Corporation..............  BWC.......................              39  Manufacturer.
Crown Boiler Company....................  Crown.....................              30  Manufacturer.
Appliance Standards Awareness Project,    Joint Advocates...........              35  Efficiency Advocacy
 American Council for an Energy-                                                       Organizations.
 Efficient Economy, Consumer Federation
 of America, National Consumer Law
 Center, Natural Resources Defense
 Council.
Northwest Energy Efficiency Alliance....  NEEA......................              36  Efficiency Advocacy
                                                                                       Organization.
New York State Energy Research and        NYSERDA...................              33  State Agency.
 Development Authority.
PB Heat, LLC............................  PB Heat...................              34  Manufacturer.
Rheem Manufacturing Company.............  Rheem.....................              37  Manufacturer.
U.S. Boiler Company, Inc................  U.S. Boiler...............              31  Manufacturer.
Weil-McLain Technologies................  WMT.......................              32  Manufacturer.
----------------------------------------------------------------------------------------------------------------
* DOE received one additional comment to this docket that was not accessible and is not discussed further.

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\15\ 
To the extent that interested parties have provided written comments 
that are substantively consistent with any oral comments provided 
during the June 16, 2022 Preliminary Analysis public meeting webinar, 
DOE cites the written comments throughout this document.
---------------------------------------------------------------------------

    \15\ The parenthetical reference provides a reference for 
information located in the docket of DOE's rulemaking to develop 
energy conservation standards for consumer boilers. (Docket No. 
EERE-2019-BT-STD-0036, which is maintained at www.regulations.gov). 
The references are arranged as follows: (commenter name, comment 
docket ID number, page of that document).
---------------------------------------------------------------------------

C. Deviation From Appendix A

    In accordance with section 3(a) of 10 CFR part 430, subpart C, 
appendix A (appendix A), DOE notes that it deviated from the provision 
at section 6(a)(2) in appendix A regarding the pre-NOPR stages for an 
energy conservation standards rulemaking (specifically, the publication 
of a framework document). As initially discussed in the May 2022 
Preliminary Analysis, DOE opted to deviate from this step by publishing 
a preliminary analysis without a framework document. A framework 
document is intended to introduce and summarize the various analyses 
DOE conducts during the rulemaking process and requests initial 
feedback from interested parties. As noted in the May 2022 Preliminary 
Analysis, prior to that document, DOE published an RFI in the Federal 
Register in which DOE identified and sought comment on the analyses 
conducted in support of the most recent energy conservation standards 
rulemakings for boilers. 87 FR 26304, 26307 (May 4, 2022).
    In accordance with section 3(a) of appendix A, DOE notes that it is 
deviating from the provision in appendix A specifying that there will 
not be less than 75 days for public comment on the NOPR (section 
6(f)(2) of appendix A). The public comment period on this NOPR will be 
60 days. DOE is opting to deviate from this step because the May 2022 
Preliminary Analysis already allowed stakeholders an opportunity to 
comment on the analytical methods and subsequent preliminary results. 
Additionally, DOE extended the comment period for the March 2021 RFI by 
30 days for a total of a 60-day comment period. 86 FR 18478, 18479 
(April 9, 2021). This NOPR relies on the same overall approach, but has 
updated the analyses to incorporate stakeholder feedback in response to 
the preliminary results. Consequently, DOE has concluded that that a 
comment period of 60 days is appropriate and will provide interested 
parties a meaningful opportunity to comment on the proposed rule.
    DOE notes that it is not deviating from the provisions in section 
8(d)(1) of appendix A, which state that a test procedure final rule 
should be published at least 180 days prior to the close of a comment 
period of a NOPR proposing amended standards for the products within 
the scope of the test procedure final rule. Specifically, section 
8(d)(1) pertains to test procedure amendments that impact measured 
energy use or efficiency. Most recently, DOE published a test procedure 
final rule in the Federal Register on March 13, 2023. 88 FR 15510. In 
this final rule, DOE concluded that the updates to the test procedure 
have minimal impact on AFUE ratings and that manufacturers will be able 
to rely on data generated under the previous version of that test 
procedure. Thus, an analysis of potential amended energy conservation 
standards for consumer boilers can be carried out using current 
performance data, so the 180-day requirement does not apply.

III. General Discussion

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

A. General Comments

    This section summarizes general comments received from interested 
parties regarding rulemaking timing and process.
    AGA, APGA, and NPGA requested that DOE host a workshop to walk 
through the Department's analytical approach for stakeholders and the 
public in general, because these commenters suggested that the TSDs and 
associated spreadsheets are complex and appear not to be consistent 
across product categories. (AGA, APGA, NPGA, No. 38 at p. 4)
    In response, DOE notes that the Department posts its TSDs and 
spreadsheet analyses to the rulemaking docket found at regulations.gov 
in order to provide transparency into the methodology used to arrive at 
the results presented in this NOPR. As stated in the DATES section of 
this proposed rule, DOE will host a public meeting via webinar which 
will include an overview of DOE's methodology and provide an 
opportunity for stakeholders to provide additional comments or pose 
questions on this topic.

[[Page 55137]]

    Crown and U.S. Boiler stated that a 60-day comment period was 
insufficient to review the May 2022 Preliminary Analysis, given that 
several calculations and underlying assumptions have changed since the 
previous rulemaking. (Crown, No. 30 at p. 2; U.S. Boiler, No. 31 at p. 
1)
    As explained in the May 2022 Preliminary Analysis, DOE opted to 
provide a 60-day comment period because the Department had already 
requested comment in the March 2021 RFI on its energy conservation 
standards analyses. DOE incorporated then most recent data inputs but 
largely relied on many of the same analytical assumptions and 
approaches used in the previous rulemaking, such that the agency 
determined that a 60-day comment period in conjunction with the prior 
comment period for the March 2021 RFI provided sufficient time for 
interested parties to review the preliminary analysis and develop 
comments. 87 FR 26304, 26307 (May 4, 2022). Further, DOE notes that it 
is providing an additional 60-day comment period for this NOPR, which 
again relies on the same analytical structure as the May 2022 
Preliminary Analysis.

B. Scope of Coverage

    Consumer boilers are appliances that transfer heat using combustion 
gases or electricity to water to provide hot water or steam for space 
heating.
    Consumer boilers are defined in EPCA as a type of furnace. 
Specifically, the term ``furnace'' is defined as a product which 
utilizes only single-phase electric current, or single-phase electric 
current or direct current in conjunction with natural gas, propane, or 
home heating oil, and which--
    Is designed to be the principal heating source for the living space 
of a residence;
    Is not contained within the same cabinet with a central air 
conditioner whose rated cooling capacity is above 65,000 Btu per hour 
(Btu/h);
    Is an electric central furnace, electric boiler, forced-air central 
furnace, gravity central furnace, or low pressure steam or hot water 
boiler; and
    Has a heat input rate of less than 300,000 Btu/h for electric 
boilers and low pressure steam or hot water boilers and less than 
225,000 Btu/h for forced-air central furnaces, gravity central furnace, 
and electric central furnaces. (42 U.S.C. 6291(23))
    DOE has codified definitions for the terms ``electric boiler'' and 
``low pressure steam or hot water boiler'' in its regulations as 
follows:
    Electric boiler means an electrically powered furnace designed to 
supply low pressure steam or hot water for space heating application. A 
low pressure steam boiler operates at or below 15 pounds per square 
inch gauge (psig) steam pressure; a hot water boiler operates at or 
below 160 psig water pressure and 250 degrees Fahrenheit ([deg]F) water 
temperature.
    Low pressure steam or hot water boiler means an electric, gas, or 
oil-burning furnace designed to supply low pressure steam or hot water 
for space heating application. A low pressure steam boiler operates at 
or below 15 psig steam pressure; a hot water boiler operates at or 
below 160 psig water pressure and 250 [deg]F water temperature.
    10 CFR 430.2.
    In the May 2022 Preliminary Analysis, DOE requested comment on 
hydronic heat pumps as technology options for consumer boilers. (See 
the Executive Summary of the preliminary analysis TSD). In response, 
the Department received multiple comments regarding the classification 
of hydronic heat pump boilers. Hydronic heat pumps, commonly air-to-
water heat pumps, are systems that use the refrigeration cycle to heat 
or chill water for domestic hot water or space conditioning use.
    Crown and U.S. Boiler stated that heat pumps should not be 
classified as boilers due to their inability to generate water 
temperatures high enough to satisfy the design heating load of the vast 
majority of the residential hot water heating systems in the United 
States. (Crown, No. 30 at p. 3; U.S. Boiler, No. 31 at p. 3) BWC also 
disagreed with DOE's interpretation in the May 2022 Preliminary 
Analysis that air-to-water and water-to-water heat pumps (heat pump 
products) should be considered as consumer boilers, stating that heat 
pump products have pronounced differences that separate them from 
boilers. BWC also claimed that DOE has listed the two products 
separately on their website, as well as in DOE's Compliance 
Certification Management System (CCMS) database. (BWC, No. 39 at p. 1) 
AHRI similarly commented that heat pumps should not be included under 
the current regulatory definitions for boilers and boiler product 
classes, as the products cannot reach the same water temperature as 
conventional boilers and cannot provide sufficient heating year-round 
without assistance. AHRI recommended DOE update the current definition 
of a ``boiler'' to include the ability to provide the required heat on 
the coldest day of the year. AHRI further recommended that given the 
difference in the form, fit, and function of heat pumps and 
conventional boilers, DOE should establish a separate definition and 
product class for these heat pump products. (AHRI, No. 40 at p. 3)
    In contrast, Rheem, NYSERDA, the Joint Advocates, and NEEA all 
suggested that heat pump boilers are capable of meeting home heating 
design loads and should be considered as consumer boilers. (Rheem, No. 
37 at p. 3; NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35 at pp. 1-
2; NEEA, No. 36 at pp. 1-2) Rheem also stated that while heat pumps may 
not reach the same maximum temperatures as conventional products, heat 
pumps can provide adequate space heating in many applications. (Rheem, 
No. 37 at p. 2)
    In the March 2023 TP Final Rule, which was the most recent 
rulemaking amending the consumer boiler test procedure, DOE addressed 
similar comments suggesting hydronic air-to-water heat pump boilers and 
water-to-water heat pump boilers should be excluded from the ``boiler'' 
definitions because they cannot provide the same maximum water 
temperature as non-heat pump hydronic systems. Specifically, in the 
March 2023 TP Final Rule, DOE noted that neither the EPCA definition 
nor DOE's definitions at 10 CFR 430.2 for consumer boilers provide a 
minimum water temperature requirement and, thus, do not exclude 
hydronic heat pump boilers from being considered as consumer boilers. 
DOE also noted in the March 2023 TP Final Rule that hydronic heat pump 
boilers are marketed as providing the principal heating source for a 
residence. 88 FR 15510, 15515-15516 (March 13, 2023).
    In response to the comments received on the May 2022 Preliminary 
Analysis, DOE again reviewed the market for hydronic heat pumps. Based 
on its review of the hydronic heat pumps currently on the market, DOE 
agrees with Rheem, NYSERDA, the Joint Advocates, and NEEA that hydronic 
heat pumps can provide enough space heating to serve home design loads 
in many applications. These products utilize only single-phase electric 
current or direct current in conjunction with natural gas, propane, or 
home heating oil, can be designed to be the principal heating source 
for the living space of a residence, are not contained within the same 
cabinet with a central air conditioner whose rated cooling capacity is 
above 65,000 Btu/h, meet the definition of an ``electric boiler,'' and 
have a heat input rate of less than 300,000 Btu/h (i.e., the 
requirement for electric boilers). As such, hydronic heat pumps which 
are designed to be the principal heating source of the living

[[Page 55138]]

space of a residence meet the criteria of ``furnace'' as defined in 
EPCA at 42 U.S.C. 6291(23). Further, the Department notes that these 
products also meet DOE's codified regulatory definition for ``low 
pressure steam or hot water boiler.'' Therefore, DOE considers hydronic 
heat pumps to be within the scope of coverage for consumer boilers. 
However, as discussed in section III.C of this document, there is no 
currently-applicable test procedure for hydronic heat pump consumer 
boilers, and as a result, DOE has not considered these products further 
in this NOPR.
    In this NOPR, DOE has considered products which meet the 
definitions for ``electric boiler'' and ``low pressure steam or hot 
water boiler'' to be consumer boilers within the scope of this 
rulemaking, with the exception of hydronic heat pump boilers, for which 
there is currently no applicable test procedure to determine compliance 
with standards.
    See section IV.A.1 of this document for discussion of the product 
classes analyzed in this NOPR.

C. Test Procedure

    EPCA sets forth generally applicable criteria and procedures for 
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) 
Manufacturers of covered products must use these test procedures to 
quantify the efficiency of their product, to certify to DOE that their 
product complies with energy conservation standards, and when making 
efficiency-related representations to the public. (42 U.S.C. 6293(c) 
and 42 U.S.C. 6295(s)) EPCA states that the AFUE is the efficiency 
descriptor for furnaces and boilers (See 42 U.S.C. 6291(20) and (22)); 
however, as discussed in section II.A of this document, DOE is required 
to also account for standby mode and off mode energy consumption. 
Accordingly, for the current consumer boiler energy conservation 
standards, AFUE is the active mode efficiency metric, while 
PW,SB and PW,OFF are the metrics for standby mode 
and off mode electrical energy consumption, respectively (see 10 CFR 
430.32(e)(2)(iii)). All three of these metrics are measured by the DOE 
test procedure for consumer boilers.
    On March 13, 2023, DOE published a final rule in the Federal 
Register amending the test procedure for consumer boilers (March 2023 
TP Final Rule). 88 FR 15510. The amended test procedure became 
effective on April 12, 2023.
    Prior to April 12, 2023, the DOE test procedure for determining the 
AFUE, PW,SB, and PW,OFF of consumer boilers was 
located at appendix N to subpart B of 10 CFR part 430 (appendix N) and 
referenced American Society of Heating, Refrigerating and Air-
Conditioning Engineers (ASHRAE) Standard 103-1993, ``Method of Testing 
for Annual Fuel Utilization Efficiency of Residential Central Furnaces 
and Boilers'' \16\ and International Electrotechnical Commission (IEC) 
62301 (Edition 2.0), ``Household electrical appliances--Measurement of 
standby power.'' AFUE is an annualized fuel efficiency metric that 
fully accounts for fuel consumption in active, standby, and off modes 
but does not include auxiliary electrical energy consumption. 
PW,SB and PW,OFF are measures of the standby mode 
and off mode power consumption, respectively, in watts.
---------------------------------------------------------------------------

    \16\ American Society for Testing and Materials (ASTM) Standard 
D2159-09 (Reapproved 2013), ``Standard test methods and procedures 
for Smoke Density in Flue Gases From Burning Distillate Fuels,'' 
(ASTM D2156-09 (R2013)) is also referenced by the appendix EE test 
procedure for setting up oil-fired burners.
---------------------------------------------------------------------------

    In the March 2023 TP final rule, DOE updated appendix N to remove 
the provisions applicable only to consumer boilers and to rename the 
appendix ``Uniform Test Method for Measuring the Energy Consumption of 
Furnaces.'' Correspondingly, the final rule established a new test 
procedure specific to consumer boilers in a new appendix EE to subpart 
B of 10 CFR part 430 (appendix EE). On and after September 11, 2023, 
manufacturers will be required to use the amended test procedure 
(though manufacturers may opt to do so early (i.e., any time after 
April 12, 2023)), per the March 2023 TP Final Rule, to determine 
ratings for consumer boilers. The amended test procedure located at 
appendix EE consists of all provisions that were previously included in 
appendix N relevant to consumer boilers, with the following 
modifications:
    Incorporating by reference the current revision to the applicable 
industry standard, American National Standards Institute (ANSI)/ASHRAE 
Standard 103-2017, ``Methods of Testing for Annual Fuel Utilization 
Efficiency of Residential Central Furnaces and Boilers;''
    Incorporating by reference the current revision of American Society 
for Testing and Materials (ASTM) Standard D2156-09 (Reapproved 2018), 
``Standard Test Method for Smoke Density in Flue Gases from Burning 
Distillate Fuels;''
    Incorporating by reference ANSI/ASHRAE Standard 41.6-2014, 
``Standard Method for Humidity Measurement;''
    Updating the definitions to reflect the changes in ANSI/ASHRAE 103-
2017 as compared to ANSI/ASHRAE 103-1993;
    Removing the definition of ``outdoor furnace or boiler'' from 10 
CFR 430.2;
    Making certain corrections to improve the accuracy, repeatability, 
and reproducibility of calculations within the test procedure.
    88 FR 15510, 15512-15513 (March 13, 2023).
    DOE determined that the amendments in the March 2023 TP Final Rule 
would minimally impact the measured efficiency of certain consumer 
boilers, and retesting and re-rating would not be required. 88 FR 
15510, 15514 (March 13, 2023). Therefore, DOE expects that the energy 
efficiency and energy consumption ratings currently achieved are still 
representative of ratings that would be achieved under the revised test 
method. As a result, DOE evaluated potential amended energy 
conservation standards for consumer boilers using current market data.
    As discussed in section III.B of this document, DOE has become 
aware of hydronic air-to-water and water-to-water heat pumps, which DOE 
has determined meet the definitional criteria to be classified as 
consumer boilers. However, the AFUE metric described in ASHRAE 103-2017 
(which is incorporated by reference into appendix EE) calculates the 
efficiency of an electric boiler as 100 percent minus jacket loss,\17\ 
which provides a representative measure of efficiency for electric 
boilers using electric resistance technology, for which an efficiency 
value of 100 percent (the ratio of heat output to energy input) is the 
maximum upper limit that technically could be achieved. DOE concluded 
that the AFUE metric would not provide a representative or meaningful 
measure of efficiency for a boiler with a heat pump supplying the heat 
input, because heat pump efficiency (in terms of heat output to energy 
input) typically exceeds 100 percent, and the AFUE metric does not 
allow for ratings greater than 100 percent for electric boilers. 88 FR 
15510, 15515 (March 13, 2023). Similarly, the ASHRAE 103-2017 test 
procedure assumes a maximum value of 100 percent for gas-fired and oil-
fired boilers when calculating the steady-state efficiency and heating 
seasonal efficiency, such that the methodology would not result in 
representative AFUE

[[Page 55139]]

values for gas-fired or oil-fired absorption heat pump boilers.
---------------------------------------------------------------------------

    \17\ The term ``jacket loss'' is used by industry to mean the 
transfer of heat from the outer surface (i.e., jacket) of a boiler 
to the ambient air surrounding the boiler.
---------------------------------------------------------------------------

    Rheem, NYSERDA, the Joint Advocates, and NEEA all urged DOE to 
develop a test procedure for heat pump consumer boilers. (Rheem, No. 37 
at p. 3; NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35 at p. 2; 
NEEA, No. 36 at p. 2)
    DOE will consider heat pump boilers when re-evaluating the test 
procedure for consumer boilers in a future rulemaking. As noted in 
section III.B of this document, due to the lack of a Federal test 
procedure at this time which adequately addresses AFUE for heat pump 
boilers, DOE has initially determined not to analyze heat pump boilers 
in this standards rulemaking. However, the standby mode and off mode 
power consumption test procedures in appendix EE remain applicable to 
heat pump boilers; hence, these metrics are required for heat pump 
boilers. Similarly, the statutory design requirements at 10 CFR 
430.32(e)(2)(iii)(A) apply to these products.

D. Boilers Not Requiring Electricity

    On July 28, 2008, DOE published a final rule technical amendment in 
the Federal Register to codify the requirements that would be 
applicable to consumer boilers as established in the Energy 
Independence and Security Act of 2007. 73 FR 43611. That final rule 
codified, as per the statute, that a boiler that is manufactured to 
operate without any need for electricity or any electric connection, 
electric gauges, electric pumps, electric wires, or electric devices 
shall not be required to meet the current minimum AFUE standards or 
design requirements for consumer boilers. Id. at 73 FR 43613.
    As a result of this statutory exception, the regulations require 
that boilers manufactured to operate without any need for electricity 
or any electric connection, electric gauges, electric pumps, electric 
wires, or electric devices must still meet the minimum AFUE 
requirements in 10 CFR 430.32(e)(2)(i)--namely, a minimum AFUE of 80 
percent (for all classes except gas-fired steam boilers), and 75 
percent for gas-fired steam boilers.
    In subsequent final rules, including the January 2016 final rule, 
DOE maintained this exception for boilers not requiring electricity as 
required by EPCA; however, the codified language had a technical error 
wherein the exception inadvertently only applied to boilers 
manufactured on or after September 1, 2012, and before January 15, 2021 
(see 10 CFR 430.32(e)(2)(v), which only references 10 CFR 
430.32(e)(2)(ii)). The provisions at 10 CFR 430.32(e)(2)(v) apply also 
to boilers manufactured on or after January 15, 2021 (which must meet 
the requirements at 10 CFR 430.32(e)(2)(iii)).
    In this NOPR, DOE proposes to make technical amendments to the 
standards for consumer boilers to clarify that the aforementioned 
exceptions continue to apply.

E. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially-available products or in working prototypes to be 
technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix 
A.
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; (3) adverse impacts on 
health or safety, and (4) unique-pathway proprietary technologies. 
Sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A. Section IV.B of 
this document discusses the results of the screening analysis for 
consumer boilers, particularly the designs DOE considered, those it 
screened out, and those that are the basis for the potential standards 
considered in this rulemaking. For further details on the screening 
analysis for this rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for consumer 
boilers, using the design parameters for the most efficient products 
available on the market or in working prototypes. The max-tech levels 
that DOE determined for this rulemaking are described in section 
IV.C.1.b of this document and in chapter 5 of the NOPR TSD.

F. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from application of the 
TSL to consumer boilers purchased in the 30-year period that begins in 
the year of compliance with the proposed standards (2030-2059).\18\ The 
savings are measured over the entire lifetime of consumer boilers 
purchased in the previous 30-year period. DOE quantified the energy 
savings attributable to each TSL as the difference in energy 
consumption between each standards case and the no-new-standards case. 
The no-new-standards case represents a projection of energy consumption 
that reflects how the market for a product would likely evolve in the 
absence of new or amended energy conservation standards.
---------------------------------------------------------------------------

    \18\ Each TSL is composed of specific efficiency levels for each 
product class. The TSLs considered for this NOPR are described in 
section V.A of this document. DOE conducted a sensitivity analysis 
that considers impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet model to 
estimate national energy savings (NES) from potential amended or new 
standards for consumer boilers. The NIA spreadsheet model (described in 
section IV.H of this document) calculates energy savings in terms of 
site energy, which is the energy directly consumed by products at the 
locations where they are used. For electricity, DOE reports national 
energy savings in terms of primary energy savings, which is the savings 
in the energy that is used to generate and transmit the site 
electricity. For natural gas, the primary energy savings are considered 
to be equal to the site energy savings. DOE also calculates NES in 
terms of FFC energy savings. The FFC metric includes the energy 
consumed in extracting, processing, and transporting primary fuels 
(i.e., coal, natural gas, petroleum fuels), and, thus, presents a more 
complete picture of the impacts of energy conservation standards.\19\ 
DOE's approach is based on the calculation of an FFC multiplier for 
each of the energy

[[Page 55140]]

types used by covered products or equipment. For more information on 
FFC energy savings, see section IV.H.2 of this document.
---------------------------------------------------------------------------

    \19\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51281 (August 18, 2011), as 
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt any new or amended standards for a covered product, DOE 
must determine that such action would result in significant energy 
savings. (42 U.S.C. 6295(o)(3)(B))
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a given rulemaking.\20\ For 
example, some covered products and equipment have most of their energy 
consumption occur during periods of peak energy demand. The impacts of 
these products on the energy infrastructure can be more pronounced than 
products with relatively constant demand. Accordingly, DOE evaluates 
the significance of energy savings on a case-by-case basis, taking into 
account the significance of cumulative FFC national energy savings, the 
cumulative FFC emissions reductions, and the need to confront the 
global climate crisis, among other factors. DOE has initially 
determined the energy savings from the proposed standard levels are 
``significant'' within the meaning of 42 U.S.C. 6295(o)(3)(B).
---------------------------------------------------------------------------

    \20\ The numeric threshold for determining the significance of 
energy savings, established in a final rule published in the Federal 
Register on February 14, 2020 (85 FR 8626, 8670), was subsequently 
eliminated in a final rule published in the Federal Register on 
December 13, 2021 (86 FR 70892, 70906), which went into effect on 
January 12, 2022.
---------------------------------------------------------------------------

G. Economic Justification

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

[[Page 55141]]

the Attorney General with a request that the Department of Justice 
(DOJ) provide its determination on this issue. DOE will publish and 
respond to the Attorney General's determination in the final rule. DOE 
invites comment from the public regarding the competitive impacts that 
are likely to result from this proposed rule. In addition, stakeholders 
may also provide comments separately to DOJ regarding these potential 
impacts. See the ADDRESSES section for information to send comments to 
DOJ.
f. Need for National Energy Conservation
    DOE also considers the need for national energy and water 
conservation in determining whether a new or amended standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy 
savings from the proposed standards are likely to provide improvements 
to the security and reliability of the Nation's energy system. 
Reductions in the demand for electricity also may result in reduced 
costs for maintaining the reliability of the Nation's electricity 
system. DOE conducts a utility impact analysis to estimate how 
standards may affect the Nation's needed power generation capacity, as 
discussed in section IV.M of this document.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. The proposed standards are likely to result in 
environmental benefits in the form of reduced emissions of air 
pollutants and GHGs associated with energy production and use. DOE 
conducts an emissions analysis to estimate how potential standards may 
affect these emissions, as discussed in section IV.K of this document; 
the estimated emissions impacts are reported in section V.B.6 of this 
document. DOE also estimates the economic value of emissions reductions 
resulting from the considered TSLs, as discussed in section IV.L of 
this document.
g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To 
the extent DOE identifies any relevant information regarding economic 
justification that does not fit into the other categories described 
previously, DOE could consider such information under ``other 
factors.''
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic analysis that considers 
the full range of impacts to consumers, manufacturers, the Nation, and 
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section IV.F.9 and results reported in section V.B.1.c 
of this document.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to consumer boilers. Separate subsections 
address each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards proposed in this document. The first tool is a spreadsheet 
that calculates the LCC savings and PBP of potential amended or new 
energy conservation standards. The national impacts analysis uses a 
second spreadsheet set that provides shipments projections and 
calculates national energy savings and net present value of total 
consumer costs and savings expected to result from potential energy 
conservation standards. DOE uses the third spreadsheet tool, the 
Government Regulatory Impact Model (GRIM), to assess manufacturer 
impacts of potential standards. These three spreadsheet tools are 
available on the DOE website for this proposed rulemaking: 
www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=45&action=viewcurrent. Additionally, DOE used 
output from the latest version of the Energy Information 
Administration's (EIA's) Annual Energy Outlook (AEO), a widely known 
energy projection for the United States, for the emissions and utility 
impact analyses.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly-available 
information. The subjects addressed in the market and technology 
assessment for this proposed rulemaking include: (1) a determination of 
the scope of the rulemaking and product classes, (2) manufacturers and 
industry structure, (3) existing efficiency programs, (4) shipments 
information, (5) market and industry trends; and (6) technologies or 
design options that could improve the energy efficiency of consumer 
boilers. The key findings of DOE's market assessment are summarized in 
the following sections. See chapter 3 of the NOPR TSD for further 
discussion of the market and technology assessment.
1. Product Classes
    When evaluating and establishing energy conservation standards, DOE 
may establish separate standards for a group of covered products (i.e., 
establish a separate product class) if DOE determines that separate 
standards are justified based on the type of energy used, or if DOE 
determines that a product's capacity or other performance-related 
feature justifies a different standard. (42 U.S.C. 6295(q)) In making a 
determination whether a performance-related feature justifies a 
different standard, DOE must consider such factors as the utility of 
the feature to the consumer and other factors DOE determines are 
appropriate. (Id.)
    The current product classes are divided by the type of energy used 
(i.e., gas, oil, or electricity) and by the heat transfer medium (i.e., 
steam or hot water) as shown in Table IV.1. (See 10 CFR 430.32(e)(2)) 
The current product classes were originally established by EISA 2007 
and are codified at 10 CFR 430.32(e)(2)(iii)(A).

[[Page 55142]]



               Table IV.1--Consumer Boiler Product Classes
------------------------------------------------------------------------
                 Fuel type                      Heat transfer medium
------------------------------------------------------------------------
Gas.......................................  Steam.
                                            Hot Water.
Oil.......................................  Steam.
                                            Hot Water.
Electric..................................  Steam.
                                            Hot Water.
------------------------------------------------------------------------

    In the May 2022 Preliminary Analysis, DOE maintained these product 
classes, and the Department solicited feedback on whether any 
additional product classes would be necessary for consumer boilers, 
including a potential consideration for hydronic heat pump boilers. 
(See the Executive Summary of the preliminary analysis TSD). Multiple 
stakeholders provided feedback on potential additional product classes 
for fossil fuel-fired hot water boilers and hydronic heat pump boilers, 
as discussed in the subsections that follow.
a. Fossil Fuel-Fired Hot Water Boilers \21\
---------------------------------------------------------------------------

    \21\ As discussed in chapter 3 of the NOPR TSD, due to the high 
temperature of steam, condensing operation is not utilized in steam 
boilers, and all steam boilers on the market are non-condensing. 
Therefore, the discussion in this section is only applicable to hot 
water boilers.
---------------------------------------------------------------------------

    On December 29, 2021, DOE published in the Federal Register a final 
interpretive rule for consumer furnaces, commercial water heaters, and 
similarly situated products or equipment (the December 2021 
Interpretive Rule), which explained DOE's return to its historic 
position that, among other things, non-condensing technology and 
associated venting of the flue gases is not a performance-related 
``feature'' that provides a distinct consumer utility under EPCA.\22\ 
86 FR 73947.
---------------------------------------------------------------------------

    \22\ For more information, see www.regulations.gov/docket/EERE-2018-BT-STD-0018 (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    In the May 2022 Preliminary Analysis, DOE addressed several 
comments on the March 2021 RFI from stakeholders requesting that the 
Department consider non-condensing technology and associated venting to 
be a performance-related feature, (see chapter 2 of the preliminary 
TSD), and DOE maintained its position that non-condensing technology 
does not constitute a performance-related ``feature,'' consistent with 
the December 2021 Interpretive Rule. 87 FR 26304, 26308 (May 4, 2022). 
In response to the May 2022 Preliminary Analysis, commenters provided 
follow-up feedback with more information regarding how condensing 
versus non-condensing technology would affect the applicable venting 
categories.
    As discussed in chapter 3 of the NOPR TSD, manufacturers generally 
provide specific venting instructions based on the characteristics of 
the heating appliance. The National Fire Protection Association (NFPA) 
and ANSI maintain NFPA 54/ANSI Z223.1, ``National Fuel Gas Code,'' 
which assigns four venting categories to gas-fired appliances. Category 
I venting is for nonpositive vent static pressures \23\ and limited 
flue gas condensate \24\ production in the vent; Category II venting is 
for nonpositive vent static pressures and excessive condensate 
production in the vent; Category III venting is for positive vent 
static pressures and limited condensate production in the vent, and 
Category IV venting is for positive vent static pressures and excessive 
condensate production in the vent. Non-condensing boilers can use 
Category I venting, which is compatible with natural draft vent systems 
that use chimney venting, but condensing boilers require category IV 
venting, which is not compatible with natural draft vent systems. 
(Category II venting is not common for consumer boilers, and Category 
III venting can be used for non-condensing boilers but is also not 
compatible with natural draft vent systems.)
---------------------------------------------------------------------------

    \23\ Static pressure is the pressure created by a fluid at rest 
relative to the measurement instrument. Here non-positive static 
pressure refers to the flue gases having a pressure lower than 
atmospheric pressure so no assistance is needed for the flue gases 
to escape through the vent system.
    \24\ Condensate refers to the moisture that condenses inside 
venting systems when the flue gas is cooled to below the dew point 
and liquid begins to condense on the walls of the vent system.
---------------------------------------------------------------------------

    Crown and U.S. Boiler stated that the ability to vent residential 
boilers using Category I venting is a feature that must be preserved 
due to boilers being a primarily replacement market in older urban 
areas with limited exterior wall space suitable for a vent terminal, 
and they recommended that there should be a product class for Category 
I boilers. Crown stated that the elimination of Category I venting 
would result in the need for extensive renovations to some existing 
structures if the chimney can no longer be used, the potential for 
boilers to be used long after they are a safe option, the potential use 
of less safe heating equipment such as electric space heaters, or the 
possibility of poor venting reconfigurations that could lead to safety 
issues. Crown and U.S. Boiler stated that these ramifications cannot be 
addressed in the standards cost-benefit analysis. Crown and U.S. Boiler 
pointed to the preliminary TSD, which discussed that both the United 
Kingdom and European Union have exceptions to their condensing boiler 
standards that allow for installation of non-condensing boilers in 
difficult installation circumstances. (Crown, No. 30 at pp. 2-3; U.S. 
Boiler, No. 31 at p. 2)
    WMT stated that it believes that EPCA (42 U.S.C. 6295(o)(4)) 
prohibits the elimination of non-condensing hot water boilers, and non-
condensing operation constitutes a product feature per EPCA that 
warrants a separate product class under 42 U.S.C. 6295(q)(1), as stated 
by DOE in the January 2021 Interpretative Rule (86 FR 4776). (WMT, No. 
32 at pp. 1-2) WMT suggested that non-condensing boilers in Category I 
venting should be a separate product class in order to recognize that 
these products operate at 180 [deg]F return water temperatures, vent 
through Category I venting, and may be installed in insufficiently-
insulated homes. WMT asserted that these homes also do not have the 
ability to increase heat emitter surface area, and, thus, the various 
efficiency levels analyzed in the preliminary analysis could not be 
achieved by this hypothetical new product class. (WMT, No. 32 at p. 7)
    PB Heat advocated for a separate product class for non-condensing 
boilers, claiming that this action would secure cost-effective products 
for consumers, in terms of product lifespan and maintenance, as well as 
maintaining the consumer boiler replacement market. (PB Heat, No. 34 at 
p. 2)
    In contrast, NYSERDA stated that condensing and non-condensing 
boilers should remain in the same product class because condensing 
operation is not a performance-related feature. NYSERDA indicated that 
challenging installations represent a small proportion of the market. 
NYSERDA provided data showing that almost 40 percent of all furnaces 
and boilers in New York achieve a condensing level of performance,\25\ 
and commented that DOE's estimate that fewer than 5 percent of 
installations could be labeled as challenging is well-supported and 
reflective of the significant gain of market share that condensing 
products have achieved over the last twenty years. (NYSERDA, No. 33 at 
p. 3)
---------------------------------------------------------------------------

    \25\ NYSERDA provided information from its 2019 Residential 
Building Stock Assessment, found online at www.nyserda.ny.gov/About/Publications/Building-Stock-and-Potential-Studies/Residential-Building-Stock-Assessment (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    The Joint Advocates likewise supported DOE's decision to evaluate 
condensing and non-condensing boilers within a single product class (as

[[Page 55143]]

discussed in chapter 2 of the preliminary TSD). The Joint Advocates 
stated that condensing technology provides the same utility, uses the 
same fuel source, and does not constitute a ``performance related 
feature'' that would warrant a separate product class from non-
condensing technology. (Joint Advocates, No. 35 at p. 1) NEEA also 
supported DOE's decision to evaluate condensing and non-condensing 
boilers within a single product class, as both products utilize the 
same primary fuel source, neither provides unique consumer utility, and 
keeping them in the same class prevents non-condensing boiler 
manufacturers from obtaining a competitive, regulatory advantage over 
condensing boiler manufacturers (i.e., by having less-stringent 
requirements). (NEEA, No. 36 at p. 1)
    With respect to commenters' statements that non-condensing 
technology and associated venting is a ``feature'' that DOE's standards 
cannot make unavailable, DOE concluded in the December 2021 final 
interpretive rule that incorporation of non-condensing technology and 
associated venting is not a performance-related ``feature'' for the 
purpose of the EPCA prohibition at 42 U.S.C. 6295(o)(4). 86 FR 73955 
73947, 73955 (Dec. 29. 2021). In support of that conclusion, DOE 
explained that given EPCA's focus on an appliance's major function(s), 
it is reasonable to assume that the consumer would be aware of 
performance-related features and would recognize such features as 
providing additional benefit in the appliance's performance of such 
major function. Id. For example, some boilers have Wi-Fi connectivity 
features that allow the consumer to remotely monitor and control their 
boiler.\26\ In contrast to these features, an aspect of the appliance 
that does not provide any additional benefit to the consumer during 
operation would not be a performance-related feature that Congress 
would expect DOE to preserve at the expense of energy savings. With 
respect to boilers, some examples are heat exchanger designs or 
materials, burner designs, and ignition system designs. While all of 
these components are necessary parts of a boiler, they are not 
performance-related features that provide other additional benefit to 
the consumer during operation. Non-condensing technology and associated 
venting falls squarely into this category. Further, energy conservation 
standards work by removing the less-efficient technologies and designs 
from the market. For example, DOE set standards for furnace fans in 
2014 that effectively eliminated permanent split capacitor motors from 
several product classes in favor of brushless permanent magnet motors, 
which are more efficient. 79 FR 38130. As a second example, the amended 
standards for residential clothes washers established by the May 31, 
2012, rule effectively eliminated the use of electromechanical-style 
user interface controls from the market, in favor of fully electronic 
user interface controls--which enable more efficient energy and water 
performance. 77 FR 32307. As a third example, DOE published a final 
rule on June 17, 2013, adopting energy conservation standards for 
microwave oven standby mode and off mode. These standards effectively 
eliminated the use of linear power supplies from microwave oven control 
boards, in favor of switch-mode power supplies, which exhibit 
significantly lower standby mode and off mode power consumption. 78 FR 
36316. It would completely frustrate the energy-savings purposes of 
EPCA if DOE were to adopt an overly-broad reading of ``features'' that 
preserves less-efficient technologies without determining that boilers 
using those less-efficient technologies offer consumers an additional 
benefit during normal operation that other boilers do not offer.
---------------------------------------------------------------------------

    \26\ For example, see: https://www.viessmann-us.com/content/dam/public-brands/us/flyers/Vitodens_200_W_B2HE_06_2021.pdf/_jcr_content/renditions/original./Vitodens_200_W_B2HE_06_2021.pdf 
and https://ntiboilers.com/wp-content/uploads/2020/09/FTVN_Series-Handout_2020_Web.pdf.
---------------------------------------------------------------------------

    For these reasons, DOE disagrees with commenters that eliminating 
non-condensing boiler technology and associated venting from the market 
would violate EPCA's ``unavailability'' provision as that technology 
does not provide unique utility to consumers that is not substantially 
the same as that provided by condensing boilers. Moreover, such a 
finding would preserve a less efficient technology with no unique 
consumer utility at the expense of a significant savings of energy and 
consumer benefit. Accordingly, for the purpose of the analysis 
conducted for this rulemaking, DOE did not analyze separate equipment 
classes for non-condensing and condensing boilers in this final rule.
    In addition, while DOE agrees with NYSERDA that the number of 
challenging installations represent a decreasing proportion of the 
market because newer constructions can be designed around Category IV 
venting considerations, DOE also agrees with manufacturers that those 
few consumers with challenging installations could incur significant 
costs. But DOE does not agree with the assertion by Crown and U.S. 
Boiler that non-condensing technology and associated venting must be 
preserved because the costs of these challenging installations cannot 
be accounted for in DOE's economic analysis. First, as stated 
previously, non-condensing technology and associated venting is not a 
performance-related feature because, among other things, it does not 
provide additional benefit in the appliance's performance of its major 
function. Using existing venting can reduce installation costs, but 
that does not provide the consumer with any additional benefits during 
operation of the boiler. Further, EPCA specifically directs DOE to 
consider installation and operating costs as part of the Department's 
determination of economic justification. (See 42 U.S.C. 
6295(o)(2)(B)(i)(II)) As a result, there is a clear distinction in EPCA 
between the purposes of the product class provision in 42 U.S.C. 
6295(q)--preserve performance-related features in the market--and the 
economic justification requirement in 42 U.S.C. 6295(o)(2)(B)--
determine whether the benefits, e.g., reduced fuel costs for an 
appliance, of a proposed standard exceed the burdens, e.g., increased 
installation cost. And, DOE has accounted for the costs of altering or 
replacing an existing venting system with a venting system that will 
accommodate a condensing furnace as part of the installation costs in 
the LCC analysis (see section IV.F.2 of this document and chapter 8 of 
the NOPR TSD).
    With respect to Crown and U.S. Boiler's concerns regarding safety 
issues caused by condensing boilers, DOE is not aware of, nor have the 
commenters provided, any data showing that non-condensing boilers are a 
safer option than condensing boilers. DOE notes that condensing boilers 
are currently widely available on the market and have been available 
for decades, and in certain locations have experienced widespread 
adoption (even having achieved greater market share than non-condensing 
boilers in some areas). Given the track record of condensing boilers 
being installed and operated safely, DOE finds that installers are 
capable of safely installing and venting condensing boilers, even in 
circumstances that would require the venting system to be upgraded.
    Additionally, in response to WMT, DOE expects that condensing 
boilers and non-condensing boilers alike would be capable of operating 
with return water temperatures of 180 [deg]F. Thus, the return water 
temperature provided by the product would not be reason to 
differentiate product classes. DOE understands that condensing boilers, 
when operating at these temperatures,

[[Page 55144]]

would have minimal condensation occurring in the heat exchanger, which 
does result in non-condensing efficiency. This effect is accounted for 
in the energy use analysis (see section IV.E of this document).
b. Hydronic Heat Pump Boilers
    In the May 2022 Preliminary Analysis, DOE specifically sought 
information regarding whether there are any performance-related 
features of heat pump boilers which would justify a separate product 
class. DOE also requested information on the expected market for such 
products (see the Executive Summary of the preliminary analysis TSD).
    Rheem suggested that DOE should include heat pump boilers in the 
existing product class structure, but if that cannot be accomplished, a 
separate product class may be warranted, with changes to the regulatory 
definition for consumer boilers. (Rheem, No. 37 at p. 2)
    Crown and U.S. Boiler stated that heat pump boilers are unable to 
generate water temperatures high enough to satisfy the design heating 
load of the vast majority of the residential hot water heating systems 
in the United States, and, therefore, if heat pump boilers are 
considered to be consumer boilers, they should be placed in their own 
products class. (Crown, No. 30 at p. 3; U.S. Boiler, No. 31 at p. 3) 
BWC commented that heat pump boilers are not able to provide the same 
utility as conventional consumer boilers, especially during extreme 
environmental conditions, and, therefore, should be placed in a 
separate class than conventional consumer boilers. (BWC, No. 39 at p. 
1)
    As discussed in section III.C of this document, the DOE test 
procedure for consumer boilers would not currently provide test results 
that are representative of the energy use or energy efficiency of an 
air-to-water or water-to-water heat pump boiler, and without an 
appropriate test procedure for these products at this time, DOE did not 
analyze heat pump boilers in this NOPR.
2. Market Assessment
    In the market assessment, DOE obtains information on the present 
and past industry structure and market characteristics in order to 
inform multiple other analyses. In preparing the May 2022 Preliminary 
Analysis, DOE reviewed available public literature to develop an 
understanding of the consumer boiler industry in the United States, 
including assessing manufacturer market share and characteristics, 
existing regulatory and non-regulatory initiatives for improving 
product efficiency, and trends in product characteristics and retail 
markets. The Department used data sources such as its own Compliance 
Certification Database (CCD),\27\ supplemented by information in 
California Energy Commission's Modernized Appliance Efficiency Database 
System (MAEDbS),\28\ AHRI's Directory of Certified Product 
Performance,\29\ and the U.S. Environmental Protection Agency's ENERGY 
STAR product finder.\30\ DOE specifically sought comment in the May 
2022 Preliminary Analysis on whether manufacturer model counts from 
publicly-available databases accurately reflect manufacturer market 
shares on a model-weighted or sales-weighted basis in order to inform 
the LCC analysis by providing insights into the typical consumer or 
installation scenarios (see the Executive Summary of the consumer 
boilers preliminary TSD).
---------------------------------------------------------------------------

    \27\ DOE's CCD can be found online at: www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (Last accessed Jan. 3, 
2023).
    \28\ MAEDbS can be found online at: 
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (Last 
accessed Jan. 3, 2023).
    \29\ AHRI's Directory of Certified Product Performance can be 
found online at: www.ahridirectory.org/Search/SearchHome?ReturnUrl=%2f (Last accessed March 1, 2023).
    \30\ EPA's ENERGY STAR product finder can be found online at: 
www.energystar.gov/products/products_list (Last accessed Jan. 3, 
2023).
---------------------------------------------------------------------------

    WMT stated that certification databases do not indicate shipments 
and, thus, reflect the distribution of neither input capacities nor 
efficiencies. (WMT, No. 32 at pp. 7-8) WMT commented that the boilers 
market is increasingly transitioning towards higher efficiencies, and 
this is occurring in specific areas and regions where higher-efficiency 
consumer boilers have the most financial benefit and the application 
allows for it. The commenter stated that areas with lower adoption 
rates are based less on need for financial benefit than the inability 
to adapt the building to lower water circulation temperatures required 
for high-efficiency products; in other words, regions where local 
building codes or policies result in increased installation costs or 
even prohibit condensing appliance installations have the least 
transition towards higher efficiencies. WMT commented that this would 
disproportionally affect certain consumer subgroups. (WMT, No. 32 at p. 
11)
    Similarly, Rheem did not recommend using model counts from 
publicly-available databases to reflect market shares. (Rheem, No. 37 
at p. 2)
    AHRI also disagreed with the Department's use of manufacturer model 
counts from publicly-available databases to reflect manufacturer market 
shares on a model-weighted or sales-weighted basis, claiming that these 
databases do not accurately represent market share and misrepresent the 
market. (AHRI, No. 40 at p. 3) In a follow-up submission, AHRI provided 
information to DOE containing a market share analysis for gas-fired hot 
water boilers. AHRI stated that its contractor survey, completed in 
July 2022, was conducted in conjunction with the Air Conditioning 
Contractors of America (ACCA) and the Plumbing, Heating, and Cooling 
Contractors Association (PHCC), and that it gathered feedback from over 
140 experienced contractors. (AHRI, No. 42 at p. 1)
    DOE notes that the data provided by AHRI contained insights into 
manufacturer shipments, installation types, consumer boiler lifetimes, 
and other parameters which DOE has incorporated, as applicable, into 
its market assessment and considered for the downstream analyses (e.g., 
LCC and PBP, shipments).
3. Technology Options
    In the preliminary market analysis and technology assessment, DOE 
identified 13 technology options that would be expected to improve the 
efficiency (in terms of the three regulated metrics: AFUE, 
PW,SB, and PW,OFF) of consumer boilers, as 
measured by the DOE test procedure:
    Technology options to improve AFUE: heat exchanger improvements, 
modulating operation, vent dampers, direct vent, pulse combustion, 
premix burners, burner derating, low-pressure air-atomized oil burners, 
delayed-action oil pump solenoid valves, and electronic ignition.
    Technology option to improve PW,SB and PW,OFF: control relays for 
models with brushless permanent magnet (BPM) motors, transformer 
improvements, and switching mode power supplies.
    Additionally, based on an extensive review of publicly available 
literature, DOE listed technologies that could potentially improve the 
overall efficiency of consumer boilers but would not result in 
improvements to AFUE, PW,SB, or PW,OFF. These 
were, namely: micro combined heat and power systems, improved motor 
efficiency, positive shut-off valves for oil burner nozzles, renewable 
natural

[[Page 55145]]

gas,\31\ and heat pump technology. See chapter 3 of the preliminary TSD 
for details. After developing the preliminary list of technology 
options, DOE requested feedback on this list. The Department also 
sought information regarding the adoption of low-loss transformers and 
switching mode power supplies in consumer boilers to meet the existing 
PW,SB and PW,OFF standards.
---------------------------------------------------------------------------

    \31\ Renewable natural gas is methane (natural gas) that is 
produced via the breakdown of biological material, then treated to 
remove contaminants.
---------------------------------------------------------------------------

    BWC disagreed with some of the design characteristics which were 
presented in Table 3.3.2 of the preliminary TSD, stating that non-
condensing copper heat exchangers can be either Category I or II 
venting, not just Category II venting. BWC also stated that condensing 
operation can begin in venting at around the 85-percent AFUE level, as 
opposed to the 88-percent AFUE threshold described in the preliminary 
TSD. BWC recommended that DOE perform a more up-to-date teardown 
analysis to address these discrepancies. (BWC, No. 39 at p. 2) In 
response, DOE believes that BWC may have misinterpreted the information 
provided in this table. Table 3.3.2 of the preliminary TSD simply 
provides brief descriptions of the terms that are used to characterize 
consumer boiler designs, and these terms are grouped together in 
accordance with the corresponding design parameter. DOE stated in Table 
3.3.2 that copper heat exchangers are used in some non-condensing 
models, not that these heat exchangers are limited to Category II 
venting.
    Rheem stated that renewable natural gas likely has little effect on 
efficiency compared to traditional natural gas, and, therefore, the 
commenter recommended that this technology option should be removed 
from the analysis. (Rheem, No. 37 at p. 2) DOE agrees that renewable 
natural gas would not result in improvements to AFUE, PW,SB, 
or PW,OFF, and, thus, this fuel has not been considered as a 
technology option in this NOPR.
    AHRI stated that it does not have data on any current technologies 
that can be used to reach a more-stringent standard, but further stated 
that consumer boilers are typically installed within the thermal 
envelope of the building and any energy lost from the consumer boiler 
results in useful heat provided to the building. (AHRI, No. 40 at pp. 
3-4) In response, DOE notes that a consumer boiler's primary purpose is 
to deliver heat to the hot water or steam in the home heating loop. DOE 
understands the comment from AHRI to mean that any technologies which 
limit the loss of heat from the consumer boiler to its immediate 
surroundings (i.e., heat that does not go into the hot water or steam) 
should not be considered as improving the efficiency of the consumer 
boiler because the heat is ultimately delivered to the building even if 
it is not through the hot water or steam. The previous appendix N test 
procedure and the new appendix EE test procedure both account for this 
by assigning a value of 0 to the jacket loss factor (a value which 
quantifies heat lost directly to the consumer boiler's surroundings 
through its jacket) if the boiler is non-weatherized, as it is assumed 
to be located within the conditioned space of the building.\32\ At the 
time of this analysis, DOE did not identify any commercially available 
weatherized consumer boilers. The technology options identified as 
improving AFUE are consistent with this understanding.
---------------------------------------------------------------------------

    \32\ In defining the AFUE metric, EPCA states that this 
descriptor is based on the assumption that all weatherized warm air 
furnaces or boilers are located out-of-doors, and boilers which are 
not weatherized are located within the heated space. (42 U.S.C. 
6291(20)(A)-(C)) The jacket loss is, therefore, assigned a value of 
0 for any boilers that are non-weatherized.
---------------------------------------------------------------------------

    DOE requests information on the market share of weatherized 
consumer boilers and the typical jacket losses of such products.
    BWC strongly discouraged DOE from evaluating more-stringent standby 
mode and off mode power consumption (PW,SB and 
PW,OFF) standards. BWC commented that, based on its own 
testing, it has not seen a significant decrease in energy used in 
standby mode through the use of larger, low-loss transformers. BWC also 
stated that DOE's methodology of examining a few discrete components 
and their energy consumption instead of the overall power consumption 
of the consumer boiler was of concern to BWC because it fails to 
account for the power consumed by a consumer boiler's entire electrical 
system (including all ancillary components), and it recommended not to 
pursue more-stringent power consumption standards. (BWC, No. 39 at p. 
2)
    In response, DOE has considered this information about the 
implementation of low-loss transformers and has tentatively determined 
that it remains uncertain whether this technology option can be used to 
further reduce standby mode and off mode energy consumption. In the 
January 2016 Final Rule, DOE had determined that low-loss transformers 
and switching mode power supplies would be necessary to achieve the 
PW,SB and PW,OFF standards that were promulgated 
in that rule (which were set at the maximum technologically feasible 
levels at the time). 81 FR 2320, 2407-2408 (Jan. 15, 2016). As 
discussed in chapter 5 of the NOPR TSD, transformer improvements (i.e., 
low loss transformers) and switching mode power supplies would have 
uncertain potential to further improve standby mode and off mode power 
consumption because these were considered to be the maximum 
technologically feasible designs in the January 2016 Final Rule which 
established the current standards. Thus, low-loss transformers and 
switching mode power supplies were not considered as potential design 
options for consumer boilers in this NOPR. In this NOPR, DOE 
tentatively determined that control relays are the only viable 
technology option remaining which can lead to discernible improvements 
to PW,SB and PW,OFF. However, as discussed in 
section IV.B of this document, control relays were screened out from 
further consideration, leaving no design options currently identified 
to improve these metrics. As a result, this NOPR did not further assess 
potential amended PW,SB and PW,OFF standards, and 
only amended AFUE standards are proposed. See chapters 3 and 4 of the 
NOPR TSD for further details of the technology assessment leading to 
this tentative conclusion not to further analyze amended standby mode 
and off mode energy consumption standards at this time.
    DOE received multiple comments in response to the May 2022 
Preliminary Analysis regarding heat pumps as technology options for 
consumer boilers. NYSERDA, the Joint Advocates, and NEEA recommended 
that heat pumps be considered as technology options once a test 
procedure for these products is established, suggesting that heat pump 
boilers would define the maximum technologically feasible efficiency 
for consumer boilers. (NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35 
at pp. 1-2; NEEA, No. 36 at pp. 1-2)
    Additionally, NYSERDA stated that New York's ambitious climate 
objectives will require retrofitting the heating systems of existing 
homes to reduce GHGs, and given the prevalence of hydronic systems in 
the New York market, providing consumers choices for low-emission 
hydronic heating solutions will be important. (NYSERDA, No. 33 at p. 2)
    The Joint Advocates commented that hydronic heating is used in 8 
percent of homes overall in the United States, including 28 percent of 
homes in the Northeastern region, and heat pump boilers will assist 
that proportion's rise to higher efficiencies as State policies

[[Page 55146]]

shift forward. The Joint Advocates stated that gas absorption heat 
pumps can replace standard gas space heating appliances in cold 
climates, operating at much higher theoretical AFUE values. (Joint 
Advocates, No. 35 at pp. 1-2)
    NEEA recommended that DOE should evaluate electric and gas heat 
pump technology, as well as dual-fuel heat pump boilers and gas 
absorption heat pump boilers, for consumer boilers as potential ``max-
tech'' efficiency levels. NEEA stated that these products provide the 
same product utility as conventional consumer boilers and that these 
products are commercially available. (NEEA, No. 36 at pp. 1-2)
    WMT, on the other hand, stated that it is not aware of viable heat 
pump boilers in the market which can operate consistently and reliably 
at circulating water temperatures sufficient for heating needs across 
the Nation. (WMT, No. 32 at p. 8) AHRI commented that it did not have 
data regarding current technologies that can be used to meet more-
stringent standards or the adoption of electric heat pump or gas heat 
pump technology in the consumer boiler market. (AHRI, No. 40 at pp. 3-
4)
    As discussed in section IV.A.1.b of this document, DOE has 
tentatively determined that heat pump technology would not yield 
improvements in AFUE per the new appendix EE test procedure, and that 
further development of the test procedure would be necessary in order 
to address these novel products. Therefore, DOE has not included heat 
pump technologies in its list of technology options for this NOPR. The 
Department appreciates the feedback and information provided by 
stakeholders on this topic and will continue to evaluate heat pump 
boilers in a future rulemaking.

B. Screening Analysis

    DOE uses the following five screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:

    (1) Technological feasibility. Technologies that are not 
incorporated in commercial products or in commercially viable, 
existing prototypes will not be considered further.
    (2) Practicability to manufacture, install, and service. If it 
is determined that mass production of a technology in commercial 
products and reliable installation and servicing of the technology 
could not be achieved on the scale necessary to serve the relevant 
market at the time of the projected compliance date of the standard, 
then that technology will not be considered further.
    (3) Impacts on product utility. If a technology is determined to 
have a significant adverse impact on the utility of the product to 
subgroups of consumers, or results in the unavailability of any 
covered product type with performance characteristics (including 
reliability), features, sizes, capacities, and volumes that are 
substantially the same as products generally available in the United 
States at the time, it will not be considered further.
    (4) Safety of technologies. If it is determined that a 
technology would have significant adverse impacts on health or 
safety, it will not be considered further.
    (5) Unique-pathway proprietary technologies. If a technology has 
proprietary protection and represents a unique pathway to achieving 
a given efficiency level, it will not be considered further, due to 
the potential for monopolistic concerns.

    10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).
    In summary, if DOE determines that a technology, or a combination 
of technologies, fails to meet one or more of the listed five criteria, 
it will be excluded from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed in 
the following sections.
    The subsequent discussion includes comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
    In response to the May 2022 Preliminary Analysis, several 
commenters raised concerns regarding the consideration of an 85-percent 
AFUE efficiency level for gas-fired hot water boilers, stating that 
this particular efficiency could have issues with installation and 
repair, reliability, and safety. These commenters assert that this 
issue should have bearing on DOE's consideration of technology options 
for this rulemaking.
    AGA, APGA, and NPGA stated that if DOE were to propose 85-percent 
AFUE as a standard, it would be too close to condensing operation to be 
safely implemented with existing Category I venting systems, and that 
forcing the consumer to upgrade to condensing technology would place 
undue burden and expense on the consumer. AGA, APGA, and NPGA stated 
that manufacturers would not produce consumer boilers that are prone to 
failure, instead opting to make condensing boilers, thereby limiting 
the choice of and increasing the burden on the consumer. (AGA, APGA and 
NPGA, No. 38 at p. 3) Rheem similarly expressed concern that the 85-
percent efficiency level is too close to condensing operation to be 
used safely without reliability issues and costly upgrades. (Rheem, No. 
37 at p. 4)
    Reiterating its comments from the previous standards rulemaking, 
Crown provided data from the U.S. Consumer Product Safety Commission 
(CPSC) on failure modes that led or contributed to carbon monoxide 
incidents associated with modern furnaces and boilers between the years 
2002-2009 and concluded that, as the AFUE increases, the likelihood 
that one of these failure modes would cause a carbon monoxide incident 
also increases. Crown stated that this is due the flue gases being less 
buoyant at higher efficiencies, and, thus, being less able to overcome 
the effects of depressurization, partial blockage, back-drafting, or an 
improperly designed vent system; additionally, cooler flue gases are 
more likely to cause damage to the vent system if something else also 
goes wrong (e.g., Crown provided the example of trace halogen 
aspiration into the consumer boiler). (Crown, No. 30 at pp. 3-5) U.S. 
Boiler provided the same comments as Crown. (U.S. Boiler, No. 31 at pp. 
3-5)
    Crown stated that setting a standard for gas-fired hot water 
boilers at 85-percent AFUE would completely ignore the safety and 
reliability concerns that can result from the installation of a 
consumer boiler operating at this efficiency level into a Category I 
chimney. Crown provided graphical data charting flue gas CO2 
concentration and net flue gas temperature that suggested that the 
steady-state efficiency at which a consumer boiler could operate while 
maintaining a Category I designation would be between 82.7-84.1-percent 
AFUE. Crown made the observation that, since AFUE will never exceed 
steady-state efficiency, the current standard at 84-percent AFUE, for 
all practical purposes, is already at this limit. Crown argued that 
while there are consumer boilers on the market at 85-percent AFUE, not 
all of them are certified to ANSI Z21.13, ``Gas-Fired Low Pressure 
Steam And Hot Water Boilers,'' and are, therefore, not officially 
Category I venting. Crown also stated that these 85-percent AFUE 
consumer boilers have modifications such as power gas burners and 
operate in conditions different than laboratory conditions where AFUE 
was determined, creating uncertainty on whether they would be safe in 
all field conditions. Crown commented that while there are explicit 
instructions on how to install consumer boilers, manufacturers have 
little control on whether these instructions are followed, and an AFUE 
minimum of 85 percent introduces more of a safety risk to the consumer; 
therefore, a standard at this level would force all manufacturers to

[[Page 55147]]

either prescribe vent requirements more stringent than those currently 
in the National Fuel Gas Code and/or give up any remaining extra safety 
margin they have built into their products for suboptimal vent systems, 
all for an incremental energy savings benefit likely amounting to a 
rounding error. (Crown, No. 30 at pp. 3-5) U.S. Boiler provided the 
same comments. (U.S. Boiler, No. 31 at pp. 3-5)
    In response, DOE understands that Crown, U.S. Boiler, APA, APGA, 
and NPGA are concerned about the safety of installing gas-fired hot 
water boilers with incremental heat exchanger improvements (leading to 
an AFUE of 85 percent) within current Category I venting systems. 
However, as a technology option, an increase in heat exchanger 
effectiveness alone does not pose a safety risk for consumers or 
service technicians. To this point, in the January 2016 Final Rule, the 
Department recognized that certain efficiency levels could pose health 
or safety concerns under certain conditions if they are not installed 
properly in accordance with manufacturer specifications. However, these 
concerns can be resolved with proper product installations and venting 
system design; this is evidenced by the significant shipments of 
products that are currently commercially available at these efficiency 
levels, as well as the lack of restrictions on the installation 
location of these units in installation manuals. In addition, DOE noted 
that products achieving these efficiency levels have been on the market 
since at least 2002, which demonstrates their reliability, safety, and 
consumer acceptance. In some circumstances, if the potential for 
condensate is high, different vent materials (such as a high grade 
stainless steel vent) may be required to withstand the condensate. High 
efficiency condensing boilers typically use PVC/CPVC venting since the 
exhaust gases are cool enough. Given the significant product 
availability and the amount of time products at these efficiency levels 
have been available on the market, DOE continues to believe that 
products at these efficiency levels are safe and reliable when 
installed correctly. 81 FR 2320, 2344-2345 (Jan. 15, 2016).
    Further, DOE examined the most recent report from the CPSC 
regarding carbon monoxide incidents related to the use of consumer 
products, which presented data from 2018 (CPSC 2018 Report).\33\ This 
report discusses that information collected on the carbon monoxide 
incidents often describes conditions of compromised vent systems, flue 
passageways, and chimneys for furnaces, boilers, and other heating 
systems. CPSC 2018 Report at p. 9. Specifically, the CPSC 2018 Report 
states that ``[a]ccording to the information available, some products 
had vents that became detached or were installed/maintained improperly. 
Vents were also sometimes blocked by soot caused by inefficient 
combustion, which, in turn, may have been caused by several factors, 
such as leaky or clogged burners, an over-firing condition, or 
inadequate combustion air. Other furnace-related conditions included 
compromised heat exchangers or filter doors/covers that were removed or 
not sealed. Some products were old and apparently not well maintained. 
Other incidents mentioned a backdraft condition, large amounts of 
debris in the chimney, and the use of a product that was later 
prohibited by the utility company and designated not to be turned on 
until repaired.'' Id. Based on this information, DOE has tentatively 
determined that it is the potential for older or improperly maintained 
venting and burner systems to be inadequate which may pose a safety 
risk, and not the higher-efficiency consumer boiler itself. In other 
words, high efficiency boilers available on the market today are just 
as safe as baseline boilers when they are installed and maintained 
properly. If either high-efficiency or low-efficiency boilers are not 
installed and maintained properly, then some potential for safety 
concerns may exist as outlined by the CPSC report. But DOE has not 
found, nor have commenters presented, evidence that more stringent 
standards for boilers would result in a reduction of boiler safety. In 
the LCC analysis, DOE accounts for the costs associated with correctly 
installing boilers (including modifications to vent system when 
appropriate), as well as preventative maintenance and any necessary 
repairs over the lifetime of a product. As a result, DOE has not 
screened out heat exchanger improvements as a technology option from 
this NOPR analysis.
---------------------------------------------------------------------------

    \33\ M.V. Hnatov, ``Non-Fire Carbon Monoxide Deaths Associated 
with the Use of Consumer Products; 2018 Annual Estimates,'' U.S. 
Consumer Product Safety Commission, September 2021. Available online 
at www.cpsc.gov/s3fs-public/Non-Fire-Carbon-Monoxide-Deaths-Associated-with-the-Use-of-Consumer-Products-2018-Annual-Estimates.pdf?VersionId=IN1CTo8Njoxta0CmddOUl2t.tmQ.iEEb (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    PB Heat stated that the current minimum efficiency levels are close 
to the condensing range, and increasing them any further will reduce 
applications where Category I consumer boilers can be installed and, 
therefore, reduce consumer utility and access to affordable heating. 
(PB Heating, No. 34 at p. 1)
    As stated in section IV.A.1.a of this document, in this rulemaking, 
DOE is not considering venting configurations to constitute a consumer 
or product utility, consistent with the conclusions of the December 
2021 Interpretive Rule. DOE acknowledges that certain types of homes 
may require substantial investment to upgrade the venting if 
transitioning from a Category I vent system to a Category IV vent 
system, and the Department aims to accurately capture these costs to 
the consumer in the LCC and PBP analyses. Additionally, DOE has 
considered a low-income consumer subgroup in order to assess the LCC 
impacts on access to affordable heating in particular. The details of 
these analyses are discussed in sections IV.F and IV.I of this 
document, respectively.
1. Screened-Out Technologies
    Rheem suggested that hydrogen technology (including hydrogen and 
hydrogen blends) should be screened out from the technology options in 
this rulemaking due to technological feasibility. (Rheem, No. 37 at p. 
3)
    In response, DOE notes that in commenting on the March 2021 RFI, 
Rheem had recommended that the Department consider new fuel sources, 
including hydrogen-blended gas and renewable natural gas, while stating 
that industry groups are currently evaluating the safe and efficient 
use of hydrogen-blended fuels (with up to 15-percent hydrogen) in gas-
fired appliances. (Rheem, No. 10 at p. 5) Consequently, DOE included 
hydrogen-ready boilers \34\ in the technology assessment of the May 
2022 Preliminary Analysis (see chapter 3 of the preliminary TSD). DOE 
evaluated hydrogen-ready boilers and differences in burner systems that 
would be able to accommodate a transition to hydrogen blend gas and has 
tentatively determined that hydrogen-ready burner designs do not appear 
to contribute to gains in AFUE. As a result of these findings, DOE did 
not consider hydrogen-ready burners in this NOPR as a technology option 
to improve consumer boiler AFUE, and, thus, this technology was not 
even included in the NOPR screening analysis. In addition, DOE notes 
that hydrogen-ready boilers do not appear to be commercially-available 
technologies in the United States, and have not yet been

[[Page 55148]]

demonstrated to be commercially-viable and mass-produced, as per 
screening criteria number 2; therefore, even if hydrogen-ready burners 
were to provide an efficiency benefit to consumer boilers, this 
technology would have likely been screened out during this proposed 
rulemaking on the basis of practicability to manufacture, install, and 
service.
---------------------------------------------------------------------------

    \34\ ``Hydrogen-ready'' boilers are appliances that have the 
ability to burn both natural gas and hydrogen (i.e., either a blend 
of the two fuels or a complete switch between fuels).
---------------------------------------------------------------------------

    DOE requests further information on the potential future adoption 
of hydrogen-ready consumer boilers in the United States and any data 
demonstrating potential impacts of these burner systems on AFUE.
    After consideration of each technology option analyzed in the 
technology assessment, DOE has screened out the following technologies 
in this NOPR analysis: condensing operation in oil-fired hot water 
boilers, pulse combustion, burner derating, low-pressure air-atomized 
oil burners, and control relays for models with BPM motors. DOE 
screened these technologies out in the May 2022 Preliminary Analysis 
for the reasons explained in that document (see chapter 4 of the 
preliminary analysis TSD), but the Department did not receive any 
additional feedback from stakeholders on these determinations. Table 
IV.2 presents the criteria that were the basis for screening out each 
of these technologies from further consideration in the NOPR analysis. 
Further details can be found in chapter 4 of the NOPR TSD.

                                               Table IV.2--Screened-Out Technologies for Consumer Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        EPCA criterion (X = basis for screening out)
                                                                   -------------------------------------------------------------------------------------
                                                                                      Practicability       Adverse          Adverse
                         Technology option                           Technological    to manufacture,     impacts on       impacts on    Unique- pathway
                                                                      feasibility      install, and       utility or       health and       proprietary
                                                                                          service        availability        safety        technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Condensing operation in oil-fired hot water boilers...............  ...............                X   ...............  ...............  ...............
Pulse combustion..................................................  ...............  ................  ...............               X   ...............
Burner derating...................................................  ...............  ................               X   ...............  ...............
Low-pressure air-atomized oil burners.............................  ...............                X   ...............  ...............  ...............
Control relays for BPM motors.....................................  ...............  ................               X   ...............  ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    DOE requests comment on the tentative determination that condensing 
operation in oil-fired hot water boilers, pulse combustion, burner 
derating, low-pressure air-atomized oil burners, and control relays for 
models with BPM motors should be screened out from further analysis.
2. Remaining Technologies
    Through a review of each technology, DOE tentatively concludes that 
all of the other identified technologies met all five screening 
criteria to be examined further as design options to improve AFUE in 
DOE's NOPR analysis. In summary, DOE did not screen out the following 
technology options presented in Table IV.3.

         Table IV.3--Retained Technologies for Consumer Boilers
------------------------------------------------------------------------
                               Technology
-------------------------------------------------------------------------
               Type                             Design Option
------------------------------------------------------------------------
Fans/Venting......................  Inducer fans.*
                                    Vent dampers.
                                    Direct venting/power venting.
Heat Exchanger Improvements.......  Condensing heat exchanger (for gas
                                     hot water boilers only)
                                    Improved geometry and increased heat
                                     exchanger surface area.
                                    Baffles.
Burner............................  Modulating operation/modulating
                                     Aquastats.
                                    Premix burners.
                                    Delayed-action oil pump solenoid
                                     valves.
Ignition..........................  Electronic ignition (for oil-fired
                                     boilers)
------------------------------------------------------------------------
* In chapter 3 of the May 2022 Preliminary Analysis TSD, inducer fans
  were described as mechanical draft systems and grouped with heat
  exchanger improvements, as use of induced draft can allow for use of
  more restrictive heat exchanger designs that improve heat transfer.

    DOE has initially determined that these technology options are 
technologically feasible because they are being used or have previously 
been used in commercially-available products or working prototypes. DOE 
also finds that all of the remaining technology options to improve AFUE 
meet the other screening criteria (i.e., practicable to manufacture, 
install, and service and do not result in adverse impacts on consumer 
utility, product availability, health, or safety, unique-pathway 
proprietary technologies).
    By screening out control relays for models with BPM motors, DOE has 
tentatively determined that there remain no other technology options 
which could viably improve standby mode and off mode power consumption. 
As a result of this screening analysis, DOE has tentatively determined 
that it is not technologically feasible at this time to increase the 
stringency of the standby mode and off mode power consumption standards 
for consumer boilers.
    For additional details, see chapter 4 of the NOPR TSD.

C. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the efficiency and cost of consumer boilers. There 
are two elements to consider in the engineering analysis: the selection 
of efficiency levels to analyze (i.e., the ``efficiency analysis'') and 
the determination of product cost at each efficiency level (i.e., the 
``cost analysis''). In determining the performance of higher-efficiency 
products, DOE considers technologies

[[Page 55149]]

and design option combinations not eliminated by the screening 
analysis. For each product class, DOE estimates the baseline cost, as 
well as the incremental cost for the product at efficiency levels above 
the baseline. The output of the engineering analysis is a set of cost-
efficiency ``curves'' that are used in downstream analyses (i.e., the 
LCC and PBP analyses and the NIA).
    As discussed in the previous section of this document, DOE has 
tentatively determined that it is not technologically feasible at this 
time to increase the stringency of the standby mode and off mode power 
consumption standards for consumer boilers because all of the potential 
technology options have either uncertain impact on PW,SB and 
PW,OFF or have been removed from further consideration in 
the screening analysis. Thus, the engineering analysis of this NOPR 
assesses improvements in AFUE only.
    AHRI supported the Department's preliminary decision not to analyze 
a more-stringent standard for standby and off mode power consumption, 
stating that there is limited benefit to setting a more-stringent 
standard. (AHRI, No. 40 at p. 4) Rheem also supported DOE's tentative 
determination not to analyze more-stringent standby mode and off mode 
standards. Rheem requested clarification as to whether DOE can 
simultaneously increase the minimum AFUE if that results in an increase 
in electrical energy consumption and a corresponding increase in 
standby mode and off mode energy use, even if the combined change 
results in a net decrease in energy use. (Rheem, No. 37 at pp. 3-4)
    In response to the question from Rheem, EPCA states that the 
Secretary may not prescribe any amended standard which increases the 
maximum allowable energy use or decreases the minimum required energy 
efficiency of a covered product (which includes consumer boilers). (42 
U.S.C. 6295(o)(1)) This statutory ``anti-backsliding'' provision would 
prohibit DOE from increasing the standby mode and off mode energy 
consumption standards.
    The comment from Rheem appears to suggest that standards should 
consider a combined metric of both active mode, standby mode, and off 
mode energy consumption. EPCA requires integration of standby mode and 
off mode energy consumption ``into the overall energy efficiency, 
energy consumption, or other energy descriptor for each covered 
product, with one exception being if such an integrated test procedure 
is technically infeasible for a particular covered product, in which 
case the Secretary shall prescribe a separate standby mode and off mode 
energy use test procedure for the covered product, if technically 
feasible. (42 U.S.C. 6295(gg)(2)(A)) In a final rule published in the 
Federal Register on October 20, 2010, DOE determined that an integrated 
metric is not technically feasible because the measurement of standby 
mode and off mode energy consumption is much smaller than the active 
mode fuel consumption reflected in AFUE, making the standby mode and 
off mode energy consumption infeasible to regulate as part of a 
combined metric. 75 FR 64621, 64622-64627.
    From its own test data and manufacturer interviews, DOE has 
tentatively determined that increases to the AFUE of a boiler would not 
result in increases to the standby mode and off mode power consumption 
in such a way that it would be impossible to comply with the existing 
standby mode and off mode power consumption standards.
    Additionally, as discussed in section III.C of this document, DOE's 
test method for consumer boilers assigns a value of 100-percent AFUE to 
any electric boiler which is non-weatherized (see section 11.1 of 
ASHRAE 103-2017, which is incorporated by reference into appendix EE). 
DOE has not identified any electric boilers that are weatherized or 
intended for installation outdoors, and has tentatively determined that 
electric boilers would typically be non-weatherized and installed 
indoors. As such, the AFUE for these products would already be at the 
maximum possible value per the test procedure. Thus, DOE did not 
further analyze electric hot water or electric steam boilers in the 
engineering analysis, and AFUE-based standards for these product 
classes are not proposed in this NOPR.
    The following subsections outline the methodology used when 
conducting the efficiency analysis and cost analysis.
1. Efficiency Analysis
    DOE typically uses one of two approaches to develop energy 
efficiency levels for the engineering analysis: (1) relying on observed 
efficiency levels in the market (i.e., the efficiency-level approach), 
or (2) determining the incremental efficiency improvements associated 
with incorporating specific design options to a baseline model (i.e., 
the design-option approach). Using the efficiency-level approach, the 
efficiency levels established for the analysis are determined based on 
the market distribution of existing products (in other words, based on 
the range of efficiencies and efficiency level ``clusters'' that 
already exist on the market). Using the design option approach, the 
efficiency levels established for the analysis are determined through 
detailed engineering calculations and/or computer simulations of the 
efficiency improvements from implementing specific design options that 
have been identified in the technology assessment. DOE may also rely on 
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended 
using the design option approach to ``gap fill'' levels (to bridge 
large gaps between other identified efficiency levels) and/or to 
extrapolate to the max-tech level (particularly in cases where the max-
tech level exceeds the maximum efficiency level currently available on 
the market).
    In this proposed rulemaking, DOE has relied on the efficiency-level 
approach. This approach ensures that the efficiency levels considered 
in the engineering analysis are attainable using technologies which are 
commercially available and viable for consumer boilers, and DOE 
considered this approach reasonable because all of the technology 
options to improve AFUE that passed the screening analysis have been 
observed in commercially-available products. Additionally, as discussed 
later, since the consumer boiler industry is relatively mature, it 
exhibits a design option pathway to improved AFUE efficiency 
demonstrated by models on the market. As such, DOE was able to conduct 
teardown analyses on consumer boilers which meet each efficiency level, 
and ascertain a list of representative design options which 
manufacturers are most likely to employ in order to achieve these 
efficiencies. The selection of these efficiency levels from market data 
is discussed in the following sections.
a. Baseline Efficiency
    For each product class, DOE generally selects a baseline model as a 
reference point for each class, and measures changes resulting from 
potential energy conservation standards against the baseline. The 
baseline model in each product class represents the characteristics of 
a product typical of that class (e.g., capacity, physical size). 
Generally, a baseline model is one that just meets current energy 
conservation standards, or, if no standards are in place, the baseline 
is typically the most common or least efficient unit on the market. For 
consumer boilers, there currently exist minimum AFUE standards for gas-
fired and oil-fired products at 10 CFR 430.32(e)(2)(iii)(A), which were 
used to define the baseline efficiency levels for these product 
classes. Additionally, baseline models

[[Page 55150]]

must meet the design requirements at 10 CFR 430.32(e)(2)(iii)(A) and 
the standby mode and off mode power consumption standards at 10 CFR 
430.32(e)(2)(iii)(B).
b. Higher Efficiency Levels
    As part of DOE's analysis, the maximum available efficiency level 
is the highest efficiency unit currently available on the market. DOE 
also defines a ``max-tech'' efficiency level to represent the maximum 
possible efficiency for a given product. For this analysis, because the 
consumer boiler industry is relatively mature and there is a clear 
design option pathway to improved AFUE efficiency demonstrated by 
models on the market, DOE has tentatively determined that the maximum 
available efficiency level is representative of the max-tech efficiency 
level for gas-fired and oil-fired boilers, and that any additional 
design options that could theoretically be used to further improve 
efficiency have been screened out. The max-tech efficiency levels 
analyzed in the May 2022 Preliminary Analysis are provided in Table 
IV.4.

    Table IV.4--Max-Tech AFUE Efficiency Levels for Consumer Boilers
------------------------------------------------------------------------
                                                                   AFUE
                          Product class                             (%)
------------------------------------------------------------------------
Gas-fired hot water.............................................      96
Gas-fired steam.................................................      83
Oil-fired hot water.............................................      88
Oil-fired steam.................................................      86
------------------------------------------------------------------------

    In the May 2022 Preliminary Analysis, DOE also considered the range 
of input capacities of models certified at these efficiencies to ensure 
that the max-tech efficiencies analyzed would not inadvertently 
correspond to a lessening of product availability to meet the full 
range of household heating needs (see chapter 5 of the preliminary 
analysis TSD). These assessments were made based on the database of 
consumer boilers constructed as part of the market assessment, 
discussed in section IV.A.2 of this document.
    In response to the May 2022 Preliminary Analysis, AHRI noted that 
NFPA-31, ``Standard for the Installation of Oil[hyphen]Burning 
Equipment'' (NFPA-31),\35\ provides guidance for the relining of 
chimneys based on steady-state efficiency, and within these guidelines 
are restrictions on higher-efficiency oil boilers that AHRI stated may 
have an impact on consumers. AHRI commented that, according to NFPA-31, 
a 6-inch diameter by 35-foot long metal chimney liner can be used for 
an 86-percent ``steady-state efficiency'' boiler having an input 
between 119,000 and 280,000 Btu/h, but this input range becomes 140,000 
to 210,000 Btu/h if the ``steady-state efficiency'' is 88-percent. As a 
result, AHRI recommended that DOE should treat 86.0-percent AFUE as 
max-tech for oil-fired hot water boilers. (AHRI, No. 40 at p. 4)
---------------------------------------------------------------------------

    \35\ NFPA-31 Appendix E states that metal chimney liners may be 
needed to reduce transient low draft during startup, as well as 
protect masonry from acidic condensate damage. The required size of 
the liner is specified based on the steady state efficiency of the 
boiler, which is shown in NFPA-31 Appendix E tables E.5.4(a) and 
E.5.4(b).
---------------------------------------------------------------------------

    In response, DOE reviewed the 2020 edition of NFPA-31 \36\ and 
notes that Tables E.5.4(a) through E.5.4(e) of that standard present 
the chimney metal liner specifications that are appropriate for various 
firing rates (in terms of gallons of oil per hour), and DOE understands 
that AHRI has converted these values of oil firing rates into Btu/h 
input rates. AHRI's comment indicates that, for a 6-inch diameter by 
35-foot long chimney liner, a steady-state efficiency \37\ greater than 
86-percent could result in a smaller range of input capacities 
allowable. Upon further inspection of Table E.5.4(a) of NFPA-31, DOE 
notes that AHRI's calculation is based on a lateral run of 10 feet. 
Adjusting to a shorter horizontal vent run of 4 feet,\38\ for example, 
would allow households to meet their heating needs using a boiler with 
a higher efficiency. Table E.5.4(a) of NFPA-31 indicates that a firing 
rate of 1.75 gallons per hour (approximately 245,000 Btu/h) is 
acceptable at the high end of firing rates for steady-state 
efficiencies of 88 percent, which DOE estimates would correspond to 
AFUEs of 87-88 percent. This would suggest that the narrowing of the 
acceptable input capacity range is not significant enough to mean that 
a large fraction of homes would not be able to find a replacement 
boiler to meet their heating needs if the standard were set at 88-
percent AFUE.
---------------------------------------------------------------------------

    \36\ Found online at link.nfpa.org/free-access/publications/31/2020 (Last accessed Jan. 3, 2023).
    \37\ Section E.8.3 of NFPA-31 suggests that the steady-state 
efficiency of a hydronic boiler can be estimated by adding 1 
percentage point to the rated AFUE of the boiler.
    \38\ As discussed in appendix 8D of the NOPR TSD, most oil-fired 
boilers do not have a horizontal vent option, so the horizontal run 
would be limited for vertical venting.
---------------------------------------------------------------------------

    Therefore, upon re-evaluating the input capacity ranges available 
for the maximum available AFUEs on the market, DOE has initially 
concluded that the max-tech levels from the May 2022 Preliminary 
Analysis are still applicable, and these levels were analyzed as max-
tech in this NOPR.
    Between the baseline efficiency level and max-tech efficiency 
level, DOE analyzed several other intermediate higher efficiency 
levels. In the May 2022 Preliminary Analysis, DOE sought comment on 
whether the AFUE efficiency levels identified at the preliminary stage 
were appropriate for each product class (see the Executive Summary of 
the preliminary TSD).
    As discussed in section IV.B of this document, DOE received 
multiple comments regarding the 85-percent AFUE efficiency level which 
was analyzed for gas-fired hot water boilers in the May 2022 
Preliminary Analysis. For the reasons explained in that section, the 
Department has tentatively determined that the concerns raised by 
stakeholders reflect potential downsides to these products regarding 
the installation, maintenance, and repair costs--and not a risk 
directly associated with incrementally more-efficient heat exchanger 
technologies. Hence, DOE has retained the 85-percent AFUE efficiency 
level in this NOPR analysis after observing that a substantial number 
of models on the market are certified at this level. This observation 
is further corroborated by AHRI's 2021 shipment data for consumer 
boilers, which indicate that boilers rated between 85.0-percent and 
85.9-percent AFUE are the second-highest frequency of non-condensing 
model shipments, behind only baseline models (see AHRI, No. 42 at p. 
2).
    Crown provided a detailed analysis of how venting category 
requirements correlate to the flue gas temperature and percent of 
CO2 in the flue gas, and described the approximate 
relationship between these parameters and the steady-state combustion 
efficiency of a consumer boiler. Reiterating comments provided in the 
previous rulemaking, Crown stated that there is a limit to the steady-
state efficiency that is achievable while maintaining Category I 
venting status. (Crown, No. 30 at pp. 3-5) U.S. Boiler provided the 
same comments as Crown. (U.S. Boiler, No. 31 at pp. 3-5) DOE agrees 
with the assessment provided by Crown and U.S. Boiler and notes that, 
in the engineering analysis, design options to improve efficiency 
include technologies which would move the consumer boiler out of 
Category I venting status.
    In response to the May 2022 Preliminary Analysis, Rheem suggested 
consideration of an additional efficiency level for gas-fired hot water 
boilers at 90-percent AFUE to capture a segment of the market certified 
by ENERGY STAR (at the minimum level under that program) with existing 
products on the market. (Rheem, No. 37 at p. 4)

[[Page 55151]]

    In response, DOE notes that EPA's ENERGY STAR Product Specification 
for Boilers, Version 3.0 (effective October 1, 2014) (ENERGY STAR 
Product Specification V3.0) requires a minimum performance of 90-
percent AFUE for gas-fired boilers and 87-percent AFUE for oil-fired 
boilers.\39\ While the 87-percent AFUE efficiency level was already 
considered for oil-fired hot water boilers, the May 2022 Preliminary 
Analysis did not assess a 90-percent AFUE efficiency level for gas-
fired hot water boilers. Therefore, in this NOPR analysis, DOE has 
added an efficiency level corresponding to the ENERGY STAR Product 
Specification V3.0 for gas-fired hot water boilers. Additional teardown 
analyses were conducted to assess the design options representative of 
this efficiency level, and further details are described in chapter 5 
of the NOPR TSD.
---------------------------------------------------------------------------

    \39\ ENERGY STAR Product Specification for Boilers, Version 3.0 
can be found online at www.energystar.gov/sites/default/files/specs/Boilers%20Program%20Requirements%20Version%203%200.pdf (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    The efficiency levels analyzed in this NOPR are shown subsequently 
in Table IV.5 through Table IV.8.
2. Cost Analysis
    The cost analysis portion of the engineering analysis is conducted 
using one or a combination of cost approaches. The selection of cost 
approach depends on a suite of factors, including the availability and 
reliability of public information, characteristics of the regulated 
product, and the availability and timeliness of purchasing the product 
on the market. The cost approaches are summarized as follows:
     Physical teardowns: Under this approach, DOE physically 
dismantles a commercially-available product, component-by-component, to 
develop a detailed bill of materials (BOM) for the product.
     Catalog teardowns: In lieu of physically deconstructing a 
product, DOE identifies each component using parts diagrams (available 
from manufacturer websites or appliance repair websites, for example) 
to develop the bill of materials for the product.
     Price surveys: If neither a physical nor catalog teardown 
is feasible (for example, for tightly integrated products such as 
fluorescent lamps, which are infeasible to disassemble and for which 
parts diagrams are unavailable) or cost-prohibitive and otherwise 
impractical (e.g. large commercial boilers), DOE conducts price surveys 
using publicly-available pricing data published on major online 
retailer websites and/or by soliciting prices from distributors and 
other commercial channels.
    In the present case, DOE conducted the analysis using physical and 
catalog teardowns to generate BOMs for models meeting the efficiency 
levels selected in the efficiency analysis. While the BOM generated for 
each model describe the product's construction in detail (i.e., 
including each fabrication and assembly operation, types of parts that 
are purchased versus built in-house, types of equipment needed to 
manufacture the product, and manufacturing process parameters), any 
additional higher-cost features that were included in the consumer 
boiler design but do not have any impact on AFUE were not factored into 
the engineering analysis. Wherever possible, DOE compared models from 
similar product lines at different efficiencies in order to clearly 
identify the design option pathway to higher efficiency levels. Through 
these teardown analyses, DOE has found that the pathway for improving 
AFUE is relatively homogeneous across all boiler product classes and 
efficiency levels--consisting mainly of heat exchanger improvements.
    The BOM provides the basis for the manufacturer production cost 
(MPC) estimates. DOE sought comment on the MPC estimates presented in 
the May 2022 Preliminary Analysis (see the Executive Summary of the 
preliminary TSD).
    Crown and U.S. Boiler commented that manufacturing, installation, 
and operating costs used for DOE's preliminary analysis are likely 
obsolete due to recent sharp increases in prices (reflecting inflation 
and supply chain issues). Crown stated that if DOE were to raise the 
standards for gas-fired hot water boilers to a condensing efficiency 
level, it would result in significant increases in MPCs for gas steam 
and oil-fired cast-iron boilers even if the standards for those product 
classes remain unchanged due to the large, fixed costs for cast-iron 
foundries. Crown indicated that if standards for gas-fired hot water 
boilers were raised to a condensing efficiency level, the fixed costs 
of the foundries could no longer be shared between gas-fired hot water 
boilers and noncondensing gas steam and/or oil-fired boilers due to 
their significant differences in design. Such a scenario could render 
some foundries no longer financially viable. (Crown, No. 30 at pp. 5-6; 
U.S. Boiler, No. 31 at pp. 5-6) Similarly, WMT indicated that sectional 
cast-iron heat exchangers are nearly identical across product classes, 
so the potential elimination of non-condensing cast-iron gas-fired hot 
water boilers would significantly change the cost structure for other 
product classes. (WMT, No. 32 at p. 2)
    In response, DOE's cost analysis accounts for the recent increases 
in material and part prices caused by inflation and supply chain 
challenges; specifically, prices from September 2022 were used for 
purchased parts and non-metals, and a five-year average up to September 
2022 was used to account for raw metal prices (this average being a 
method to account for rapid fluctuations which typically average out in 
the future). For this NOPR and with regards to the potential changes in 
manufacturing cost due to cast-iron foundry impacts, DOE did not 
directly account for the pricing interaction across product classes 
described by Crown and U.S. Boiler for cast-iron boilers in the 
industry MPC estimates. DOE notes that many consumer boiler original 
equipment manufacturers (OEMs) have already transitioned to using 
foundries owned by companies unrelated to the particular consumer 
boiler OEM (i.e., ``third-party foundries'') for their consumer boiler 
castings. Of the 10 consumer boiler OEMs that offer gas-fired steam, 
oil-fired hot water, or oil-fired steam cast-iron boilers, research 
indicates that only two OEMs currently own domestic foundries (i.e., 
vertically integrated OEMs) that supply consumer boiler castings for 
the U.S. market. This would suggest that current component price 
estimates already reflect a transition in foundry operation. Although 
DOE did not directly account for the pricing interaction across product 
classes in the engineering analysis, DOE estimates the potential fixed 
foundry overhead and depreciation costs associated with producing gas-
fired hot water boiler heat exchangers that may need to be reallocated 
to gas-fired steam, oil-fired hot water, and oil-fired steam production 
costs under a condensing standard and analyzes the potential impacts of 
a condensing standard on OEMs that operate their own foundries in 
section V.B.2.d of this document, ``Impacts on Subgroups of 
Manufacturers.''
    DOE requests comment on whether an increase in MPCs for gas-fired 
steam, oil-fired hot water, and oil-fired steam boilers would result 
from an amended standard requiring condensing technology for gas-fired 
hot water boilers and, if so, how much of an increase would occur. DOE 
also requests comment on whether the potential increase in cast-iron 
boiler MPCs would only be applicable to consumer boiler manufacturers 
that operate their own foundries.

[[Page 55152]]

    BWC requested that DOE re-evaluate the assumptions in Table 5.6.4 
of the preliminary TSD (``Factory Parameter Assumptions''), which it 
argued appeared to be grossly overstated given the overall size of the 
boiler industry. (BWC, No. 39 at p. 3)
    In addition to seeking public comment on the MPC estimates from the 
May 2022 Preliminary Analysis, DOE consultants discussed the results of 
the preliminary cost analysis with manufacturers in confidential 
interviews in order to solicit direct feedback on the MPCs. DOE 
incorporated a substantial amount of the qualitative and quantitative 
feedback obtained from manufacturers to refine the assumptions used in 
the cost modeling for this NOPR, as suggested by BWC. These updates are 
detailed in chapter 5 of the NOPR TSD, and include revisions to the 
factory parameter assumptions.
3. Manufacturer Markup and Shipping Costs
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a multiplier (the manufacturer markup) to the MPC. 
The resulting manufacturer selling price (MSP) is the price at which 
the manufacturer distributes a unit into commerce. DOE developed an 
average manufacturer markup by examining the annual Securities and 
Exchange Commission (SEC) 10-K reports \40\ filed by publicly-traded 
manufacturers primarily engaged in heating, ventilation, and air 
conditioning (HVAC) manufacturing and whose combined product range 
includes consumer boilers. See chapter 12 of the NOPR TSD or section 
IV.J.2.d of this document for additional detail on the manufacturer 
markup.
---------------------------------------------------------------------------

    \40\ U.S. Securities and Exchange Commission, Electronic Data 
Gathering, Analysis, and Retrieval (EDGAR) system. Available at 
www.sec.gov/edgar/search/ (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Shipping costs account for the additional non-production cost for 
manufacturers to distribute their products to the first buyer in the 
distribution chain. In the May 2022 Preliminary Analysis, DOE estimated 
shipping costs based on how many units can fit in a typical trailer, 
considering the extra space necessary for shipping and loading 
inefficiencies for mixed truckload configurations with other equipment. 
In general, DOE found that shipping costs would not vary appreciably by 
efficiency level, except for gas-fired hot water boilers. For this 
product class, models with condensing heat exchangers would have more 
lightweight and compact designs, allowing for more products to 
potentially be loaded onto a trailer such that the shipping cost would 
decrease for condensing efficiency levels (see chapter 5 of the 
preliminary analysis TSD).
    WMT commented that shipping costs have increased dramatically (in 
some cases nearly doubling or tripling the costs of shipping from pre-
pandemic levels), and this would affect costs for components to ship to 
consumer boiler manufacturers, as well as the costs for consumer 
boilers to be shipped to customers. WMT stated that such shipping cost 
impacts should be included in DOE's analysis. (WMT, No. 32 at p. 9)
    In response, DOE notes that the MPC estimates discussed in section 
IV.C.2 of this document account for the costs for components to ship to 
consumer boiler manufacturers. In general, through its review of 
publicly-available component cost data and confidential interviews with 
consumer boiler manufacturers, the Department has observed an increase 
in purchased component prices, which is reflected in the increase in 
MPCs in this NOPR analysis compared to the May 2022 Preliminary 
Analysis.
    For outgoing shipping costs, DOE monitors trailer prices on a 
regular basis to ensure that these costs reflect the most recent 
freight shipping rates to transport products. DOE did observe a 
substantial increase in prices immediately following the COVID-19 
pandemic and subsequent supply chain crisis,\41\ and these increases 
were reflected in the shipping cost estimates in the May 2022 
Preliminary Analysis. Many of the shipping costs estimated in this NOPR 
are comparable to the preliminary estimates in the May 2022 Preliminary 
Analysis; however, DOE did revise its approach for this NOPR. Instead 
of using a coast-to-coast distance estimate, which was used in the May 
2022 Preliminary Analysis, DOE relied on a Midwest-to-coast distance 
estimate after careful review of the geographic locations of consumer 
boiler manufacturing sites. Therefore, although DOE included the most 
up-to-date trailer prices, this change in the shipping distance 
estimate caused the shipping costs for most product classes to be lower 
in this NOPR compared to the May 2022 Preliminary Analysis.
---------------------------------------------------------------------------

    \41\ U.S. Bureau of Labor Statistics Producer Price Index (PPI) 
commodity data for transportation services indicate a sharp rise in 
long-distance motor carrying prices since 2020. See online at 
data.bls.gov/timeseries/wpu301202&output_view=pct_12mths (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Crown and U.S. Boiler commented that condensing boilers are often 
imported fully assembled from Europe or Asia, and when they are not, 
the ``heat engine'' (heat exchanger and burner system) almost always 
is, with final assembly occurring in the United States. Crown indicated 
that the longer supply chain for condensing boilers would negate any 
savings in shipping costs due to the reduced size and weight of 
condensing boilers. (Crown, No. 30 at p. 6; U.S. Boiler, No. 31 at p. 
6)
    In response, DOE once again notes that as mentioned, inbound 
freight costs are included in the MPCs as a portion of the cost for 
purchased parts. In this analysis, based on further manufacturer 
feedback during interviews, DOE estimated MPCs associated with final 
assembly occurring in the United States. While developing the MPCs for 
consumer boilers in this NOPR, DOE incorporated recent manufacturer 
feedback to arrive at the most recent estimates for heat exchangers and 
burners purchased from overseas. Based on the results of the 
engineering analysis, DOE agrees with Crown and U.S. Boiler that the 
MPC plus shipping costs for condensing boilers will in total be higher 
than the MPC plus shipping costs for non-condensing boilers.
4. Cost-Efficiency Results
    The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of AFUE versus MPC and MSP 
(in 2022 dollars). DOE developed four curves representing the four 
consumer boiler product classes which are being analyzed in this NOPR. 
Manufacturing costs can vary with the input rating of the consumer 
boiler, and for each product class, one representative input capacity 
was chosen as the basis for analysis to represent the entire class: 
100,000 Btu/h for gas-fired boilers and 140,000 Btu/h for oil-fired 
boilers. This allowed DOE to develop one curve to represent the cost of 
implementing engineering design changes for each product class. The 
methodology for developing the curves started with determining the MPCs 
for baseline products. Above the baseline, DOE determined the design 
options which would comprise the most cost-effective pathway to higher 
efficiency levels using teardown data at each level. See chapter 5 of 
the NOPR TSD for additional detail on the engineering analysis. The 
resulting cost-efficiency curves are shown in Table IV.5, through Table 
IV.8.
    DOE requests comment on the cost-efficiency results in this 
engineering analysis. DOE also seeks input on the design options that 
would be implemented to achieve the selected efficiency levels.

[[Page 55153]]



                        Table IV.5--Cost-Efficiency Curve for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                                        Shipping
           Efficiency level               AFUE           Design options             MPC        MSP        cost
                                          (%)                                     (2022$)    (2022$)    (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline).......................       84  Non-condensing heat exchanger;     581.22     819.52      30.32
                                                  Natural or induced draft.
EL 1..................................       85  EL0 + Increased heat exchanger     645.20     909.73      30.32
                                                  surface area; Natural or
                                                  induced draft.
EL 2 (ENERGY STAR V3.0)...............       90  Cast-aluminum or stainless-        991.66   1,398.24      18.53
                                                  steel condensing heat
                                                  exchanger; Premix modulating
                                                  burner.
EL 3..................................       95  Stainless-steel condensing       1,020.12   1,438.37      18.53
                                                  heat exchanger; Premix
                                                  modulating burner.
EL 4 (max-tech).......................       96  EL3 + Increased heat exchanger   1,471.07   2,074.21      18.53
                                                  surface area with
                                                  improvements in geometry.
----------------------------------------------------------------------------------------------------------------


                          Table IV.6--Cost-Efficiency Curve for Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                                        Shipping
           Efficiency level               AFUE           Design options             MPC        MSP        cost
                                          (%)                                     (2022$)    (2022$)    (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline).......................       82  Cast-iron non-condensing heat      781.76   1,102.28      38.59
                                                  exchanger; Natural or induced
                                                  draft.
EL 1 (max-tech).......................       83  EL0 + Increased heat exchanger     865.05   1,219.72      38.59
                                                  surface area; Natural or
                                                  induced draft.
----------------------------------------------------------------------------------------------------------------


                        Table IV.7--Cost-Efficiency Curve for Oil-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                                        Shipping
           Efficiency level               AFUE           Design options             MPC        MSP        cost
                                          (%)                                     (2022$)    (2022$)    (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline).......................       86  Cast-iron non-condensing heat    1,198.85   1,690.38      48.60
                                                  exchanger; Power oil burner.
EL 1 (ENERGY STAR V3.0)...............       87  EL0 + Increased heat exchanger   1,244.66   1,754.97      48.60
                                                  surface area.
EL 2 (max-tech).......................       88  EL1 + Increased heat exchanger   1,289.64   1,818.39      48.60
                                                  surface area.
----------------------------------------------------------------------------------------------------------------


                          Table IV.8--Cost-Efficiency Curve for Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                                        Shipping
           Efficiency level               AFUE           Design options             MPC        MSP        cost
                                          (%)                                     (2022$)    (2022$)    (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline).......................      85%  Cast-iron non-condensing heat    1,182.48   1,667.30      62.79
                                                  exchanger; Power oil burner.
EL 1 (max-tech).......................      86%  EL0 + Increased heat exchanger   1,287.50   1,815.38      62.79
                                                  surface area; Baffles.
----------------------------------------------------------------------------------------------------------------

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the MSP estimates derived in the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis. At each step in the distribution channel, companies 
mark up the price of the product to cover business costs and profit 
margin.
    For consumer boilers, the main parties in the distribution chain 
are: (1) manufacturers, (2) wholesalers or distributors, (3) retailers, 
(4) plumbing contractors, (5) builders, (6) manufactured home 
manufacturers, and (7) manufactured home dealers/retailers. See chapter 
6 and appendix 6A of the NOPR TSD for a more detailed discussion about 
parties in the distribution chain.
    For this NOPR, DOE characterized how consumer boiler products pass 
from the manufacturer to residential and commercial consumers \42\ by 
gathering data from several sources, including consultant reports 
(available in appendix 6A) and a 2022 BRG report,\43\ to determine the 
distribution channels and fraction of shipments going through each 
distribution channel. The distribution channels for replacement or new 
owners of consumer boilers in residential applications (not including 
mobile homes) are characterized as follows: \44\
---------------------------------------------------------------------------

    \42\ Based on available data, DOE estimates that 10 percent of 
hot water gas-fired boilers, 9 percent of steam gas-fired boilers, 
13 percent of hot water oil-fired boilers, and 13 percent of steam 
oil-fired boilers will be shipped to commercial applications in 
2030.
    \43\ BRG Building Solutions, The North American Heating & 
Cooling Product Markets (2022 Edition) (Available at: 
www.brgbuildingsolutions.com/reports-insights) (Last accessed Jan. 
3, 2023).
    \44\ Based on available data, DOE estimates that for both gas-
fired and oil-fired boilers, 95 percent goes through the wholesaler-
contractor distribution channel, 5 percent goes directly from 
retailers to consumers, and 5 percent goes through retailers to 
contractors and to consumers.

Manufacturer [rarr] Wholesaler [rarr] Plumbing Contractor [rarr] 
Consumer
Manufacturer [rarr] Retailer [rarr] Consumer
Manufacturer [rarr] Retailer [rarr] Plumbing Contractor [rarr] Consumer

    For mobile home replacement or new owner applications, there is one 
additional distribution channel as follows: \45\
---------------------------------------------------------------------------

    \45\ Based on available data, DOE estimates that for both gas-
fired and oil-fired boilers, 80 percent goes through the wholesaler-
contractor distribution channel, 5 percent goes directly from 
retailers to consumers, 5 percent goes through retailers to 
contractors and to consumers, and 10 percent goes through specialty 
retailers or dealers.


[[Page 55154]]


---------------------------------------------------------------------------

Manufacturer [rarr] Mobile Home Dealer/Retail Outlet [rarr] Consumer

    Mainly for consumer boilers in commercial applications (for both 
replacement and new construction markets), DOE considers an additional 
distribution channel as follows:

Manufacturer [rarr] Wholesaler [rarr] Consumer (National Account)

    The new construction distribution channel can include an additional 
link in the chain--the builder. The distribution channels for consumer 
boilers in new construction \46\ in residential applications (not 
including mobile homes) are characterized as follows: \47\
---------------------------------------------------------------------------

    \46\ Based on available data, DOE estimates that 18 percent of 
hot water gas-fired boilers, 4 percent of steam gas-fired boilers, 8 
percent of hot water oil-fired boilers, and 1 percent of steam oil-
fired boilers will be shipped to new construction applications in 
2030.
    \47\ DOE believes that many builders are large enough to have a 
master plumber and not hire a separate contractor, and assigned 45 
percent of consumer boiler shipments in new construction to this 
channel. DOE estimates that in the new construction market, 90 
percent of the residential (not including mobile homes) and 80 
percent of commercial applications go through a builder and that the 
rest go through the national account distribution channel.

Manufacturer [rarr] Wholesaler [rarr] Plumbing Contractor [rarr] 
Builder [rarr] Consumer
Manufacturer [rarr] Wholesaler [rarr] Builder [rarr] Consumer
Manufacturer [rarr] Wholesaler (National Account) [rarr] Consumer

    For new construction, all mobile home boilers are sold as part of 
mobile homes in a specific distribution chain characterized as follows:

Manufacturer [rarr] Mobile Home Manufacturer [rarr] Mobile Home Dealer 
[rarr] Consumer

    DOE developed baseline and incremental markups for each actor in 
the distribution chain. Baseline markups are applied to the price of 
products with baseline efficiency, while incremental markups are 
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental 
markup is typically less than the baseline markup and is designed to 
maintain similar per-unit operating profit before and after new or 
amended standards.\48\
---------------------------------------------------------------------------

    \48\ Because the projected price of standards-compliant products 
is typically higher than the price of baseline products, using the 
same markup for the incremental cost and the baseline cost would 
result in higher per-unit operating profit. While such an outcome is 
possible, DOE maintains that, in markets that are reasonably 
competitive, it is unlikely that standards would lead to a 
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

    To estimate average baseline and incremental markups, DOE relied on 
several sources, including: (1) form 10-K from the U.S. Securities and 
Exchange Commission (SEC) for Home Depot, Lowe's, Wal-Mart, and Costco 
(for retailers); (2) U.S. Census Bureau 2017 Annual Retail Trade Report 
for miscellaneous store retailers (North American Industry 
Classification System (NAICS) 453) (for online retailers),\49\ (3) U.S. 
Census Bureau 2017 Economic Census data \50\ on the residential and 
commercial building construction industry (for builder, plumbing 
contractor, mobile home manufacturer, mobile home retailer/dealer); and 
(4) the U.S. Census Bureau 2017 Annual Wholesale Trade Report data \51\ 
(for wholesalers). DOE assumes that the markups for national account is 
half of the value of wholesaler markups. In addition, DOE used the 2005 
Air Conditioning Contractors of America's (ACCA) Financial Analysis on 
the Heating, Ventilation, Air-Conditioning, and Refrigeration (HVACR) 
contracting industry \52\ to disaggregate the mechanical contractor 
markups into replacement and new construction markets for consumer 
boilers used in commercial applications.
---------------------------------------------------------------------------

    \49\ U.S. Census Bureau, 2017 Annual Retail Trade Report (AWTR) 
(Available at: www.census.gov/programs-surveys/arts.html) (Last 
accessed January 3, 2023). Note that the 2017 Annual Retail Trade 
Report is the latest version of the report that includes detailed 
operating expenses data.
    \50\ U.S. Census Bureau, 2017 Economic Census Data (Available 
at: www.census.gov/programs-surveys/economic-census.html) (Last 
accessed Jan. 3, 2023). Note that the 2017 Economic Census Data is 
the latest version of this data.
    \51\ U.S. Census Bureau, 2017 Annual Wholesale Trade Report 
(AWTR) (Available at: www.census.gov/wholesale/index.html) (Last 
accessed Jan. 3, 2023). Note that the 2017 AWTR Census Data is the 
latest version of this data.
    \52\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry (2005) (Available at: 
www.acca.org/store#/storefront) (Last accessed Jan. 3, 2023). Note 
that the 2005 Financial Analysis for the HVACR Contracting Industry 
is the latest version of the report and is only used to disaggregate 
the mechanical contractor markups into replacement and new 
construction markets.
---------------------------------------------------------------------------

    In addition to the markups, DOE obtained State and local taxes from 
data provided by the Sales Tax Clearinghouse.\53\ These data represent 
weighted-average taxes that include county and city rates. DOE derived 
shipment-weighted average tax values for each State considered in the 
analysis.
---------------------------------------------------------------------------

    \53\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates (Jan. 4, 2022) 
(Available at: www.thestc.com/STrates.stm) (Last accessed May 3, 
2023).
---------------------------------------------------------------------------

    BWC stated that it is not aware of any boiler manufacturer that is 
selling direct to consumers, for both new construction and replacement, 
and that it is possible that some boilers are being sold from a 
manufacturer to a mechanical contractor followed by the consumer. BWC 
stated that it does not see boilers being sold from a manufacturer to a 
wholesaler and then to a builder and consumer, as a contractor would 
still need to be involved for the installation. (BWC, No. 39 at p. 3) 
Based on available data sources, DOE estimated that the majority of the 
contractors obtain boilers from wholesaler or retailer stores. DOE 
acknowledges that contractors are needed for installations, and for the 
new construction distribution channel without contractors, the 
assumption is that the builders have in-house contractors.
    Rheem noted that not only do the percentages in Table 6.2.3 of the 
preliminary analysis TSD not add up to 100, but the manufacturer markup 
is also inconsistent throughout the analysis, with different values in 
the comment request and Tables 6.9.1, 6.9.2, and 6.9.3. (Rheem, No. 37 
at p. 4) DOE acknowledges that the percentages in Table 6.2.3 and 
manufacturer markup values in Tables 6.9.1, 6.9.2, and 6.9.3 of the 
preliminary analysis TSD were incorrectly reported and they have been 
fixed in the NOPR TSD. The actual values applied in the analysis remain 
the same between the preliminary and NOPR analysis.
    AGA, APGA, and NPGA stated that DOE should put greater weight on ex 
post and market-based evidence of markups to project a more realistic 
range of likely effects of a standard on prices, including the 
possibility that prices may fall. (AGA, APGA, and NPGA, No. 38 at p. 4) 
In response, DOE is not aware of any non-proprietary data that would 
allow estimation of changes in actual markups on consumer boilers. 
Regarding the effect of standards on prices, one study in 2013 that 
compared predicted and observed prices for nine products found that 
costs after standards, after adjusting for inflation, were less than 
what DOE estimated.\54\ In the case of consumer boilers, DOE compared 
retail prices before and after the 2021 standards took effect and found 
that on average, actual consumer boiler retail prices were below what 
DOE estimated after adjusting for inflation. (See appendix 6A of the 
NOPR TSD for further details) Such comparisons are problematic, 
however, because a number of factors can cause

[[Page 55155]]

prices to change, in addition to new efficiency standards. To serve the 
goal of DOE's analysis to specifically estimate the cost to consumers 
of new or amended energy conservation standards, DOE's method of 
estimating incremental costs relative to a baseline product is more 
likely to yield relevant results.
---------------------------------------------------------------------------

    \54\ Steven Nadel and Andrew deLaski, Appliance Standards: 
Comparing Predicted and Observed Prices (July 30, 2013) ACEEE and 
ASAP (Available at: www.aceee.org/research-report/e13d) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Chapter 6 of the NOPR TSD provides details on DOE's development of 
markups for consumer boilers.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of consumer boilers at different efficiencies in 
representative U.S. single-family homes, multi-family residences, 
mobile homes, and commercial buildings, and to assess the energy 
savings potential of increased consumer boiler efficiency. The energy 
use analysis estimates the range of energy use of consumer boilers in 
the field (i.e., as they are actually used by consumers). The energy 
use analysis provides the basis for other analyses DOE performed, 
particularly assessments of the energy savings and the savings in 
consumer operating costs that could result from adoption of amended or 
new standards.
    DOE estimated the annual energy consumption of consumer boilers at 
specific energy efficiency levels across a range of climate zones, 
building characteristics, and applications. The annual energy 
consumption includes the natural gas, liquid petroleum gas (LPG), fuel 
oil, and electricity used by the consumer boilers. DOE's assessment of 
annual energy consumption is calculated for all households or buildings 
using a consumer boiler intended for space heating. In addition, DOE 
also included the annual energy consumption for a fraction of consumer 
boilers that are used to provide hot water in addition to space 
heating. DOE does not account for other potential boiler uses such as 
snow melt systems, pool or spa heating, or steam or hot water 
production for industrial or commercial processes, since currently DOE 
does not have any information about the market share and energy use of 
such systems to include it in its analysis.
    The energy used by a consumer boiler when installed will vary by 
household or building characteristics, usage, and region. For this 
proposed rulemaking, the energy use for consumer boilers is estimated 
by identifying the various households or buildings in RECS and CBECS 
dataset that utilize consumer boilers covered by this proposed rule. 
Next, DOE used the same datasets to identify the space and water 
heating load for each of the buildings within the sample, which was 
used to determine the size of the commercial water heating equipment 
needed to meet the space and water heating need of the households or 
buildings being analyzed. The determination of the boiler capacity of a 
sampled household or building is based on heating load sizing 
calculations from industry reference manuals such as Manual J coupled 
with the above building characteristics and climate data. Households or 
buildings with higher heating requirements need larger capacity boilers 
per this sizing calculation. These households or buildings are then 
rank ordered to match available industry and market research shipment 
data by boiler capacity, so that the analysis has an informed 
distribution of boiler capacities that matches industry shipment data 
and larger capacity boilers are preferentially assigned to households 
or buildings with higher heating loads.
    In order for energy use of the equipment to be determined, DOE 
calculated the time the boiler is spent in active mode (providing space 
heating or hot water to meet the load of the building) and in standby 
mode (electrical components are on but the boiler is not actively 
heating water). Starting from this energy consumption estimate, the 
heating load is further refined based on building characteristic data 
also included in RECS and CBECS, such as the building square footage, 
building vintage, foundation type, number of floors, and outdoor 
temperature (i.e., climate for a given region of the country). Certain 
building shell characteristics (e.g., insulation) are inferred based on 
the building's age and building shell indices from AEO 2023 dataset. 
The efficiency of the existing boiler for each household or buildings 
is estimated based on informed assumptions about the reported boiler 
age and historical efficiency distributions. The energy use is further 
adjusted by informed assumptions to reflect the impact of the return 
water temperature, which is discussed below in more detail below, as 
well as more minor effects such as jacket losses.
    Chapter 7, appendix 7A, and appendix 7B presents further detail 
regarding the boiler sizing methodology and estimation of energy 
consumption.
    DOE requests comment on DOE's space heating and water heating 
energy use methodology. DOE would also appreciate feedback, 
information, and data on these additional system types and processes 
that use consumer boilers (such as snow melt systems, pool or spa 
heating, or steam or hot water production for industrial or commercial 
processes).
    Chapter 7 of the NOPR TSD provides details on DOE's energy use 
analysis for consumer boilers.
1. Building Sample
    To determine the field energy use of consumer boilers used in 
homes, DOE established a sample of households using consumer boilers 
from EIA's 2015 Residential Energy Consumption Survey (RECS 2015),\55\ 
which is the most recent such survey that is currently fully available. 
The RECS data provide information on the vintage of the home, as well 
as space heating and water heating energy use in each household. DOE 
used the household samples not only to determine boiler annual energy 
consumption, but also as the basis for conducting the LCC and PBP 
analyses. DOE projected household weights and household characteristics 
in 2030, the anticipated first year of compliance with any amended or 
new energy conservation standards for consumer boilers. To characterize 
future new homes, DOE used a subset of homes in RECS 2015 that were 
built after 1990.
---------------------------------------------------------------------------

    \55\ Energy Information Administration (EIA), 2015 Residential 
Energy Consumption Survey (RECS) (Available at: www.eia.gov/consumption/residential) (Last accessed Jan. 3, 2023). Note that 
RECS 2020 building characteristics have been released in preliminary 
form by EIA; however, the full release of RECS 2020 data was still 
not published when the analysis was conducted (expected to be 
published on June 2023).
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    To determine the field energy use of consumer boilers used in 
commercial buildings, DOE established a sample of buildings using 
consumer boilers from EIA's 2018 Commercial Building Energy Consumption 
Survey (CBECS 2018), which is the most recent such survey that is 
currently fully available. See appendix 7A of the NOPR TSD for details 
about the CBECS 2018 sample.
    In commenting on the May 2022 preliminary analysis, WMT expressed 
concern about the level of accuracy in RECS 2015 data due to the 
substantial update to the end-use modeling and calibration methods 
described by EIA as having been implemented in this dataset. WMT noted 
that EIA removed unusually small or large outliers from the dataset, 
and that the variation in the data should be quantified to determine 
whether the data is actually representative of home sizes in the United 
States. WMT also commented that RECS estimates the energy used by 
boilers but does not include a reference to the actual energy use data 
used to validate these models, and, thus, this data may not accurately 
estimate the

[[Page 55156]]

impact of proposed minimum efficiency levels relative to the base case 
energy consumption. WMT concluded that any LCC analysis based upon RECS 
must include the documented variation in the RECS dataset, as 
identified by EIA. (WMT, No. 32 at pp. 9-10)
    In response, DOE notes that EIA administers the RECS to a 
nationally representative sample of U.S. housing units. For RECS 2015, 
specially trained interviewers collected energy characteristics on the 
housing unit, usage patterns, and household demographics. This 
information is combined with data from energy suppliers to these homes 
to estimate energy costs and usage for heating, cooling, appliances, 
and other end uses. The RECS survey data, including energy use, is an 
integral ingredient of EIA's Annual Energy Outlook (AEO) and Monthly 
Energy Review (MER). EIA's methodology for RECS 2015 is described in 
multiple reports.\56\ As described in these reports, RECS 2015 
represents a substantial update to the end-use modeling and calibration 
methods. For example, in the 2015 RECS, the end-use models follow an 
engineering approach, and the calibration--which follows a minimum 
variance estimation approach--is based on the relative uncertainties of 
and correlations between the end uses being estimated. Instead of 
estimating unknown parameters and interpreting their solution values as 
in statistical modeling, engineering models improve upon statistical 
models by drawing on existing studies. Also, engineering models lead to 
more realistic variations across modeled housing units. In addition, 
calibration procedures in RECS 2015 use minimum variance estimation, 
which better incorporates household characteristics data uncertainty 
and recognizes correlations between end uses. DOE notes that households 
that use natural gas, propane, or fuel oil predominately use these 
fuels for space heating and water heating. In the case of space 
heating, it is heavily seasonal, while water heating remains more 
constant throughout the year.
---------------------------------------------------------------------------

    \56\ See www.eia.gov/consumption/residential/data/2015/index.php?view=methodology (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    DOE determined the 95-percent confidence level for the average 
energy use values used in its analysis for consumer boilers to be plus 
or minus 7.2 percent, using EIA's methodology for calculating sampling 
error.\57\ DOE also compared the RECS 2015 energy consumption estimates 
for boilers to previous RECS energy consumption estimates and other 
available studies for consumer boilers, and the Department found that 
energy consumption values estimated in 2015 are similar (or within in 
the RECS 2015 sampling error) of those other sources, after being 
adjusted for heating degree-day differences, building shell changes in 
the stock, and average boiler efficiency in the stock. This analysis 
included comparing homes using consumer boilers by home sizes and type 
in the different studies, including larger sample sized studies at the 
national level such as the 2021 American Community Survey (ACS),\58\ 
the 2021 American Housing Survey (AHS),\59\ the 2022 American Home 
Comfort Study,\60\ as well as regional studies such as the 2016-2017 
Residential Building Stock Assessment (RBSA) for the northwest region 
(Idaho, Montana, Oregon, and Washington),\61\ the 2019 Residential 
Building Stock Assessment for the State of New York,\62\ the 
Massachusetts Residential Baseline Study,\63\ and the 2019 California 
Residential Appliance Saturation Study (RASS).\64\ In conclusion, DOE 
finds that RECS 2015 matches other studies' energy use estimates for 
boilers and is a reliable source for DOE to use to create a 
representative national sample reflecting variations in real world 
energy use. See appendix 7A and 7B of the NOPR TSD for more details.
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    \57\ See www.eia.gov/consumption/residential/data/2015/pdf/microdata_v3.pdf (Last accessed Jan. 3, 2023).
    \58\ U.S. Census Bureau, 2021 American Community Survey 
(Available at: www.census.gov/programs-surveys/acs) (Last accessed 
Jan. 3, 2023).
    \59\ Department of Housing and Urban Development (HUD) and U.S. 
Census Bureau, 2021 American Housing Survey (Available at: 
www.census.gov/programs-surveys/ahs.html) (Last accessed Jan. 3, 
2023).
    \60\ Decision Analyst, 2022 American Home Comfort Study 
(Available at: www.decisionanalyst.com/syndicated/homecomfort/) 
(Last accessed Jan. 3, 2023).
    \61\ NEEA, 2016-2017 Residential Building Stock Assessment 
(Individua Reports for Single Family, Manufactured Homes and 
Multifamily Homes) (Available at: neea.org/data/residential-building-stock-assessment) (Last accessed Jan. 3, 2023).
    \62\ NYSERDA, 2019 Residential Building Stock Assessment 
(Available at: www.nyserda.ny.gov/About/Publications/Building-Stock-and-Potential-Studies/Residential-Building-Stock-Assessment) (Last 
accessed Jan. 3, 2023).
    \63\ Electric and Gas Program Administrators of Massachusetts, 
Massachusetts Residential Building Use and Equipment 
Characterization Study (Available at: ma-eeac.org/wp-content/uploads/Residential-Building-Use-and-Equipment-Characterization-Study-Comprehensive-Report-2022-03-01.pdf) (Last accessed Jan. 3, 
2023).
    \64\ CEC, 2019 California Residential Appliance Saturation Study 
(Available at: www.energy.ca.gov/publications/2021/2019-california-residential-appliance-saturation-study-rass) (Last accessed Jan. 3, 
2023).
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    AHRI and Rheem expressed concern with the Department using 
allegedly outdated data for the analysis, and these commenters stated 
that it is not a valid assumption that the market has remained 
unchanged since 2012 or 2015, and that the use of such data in the 
final rule will not be representative of impacts on consumers. AHRI and 
Rheem encouraged the Department to update its analysis to use the CBECS 
2018 data and to use the RECS 2020 data as soon as it becomes 
available. In addition, AHRI and Rheem recommended that DOE conduct 
updated surveys, studies, and analyses where the existing data sources 
are out of date. (AHRI, No. 40 at p. 5; Rheem, No. 37 at pp. 4-5) BWC 
commented that throughout the TSD, numerous references are made to what 
it perceived to be outdated surveys and other data sources. BWC stated 
that the reality of today's costs to consumers and manufacturers are 
significantly beyond what they were just a few years ago, let alone 
more than a decade ago. Accordingly, BWC strongly recommended that DOE 
should conduct surveys or studies to obtain the information necessary 
to properly inform major regulatory policy decisions. (BWC, No. 39 at 
p. 3)
    In response, DOE notes that for this NOPR, it used the most recent 
data that was available. While conducting the preliminary analysis, 
RECS 2020 and CBECS 2018 were not fully available and did not have 
energy consumption estimates. However, DOE did incorporate CBECS 2018 
for this NOPR and updated the weighting for residential sample based on 
RECS 2020. To confirm sample weighting using RECS 2020 and CBECS 2018, 
DOE also reviewed trends from multiple sources including Home 
Innovations data, American Home Comfort Survey data, and the American 
Housing Survey (AHS) to determine any changes in occupant density and 
types of home, changes in the housing stock by region, new construction 
trends, and changes in the types of water heater used by region and 
market segment. Regarding conducting independent surveys, DOE does not 
have the capacity to conduct nationally-representative surveys with 
sufficiently large sample sizes to provide useful results, on the same 
level as RECS and CBECS. However, as stated previously, DOE compared 
its energy use model results to multiple studies, including NEEA data, 
RASS data, and multiple other residential boiler studies and determined 
that its methodology for assessment of the current market is 
appropriate.
    Crown and U.S. Boiler stated that DOE is significantly 
overestimating the number of residential boilers used in commercial 
buildings, which inflated

[[Page 55157]]

the estimate of energy savings that would result from adoption of a new 
standard. They also stated that while most of the buildings in the 
CBECS sample may indeed have multiple boilers, they are far more likely 
to have multiple commercial boilers than DOE has assumed. Crown and 
U.S. Boiler stated that the preliminary TSD indicates that DOE assumed 
that half of all buildings over 10,000 square feet that are heated with 
boilers use commercial boilers and the other half use residential 
boilers, but these commenters argued that DOE has provided no rationale 
for this breakdown. (Crown, No. 30 at p. 6; U.S. Boiler, No. 31 at p. 
6)
    In response, DOE revised its estimates of the number of consumer 
boilers in commercial buildings based on available shipment data from 
the 2022 BRG Building Solutions report,\65\ the updated 2018 CBECS 
sample, and revised sizing methodology for boilers in commercial 
buildings. This resulted in a decrease in the fraction of commercial 
buildings above 10,000 square feet that use consumer boilers from 50 
percent to 22 percent. See appendix 7A of the NOPR TSD for more 
details.
---------------------------------------------------------------------------

    \65\ BRG Building Solutions, The North American Heating & 
Cooling Product Markets (2022 Edition) (Available at: 
www.brgbuildingsolutions.com/reports-insights) (Last accessed Jan. 
3, 2023).
---------------------------------------------------------------------------

    DOE requests comment on DOE's methodology for determining the 
fraction of consumer boilers used in commercial buildings. DOE also 
seeks input regarding the fraction of consumer boilers in commercial 
buildings larger than 10,000 square feet.
    Crown and U.S. Boiler stated that residential steam systems are 
obsolete and that the newest residential steam systems in the U.S. were 
installed long before 1970, so all residential steam boilers sold in 
the U.S. for space heating are, therefore, used in replacement 
installations. They stated that in some cases, oil steam boilers are 
replaced with gas steam boilers, making them ``new owner'' 
installations. Crown and U.S. Boiler stated that it is reasonable to 
expect the stock of buildings heated by residential steam heating 
boilers and steam boiler sales to decline over time. (Crown, No. 30 at 
p. 6; U.S. Boiler, No. 31 at p. 6) Crown's and U.S. Boiler's statements 
are consistent with DOE's sample development for steam boilers, as 
discussed further in sample variables in appendix 7A and in the 
shipments analysis in appendix 9A of the NOPR TSD.
2. Space Heating Energy Use
    To estimate the annual energy consumption of consumer boilers, DOE 
first calculated the heating load based on the RECS and CBECS estimates 
of the annual energy consumption of the boiler for each household or 
commercial building. DOE estimated the house or building heating load 
by referencing to the existing boiler's characteristics, specifically 
its capacity and efficiency (AFUE), as well as the heat generated from 
the electrical components. The AFUE of the existing boilers was 
determined using the boiler vintage (the year of installation of the 
product) from RECS and historical data on the market share of boilers 
by AFUE.
    DOE adjusted the AFUE of the existing and new boilers to reflect 
the variation in efficiency in different hydronic space heating 
applications by associating a specific space heating application with 
each sampled household or building. The field-adjusted AFUE of the 
existing and new boilers was calculated depending on the return water 
temperature, automatic means for adjusting water temperature, and 
jacket losses.
a. Heating Load Calculation
    DOE estimated the house/building heating load by using the energy 
use estimates from RECS and CBECS for each consumer boiler and then 
assigning an existing boiler's characteristics, specifically its 
capacity and efficiency (AFUE). If DOE assigned multiple consumer 
boilers to a building, then the heating load was divided equally to 
each boiler. DOE then adjusted the energy use to normalize for weather 
by using long-term heating degree-day (HDD) data for each geographical 
region.\66\ DOE also accounted for changes in building shell 
characteristics between 2015 (for RECS data) or 2018 (for CBECS data) 
and 2030 by applying the building shell efficiency indices in the 
National Energy Modeling System (NEMS) based on EIA's Annual Energy 
Outlook 2023 (AEO 2023).\67\ DOE also accounted for future heating 
season climate based on AEO 2023 HDD projections.
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    \66\ National Oceanic and Atmospheric Administration, NNDC 
Climate Data Online (Available at: www.cpc.ncep.noaa.gov/products/analysis_monitoring/cdus/degree_days/) (Last accessed Jan. 3, 2023).
    \67\ EIA, Annual Energy Outlook 2023 with Projections to 2050, 
Washington, DC (Available at: www.eia.gov/forecasts/aeo/) (Last 
accessed May 3, 2023).
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    WMT stated that DOE's analysis does not represent the portion of 
the insufficiently insulated homes and buildings for which condensing 
boilers would operate continuously at high fire and yet may be unable 
to provide adequate heat on the coldest days. WMT stated that the 
practical impact of the variation in insulation quality across the 
country is that the annual operating cost of boilers in underserved and 
disadvantaged portions of society is understated in the current model, 
because the burner operating hours (BOH) modeled in the LCC analysis 
will not adequately represent the actual energy consumed to heat homes 
with insufficient insulation. WMT stated that the BOH approach modeled 
minimizes this concern through the ``building envelope'' approach 
described in the Technical Support Document, but neither the RECS nor 
the CBECS data address such insulation concerns adequately, and, 
therefore, these subgroups must be evaluated at the State and local 
level in addition to the national level. (WMT, No. 32 at pp. 5-6)
    In response, DOE's equipment sizing approach considers the same 
maximum output capacity for both non-condensing and condensing 
equipment, and the level of heat provided in the coldest days is 
assumed to be the same for the baseline and higher efficiency 
equipment. However, installing contractors typically oversize the 
equipment significantly so that the boiler is able to meet the heating 
load demand on the coldest days. If a contractor decided to oversize 
the condensing equipment, then this could lead to increased energy use 
for the condensing equipment (but not necessarily increased burner 
operating hours, since larger output capacity could result in similar 
or decreased operating hours). DOE argues, though, that this additional 
energy use to be able to meet the heating load in the coldest days for 
an insufficiently insulated home or building would lead to greater 
comfort for the occupant and would lead to an unfair comparison to the 
non-condensing baseline model, since the installing contractor could 
also oversize the non-condensing model to achieve a similar result.
    DOE notes that there may be a significant number of insufficiently 
insulated homes and buildings in the U.S., but RECS and CBECS already 
account for the higher energy use associated with heating these 
buildings in their energy consumption and expenditure data. The number 
of insufficiently insulated homes and buildings has decreased over time 
because of retrofit efforts (such as weatherization programs for low-
income households) and the decreasing number of older homes in the 
building stock as some older homes get demolished. DOE relies on 
``building envelope'' projections from AEO 2023 to account

[[Page 55158]]

for continued improvements to the insulation of homes and buildings, 
which accounts for changes in the building codes over time as well. For 
the NOPR analysis, DOE maintained its equipment sizing approach and 
approach for projecting changes in ``building envelope,'' as used in 
the preliminary analysis.
b. Impact of Return Water Temperature on Efficiency
    Consumer boilers need a low return water temperature (RWT) to 
condensate the hot flue gas and operate efficiently, as designed. When 
operating at a high RWT, consumer may lose the efficiency advantage. 
Considering the varying conditions in the installations, DOE accounted 
for boiler operational efficiency in specific installations by 
adjusting the AFUE of the sampled boiler based on an average system 
return water temperature. The criteria used to determine the return 
water temperature of the boiler system included consideration of 
building vintage, product type (condensing or non-condensing, single-
stage or modulating), and whether the boiler employed an automatic 
means for adjusting water temperature. Using product type and system 
return water temperature, DOE developed and applied the AFUE 
adjustments based on average heating season return water temperatures.
    BWC expressed concern with DOE using a curve fit of curves 
represented by various manufacturers showing the relationship of boiler 
efficiency versus RWT when the efficiency values represented were not 
verified by a third party, and it cannot be guaranteed that all these 
manufacturers characterized the boiler efficiencies in the same way. 
(BWC, No. 39 at p. 4) On this point, DOE notes that for the preliminary 
analysis, it used all the available data from the 2016 Final Rule 
(including data provided by Burnham in the 2015 NOPR for non-condensing 
and condensing boilers) to determine the impact of return water 
temperature on boiler efficiency. For this NOPR, DOE did not find any 
additional third-party testing data to justify changing its approach. 
DOE collected data on several more models, and these sources indicate a 
decrease similar to that encountered in the previous data DOE used.
    DOE requests comments, information, and data regarding the 
relationship between boiler efficiency and return water temperature.
    Crown and U.S. Boiler pointed to DOE's thermal efficiency versus 
RWT graphs converging into a narrow band between 86 percent and 88 
percent as the RWT approaches 140 [deg]F as supporting their position 
that the AFUE of a condensing boiler operating above the dew point is 
largely independent of the rated efficiency in condensing mode. (Crown, 
No. 30 at p. 7; U.S. Boiler, No. 31 at pp. 7-8) In response, DOE would 
point out that although the regression analysis does show a narrow band 
at temperatures at or above 140 [deg]F RWT, there is still a 
differential between the three condensing efficiency levels, and that 
the graph presents the extent of the efficiency decreases in different 
temperature ranges. Consequently, DOE contends that it is not accurate 
to portray estimated condensing boiler efficiency above dew point as 
independent of rated efficiency.
    BWC commented that DOE stated in the preliminary analysis TSD that 
a single-stage condensing boiler rated without automatic means or a 
condensing boiler (either two-stage or modulating) with automatic 
means, would have a field-adjusted efficiency above 90 percent AFUE in 
a high RWT system (160 [deg]F), a result which does not seem possible 
when an RWT above 130 [deg]F would prevent the boiler from condensing, 
and as such, its maximum expected efficiency would range from 85-
percent to 88-percent AFUE. (BWC, No. 39 at pp. 3-4) Crown and U.S. 
Boiler stated that the current DOE assumption that adjustments for 
return water temperature are additive and constant relative to the 
rated AFUE at 120 [deg]F RWT. According to the commenters, this 
correction leads to a 95-percent AFUE modulating condensing boiler 
having a field-adjusted AFUE of 92.94 percent at 140 [deg]F RWT, a 
result which Crown and U.S. Boiler characterized as being unreasonable 
and highly optimistic. (Crown, No. 30 at p. 7; U.S. Boiler, No. 31 at 
pp. 7-8) Crown and U.S. Boiler also stated that any ``AFUE 
adjustments'' that are made should have a sound technical basis, or not 
be made at all. Crown and U.S. Boilers agreed with DOE that actual 
energy use for a boiler having a given rated AFUE will vary from one 
installation to the next based upon many factors, but stated that DOE's 
attempt to adjust the rated AFUE to account for these varying field 
conditions is flawed and generally tends to overstate the efficiency of 
condensing boilers relative to non-condensing boilers. (Crown, No. 30 
at p. 7; U.S. Boiler, No. 31 at p. 7)
    In response to Crown's and U.S. Boiler's comments, DOE reviewed its 
field-adjusted AFUE values and compared them with the latest available 
field data. Based on this data (see appendix 7B of the NOPR TSD for 
details), DOE was able to refine field-adjusted AFUE by taking into 
account differences in local weather conditions, equipment sizing, heat 
emitter types, return water temperatures, and other installation 
characteristics for each sampled household or building. Overall, DOE 
found that modulating condensing boilers are able to match the heating 
load even if they are significantly oversized, compared to non-
modulating equipment that might short-cycle more often if significantly 
oversized, which would impact efficiency. DOE also notes that current 
modulating condensing boilers with outdoor reset controls are able to 
handle a significant fraction of the heating load during typical winter 
conditions, even if the heat emitters are not properly sized. On 
average, the field-adjusted AFUE used in the preliminary analysis is 
similar to the field-adjusted efficiency for the NOPR, but the updated 
approach provides a more significant level of variability that is found 
in the field. See appendix 7B of the NOPR TSD for more details.
    WMT stated that the vast majority of current boiler installations 
operate at 180 [deg]F circulating (return) water temperatures and that 
the prevalence of such boiler systems should be accounted for in the 
analysis. The commenter likewise argued that a related reduction in 
efficiency (for condensing boilers where additional emitter surface 
area is not added) should be accounted for in the analysis. WMT also 
stated that higher efficiencies are only consistently realized when the 
heat emitter surface area is adequately sized, because when it is not 
adequately sized, increased efficiencies are highly dependent upon the 
local climate. (WMT, No. 32 at p. 5) AHRI stated that according to a 
contractor survey they conducted, when replacing a non-condensing 
boiler with a condensing boiler, heat emitters are not being added in 
the field due to the cost of additional heat emitters or installation 
space constraints. Therefore, AHRI argued that DOE overstated the 
energy savings in its model, because such installations provide less 
than the stated efficiency levels, and the boilers would have to run 
longer to maintain home temperatures. (AHRI, No. 42 at p. 4)
    In response, DOE agrees that many existing hydronic distribution 
systems were originally designed to meet the heating load on the 
coldest day, with the hot water circulating through the heat emitters 
(such as radiators) at 180 [deg]F. Based on weather data, boilers today 
typically experience conditions \68\

[[Page 55159]]

at design limits less than five percent of the time when fulfilling 
space heating needs. The conditions that boilers usually face are 
considerably less than design during the rest of the year. By using bin 
data, DOE estimated that for most consumer boiler installations, for 80 
percent or more of the heating season, boilers are required to consume 
50 percent or less energy than the BTUs needed to meet designed maximum 
heating needs. In addition, the heating system (including the boiler 
and the installed radiator) is typically oversized significantly 
compared to the design conditions, and a significant number of 
buildings have improved their building shell in comparison to when the 
original hydronic heating system was originally installed. Condensing 
boilers also use outdoor reset features to calculate the right water 
temperature for the heat emitters based upon the load that the house or 
building is experiencing. DOE analyzed the design conditions, reset 
curves, and bin data for different houses or buildings in DOE's sample 
and determined that for a large majority of the heating season, the 
boiler can lower the water temperature so that the return temperatures 
coming back to the boiler are below combustion gas dewpoint levels,\69\ 
which allows the boiler flue gases to condense and the boiler to 
operate at or near its rated efficiency. Another feature of condensing 
boilers is that the burner modulates, which typically increases the 
overall efficiency of the unit by allowing it to operate the majority 
of the time in part-load, which is typically at or near its rated 
efficiencies. In an ideal situation, the heat emitter for a condensing 
boiler installation is chosen to provide all the BTUs needed. For this 
to occur, all of the existing homes and commercial buildings would have 
to change and/or upgrade their existing heat emitters. As shown in 
AHRI's 2022 contractor survey, although upgrading the heat emitter does 
occur in the field to some extent, the majority of the time it does 
not. Therefore, for the NOPR, DOE updated its energy use model to 
estimate the fraction of the time the condensing boiler would operate 
at different efficiencies based on return water temperature by using 
binned weather data for each household or building installation. Such 
approach should allow DOE to characterize the impact of individual 
installations more accurately, but on average, the Department has found 
the resulting efficiencies to be similar to the ones estimated in the 
preliminary analysis.
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    \68\ The space heating design outdoor temperature is typically 
defined as the temperature point above which the actual ambient 
temperature would be for 99 percent of all the hours in the year, 
based on a 30-year average. In other words, at the space heating 
design temperature, the boiler would be expected to encounter colder 
temperatures for only 1 percent of the hours in a year.
    \69\ For example, when a condensing boiler is designed for 180 
[deg]F water, 70 [deg]F indoors, and a design outdoor temperature of 
between 0 [deg]F and 10 [deg]F, the reset curve will calculate a 
water temperature that provides return temperatures below the 
dewpoint of the flue gases. Such mechanism would be expected to work 
as intended down to 25 [deg]F in order to ensure that the boiler is 
operating in a condensing mode.
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    DOE requests comment on DOE's updated methodology for determining 
energy use for condensing boilers in different return water temperature 
applications.
c. Impact of Jacket Losses on Energy Use
    In its analysis, DOE accounted for jacket losses when the boiler is 
located in a non-conditioned space (i.e., unconditioned basement or 
garage). For boilers located in conditioned spaces, DOE assumed that 
jacket losses contribute to space heating as useful heat.
    Crown and U.S. Boiler stated that there is little justification in 
applying jacket loss to any boilers installed in basements, especially 
when the DOE test procedure treats non-weatherized boilers as being 
located indoors in a conditioned space, consistent with long-standing 
DOE practice. Crown and U.S. Boiler also pointed out that there may be 
a problem with the two jacket loss factors K and CJ being 
inconsistent with each other in ASHRAE 103-2017. (Crown, No. 30 at p. 
8; U.S. Boiler, No. 31 at p. 8)
    In response, because some of the jacket losses could contribute to 
heating the conditioned space, DOE maintains that the jacket loss 
adjustment values are only applied to installations in unconditioned 
basements. In regard to the jacket loss values, since there are very 
limited test data, for the NOPR, DOE revised its jacket loss value for 
condensing boilers so that it is equal to on average 0.5 (per ASHRAE 
103-2022 for finned-tube boilers, which would more closely approximate 
condensing boiler designs, and DOE assumed 0.5 percent for the jacket 
loss fraction.
d. Impact of Excess Air Adjustments
    A properly controlled amount of excess air provided to the boiler 
during operation helps with efficient combustion and safe venting, but 
will impact the efficiency of the boiler if the excess air becomes too 
much. The current DOE test procedure requires the burners of gas-fired 
boilers to be adjusted to their maximum Btu input ratings at the normal 
pressure and to set the primary air shutters in accordance with the 
manufacturer's recommendation to give a good flame. However, as many 
consumer boilers operate on the lower end of the firing rates in the 
field, the excess air level calibrated at high fire decreases the 
operational efficiency. For the preliminary analysis, DOE accounted for 
differences in excess air between the test procedure and field 
conditions; DOE assumed that the increased excess air level in the 
field would be based on the assumed stack temperature and draft type, 
and addressed this by reducing AFUE by an adjustment factor ranging 
from 0.0 percent to 1.6 percent.
    Crown and U.S. Boiler stated that DOE's ``excess air adjustment'' 
adds error to the analysis and needs to be dropped. Crown and U.S. 
Boiler stated that because DOE's test procedure does not require gas 
burner excess air to be adjusted in accordance with manufacturer's 
instructions, and because excess air on non-atmospheric gas burners can 
often be adjusted independently of input, they believe that non-
atmospheric boilers are more likely than atmospheric to run in the 
field at an excess air level above (and efficiency below) that at which 
the AFUE was measured, which is exactly opposite what is done in DOE's 
adjustment. (Crown, No. 30 at p. 9; U.S. Boiler, No. 31 at p. 9)
    In response, DOE assumed that boilers at high fire operate at 15 to 
20 percent excess air, based on an article in the ASHRAE Journal \70\ 
and the relationship between excess air, stack temperature, and 
combustion efficiency from the Engineering Toolbox.\71\ Based on these 
two sources, DOE made the following assumptions. For natural draft 
(atmospheric) boilers below 86 percent AFUE, DOE assumed 20 percent 
excess air and 400 [deg]F stack temperature, resulting in a triangular 
distribution of AFUE impact from 0 percent to 1.6 percent (0.8 percent 
average). For non-condensing mechanical draft boilers and natural draft 
boilers above 86-percent AFUE, DOE assumed 15 percent excess air and 
400 [deg]F stack temperature, resulting in a 0.4 percent average, which 
is half of the impact on AFUE compared to natural draft boilers below 
86 percent AFUE. For condensing boilers, DOE assumed 15 percent excess 
air and 200 [deg]F stack temperature, resulting in 0.2 percent average, 
which is half of the impact on AFUE compared to non-condensing 
mechanical draft boilers. DOE has not found additional data or

[[Page 55160]]

information to support changing its methodology.
---------------------------------------------------------------------------

    \70\ Eoff, D., Understanding Fuel Savings in the Boiler Room, 
ASHRAE Journal (2008) 50(12): pp. 38-43.
    \71\ The Engineering Toolbox, Combustion Efficiency and Excess 
Air (Available at: www.engineeringtoolbox.com/boiler-combustion-efficiency-d_271.html) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    DOE requests comments, information, and data showing the 
relationship between boiler efficiency and excess air during AFUE 
testing and in the field.
3. Water Heating Use
    Consumer boilers are often used to provide hot water in addition to 
space heating. The most common means of doing so are through an 
indirect water heater, tankless coil, or as an integrated part of the 
boiler. This functionality's energy use is taken into account in the 
DOE test procedure for consumer boilers.
    As mentioned previously, DOE does not account for other boiler uses 
such as snow melt systems, pool or spa heating, or steam or hot water 
production for commercial processes, since currently DOE does not have 
any information about the prevalence and energy use of such systems. 
DOE welcomes information and data on these additional system types and 
processes.
    RECS 2015 and CBECS 2018 do not directly provide information about 
whether a boiler is used to provide hot water. For that to happen, DOE 
determined that it is a prerequisite for the households and buildings 
with (a) boiler(s) to report using the same fuel for both space and 
water heating. DOE also estimated the probability of consumer boilers 
used for water heating based on a 2015 AHRI contractor survey.\72\ DOE 
determined that boilers are used for water heating in 50 percent of 
gas-fired hot water boiler installations, 5 percent of gas-fired steam 
boiler installations, 40 percent of oil-fired hot water boiler 
installations, and 5 percent of oil-fired steam boiler installations.
---------------------------------------------------------------------------

    \72\ AHRI, Survey of Boiler Installation Contractors (2015), 
Usage of Boilers for Both Heat and Hot Water, pp. 10-11 (Available 
at: www.regulations.gov/document/EERE-2012-BT-STD-0047-0066) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    On this topic, Crown and U.S. Boiler stated that according to 
EPCA's definition of a ``furnace,'' within which boilers are included, 
nothing is said about domestic water production, so DOE's authority to 
include the energy use in the cost-benefit analysis for a standard is 
questionable. Crown and U.S. Boiler also stated that DOE's residential 
boiler test method is not designed to measure this energy consumption 
(including idle losses) and that DOE's crude attempt to estimate it 
includes several questionable and arbitrary assumptions. (Crown, No. 30 
at pp. 9-10; U.S. Boiler, No. 31 at pp. 9-10) In response, DOE notes 
that EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) As there is no restriction on the type of energy-
consuming service provided by a covered product, it is appropriate for 
DOE to include all such energy consumption and related costs associated 
with boiler operation, including those for domestic hot water supply. 
DOE believes that its energy use approach for estimating energy use for 
water heating and idle losses is reasonable, but welcomes any comments, 
methodology suggestions, and data to make further improvements to its 
energy use model.
    Crown and U.S. Boiler also stated that DOE is likely overstating 
the use of water heating by assuming any boiler, other than an oil-
fired steam boiler, is providing water heating if RECS 2015 or CBECS 
2012 reports the use of ``tankless water heating.'' (Crown, No. 30 at 
pp. 9-10; U.S. Boiler, No. 31 at p. 10) Overall, DOE has found that the 
fraction of boilers that are used for water heating in its sample 
matches the available contractor survey data compiled by AHRI in 2014 
and 2022. For the sampling process, DOE assumed that for oil-fired 
boilers (both steam and hot water), if RECS 2015 or CBECS 2018 reports 
the use of ``tankless water heating,'' then the boiler provides hot 
water. For gas-fired boilers, only a fraction of the reported 
``tankless water heating'' is assumed to be provided by the boiler.
    See appendix 7B of the NOPR TSD for more information about the 
energy use 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 
consumer 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. DOE used the following 
two metrics to measure consumer impacts:
     The LCC is the total consumer expense of an appliance or 
product over the life of that product, consisting of total installed 
cost (manufacturer selling price, distribution chain markups, sales 
tax, and installation costs) plus operating costs (expenses for energy 
use, maintenance, and repair). To compute the operating costs, DOE 
discounts future operating costs to the time of purchase and sums them 
over the lifetime of the product.
     The PBP is the estimated amount of time (in years) it 
takes consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
at higher efficiency levels by the change in annual operating cost for 
the year that amended or new standards are assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of consumer boilers in the absence of 
new or amended energy conservation standards. In contrast, the PBP for 
a given efficiency level is measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and commercial buildings. As stated previously, DOE 
developed household samples from RECS 2015 and CBECS 2018. For each 
sample household and commercial building, DOE determined the energy 
consumption for the consumer boilers and the appropriate energy price. 
By developing a representative sample of households and commercial 
buildings, the analysis captured the variability in energy consumption 
and energy prices associated with the use of consumer boilers.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    The computer model DOE uses to calculate the LCC relies on a Monte 
Carlo simulation to incorporate uncertainty and variability into the 
analysis. The Monte Carlo simulations randomly sample input values from 
the probability distributions and consumer boiler user samples. For 
this rulemaking, the Monte Carlo approach

[[Page 55161]]

is implemented in MS Excel together with the Crystal Ball\TM\ add-
on.\73\ The model calculated the LCC for products at each efficiency 
level for 10,000 housing units and commercial buildings per simulation 
run. The analytical results include a distribution of 10,000 data 
points showing the range of LCC savings for a given efficiency level 
relative to the no-new-standards case efficiency distribution. In 
performing an iteration of the Monte Carlo simulation for a given 
consumer, product efficiency is chosen based on its probability. If the 
chosen product efficiency is greater than or equal to the efficiency of 
the standard level under consideration, the LCC calculation reveals 
that a consumer is not impacted by the standard level. By accounting 
for consumers who already purchase more-efficient products, DOE avoids 
overstating the potential benefits from increasing product efficiency.
---------------------------------------------------------------------------

    \73\ Crystal Ball\TM\ is commercially-available software tool to 
facilitate the creation of these types of models by generating 
probability distributions and summarizing results within Excel 
(Available at: www.oracle.com/technetwork/middleware/crystalball/overview/index.html) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    DOE calculated the LCC and PBP for consumers of consumer boilers as 
if each were to purchase a new product in the expected year of required 
compliance with new or amended standards. New and amended standards 
would apply to consumer boilers manufactured 5 years after the date on 
which any new or amended standard is published. (42 U.S.C. 
6295(m)(4)(A)(ii)) At this time, DOE estimates publication of a final 
rule in mid-2024. Therefore, for purposes of its analysis, DOE used 
2030 as the first full year of compliance with any amended standards 
for consumer boilers.
    Table IV.9 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. Details of the spreadsheet model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the NOPR TSD and its appendices.

Table IV.9--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
            Inputs                           Source/method
------------------------------------------------------------------------
Product Cost.................  Derived by multiplying MPCs by
                                manufacturer and retailer markups and
                                sales tax, as appropriate. Used
                                historical data to derive a price
                                scaling index to project product costs.
Installation Costs...........  Baseline installation cost determined
                                with data from RSMeans 2023. Assumed no
                                change with efficiency level.
Annual Energy Use............  The total annual energy use multiplied by
                                the hours per year. Average number of
                                hours based on field data.
                               Variability: Based on RECS 2015 and CBECS
                                2018.
Energy Prices................  Natural Gas: Based on EIA's Natural Gas
                                Navigator data for 2022 and RECS 2015
                                billing data;
                               Electricity: Based on EIA's Form 861 data
                                for 2022 and RECS 2015 billing data;
                               Propane and Fuel Oil: Based on EIA's
                                State Energy Data System (SEDS) for
                                2021.
                               Variability: Energy prices by States were
                                used for residential and commercial
                                applications.
                               Marginal prices used for natural gas,
                                propane, and electricity prices.
Energy Price Trends..........  Based on AEO2023 price projections.
Repair and Maintenance Costs.  Based on RSMeans data and other sources.
Product Lifetime.............  GHW: 26.9 years; GST: 23.7 years; OHW:
                                25.6 years; OST: 19.6 years.
Discount Rates...............  Residential: approach involves
                                identifying all possible debt or asset
                                classes that might be used to purchase
                                the considered appliances, or might be
                                affected indirectly. Primary data source
                                was the Federal Reserve Board's Survey
                                of Consumer Finances.
                               Commercial: Calculated as the weighted-
                                average cost of capital for businesses
                                purchasing consumer boilers. Primary
                                data source was Damodaran Online.
Compliance Date..............  2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the NOPR TSD.

1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described 
previously (along with sales taxes). DOE used different markups for 
baseline products and higher-efficiency products, because DOE applies 
an incremental markup to the increase in MSP associated with higher-
efficiency products.
    Examination of historical price data for certain appliances and 
equipment that have been subject to energy conservation standards 
indicates that the assumption of constant real prices may, in many 
cases, overestimate long-term trends in appliance and equipment prices. 
Economic literature and historical data suggest that the real costs of 
these products may in fact trend downward over time according to 
``learning'' or ``experience'' curves.
    In the experience curve method, the real cost of production is 
related to the cumulative production or ``experience'' with a 
manufactured product. This experience is usually measured in terms of 
cumulative production. As experience (production) accumulates, the cost 
of producing the next unit decreases. The percentage reduction in cost 
that occurs with each doubling of cumulative production is known as the 
learning rate. In typical experience curve formulations, the learning 
rate parameter is derived using two historical data series: cumulative 
production and price (or cost). DOE obtained historical PPI data for 
heating equipment from 1999 to 2021 for cast iron boilers and from 1980 
to 1986 and 1994 to 2014 for steel boilers from the Bureau of Labor 
Statistics (BLS).\74\ The PPI data reflect nominal prices, adjusted for 
product quality changes. An inflation-adjusted (deflated) price index 
for heating equipment manufacturing was calculated by dividing the PPI 
series by the implicit price deflator for Gross Domestic Product 
Chained Price Index.\75\
---------------------------------------------------------------------------

    \74\ See www.bls.gov/ppi/.
    \75\ See www.bea.gov/data/gdp/gross-domestic-product.
---------------------------------------------------------------------------

    From 1999 to 2001, the deflated price index of the cast iron 
heating boiler was decreasing. Since then, the indices for cast iron 
boilers and steel boilers have both risen, due to rising prices of the 
raw materials. However, given the uncertainty in the material prices 
and the economy, it is uncertain the current trend of the price indices 
will be sustained. Therefore, DOE decided to use constant prices as the 
default price

[[Page 55162]]

assumption to project future consumer boiler prices. Thus, projected 
prices for the LCC and PBP analysis are equal to the 2021 values for 
each efficiency level in each product class.
    DOE requests comments on the default constant price trend for 
consumer boilers. DOE seeks comments on how material prices and 
technological advancement would be expected to impact future prices of 
consumer boilers.
2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product, such as venting and 
piping modifications and condensate disposal that might be required 
when installing products at various efficiency levels. DOE estimated 
the costs associated with installing a boiler in a new housing unit/
commercial building or as a replacement for an existing boiler. DOE 
used data from RSMeans to estimate the baseline and higher efficiency 
installation costs for consumer boilers.\76\
---------------------------------------------------------------------------

    \76\ See www.rsmeansonline.com/.
---------------------------------------------------------------------------

    DOE calculated the basic installation cost, which is applicable to 
both replacement and new construction boiler installations and includes 
the cost of putting in place and setting up the boiler, permitting, and 
removal or disposal fees. DOE also considered additional costs 
(``adders'') for a fraction of installations of non-condensing and 
condensing boilers. These additional costs may account for installing a 
new vent system, chimney relining, updating of flue vent connectors, 
vent resizing, the costs for a stainless-steel vent, and condensate 
withdrawal (if required). In addition, DOE accounted for the costs 
associated with adding water heating service using the boiler (for 
example, through an indirect tank or through combination space heating/
water heating boilers) for a fraction of installations. See chapter 8 
and appendix 8C of the TSD for more details on installation cost 
including average installation costs by product class and efficiency 
level.
    AHRI expressed concerns that RSMeans does not have enough 
resolution with respect to the differences in installation times for 
condensing and non-condensing boilers. (AHRI, No. 40 at p.6) WMT stated 
that RSMeans should not be utilized as a true job costing calculator 
because it does not accurately capture the true and nuanced costs of 
installation work. WMT believes the RSMeans data is intended as an 
initial estimation tool, providing information for businesses to 
benchmark against the larger industry and to provide quotations of 
complicated projects, and, in fact, RSMeans itself states that they 
have no expressed or implied warranty as to the fitness of the 
information for a particular purpose. WMT believes the actual cost of a 
project is determined after the work is completed, and, therefore, the 
best source of information for the difference in installation 
activities is the manufacturer's service call information. (WMT, No. 32 
at pp. 10-11)
    In response, DOE notes that the Department does not utilize RSMeans 
as the sole source for its estimation of boiler installation costs. DOE 
uses RSMeans data to provide labor costs, materials costs, and labor 
hours for a variety of installation tasks associated with installing a 
boiler. In order to appropriately characterize the installation costs, 
DOE used a variety of additional sources including consultant reports, 
manufacturer installation manuals, and other online resources. The 
resulting installation cost model for consumer boilers provides a 
distribution of costs that matches with available field data from 2014 
and 2022 AHRI contractor surveys and other online resources (see 
Appendix 8D for more details).
    Crown and U.S. Boiler argued that DOE used labor rates from RSMeans 
that do not appear applicable to residential boiler installation, 
service, and maintenance. Crown and U.S. Boiler stated that, for 
example, installation work on simple gas-fired natural draft non-
condensing boilers is sometimes performed by plumbers. (Crown, No. 30 
at p. 11; U.S. Boiler, No. 31 at p. 10) In response, DOE uses RSMeans 
data and consultant reports to estimate the appropriate labor crew for 
residential boiler tasks. DOE is aware that residential consumer boiler 
installations can be, and in certain cases are, accomplished by 
plumbers and other contractors, but RSMeans crew type for boilers 
approximates the average labor costs per hour for a crew performing the 
main boiler installation tasks. Also, the cost differential for this 
crew type versus a plumber for example is not very significant. (See 
appendix 8D of the NOPR TSD). Therefore, DOE kept its approach for 
using labor rates based on RSMeans for the NOPR analysis.
    Crown and U.S. Boiler stated DOE is underestimating the relative 
difference in the installation costs for condensing and non-condensing 
boilers, and past discussions with their customers suggest that a 
$3,500 adder for a condensing boiler installation, as evidenced by 
DOE's consultant, is closer to reality. (Crown, No. 30 at p. 11; U.S. 
Boiler, No. 31 at p. 11) In contrast, NEAA and the Joint Advocates 
stated that DOE's analysis of installation costs for consumer boilers 
is comprehensive and reasonable for condensing boiler installations and 
includes an evaluation of the installation issues associated with 
switching from a non-condensing to a condensing boiler. (NEAA, No. 36 
at p. 2; Joint Advocates, No. 35 at p. 3) NYSERDA stated that DOE 
correctly found that new technologies have entered the market to help 
alleviate previously challenging installations, particularly related to 
venting, for condensing products. NYSERDA further commented that the 
contractors have significant experience installing these products in a 
wide variety of scenarios, as almost 40 percent of all furnaces and 
boilers in New York achieve a condensing level of performance. NYSERDA 
added that DOE's analysis, which revealed that fewer than 5 percent of 
installations could be labeled as challenging, is well-supported and 
reflects the significant gain of market share that condensing products 
have achieved over the last twenty years. (NYSERDA, No. 33 at p.3)
    In response, DOE acknowledges that a small fraction of replacement 
installations may be difficult, but DOE does not believe that the 
difficulties are insurmountable. DOE notes that in response to the NOPR 
for the current residential furnaces rulemaking, the American Council 
for an Energy-Efficient Economy (ACEEE) stated that the Energy 
Coordinating Agency, a major weatherization program in Philadelphia 
that has installed many condensing furnaces in row houses, has 
developed moderate cost solutions (at most $350) to common problems 
such as having no place to horizontally vent directly from the 
basement. (Docket No. EERE-2014-BT-STD-0031, ACEEE, No. 113 at p. 7) 
DOE's analysis accounts for additional costs for that small fraction of 
installations that would require significant installation costs in the 
range of several thousand dollars. DOE also accounts for adders for 
condensing models in a distribution of costs that matches with 
available field data from 2014 and 2022 AHRI contractor surveys and 
other online resources (see appendix 8D of the NOPR TSD for more 
details). Although in some areas and certain applications a bigger 
relative difference can be observed in the field, DOE argues that the 
distribution of costs it develops for the installation cost analysis 
will better represent field applications overall. DOE agrees with 
NYSERDA that the fraction of remaining

[[Page 55163]]

difficult installations has been decreasing as the market share of 
condensing boiler installations has increased over time.
    PB Heat stated that the current minimum efficiency levels for 
Category I, chimney-vented boilers are near physical limits of chimney 
venting. The commenter added that increasing boiler minimum efficiency 
levels beyond the current levels would significantly reduce the 
applications where a Category I boiler could be installed with an 
existing chimney and produce reliable and safe operation over its 
expected life. PB Heat asserted that increasing the minimum efficiency 
would reduce the flue temperature, which along with chimney height is a 
key driver for venting of flue gases, and this would increase the 
likelihood of condensation in the chimney (causing premature 
degradation) and the likelihood of poor draft, which can result in flue 
gas spillage into the heated space. (PB Heat, No. 34 at p. 1)
    In response, DOE agrees that Category I venting may no longer be 
suitable for amended energy conservation standards set at significantly 
higher levels of boiler efficiency. DOE has estimated that in cases of 
replacement with near-condensing gas-fired boilers (85-89 percent 
AFUE), instead of using Category I chimney venting or Category II 
stainless steel venting, installers would use Category III stainless 
steel venting with mechanical draft.\77\ When considering condensing 
boilers, Category I or Category II venting presents reliability issues, 
even with stainless steel venting, because of the variety of operating 
conditions encountered in the field. Accordingly, for this analysis, 
DOE assumed that for such installations (that otherwise would require 
Category II venting), it would be appropriate to install a mechanical 
draft boiler with Category III venting (which requires stainless steel 
venting), in order to prevent safety and reliability issues. DOE 
included the cost of AL29-4C stainless steel venting for all Category 
III installations.
---------------------------------------------------------------------------

    \77\ For replacement with an 84-percent AFUE boiler, DOE found 
that that it is necessary to use special venting in a small fraction 
of cases based on shipments data provided by Burnham during the 2015 
NOPR. [EERE-2012-BT-STD-0047 (Burnham, No. 60, p.18)].
---------------------------------------------------------------------------

    AHRI stated that its contractor survey showed that while direct 
venting is a common means to vent condensing boilers, it is not the 
only method being used in the field. The commenter opined that the 
choice in venting is most likely based on the availability of the 
product and, as such, must be maintained as an option to ensure that 
contractors can install and vent boilers safely and effectively in all 
situations that they may encounter. (AHRI, No. 42 at p. 8) In response, 
for the preliminary analysis, DOE assumed that direct venting is used 
by a fraction of condensing installations. For the NOPR analysis, DOE 
updated its fraction of direct vent installations to match the data 
provided by AHRI's contractor survey.
    AHRI stated that DOE is not including in its costing model the cost 
of replacement baseboard. AHRI elaborated that when a consumer switches 
from a non-condensing boiler to a condensing boiler, they will need to 
replace or increase the length of their baseboard to work with lower 
water temperatures in order to realize the energy savings potential of 
the condensing boiler. (AHRI, No. 40 at p. 1) AHRI's 2022 contractor 
survey shows that upgrading the heat emitter rarely occurs in practice. 
Therefore, for this analysis, DOE has chosen not to include the cost of 
replacing or increasing the length of the baseboard for retrofitting an 
existing non-condensing boiler with a condensing boiler. Instead, DOE 
has chosen to adjust the energy efficiency of the boiler to compensate 
for the decrease in the field efficiency of condensing boilers when the 
heat emitter is not sized properly.
3. Annual Energy Consumption
    For each sampled household and commercial building, DOE determined 
the energy consumption for a consumer boiler at different efficiency 
levels using the approach described previously in section IV.E of this 
document.
    Higher-efficiency boilers reduce the operating costs for a 
consumer, which can lead to greater use of the boiler (i.e., a 
``rebound effect''). A direct rebound effect occurs when a product that 
is made more efficient is used more intensively, such that the expected 
energy savings from the efficiency improvement may not fully 
materialize. At the same time, consumers benefit from increased 
utilization of products due to rebound. Although some households may 
increase their boiler use in response to increased efficiency, DOE does 
not include the rebound effect in the LCC analysis because the 
increased utilization of the water heater provides value to the 
consumer. DOE does include rebound in the NIA for a conservative 
estimate of national energy savings and the corresponding impact to 
consumer NPV. See section IV.H.3 of this document and chapter 10 of the 
NOPR TSD for more details.
4. Energy Prices
    Because marginal energy prices more accurately capture the 
incremental savings associated with a change in energy use from higher 
efficiency, they provide a better representation of incremental change 
in consumer costs than average energy prices. Therefore, DOE applied 
average energy prices for the energy use of the products purchased in 
the no-new-standards case, and marginal energy prices for the 
incremental change in energy use associated with the other efficiency 
levels considered.
    DOE derived average monthly marginal residential and commercial 
electricity, natural gas, LPG, and fuel oil prices for each State using 
data from EIA.78 79 80 DOE calculated marginal monthly 
regional energy prices by: (1) first estimating an average annual price 
for each region; (2) multiplying by monthly energy price factors, and 
(3) multiplying by seasonal marginal price factors for electricity, 
natural gas, LPG, and fuel oil. The analysis used historical data up to 
2022 for residential and commercial natural gas and electricity prices 
and historical data up to 2021 for LPG and fuel oil prices adjusted to 
2022 values using AEO data. Further details may be found in chapter 8 
of the NOPR TSD.
---------------------------------------------------------------------------

    \78\ U.S. Department of Energy-Energy Information 
Administration, Form EIA-861M (formerly EIA-826) detailed data 
(2022) (Available at: www.eia.gov/electricity/data/eia861m/) (Last 
accessed May 3, 2023).
    \79\ U.S. Department of Energy-Energy Information 
Administration, Natural Gas Navigator (2022) (Available at: 
www.eia.gov/naturalgas/data.php) (Last accessed May 3, 2023).
    \80\ U.S. Department of Energy-Energy Information 
Administration, 2021 State Energy Data System (SEDS) (2021) 
(Available at: www.eia.gov/state/seds/) (Last accessed May 3, 2023).
---------------------------------------------------------------------------

    The Joint Commenters encouraged DOE to evaluate one or more 
alternate natural gas price scenarios to better understand the effect 
of increased gas prices, because they believe that DOE significantly 
underestimates future natural gas prices using the projections from AEO 
2021. The Joint Commenters argued that as the movement towards 
electrification continues and the efficiencies of gas-fired appliances 
increase, customers and sales of natural gas will likely decline over 
time and that multiple studies indicate that a consistent decline in 
gas customers and/or consumption will result in an increase in gas 
prices for the remaining customers. (Joint Commenters, No. 35 at p. 2)
    In response, because the extent of widespread electrification, and 
the associated impact on natural gas prices, are very uncertain at this 
point, DOE

[[Page 55164]]

prefers to rely on the latest AEO price forecasts in its analysis. DOE 
uses other inputs from the AEO analysis, and the Department contends 
that it is important to maintain consistency in terms of its use of AEO 
in DOE's other inputs and energy price projections since they are 
interconnected in the National Energy Modeling System (NEMS) that EIA 
uses.\81\ DOE notes that if future natural gas prices end up higher 
than DOE estimates due to electrification, the economic justification 
for the standards proposed for gas-fired boilers in this NOPR would 
become stronger still. DOE's analysis also includes sensitivity 
analysis using energy prices in high and low economic growth scenarios. 
However, DOE has tentatively concluded that such alternate energy price 
trends are too speculative for use as the agency's primary analysis.
---------------------------------------------------------------------------

    \81\ See www.eia.gov/outlooks/aeo/info_nems_archive.php.
---------------------------------------------------------------------------

    Accordingly, for this NOPR, to estimate energy prices in future 
years, DOE multiplied the 2022 energy prices by the projection of 
annual average price changes for each of the nine Census Divisions from 
the Reference case in AEO 2023, which has an end year of 2050.\82\ To 
estimate price trends after 2050, DOE used the average annual growth 
rate in prices from 2046 to 2050 based on the methods used in the 2022 
Life-Cycle Costing Manual for the Federal Energy Management Program 
(FEMP).\83\
---------------------------------------------------------------------------

    \82\ EIA. Annual Energy Outlook 2023 with Projections to 2050. 
Washington, DC (Available at: www.eia.gov/forecasts/aeo/) (Last 
accessed May 3, 2023).
    \83\ Lavappa, Priya D. and J.D. Kneifel, Energy Price Indices 
and Discount Factors for Life-Cycle Cost Analysis--2022 Annual 
Supplement to NIST Handbook 135. National Institute of Standards and 
Technology (NIST). NISTIR 85-3273-37 (Available at: www.nist.gov/publications/energy-price-indices-and-discount-factors-life-cycle-cost-analysis-2022-annual) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance; maintenance costs are 
associated with maintaining the operation of the product. Typically, 
small incremental increases in product efficiency produce no, or only 
minor, changes in repair and maintenance costs compared to baseline 
efficiency products. In the present case, DOE included additional 
repair costs for higher-efficiency consumer boilers (including repair 
costs associated with electronic ignition, controls, and blowers for 
condensing designs) based on 2023 RSMeans data. DOE also accounted for 
regional differences in labor costs by using RSMeans regional cost 
factors. Further details may be found in appendix 8F of the NOPR TSD.
    Crown and U.S. Boiler stated that DOE used labor rates from RSMeans 
that do not appear applicable to residential boiler service and 
maintenance. Crown and U.S. Boiler stated that maintenance and repair 
on residential boilers mostly will be performed by an HVAC technician, 
which requires a completely different skill set from the ``steam fitter 
and steam fitter apprentice'' that DOE assumed. (Crown, No. 30 at p. 
11; U.S. Boiler, No. 31 at p. 10).
    In response, DOE uses RSMeans data and consultant reports to 
estimate the appropriate labor crew for residential boiler tasks. DOE 
is aware that residential consumer boiler maintenance and repair are 
typically accomplished by an HVAC technician, but the RSMeans crew type 
for boilers approximates the average labor costs per hour for a crew 
performing these maintenance and repair tasks. See IV.F.2 of this 
document for further discussions about the use of RSMeans. Therefore, 
DOE kept its approach for using labor rates from RSMeans.
6. Product Lifetime
    Product lifetime is the age at which an appliance is retired from 
service. To determine boiler lifetimes, DOE relied on RECS 1990, 1993, 
2001, 2005, 2009, 2015, and 2020. DOE also used the U.S. Census's 
biennial American Housing Survey (AHS), from 1974-2021, which surveys 
all housing and notes the presence of a range of appliances. DOE used 
the appliance age data from these surveys, as well as the historical 
boiler shipments, to generate an estimate of the survival function for 
consumer boilers. The survival function provides a lifetime range from 
minimum to maximum, as well as an average lifetime.
    PB Heat and AHRI stated that condensing boilers have a shorter 
lifespan than non-condensing boilers, in line with AHRI's Survey of 
Boiler Installation Contractors (July 2015) and EER Consultants on 
boiler lifetime. (PB Heat, No. 34 at p. 1; AHRI, No. 40 at p. 5) AHRI 
stated that the contractor survey it conducted showed that condensing 
boilers on average are expected to last between 10-20 years. (AHRI, No. 
42 at p. 6) BWC commented that condensing boilers are technically more 
complex products with additional components, and that they have higher 
lifetime service and maintenance costs compared to non-condensing 
boilers, which are contributing factors that make it challenging for 
condensing boilers to have the same life span as non-condensing 
boilers. (BWC, No. 39 at p. 2) PB Heat mentioned the complexity of 
condensing boilers and negatively impacting their lifetime, and the 
company stated that the heat exchanger of a boiler is the key component 
whose failure is highly likely to drive early end-of-life decisions. 
(PB Heat, No. 34 at p. 2) Crown and U.S. Boilers stated that condensing 
boilers have a significantly shorter life expectancy than non-
condensing boilers because of their increased complexity, exposure of 
components to acids, and also the much tighter flue and water passages 
that are subject to fouling if not cleaned diligently. Crown and U.S. 
Boilers pointed to the difference in the heat exchanger warranty 
coverages as an indication of what manufacturers themselves expect the 
lifetime to be. (Crown, No. 30 at p. 11-15; U.S. Boilers, No. 31 at pp. 
12-16) WMT stated that the product lives of condensing boilers are 
approximately half that of the 25- to 30-year expected life of cast 
iron non-condensing boilers. (WMT, No. 32 at pp. 2-3) Crown and U.S. 
Boilers also stated that many of DOE's sources are even older than the 
2016 AHRI survey whose values DOE did not adopt. (Crown, No. 30 at p. 
12; U.S. Boilers, No. 31 at p. 12)
    After carefully considering these comments, DOE has concluded that 
there is not enough data available to accurately distinguish the 
lifetime of non-condensing and condensing gas-fired boilers, because 
they have not been prevalent in the U.S. market long enough to 
demonstrate whether their average lifetime is less than or greater than 
25 years. Commenters provided opinions based on their conjecture and 
certain anecdotal experiences, but they did not provide data that would 
evidence a significantly reduced lifetime for condensing boilers. In 
addition, condensing boiler technologies have been improving since 
their introduction to the U.S. market; therefore, the lifetime of the 
earliest condensing boilers may not be representative of current or 
future condensing boiler designs. Consequently, condensing lifetime 
estimates from AHRI's contractor survey might be biased towards 
earliest condensing boiler designs, and it lacks clarity as to the 
number of condensing boilers installed that were 15 years or older. 
Therefore, DOE has maintained the same lifetime for condensing and non-
condensing boilers for this NOPR. However, as mentioned previously, DOE 
did include additional repair costs for condensing boilers that would 
likely allow for a lifetime similar to non-

[[Page 55165]]

condensing boilers, by assuming different service lifetimes for heat 
exchangers for condensing boilers and non-condensing boilers based on 
warranty data from product literature and survey data provided by 
stakeholders.
    In light of the above, for this NOPR, DOE used the appliance age 
data derived from RECS 1990-2020 and the U.S. Census's biennial 
American Housing Survey (AHS) 1974-2021, as well as the historical 
boiler shipments, to generate an estimate of the survival function for 
consumer boilers. The survival function provides a lifetime range from 
minimum to maximum, as well as an average lifetime. Utilizing this 
approach, DOE estimates the average product lifetime to be 24.6 years 
for consumer boilers. This estimate is consistent with the range of 
values identified in a literature review in appendix 8G of the NOPR 
TSD.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to households and commercial buildings to estimate the present value of 
future operating cost savings. DOE estimated a distribution of discount 
rates for consumer boilers based on the opportunity cost of consumer 
funds and cost of capital for commercial applications.
    DOE applies weighted-average discount rates calculated from 
consumer debt and asset data, rather than marginal or implicit discount 
rates.\84\ The LCC analysis estimates net present value over the 
lifetime of the product, so the appropriate discount rate will reflect 
the general opportunity cost of household funds, taking this time scale 
into account. Given the long time horizon modeled in the LCC analysis, 
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. For commercial applications, DOE's method views 
the purchase of a higher-efficiency appliance as an investment that 
yields a stream of energy cost savings. DOE derived the discount rates 
for the LCC analysis by estimating the cost of capital for companies or 
public entities that purchase consumer boilers. For private firms, the 
weighted-average cost of capital (WACC) is commonly used to estimate 
the present value of cash flows to be derived from a typical company 
project or investment. Most companies use both debt and equity capital 
to fund investments, so their cost of capital is the weighted average 
of the cost to the firm of equity and debt financing, as estimated from 
financial data for publicly-traded firms in the sectors that purchase 
consumer boilers. As discount rates can differ across industries, DOE 
estimates separate discount rate distributions for a number of 
aggregate sectors with which elements of the LCC building sample can be 
associated.
---------------------------------------------------------------------------

    \84\ 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; and interest rates at 
which a consumer is able to borrow or lend. The implicit discount 
rate is not appropriate for the LCC analysis because it reflects a 
range of factors that influence consumer purchase decisions, rather 
than the opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------

    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 triennial Survey of Consumer Finances 
\85\ (SCF) starting in 1995 and ending in 2019. 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 4.2 
percent.
---------------------------------------------------------------------------

    \85\ The Federal Reserve Board, Survey of Consumer Finances 
(1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019) 
(Available at: www.federalreserve.gov/econres/scfindex.htm) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    To establish commercial discount rates for the small fraction of 
consumer boilers installed in commercial buildings, DOE estimated the 
weighted-average cost of capital using data from Damodaran Online.\86\ 
The weighted-average cost of capital is commonly used to estimate the 
present value of cash flows to be derived from a typical company 
project or investment. Most companies use both debt and equity capital 
to fund investments, so their cost of capital is the weighted average 
of the cost to the firm of equity and debt financing. DOE estimated the 
cost of equity using the capital asset pricing model, which assumes 
that the cost of equity for a particular company is proportional to the 
systematic risk faced by that company. DOE's commercial discount rate 
approach is based on the methodology described in an LBNL report, and 
the distribution varies by business activity.\87\ The average rate for 
consumer boilers used in commercial applications in this NOPR analysis, 
across all business activity, is 10.0 percent.
---------------------------------------------------------------------------

    \86\ Damodaran Online, Data Page: Costs of Capital by Industry 
Sector (2022) (Available at: pages.stern.nyu.edu/~adamodar/) (Last 
accessed May 3, 2023).
    \87\ Fujita, K. Sydny. Commercial, Industrial, and Institutional 
Discount Rate Estimation for Efficiency Standards Analysis: Sector-
Level Data 1998-2022. 2023. (Available at: eta-publications.lbl.gov/publications/commercial-industrial-and-2) (Last accessed May 3, 
2023).
---------------------------------------------------------------------------

    See chapter 8 of this NOPR TSD for further details on the 
development of consumer and commercial discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy 
conservation standards) in the compliance year (2030). This approach 
reflects the fact that some consumers may purchase products with 
efficiencies greater than the baseline levels.
    To estimate the energy efficiency distribution of consumer boilers 
for 2030, DOE used available shipments data by efficiency, including 
previous AHRI-submitted historical shipments data, ENERGY STAR unit 
shipments data, 2013-2021 HARDI shipment data, and data from the 2022 
BRG Building Solutions report. To cover gaps in the available shipments 
data, DOE used DOE's public CCD model database and AHRI certification 
directory.
    In its comments on the May 2022 Preliminary Analysis, AHRI 
submitted 2021 shipment data for gas-fired hot water boilers to DOE. 
AHRI stated that while there is an array of products at 85-percent AFUE 
in the AHRI Directory and CCD, these products do not account for a 
significant portion of current

[[Page 55166]]

shipments. (AHRI, No. 42 at p. 2) For the NOPR, DOE included these data 
to supplement its fraction of 85-percent AFUE gas-fired hot water 
consumer boilers.
    The estimated market shares for the no-new-standards case for 
consumer boilers are shown in Table IV.10.

  Table IV--10 No-New-Standards Case Energy Efficiency Distributions in
                        2030 for Consumer Boilers
------------------------------------------------------------------------
          Product class            Efficiency level    Distribution  (%)
------------------------------------------------------------------------
Gas-fired Hot Water.............                   0                13.3
                                                   1                 2.5
                                                   2                10.7
                                                   3                45.4
                                                   4                 7.6
Gas-fired Steam.................                   0                 7.6
                                                   1                 1.6
Oil-fired Hot Water.............                   0                 7.5
                                                   1                 1.9
                                                   2                 1.0
Oil-fired Steam.................                   0                 0.8
                                                   1                 0.1
------------------------------------------------------------------------

    Each building in the sample was then assigned a boiler efficiency 
sampled from the no-new-standards-case efficiency distribution for the 
appropriate product class shown in Table IV.10. In assigning boiler 
efficiencies, DOE determined that, based on the presence of well-
understood market failures (discussed at the end of this section), a 
random assignment of efficiencies, with some modifications discussed 
below, best accounts for consumer behavior in the consumer boilers 
market. Random assignment of efficiencies reflects the full range of 
consumer behaviors in this market, including consumers who make 
economically beneficial decisions and consumers that, due to market 
failures, do not make such economically beneficial decisions.
    The LCC Monte Carlo simulations draw from the efficiency 
distributions and randomly assign an efficiency to the consumer boilers 
purchased by each sample household and commercial building in the no-
new-standards case. The resulting percentage shares within the sample 
match the market shares in the efficiency distributions. But, as 
mentioned previously, DOE considered available data in determining 
whether any modifications should be made to the random assignment 
methodology. First, DOE considered the 2022 AHCS survey,\88\ which 
includes questions to recent purchasers of HVAC equipment regarding the 
perceived efficiency of their equipment (Standard, High, and Super-High 
Efficiency), as well as questions related to various household and 
demographic characteristics. From these data, DOE found that households 
with larger square footage exhibited a higher fraction of High or 
Super-High efficiency equipment installed. DOE used the AHCS data to 
adjust the efficiency distributions as follows: (1) the market share of 
higher-efficiency equipment for households under 1,500 sq. ft. was 
decreased by 5 percentage points; and (2) the market share of 
condensing equipment for households above 2,500 sq. ft. was increased 
by 5 percentage points.
---------------------------------------------------------------------------

    \88\ Decision Analysts, 2022 American Home Comfort Studies 
(Available at: www.decisionanalyst.com/Syndicated/HomeComfort/) 
(Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    AHRI stated that, based on contractor survey data submitted with 
its comment, a condensing boiler is nearly twice as likely to be chosen 
over a non-condensing model in new construction. (AHRI, No. 42 at p. 3) 
In response, DOE notes that for the preliminary analysis, DOE already 
assigned a greater fraction of condensing boilers to the new 
construction market. However, for the NOPR, DOE increased its fraction 
of condensing boilers assigned to the new construction market further 
to match the data provided in the 2022 AHRI contractor survey.
    AGA, APGA, and NPGA stated that DOE should place greater emphasis 
on providing an argument for the plausibility and magnitude of any 
market failure related to the energy efficiency gap in its analyses. 
These commenters added that for some commercial goods in particular, 
there should be a presumption that market actors behave rationally, 
unless DOE can provide evidence or argument to the contrary. (AGA, 
APGA, and NPGA, No. 38 at p. 4)
    In contrast to the preceding comments, NYSERDA stated that DOE's 
assignment of boiler efficiency in the no-new-standards case, using 
State-level market data in conjunction with the 2015 RECS and the 2019 
American Home Comfort Study, is thorough and robust and that DOE has 
appropriately used its wide discretion in this matter to conduct a 
reasonable and rigorous analysis of consumer purchasing decisions. 
(NYSERDA, No. 33 at p. 3) The Joint Commenters also expressed the view 
that DOE's assignment of efficiency levels in the no-new-standards case 
reasonably reflects actual consumer behavior and that the Department's 
assignment of boiler efficiency in the no-new-standards case is not 
entirely random. Specifically, the Joint Commenters stated that DOE 
used State-level market data to preferentially assign higher-efficiency 
boilers to States with higher fractions of high-efficiency boiler 
shipments, and within each State, DOE used the 2015 RECS and the 2019 
American Home Comfort Study to account for subgroups that could select 
higher-efficiency boilers more often, such as homes with higher square 
footage. Further, the Joint Commenters pointed out that there are 
various market failures, as well as aspects of consumer preference, 
that significantly impact how products are chosen by consumers, and 
there are often misaligned incentives in rental properties, where the 
landlord purchases and installs the boiler while the renter is 
responsible for paying the utility bill. Additionally, the Joint 
Commenters stated that information about the purchase price, 
installation cost, and projected energy costs of boilers is not always 
transparent, so consumers are likely to make decisions that do not 
result in the highest net present value for their specific scenario. 
(Joint Commenters, No. 35 at p. 3)
    In response, for this NOPR, DOE continued to assign boiler 
efficiency to households in the no-new-standards case in two steps, 
first at the State level and then at the building-specific level.

[[Page 55167]]

However, DOE's approach was modified to include other household 
characteristics. The market share of each efficiency level at the State 
level is based on historical shipments data (from the 2012 AHRI and 
2013-2021 HARDI data) and to assign the efficiency at the building-
specific level, DOE carefully considered any available data that might 
improve assignment of boiler efficiency in the LCC analysis. First, DOE 
examined the 2013-2021 HARDI data of gas boiler input capacity by 
efficiency level and region. DOE did not find a significant correlation 
between input capacity and condensing boiler market share in a given 
region, a correlation which might be expected a priori since buildings 
with larger boiler input capacity are more likely to be larger and have 
greater energy consumption. DOE next considered the Gas Technology 
Institute (GTI) data for 21 Illinois households, which included the 
efficiency of the boiler (AFUE), size of the boiler (input capacity), 
square footage of the house, and annual energy use.\89\ Recognizing the 
relatively small sample size, DOE notes that these data exhibit no 
significant correlations between boiler efficiency and other household 
characteristics (with most boiler installations in this sample being 
non-condensing boilers with high energy use). DOE also considered other 
data of boiler efficiency compared to household characteristics for 
other parts of the country, including the NEEA Database and permit 
data.\90\ These data also suggest fairly weak correlation between 
boiler efficiency and household characteristics or economic factors. 
Finally, DOE considered the 2022 AHCS survey data. From these data, DOE 
did find a statistically significant correlation: Households with 
larger square footage exhibited a higher fraction of High or Super-High 
efficiency equipment installed.
---------------------------------------------------------------------------

    \89\ Gas Technology Institute (GTI), Empirical Analysis of 
Natural Gas Furnace Sizing and Operation, GTI-16/0003 (Nov. 2016) 
(Available at: www.regulations.gov/document/EERE-2014-BT-STD-0031-0309) (Last accessed Jan. 3, 2023).
    \90\ See neea.org/data/residential-building-stock-assessment 
(Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    While DOE acknowledges that economic factors may play a role when 
consumers, commercial building owners, or builders decide on what type 
of boiler to install, assignment of boiler efficiency for a given 
installation, based solely on economic measures such as life-cycle cost 
or simple payback period, most likely would not fully and accurately 
reflect actual real-world installations. There are a number of market 
failures discussed in the economics literature that illustrate how 
purchasing decisions with respect to energy efficiency are unlikely to 
be perfectly correlated with energy use, as described below. DOE 
maintains that the method of assignment, which is in part random, is a 
reasonable approach. It simulates behavior in the boiler market, where 
market failures result in purchasing decisions not being perfectly 
aligned with economic interests, and it does so more realistically than 
relying only on apparent cost-effectiveness criteria derived from the 
limited information in CBECS or RECS. DOE further emphasizes that its 
approach does not assume that all purchasers of boilers make 
economically irrational decisions (i.e., the lack of a correlation is 
not the same as a negative correlation). As part of the random 
assignment, some homes or buildings with large heating loads will be 
assigned higher-efficiency boilers, and some homes or buildings with 
particularly low heating loads will be assigned baseline boilers, which 
aligns with the available data. By using this approach, DOE 
acknowledges the uncertainty inherent in the data and minimizes any 
bias in the analysis by using random assignment, as opposed to assuming 
certain market conditions that are unsupported by the available 
evidence.
    The following discussion provides more detail about the various 
market failures that affect consumer boiler purchases. First, consumers 
are motivated by more than simple financial trade-offs. There are 
consumers who are willing to pay a premium for more energy-efficient 
products because they are environmentally conscious.\91\ There are also 
several behavioral factors that can influence the purchasing decisions 
of complicated multi-attribute products, such as boilers. For example, 
consumers (or decision makers in an organization) are highly influenced 
by choice architecture, defined as the framing of the decision, the 
surrounding circumstances of the purchase, the alternatives available, 
and how they are presented for any given choice scenario.\92\ The same 
consumer or decision maker may make different choices depending on the 
characteristics of the decision context (e.g., the timing of the 
purchase, competing demands for funds), which have nothing to do with 
the characteristics of the alternatives themselves or their prices. 
Consumers or decision makers also face a variety of other behavioral 
phenomena including loss aversion, sensitivity to information salience, 
and other forms of bounded rationality.\93\ Thaler, who won the Nobel 
Prize in Economics in 2017 for his contributions to behavioral 
economics, and Sunstein point out that these behavioral factors are 
strongest when the decisions are complex and infrequent, when feedback 
on the decision is muted and slow, and when there is a high degree of 
information asymmetry.\94\ These characteristics describe almost all 
purchasing situations of appliances and equipment, including boilers. 
The installation of a new or replacement boiler is done very 
infrequently, as evidenced by the mean lifetime of 24.6 years for 
boilers. Additionally, it would take at least one full heating season 
for any impacts on operating costs to be fully apparent. Further, if 
the purchaser of the boiler is not the entity paying the energy costs 
(e.g., a building owner and tenant), there may be little to no feedback 
on the purchase. Additionally, there are systematic market failures 
that are likely to contribute further complexity to how products are 
chosen by consumers, as explained in the following paragraphs.
---------------------------------------------------------------------------

    \91\ Ward, D.O., Clark, C.D., Jensen, K.L., Yen, S.T., & 
Russell, C.S. (2011): ``Factors influencing willingness-to pay for 
the ENERGY STAR[supreg] label,'' Energy Policy, 39(3), 1450-1458 
(Available at: www.sciencedirect.com/science/article/abs/pii/S0301421510009171) (Last accessed Jan. 3, 2023).
    \92\ Thaler, R.H., Sunstein, C.R., and Balz, J.P. (2014), 
``Choice Architecture'' in The Behavioral Foundations of Public 
Policy, Eldar Shafir (ed).
    \93\ Thaler, R.H., and Bernartzi, S. (2004), ``Save More 
Tomorrow: Using Behavioral Economics in Increase Employee Savings,'' 
Journal of Political Economy 112(1), S164-S187. See also Klemick, 
H., et al. (2015) ``Heavy-Duty Trucking and the Energy Efficiency 
Paradox: Evidence from Focus Groups and Interviews,'' Transportation 
Research Part A: Policy & Practice, 77, 154-166. (providing evidence 
that loss aversion and other market failures can affect otherwise 
profit-maximizing firms).
    \94\ Thaler, R.H., and Sunstein, C.R. (2008), Nudge: Improving 
Decisions on Health, Wealth, and Happiness. New Haven, CT: Yale 
University Press.
---------------------------------------------------------------------------

    The first of these market failures--the split-incentive or 
principal-agent problem--is likely to affect boilers more than many 
other types of appliances. The principal-agent problem is a market 
failure that results when the consumer that purchases the equipment 
does not internalize all of the costs associated with operating the 
equipment. Instead, the user of the product, who has no control over 
the purchase decision, pays the operating costs. There is a high 
likelihood of split-incentive problems in the case of rental properties 
where the landlord makes the choice of what boiler to install, whereas 
the renter is responsible for paying energy bills. In the LCC sample, 
about 30 percent of households with a boiler are renters. These 
fractions are significantly higher for low-income households (see 
section IV.I of this document). In new construction, builders influence 
the type of boiler used in many homes but

[[Page 55168]]

do not pay operating costs. Finally, contractors install a large share 
of boilers in replacement situations, and they can exert a high degree 
of influence over the type of boiler purchased by suggesting certain 
designs or models for the replacement.
    In addition to the split-incentive problem, there are other market 
failures that are likely to affect the choice of boiler efficiency made 
by consumers. For example, emergency replacements of essential 
equipment such as boilers are strongly biased toward like-for-like 
replacement (i.e., replacing the non-functioning equipment with a 
similar or identical product). Time is a constraining factor during 
emergency replacements and consumers may not consider the full range of 
available options on the market, despite their availability. The 
consideration of alternative product options is far more likely for 
planned replacements and installations in new construction.
    Additionally, Davis and Metcalf \95\ conducted an experiment 
demonstrating that the nature of the information available to consumers 
from EnergyGuide labels posted on air conditioning equipment results in 
an inefficient allocation of energy efficiency across households with 
different usage levels. Their findings indicate that households are 
likely to make decisions regarding the efficiency of the climate-
control equipment of their homes that do not result in the highest net 
present value for their specific usage pattern (i.e., their decision is 
based on imperfect information and, therefore, is not necessarily 
optimal). Also, most consumers did not properly understand the labels 
(specifically whether energy consumption and cost estimates were 
national averages or specific to their State). As such, consumers did 
not make the most informed decisions.
---------------------------------------------------------------------------

    \95\ Davis, L.W., and G.E. Metcalf (2016): ``Does better 
information lead to better choices? Evidence from energy-efficiency 
labels,'' Journal of the Association of Environmental and Resource 
Economists, 3(3), 589-625 (Available at: www.journals.uchicago.edu/doi/full/10.1086/686252) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    In part because of the way information is presented, and in part 
because of the way consumers process information, there is also a 
market failure consisting of a systematic bias in the perception of 
equipment energy usage, which can affect consumer choices. Attari, 
Krantz, and Weber \96\ show that consumers tend to underestimate the 
energy use of large energy-intensive appliances, but overestimate the 
energy use of small appliances. Therefore, it is likely that consumers 
systematically underestimate the energy use associated with boilers, 
resulting in less cost-effective boiler purchases.
---------------------------------------------------------------------------

    \96\ Attari, S.Z., M.L. DeKay, C.I. Davidson, and W. Bruine de 
Bruin (2010): ``Public perceptions of energy consumption and 
savings.'' Proceedings of the National Academy of Sciences 107(37), 
16054-16059 (Available at: www.pnas.org/content/107/37/16054) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    These market failures affect a sizeable share of the consumer 
population. A study by Houde \97\ indicates that there is a significant 
subset of consumers that appear to purchase appliances without taking 
into account their energy efficiency and operating costs at all.
---------------------------------------------------------------------------

    \97\ Houde, S. (2018): ``How Consumers Respond to Environmental 
Certification and the Value of Energy Information,'' The RAND 
Journal of Economics, 49 (2), 453-477 (Available at: 
onlinelibrary.wiley.com/doi/full/10.1111/1756-2171.12231) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    There are market failures relevant to boilers installed in 
commercial applications as well. It is often assumed that because 
commercial and industrial customers are businesses that have trained or 
experienced individuals making decisions regarding investments in cost-
saving measures, some of the commonly observed market failures present 
in the general population of residential customers should not be as 
prevalent in a commercial setting. However, there are many 
characteristics of organizational structure and historic circumstance 
in commercial settings that can lead to underinvestment in energy 
efficiency.
    First, a recognized problem in commercial settings is the 
principal-agent problem, where the building owner (or building 
developer) selects the equipment and the tenant (or subsequent building 
owner) pays for energy costs.98 99 Indeed, more than a 
quarter of commercial buildings in the CBECS 2018 sample are occupied 
at least in part by a tenant, not the building owner (indicating that, 
in DOE's experience, the building owner likely is not responsible for 
paying energy costs). Additionally, some commercial buildings have 
multiple tenants. There are other similar misaligned incentives 
embedded in the organizational structure within a given firm or 
business that can also impact the choice of a boiler. For example, if 
one department or individual within an organization is responsible for 
capital expenditures (and therefore equipment selection) while a 
separate department or individual is responsible for paying the energy 
bills, a market failure similar to the principal-agent problem can 
result.\100\ Additionally, managers may have other responsibilities and 
often have other incentives besides operating cost minimization, such 
as satisfying shareholder expectations, which can sometimes be focused 
on short-term returns.\101\ Decision-making related to commercial 
buildings is highly complex and involves gathering information from and 
for a variety of different market actors. It is common to see 
conflicting goals across various actors within the same organization, 
as well as information asymmetries between market actors in the energy 
efficiency context in commercial building construction.\102\
---------------------------------------------------------------------------

    \98\ Vernon, D., and Meier, A. (2012), ``Identification and 
quantification of principal-agent problems affecting energy 
efficiency investments and use decisions in the trucking industry,'' 
Energy Policy, 49, 266-273.
    \99\ Blum, H. and Sathaye, J. (2010), ``Quantitative Analysis of 
the Principal-Agent Problem in Commercial Buildings in the U.S.: 
Focus on Central Space Heating and Cooling,'' Lawrence Berkeley 
National Laboratory, LBNL-3557E (Available at: escholarship.org/uc/item/6p1525mg) (Last accessed Jan. 3, 2023).
    \100\ Prindle, B., Sathaye, J., Murtishaw, S., Crossley, D., 
Watt, G., Hughes, J., and de Visser, E. (2007), ``Quantifying the 
effects of market failures in the end-use of energy,'' Final Draft 
Report Prepared for International Energy Agency (Available from 
International Energy Agency, Head of Publications Service, 9 rue de 
la Federation, 75739 Paris, Cedex 15 France).
    \101\ Bushee, B. J. (1998), ``The influence of institutional 
investors on myopic R&D investment behavior,'' Accounting Review, 
305-333.
    DeCanio, S.J. (1993), ``Barriers Within Firms to Energy 
Efficient Investments,'' Energy Policy, 21(9), 906-914 (explaining 
the connection between short-termism and underinvestment in energy 
efficiency).
    \102\ International Energy Agency (IEA). (2007). Mind the Gap: 
Quantifying Principal-Agent Problems in Energy Efficiency. OECD Pub. 
(Available at: www.iea.org/reports/mind-the-gap) (Last accessed Jan. 
3, 2023).
---------------------------------------------------------------------------

    Second, the nature of the organizational structure and design can 
influence priorities for capital budgeting, resulting in choices that 
do not necessarily maximize profitability.\103\ Even factors as simple 
as unmotivated staff or lack of priority-setting and/or a lack of a 
long-term energy strategy can have a sizable effect on the likelihood 
that an energy-efficient investment will be undertaken.\104\ U.S. tax 
rules for

[[Page 55169]]

commercial buildings may incentivize lower capital expenditures, since 
capital costs must be depreciated over many years, whereas operating 
costs can be fully deducted from taxable income or passed through 
directly to building tenants.\105\
---------------------------------------------------------------------------

    \103\ DeCanio, S.J. (1994). ``Agency and control problems in US 
corporations: the case of energy-efficient investment projects,'' 
Journal of the Economics of Business, 1(1), 105-124.
    Stole, L.A., and Zwiebel, J. (1996). ``Organizational design and 
technology choice under intrafirm bargaining,'' The American 
Economic Review, 195-222.
    \104\ Rohdin, P., and Thollander, P. (2006). ``Barriers to and 
driving forces for energy efficiency in the non-energy intensive 
manufacturing industry in Sweden,'' Energy, 31(12), 1836-1844.
    Takahashi, M and Asano, H (2007). ``Energy Use Affected by 
Principal-Agent Problem in Japanese Commercial Office Space 
Leasing,'' In Quantifying the Effects of Market Failures in the End-
Use of Energy. American Council for an Energy-Efficient Economy. 
February 2007.
    Visser, E and Harmelink, M (2007). ``The Case of Energy Use in 
Commercial Offices in the Netherlands,'' In Quantifying the Effects 
of Market Failures in the End-Use of Energy. American Council for an 
Energy-Efficient Economy. February 2007.
    Bjorndalen, J. and Bugge, J. (2007). ``Market Barriers Related 
to Commercial Office Space Leasing in Norway,'' In Quantifying the 
Effects of Market Failures in the End-Use of Energy. American 
Council for an Energy-Efficient Economy. February 2007.
    Schleich, J. (2009). ``Barriers to energy efficiency: A 
comparison across the German commercial and services sector,'' 
Ecological Economics, 68(7), 2150-2159.
    Muthulingam, S., et al. (2013), ``Energy Efficiency in Small and 
Medium-Sized Manufacturing Firms,'' Manufacturing & Service 
Operations Management, 15(4), 596-612 (Finding that manager 
inattention contributed to the non-adoption of energy efficiency 
initiatives).
    Boyd, G.A., Curtis, E.M. (2014), ``Evidence of an `energy 
management gap' in US manufacturing: Spillovers from firm management 
practices to energy efficiency,'' Journal of Environmental Economics 
and Management, 68(3), 463-479.
    \105\ Lovins, A. (1992), Energy-Efficient Buildings: 
Institutional Barriers and Opportunities (Available at: rmi.org/insight/energy-efficient-buildings-institutional-barriers-and-opportunities/) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Third, there are asymmetric information and other potential market 
failures in financial markets in general, which can affect decisions by 
firms with regard to their choice among alternative investment options, 
with energy efficiency being one such option.\106\ Asymmetric 
information in financial markets is particularly pronounced with regard 
to energy efficiency investments.\107\ There is a dearth of information 
about risk and volatility related to energy efficiency investments, and 
energy efficiency investment metrics may not be as visible to 
investment managers,\108\ which can bias firms towards more certain or 
familiar options. This market failure results not because the returns 
from energy efficiency as an investment are inherently riskier, but 
because information about the risk itself tends not to be available in 
the same way it is for other types of investment, like stocks or bonds. 
In some cases, energy efficiency is not a formal investment category 
used by financial managers, and if there is a formal category for 
energy efficiency within the investment portfolio options assessed by 
financial managers, they are seen as weakly strategic and not seen as 
likely to increase competitive advantage.\109\ This information 
asymmetry extends to commercial investors, lenders, and real-estate 
financing, which is biased against new and perhaps unfamiliar 
technology (even though it may be economically beneficial).\110\ 
Another market failure known as the first-mover disadvantage can 
exacerbate this bias against adopting new technologies, as the 
successful integration of new technology in a particular context by one 
actor generates information about cost-savings, and other actors in the 
market can then benefit from that information by following suit; yet 
because the first to adopt a new technology bears the risk but cannot 
keep to themselves all the informational benefits, firms may 
inefficiently underinvest in new technologies.\111\
---------------------------------------------------------------------------

    \106\ Fazzari, S.M., Hubbard, R.G., Petersen, B.C., Blinder, 
A.S., and Poterba, J.M. (1988). ``Financing constraints and 
corporate investment,'' Brookings Papers on Economic Activity, 
1988(1), 141-206.
    Cummins, J.G., Hassett, K.A., Hubbard, R.G., Hall, R.E., and 
Caballero, R.J. (1994). ``A reconsideration of investment behavior 
using tax reforms as natural experiments,'' Brookings Papers on 
Economic Activity, 1994(2), 1-74.
    DeCanio, S.J., and Watkins, W.E. (1998). ``Investment in energy 
efficiency: do the characteristics of firms matter?'' Review of 
Economics and Statistics, 80(1), 95-107.
    Hubbard R.G. and Kashyap A. (1992). ``Internal Net Worth and the 
Investment Process: An Application to U.S. Agriculture,'' Journal of 
Political Economy, 100, 506-534.
    \107\ Mills, E., Kromer, S., Weiss, G., and Mathew, P. A. 
(2006). ``From volatility to value: analysing and managing financial 
and performance risk in energy savings projects,'' Energy Policy, 
34(2), 188-199.
    Jollands, N., Waide, P., Ellis, M., Onoda, T., Laustsen, J., 
Tanaka, K., and Meier, A. (2010). ``The 25 IEA energy efficiency 
policy recommendations to the G8 Gleneagles Plan of Action,'' Energy 
Policy, 38(11), 6409-6418.
    \108\ Reed, J.H., Johnson, K., Riggert, J., and Oh, A.D. (2004), 
``Who plays and who decides: The structure and operation of the 
commercial building market,'' U.S. Department of Energy Office of 
Building Technology, State and Community Programs (Available at: 
www1.eere.energy.gov/buildings/publications/pdfs/commercial_initiative/who_plays_who_decides.pdf) (Last accessed Jan. 
3, 2023).
    \109\ Cooremans, C. (2012). ``Investment in energy efficiency: 
do the characteristics of investments matter?'' Energy Efficiency, 
5(4), 497-518.
    \110\ Lovins 1992, op. cit. The Atmospheric Fund (2017), Money 
on the table: Why investors miss out on the energy efficiency market 
(Available at: taf.ca/publications/money-table-investors-energy-
efficiency-market/) (Last accessed Jan. 3, 2023).
    \111\ Blumstein, C. and Taylor, M. (2013), Rethinking the 
Energy-Efficiency Gap: Producers, Intermediaries, and Innovation. 
Energy Institute at Haas Working Paper 243 (Available at: 
haas.berkeley.edu/wp-content/uploads/WP243.pdf) (Last accessed Jan. 
3, 2023).
---------------------------------------------------------------------------

    In sum, the commercial and industrial sectors face many market 
failures that can result in an under-investment in energy efficiency. 
This means that discount rates implied by hurdle rates \112\ and 
required payback periods of many firms are higher than the appropriate 
cost of capital for the investment.\113\ The preceding arguments for 
the existence of market failures in the commercial and industrial 
sectors are corroborated by empirical evidence. One study in particular 
showed evidence of substantial gains in energy efficiency that could 
have been achieved without negative repercussions on profitability, but 
the investments had not been undertaken by firms.\114\ The study found 
that multiple organizational and institutional factors caused firms to 
require shorter payback periods and higher returns than the cost of 
capital for alternative investments of similar risk. Another study 
demonstrated similar results with firms requiring very short payback 
periods of 1-2 years in order to adopt energy-saving projects, implying 
hurdle rates of 50 to 100 percent, despite the potential economic 
benefits.\115\ A number of other case studies similarly demonstrate the 
existence of market failures preventing the adoption of energy-
efficient technologies in a variety of commercial sectors around the 
world, including office buildings,\116\ supermarkets,\117\ and the 
electric motor market.\118\
---------------------------------------------------------------------------

    \112\ A hurdle rate is the minimum rate of return on a project 
or investment required by an organization or investor. It is 
determined by assessing capital costs, operating costs, and an 
estimate of risks and opportunities.
    \113\ DeCanio 1994, op. cit.
    \114\ DeCanio, S.J. (1998). ``The Efficiency Paradox: 
Bureaucratic and Organizational Barriers to Profitable Energy-Saving 
Investments,'' Energy Policy, 26(5), 441-454.
    \115\ Andersen, S.T., and Newell, R.G. (2004). ``Information 
programs for technology adoption: the case of energy-efficiency 
audits,'' Resource and Energy Economics, 26, 27-50.
    \116\ Prindle 2007, op. cit. Howarth, R.B., Haddad, B.M., and 
Paton, B. (2000). ``The economics of energy efficiency: insights 
from voluntary participation programs,'' Energy Policy, 28, 477-486.
    \117\ Klemick, H., Kopits, E., Wolverton, A. (2017). ``Potential 
Barriers to Improving Energy Efficiency in Commercial Buildings: The 
Case of Supermarket Refrigeration,'' Journal of Benefit-Cost 
Analysis, 8(1), 115-145.
    \118\ de Almeida, E.L.F. (1998), ``Energy efficiency and the 
limits of market forces: The example of the electric motor market in 
France'', Energy Policy, 26(8), 643-653.
    Xenergy, Inc. (1998), United States Industrial Electric Motor 
Systems Market Opportunity Assessment (Available at: www.energy.gov/sites/default/files/2014/04/f15/mtrmkt.pdf) (Last accessed Jan. 3, 
2023).
---------------------------------------------------------------------------

    The existence of market failures in the residential and commercial 
sectors is well supported by the economics literature and by a number 
of case studies. If DOE developed an efficiency distribution that 
assigned boiler efficiency in the no-new-standards case solely 
according to energy use or economic considerations such as life-cycle 
cost or payback period, the resulting distribution of efficiencies

[[Page 55170]]

within the building sample would not reflect any of the market failures 
or behavioral factors above. Thus, DOE concludes such a distribution 
would not be representative of the consumer boiler market. Further, 
even if a specific household/building/organization is not subject to 
the market failures above, the purchasing decision of boiler efficiency 
can be highly complex and influenced by a number of factors not 
captured by the building characteristics available in the RECS or CBECS 
samples. These factors can lead to households or building owners 
choosing a boiler efficiency that deviates from the efficiency 
predicted using only energy use or economic considerations such as 
life-cycle cost or payback period (as calculated using the information 
from RECS 2015 or CBECS 2018). However, DOE intends to investigate this 
issue further, and it welcomes suggestions as to how it might improve 
its assignment of boiler efficiency in its analyses.
    See chapter 8 of the NOPR TSD for further information on the 
derivation of the efficiency distributions.
9. Payback Period Analysis
    The payback period is the amount of time (expressed in years) it 
takes the consumer to recover the additional installed cost of more-
efficient products, compared to baseline products, through energy cost 
savings. Payback periods that exceed the life of the product mean that 
the increased total installed cost is not recovered in reduced 
operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. DOE 
refers to this as a ``simple PBP'' because it does not consider changes 
over time in operating cost savings. The PBP calculation uses the same 
inputs as the LCC analysis when deriving first-year operating costs.
    As noted previously, EPCA establishes a rebuttable presumption that 
a standard is economically justified if the Secretary finds that the 
additional cost to the consumer of purchasing a product complying with 
an energy conservation standard level will be less than three times the 
value of the first year's energy savings resulting from the standard, 
as calculated under the applicable test procedure. (42 U.S.C. 
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
projection for the year in which compliance with the amended standards 
would be required.

G. Shipments Analysis

    DOE uses projections of annual product shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, NPV, and future manufacturer cash flows.\119\ 
The shipments model takes an accounting approach, tracking market 
shares of each product class and the vintage of units in the stock. 
Stock accounting uses product shipments as inputs to estimate the age 
distribution of in-service product stocks for all years. The age 
distribution of in-service product stocks is a key input to 
calculations of both the NES and NPV, because operating costs for any 
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

    \119\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

    DOE developed shipment projections based on historical data and an 
analysis of key market drivers for each product. DOE estimated consumer 
boiler shipments by projecting shipments in three market segments: (1) 
replacement of existing consumer boilers; (2) new housing; and (3) new 
owners in buildings that did not previously have a consumer boiler or 
existing boiler owners that are adding an additional consumer 
boiler.\120\
---------------------------------------------------------------------------

    \120\ The new owners primarily consist of households that add or 
switch to a different space heating option during a major remodel. 
Because DOE calculates new owners as the residual between its 
shipments model compared to historical shipments, new owners also 
include shipments that switch away from boiler product class to 
another.
---------------------------------------------------------------------------

    To project boiler replacement shipments, DOE developed retirement 
functions from boiler lifetime estimates and applied them to the 
existing products in the housing stock, which are tracked by vintage. 
DOE calculated replacement shipments using historical shipments and the 
lifetime estimates. Annual historical shipments sources are: (1) 
Appliance Magazine; \121\ (2) multiple AHRI data submittals (2003-
2012); (3) BRG Building Solutions 2022 report; (4) ENERGY STAR unit 
shipments data; \122\ (5) 2013-2021 HARDI shipments; and (6) the 2016 
Consumer Boiler Final Rule. In addition, DOE adjusted replacement 
shipments by taking into account demolitions, using the estimated 
changes to the housing stock from AEO 2023.
---------------------------------------------------------------------------

    \121\ Appliance Magazine. Appliance Historical Statistical 
Review: 1954-2012. 2014. UBM Canon.
    \122\ ENERGY STAR, Unit Shipments data 2010-2021. multiple 
reports (Available at: www.energystar.gov/partner_resources/products_partner_resources/brand_owner_resources/unit_shipment_data) 
(Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    To project shipments to the new housing market, DOE used the AEO 
2023 housing starts and commercial building floor space projections to 
estimate future numbers of new homes and commercial building floor 
space. DOE then used data from U.S. Census Characteristics of New 
Housing,123 124 Home Innovation Research Labs Annual Builder 
Practices Survey,\125\ RECS 2020 housing characteristics data, AHS 
2021, and CBECS 2018 building characteristics data to estimate new 
construction boiler saturations by consumer boiler product class.
---------------------------------------------------------------------------

    \123\ U.S. Census, Characteristics of New Housing from 1999-2021 
(Available at: www.census.gov/construction/chars/) (Last accessed 
Jan. 3, 2023).
    \124\ U.S. Census, Characteristics of New Housing (Multi-Family 
Units) from 1973-2021 (Available at: www.census.gov/construction/chars/mfu.html) (Last accessed Jan. 3, 2023).
    \125\ Home Innovation Research Labs (independent subsidiary of 
the National Association of Home Builders (NAHB). Annual Builder 
Practices Survey (2015-2019) (Available at: www.homeinnovation.com/trends_and_reports/data/new_construction) (Last accessed Jan. 3, 
2023).
---------------------------------------------------------------------------

    DOE estimated shipments to the new owners market based on the 
residual shipments from the calculated replacement and new construction 
shipments compared to historical shipments in the last five years 
(2017-2021 for this NOPR). DOE compared this with data from Decision 
Analysts' 2002 to 2022 American Home Comfort Study \126\ and 2022 BRG 
data, which showed similar historical fractions of new owners. DOE 
assumed that the new owner fraction in 2030 would be the be equal to 
the 10-year average of the historical data (2012-2021) and then 
decrease to zero by the end of the analysis period (2059). If the 
resulting fraction of new owners is negative, DOE assumed that it was 
primarily due to equipment switching or non-replacement and added this 
number to replacements (thus reducing the replacements value).
---------------------------------------------------------------------------

    \126\ Decision Analysts, 2002, 2004, 2006, 2008, 2010, 2013, 
2016, 2019, and 2022 American Home Comfort Study (Available at: 
www.decisionanalyst.com/Syndicated/HomeComfort/) (Last accessed Jan. 
3, 2023).
---------------------------------------------------------------------------

    BWC commented that DOE's projections may be overstated because they 
do not appear to account for how State and local policies will impact 
the shipments of boilers. As an example, BWC stated that proposed 
actions by the California Air Resources Board, as well as a few 
California Air Districts, will push the market away from gas-fired 
boilers. In addition, BWC stated that there is similar activity in some 
of the Northeastern States, such as the New

[[Page 55171]]

Jersey Department of Environmental Protection's all-electric boiler 
proposal and New York City's all-electric ordinance. (BWC, No. 39 at 
pp. 2-3) WMT noted that the market is increasingly transitioning 
towards higher efficiencies without Federal prompting and that this 
transition is occurring in specific areas and regions where higher-
efficiency boilers provide the most financial benefit and the 
application allows for it. (WMT, No. 32 at p. 11)
    For the preliminary analysis, assumptions regarding future policies 
encouraging higher-efficiency equipment, electrification of households, 
and electric boilers were speculative at that time, so such policies 
were not incorporated into the shipments projection. Current 
requirements in many parts of California for low NOX boilers 
could increase the cost of these boilers, but it is currently unclear 
if it will be enough to drive shipments towards other space heating 
options (including heat pumps). Thus, it is very uncertain to what 
extent installations of heat pumps would increase at the expense of 
consumer boiler shipments. DOE agrees that ongoing electrification 
efforts at various levels of government could impact consumer decisions 
to switch away from fossil-fuel appliances such as boilers (including 
recently passed Federal rebates and incentives \127\ and proposed 2030 
emission standards from the California Air Resource Board \128\), but 
the Department has limited data on the potential fraction of shipments 
that might switch from gas- or oil-fired boilers to electric space 
heating options in the no-new-standards case. For the NOPR analysis, 
however, DOE was able to refine its shipments analysis and reduce the 
fraction of gas-fired boilers projected in the future based on most 
updated saturation data. See chapter 9 of the NOPR TSD for further 
details.
---------------------------------------------------------------------------

    \127\ The High-Efficiency Electric Home Rebate Act (HEEHRA) 
provides point-of-sale consumer rebates to enable low- and moderate-
income households to electrify their homes. HEEHRA covers 100 
percent of electrification project costs (up to item-specific caps) 
for low-income households and 50 percent of costs (up to item-
specific caps) for moderate-income households. The Energy Efficient 
Home Improvement credit, or 25C, allows households to deduct from 
their taxes up to 30 percent of the cost of upgrades to their homes, 
including installing heat pumps, insulation, and importantly, 
upgrading their breaker boxes to accommodate additional electric 
load.
    \128\ See ww2.arb.ca.gov/sites/default/files/2022-08/2022_State_SIP_Strategy.pdf; p. 101. The CARB vote that plans to ban 
gas furnaces and water heaters by 2030, was not the final phase in 
the process and requires State agencies to draft a rule for phasing 
out gas-fueled appliances, and then the rule will be under final 
consideration in 2025.
---------------------------------------------------------------------------

    DOE requests comments on its approach for taking into account 
electrification efforts in its shipment analysis. DOE also requests 
comments on other local, State, and Federal policies that may impact 
the shipments projection of consumer boilers.
    AGA, APGA, and NPGA stated that allowing only condensing gas 
boilers would take away consumer choice. Particularly in the 
replacement market and where condensing boilers cannot be installed or 
are cost prohibitive, these commenters argued that consumers will 
either try to repair the existing gas boiler or change out the gas 
boiler with an more energy-intensive product such as an electric 
boiler. (AGA, APGA, and NPGA, No. 38 at p. 3) Similarly, PB Heat stated 
that increasing the minimum efficiency to condensing levels will drive 
middle- and lower-income consumers to repair older equipment in order 
to avoid the high cost of installing a condensing boiler. (PB Heat, No. 
34 at p. 2) AHRI stated that the majority of boilers are used in 
replacement installations and that these replacement locations cannot 
easily be modified to meet the requirements of condensing equipment, 
and in some cases, accommodation of condensing equipment is not 
possible. Therefore, AHRI argued that a condensing standard could 
potentially lead to increased cases of fuel switching. (AHRI, No. 40 at 
p. 2)
    In response, DOE agrees that a fraction of consumers could elect to 
repair instead of replace their equipment due to higher efficiency 
standards. The NOPR analysis accounted for the impact of increased 
product price for the considered efficiency levels on shipments by 
incorporating relative price elasticity in the shipments model. This 
approach gives some weight to the operating cost savings from higher-
efficiency products. A price elasticity of demand less than zero 
reflects the expectation that demand will decrease when prices 
increase. To model the impact of the increase in relative price from a 
particular standard level on residential boiler shipments, DOE assumed 
that the shipments that do not occur represent consumers that would 
repair their product rather than replace it, extending the life of the 
product on average by six years in those cases.
    For the NOPR, DOE evaluated the potential for switching from gas-
fired and oil-fired hot water boilers to other heating systems in 
response to amended energy conservation standards. The main alternative 
to hot water boilers would be installation of an electric boiler, a 
forced-air furnace, a heat pump, or a mini-split heat pump. These 
alternatives would require significant installation costs such as 
adding ductwork or an electrical upgrade, and an electric boiler would 
have very high relative energy costs. Given that the increase in 
installed cost of boilers meeting the amended standards, relative to 
the no-new-standards case, is small, DOE has concluded that consumer 
switching away from hot water boilers due to amended standards would be 
rare. Therefore, DOE did not analyze fuel switching for consumer 
boilers for the NOPR.
    See chapter 9 of the NOPR TSD for further information on the 
development of shipments.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the NPV from 
a national perspective of total consumer costs and savings that would 
be expected to result from new or amended standards at specific 
efficiency levels.\129\ (``Consumer'' in this context refers to 
consumers of the product being regulated.) DOE calculates the NES and 
NPV for the potential standard levels considered based on projections 
of annual product shipments, along with the annual energy consumption 
and total installed cost data from the energy use and LCC analyses. For 
the present analysis, DOE projected the energy savings, operating cost 
savings, product costs, and NPV of consumer benefits over the lifetime 
of consumer boilers sold from 2030 through 2059.
---------------------------------------------------------------------------

    \129\ The NIA accounts for impacts in the 50 States and U.S. 
territories.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each product class if DOE 
adopted new or amended standards at specific energy efficiency levels 
(i.e., the TSLs or standards cases) for that class. For the standards 
cases, DOE considers how a given standard would likely affect the 
market shares of products with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing

[[Page 55172]]

various input quantities within the spreadsheet. The NIA spreadsheet 
model uses typical values (as opposed to probability distributions) as 
inputs.
    Table IV.11 summarizes the inputs and methods DOE used for the NIA 
analysis for the NOPR. Discussion of these inputs and methods follows 
the table. See chapter 10 of the NOPR TSD for further details.

   Table IV.11--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
            Inputs                               Method
------------------------------------------------------------------------
Shipments....................  Annual shipments from shipments model.
Compliance Date of Standard..  2030.
Efficiency Trends............  No-new-standards case: Based on
                                historical data. Standards cases: Roll-
                                up in the compliance year and then DOE
                                estimated growth in shipment-weighted
                                efficiency in all the standards cases.
Annual Energy Consumption per  Annual weighted-average values are a
 Unit.                          function of energy use at each TSL.
Total Installed Cost per Unit  Annual weighted-average values are a
                                function of cost at each TSL.
                               Incorporates projection of future product
                                prices based on historical data.
Annual Energy Cost per Unit..  Annual weighted-average values as a
                                function of the annual energy
                                consumption per unit and energy prices.
Repair and Maintenance Cost    Based on RSMeans data and other sources.
 per Unit.
Energy Price Trends..........  AEO2023 projections (to 2050) and
                                extrapolation thereafter.
Energy Site-to-Primary and     A time-series conversion factor based on
 FFC Conversion.                AEO2023.
Discount Rate................  3 percent and 7 percent.
Present Year.................  2023.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case and each of the standards 
cases. Section IV.F.8 of this document describes how DOE developed an 
energy efficiency distribution for the no-new-standards case (which 
yields a shipment-weighted average efficiency) for each of the 
considered product classes for the first full year of anticipated 
compliance with an amended or new standard. To project the trend in 
efficiency absent amended standards for consumer boilers over the 
entire shipments projection period, DOE used available historical 
shipments data and manufacturer input. The approach is further 
described in chapter 10 of the NOPR TSD.
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective (2030). In this scenario, the market 
shares of products in the no-new-standards case that do not meet the 
standard under consideration would ``roll up'' to meet the new standard 
level, and the market share of products above the standard would remain 
unchanged.
    To develop standards-case efficiency trends after 2030, DOE used 
historical shipment data and current boiler model availability by 
efficiency level (see chapter 8 of the NOPR TSD). DOE estimated growth 
in shipment-weighted efficiency by assuming that the implementation of 
ENERGY STAR's performance criteria and other incentives would gradually 
increase the market shares of higher-efficiency consumer boilers. DOE 
also took into account increased incentives for higher-efficiency 
equipment and electrification efforts.
    Crown and U.S. Boilers stated that they expect the growth of 
condensing boiler market share to slow as the share of remaining non-
condensing boiler sales are increasingly confined to difficult 
installations, as well as situations where the use of condensing 
boilers makes no economic or technical sense. However, these commenters 
do not agree with DOE's projected rate of growth decline, a key 
parameter which would impact the calculation of benefits attributable 
to an amended standard. (Crown, No. 30 at pp. 15-16; U.S. Boilers, No. 
31 at pp. 16-17) AHRI expressed concern that the Department's future 
shipments model is overly aggressive and suggested that the future 
shipment projections should be reconsidered at the higher efficiency 
levels. (AHRI, No. 40 at p. 2)
    In response, DOE reviewed recent shipments trends and incentives. 
Based on the latest data, DOE was able to reassess its growth in 
condensing boiler shipments, which slightly decreased the projected 
market share of condensing boilers for use in this NOPR as compared to 
the preliminary analysis.
    DOE requests comments on its approach for developing efficiency 
trends beyond 2030.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products between each 
potential standards case (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 product (by vintage or age) by the unit energy consumption 
(also by vintage). DOE calculated annual NES based on the difference in 
national energy consumption for the no-new standards case and for each 
higher-efficiency standard case. DOE estimated energy consumption and 
savings based on site energy and converted the electricity consumption 
and savings to primary energy (i.e., the energy consumed by power 
plants to generate site electricity) using annual conversion factors 
derived from AEO2023. Cumulative energy savings are the sum of the NES 
for each year over the timeframe of the analysis.
    Use of higher-efficiency products is sometimes associated with a 
direct rebound effect, which refers to an increase in utilization of 
the product due to the increase in efficiency. DOE did not find any 
data on the rebound effect specific to consumer boilers. Consequently, 
DOE applied a rebound effect of 10 percent for consumer boilers used in 
residential applications based on studies of other residential products 
and 0 percent for consumer boilers used in commercial applications. The 
calculated NES at each efficiency level is, therefore, reduced by 10 
percent in residential applications. DOE also included the rebound 
effect in the NPV analysis by accounting for the additional net benefit 
from increased consumer boiler usage, as described in section IV.H.3 of 
this document.
    DOE requests comments and any data on the potential for direct 
rebound.
    In 2011, in response to the recommendations of a committee on

[[Page 55173]]

``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (August 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in which DOE explained its determination 
that EIA's National Energy Modeling System (NEMS) is the most 
appropriate tool for its FFC analysis and its intention to use NEMS for 
that purpose. 77 FR 49701 (August 17, 2012). NEMS is a public domain, 
multi-sector, partial equilibrium model of the U.S. energy sector \130\ 
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 NOPR TSD.
---------------------------------------------------------------------------

    \130\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview 2018, DOE/EIA-0383(2018) (April 2019) 
(Available at: www.eia.gov/forecasts/aeo/index.cfm) (Last accessed 
Jan. 3, 2023).
---------------------------------------------------------------------------

3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are: (1) total annual installed cost; (2) 
total annual operating costs (energy costs and repair and maintenance 
costs), and (3) a discount factor to calculate the present value of 
costs and savings. DOE calculates net savings each year as the 
difference between the no-new-standards case and each standards case in 
terms of total savings in operating costs versus total increases in 
installed costs. DOE calculates operating cost savings over the 
lifetime of each product shipped during the projection period.
    As discussed in section IV.F.1 of this document, DOE developed 
consumer boiler price trends based on historical PPI data. DOE applied 
the same trends to project prices for each product class at each 
considered efficiency level. To evaluate the effect of uncertainty 
regarding the price trend estimates, DOE investigated the impact of 
different product price projections on the consumer NPV for the 
considered TSLs for consumer boilers. In addition to the default 
constant price trend, DOE considered two product price sensitivity 
cases: (1) a high-price case based on an exponential fit of deflated 
heating equipment PPI from 1980 to 2021 and (2) a low-price case based 
on an exponential fit of deflated steel heating boiler PPI from 1980 to 
1998 (partially extrapolated). The derivation of these price trends and 
the results of these sensitivity cases are described in appendix 10C of 
the NOPR TSD.
    The energy cost savings 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 residential and commercial energy price changes in the 
Reference case from AEO 2023, which has an end year of 2050. To 
estimate price trends after 2050, DOE used a constant value derived 
from the average value between 2046 through 2050. As part of the NIA, 
DOE also analyzed scenarios that used inputs from variants of the AEO 
2023 Reference case that have lower and higher economic growth. Those 
cases have lower and higher energy price trends compared to the 
Reference case. NIA results based on these cases are presented in 
appendix 10D of the NOPR TSD.
    In considering the consumer welfare gained due to the direct 
rebound effect, DOE accounted for change in consumer surplus attributed 
to additional cooling from the purchase of a more-efficient unit. 
Overall consumer welfare is generally understood to be enhanced from 
rebound (i.e., a measure of the enjoyment the boiler consumer receives 
through additional heating comfort). The net consumer impact of the 
rebound effect is included in the calculation of operating cost savings 
in the consumer NPV results. See appendix 10E of the NOPR TSD for 
details on DOE's treatment of the monetary valuation of the rebound 
effect.
    DOE requests comments on its approach to monetizing the impact of 
the rebound effect.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
NOPR, DOE estimated the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\131\ 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.
---------------------------------------------------------------------------

    \131\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis (Sept. 17, 2003) Section E (Available at: 
obamawhitehouse.archives.gov/omb/circulars_a004_a-4/) (Last accessed 
Jan. 3, 2023).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended energy 
conservation standards on consumers, DOE evaluates the impact on 
identifiable subgroups of consumers that may be disproportionately 
affected by a new or amended national standard. The purpose of a 
subgroup analysis is to determine the extent of any such 
disproportional impacts. DOE evaluates impacts on particular subgroups 
of consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels. For this NOPR, DOE analyzed 
the impacts of the considered standard levels on three subgroups: (1) 
low-income households; (2) senior-only households, and (3) small 
businesses. The analysis used subsets of the RECS 2015 and CBECS 2018 
samples composed of households or commercial settings that meet the 
criteria for the three subgroups. DOE used the LCC and PBP spreadsheet 
model to estimate the impacts of the considered efficiency levels on 
these subgroups. Chapter 11 in the NOPR TSD describes the consumer 
subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impacts of amended 
energy conservation standards on manufacturers of consumer boilers and 
to estimate the potential impacts of such standards on direct 
employment and manufacturing capacity. The MIA has both quantitative 
and qualitative aspects and includes analyses of projected industry 
cash flows, 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

[[Page 55174]]

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, product shipments, 
gross margin percentages (i.e., manufacturer markups), and investments 
in R&D and manufacturing capital required to produce compliant 
products. The key GRIM outputs are the INPV, which is the sum of 
industry annual cash flows over the analysis period, discounted using 
the industry-weighted average cost of capital, and the impact to 
domestic manufacturing employment. The model uses standard accounting 
principles to estimate the impacts of more-stringent energy 
conservation standards on a given industry by comparing changes in INPV 
and domestic manufacturing employment between a no-new-standards case 
and the various standards cases (i.e., TSLs). To capture the 
uncertainty relating to manufacturer pricing strategies following 
amended standards, the GRIM estimates a range of possible impacts under 
different manufacturer 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 other DOE and 
non-DOE regulations, and impacts on manufacturer subgroups. The 
complete MIA is outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared a profile of the consumer boiler 
manufacturing industry based on the market and technology assessment, 
preliminary manufacturer interviews, and publicly-available 
information. This included a top-down analysis of consumer boiler 
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 consumer boiler 
manufacturing industry, including company filings of form 10-K from the 
SEC,\132\ corporate annual reports, the U.S. Census Bureau's Annual 
Survey of Manufactures (ASM),\133\ and reports from Dun & 
Bradstreet.\134\
---------------------------------------------------------------------------

    \132\ U.S. Securities and Exchange Commission, Electronic Data 
Gathering, Analysis, and Retrieval (EDGAR) system (Available at: 
www.sec.gov/edgar/search/) (Last accessed Jan. 3, 2023).
    \133\ U.S. Census Bureau, Annual Survey of Manufactures. 
``Summary Statistics for Industry Groups and Industries in the U.S 
(2021)'' (Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2021-asm.html) (Last accessed Jan. 3, 2023).
    \134\ The Dun & Bradstreet Hoovers login is available at: 
app.dnbhoovers.com (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared a framework 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 consumer 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 of the MIA, DOE conducted structured, detailed 
interviews with representative manufacturers. During these interviews, 
DOE discussed engineering, manufacturing, procurement, and financial 
topics to validate assumptions used in the GRIM and to identify key 
issues or concerns. See section IV.J.3 of this document for a 
description of the key issues raised by manufacturers during the 
interviews. As part of Phase 3, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
standards or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash-flow analysis. Such 
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers, niche players, and/or manufacturers exhibiting a 
cost structure that largely differs from the industry average. DOE 
identified two manufacturer subgroups for a separate impact analysis: 
(1) small business manufacturers and (2) OEMs that own domestic foundry 
assets. The small business subgroup is discussed in section VI.B, 
``Review under the Regulatory Flexibility Act,'' and the OEMs that own 
domestic foundry assets subgroup is discussed in section V.B.2.d of 
this document and in chapter 12 of the NOPR TSD.
2. Government Regulatory Impact Model and Key Inputs
    DOE uses the GRIM to quantify the changes in cash flow due to 
amended standards that result in a higher or lower industry value. The 
GRIM uses a standard, annual discounted cash-flow analysis that 
incorporates manufacturer costs, markups, shipments, and industry 
financial information as inputs. The GRIM models changes in costs, 
distribution of shipments, investments, and manufacturer margins that 
could result from amended energy conservation standards. The GRIM 
spreadsheet uses the inputs to arrive at a series of annual cash flows, 
beginning in 2023 (the base year of the analysis) and continuing to 
2059. DOE calculated INPVs by summing the stream of annual discounted 
cash flows during this period. For manufacturers of consumer boilers, 
DOE used a real discount rate of 9.7 percent, which was derived from 
industry financials and then modified according to feedback received 
during manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between the no-new-standards case and each 
standards case. The difference in INPV between the no-new-standards 
case and a standards case represents the financial impact of the 
amended energy conservation standard on manufacturers. As discussed 
previously, DOE developed critical GRIM inputs using a number of 
sources, including publicly-available data, results of the engineering 
analysis, results of the shipments analysis, and information gathered 
from industry stakeholders during the course of manufacturer 
interviews. The GRIM results are presented in section V.B.2. Additional 
details about the GRIM, the discount rate, and other financial 
parameters can be found in chapter 12 of the NOPR TSD.

[[Page 55175]]

a. Manufacturer Production Costs
    Manufacturing more-efficient products is typically more expensive 
than manufacturing baseline products due to the use of more complex 
components, which are typically more costly than baseline components. 
The changes in the MPCs of covered products can affect the revenues, 
gross margins, and cash flow of the industry. For this rulemaking, DOE 
relied on the efficiency-level approach. This approach ensures that the 
efficiency levels considered in the engineering analysis are attainable 
using technologies which are commercially available and viable for 
consumer boilers. As such, DOE was able to conduct teardown analyses on 
consumer boilers which meet each efficiency level, and, thus, ascertain 
a list of representative design options which manufacturers are most 
likely to employ in order to achieve these efficiencies. For a complete 
description of the MPCs, see chapter 5 of the NOPR TSD or section IV.C 
of this document.
b. Shipments Projections
    The GRIM estimates manufacturer revenues based on total unit 
shipment projections and the distribution of those shipments 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 2023 (the base year) to 2059 (the end year of 
the analysis period). See chapter 9 of the NOPR TSD or section IV.G of 
this document for additional details.
c. Product and Capital Conversion Costs
    Amended energy conservation standards could cause manufacturers to 
incur conversion costs to bring their production facilities and product 
designs into compliance. DOE evaluated the level of conversion-related 
expenditures that would be needed to comply with each considered 
efficiency level in each product class. For the MIA, DOE classified 
these conversion costs into two major groups: (1) product conversion 
costs; and (2) capital conversion costs. Product conversion costs are 
investments in research, development, testing, marketing, and other 
non-capitalized costs necessary to make product designs comply with 
amended energy conservation standards. Capital conversion costs are 
investments in property, plant, and equipment necessary to adapt or 
change existing production facilities such that new compliant product 
designs can be fabricated and assembled.
    DOE based its estimates of the product conversion costs necessary 
to meet the varying efficiency levels on information from manufacturer 
interviews, design pathways analyzed in the engineering analysis, and 
market share and model count information. During confidential 
interviews, DOE asked manufacturers to estimate the redesign effort and 
engineering resources required at various efficiency levels to quantify 
the product conversion costs. Manufacturer data were aggregated to 
better reflect the industry as a whole and to protect confidential 
information. DOE scaled product conversion costs by the number of 
models that would require redesign to account for the portion of 
companies that were not interviewed. Such approach allows DOE to arrive 
at an industry-wide conversion cost estimate.
    DOE relied on information derived from manufacturer interviews and 
the engineering analysis to evaluate the level of capital conversion 
costs manufacturers would likely incur at the analyzed efficiency 
levels. During interviews, manufacturers provided estimates and 
descriptions of the required tooling and plant changes that would be 
necessary to upgrade product lines to meet the various efficiency 
levels. DOE used estimates of capital expenditure requirements derived 
from the product teardown analysis and engineering analysis to validate 
manufacturer feedback. For non-condensing efficiency levels above 
baseline, DOE estimated that manufacturers would require new tooling 
for some new casting designs. For efficiency levels requiring 
condensing technology, DOE estimated that manufacturers with a 
significant volume of non-condensing gas-fired hot water boilers would 
incur large capital conversion costs to develop additional assembly 
lines for condensing boilers. Based on manufacturer feedback, DOE 
assumed manufacturers would continue to source condensing heat 
exchangers and would not shift to in-house manufacturing of condensing 
heat exchangers. DOE estimated industry capital conversion costs by 
extrapolating the interviewed manufacturers' capital conversion costs 
for each product class to account for the market share of companies 
that were not interviewed.
    In general, DOE assumes 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 standard. The conversion 
cost figures used in the GRIM can be found in section V.B.2 of this 
document. For additional information on the estimated capital and 
product conversion costs, see chapter 12 of the NOPR TSD.
d. Manufacturer Markup Scenarios
    MSPs include direct manufacturing production costs (i.e., labor, 
materials, and overhead estimated in DOE's MPCs) and all non-production 
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate 
the MSPs in the GRIM, DOE applied manufacturer markups to the MPCs 
estimated in the engineering analysis for each product class and 
efficiency level. Modifying these manufacturer markups in the standards 
case yields different sets of impacts on manufacturers. For the MIA, 
DOE modeled two standards-case scenarios to represent 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 
scenario; and (2) a preservation of operating profit scenario. These 
scenarios lead to different manufacturer markup values that, when 
applied to the MPCs, result in varying revenue and cash-flow impacts on 
manufacturers.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' markup across all 
product classes and all efficiency levels (including baseline 
efficiency), which assumes that manufacturers would be able to maintain 
the same amount of profit as a percentage of revenues at all efficiency 
levels within a product class. As manufacturer production costs 
increase with efficiency, this scenario implies that the per-unit 
dollar profit will increase. DOE assumed a gross margin percentage of 
29 percent for all product classes.\135\ Manufacturers tend to believe 
it is optimistic to assume that they would be able to maintain the same 
gross margin percentage as their production costs increase, 
particularly for minimally-efficient products. Therefore, this scenario 
represents a high bound of industry profitability under an amended 
energy conservation standard.
---------------------------------------------------------------------------

    \135\ The gross margin percentage of 29 percent is based on a 
manufacturer markup of 1.41.
---------------------------------------------------------------------------

    Under the preservation of operating profit scenario, as the cost of 
production goes up under a standards case, manufacturers are generally 
required to reduce their manufacturer markups to a level that maintains 
base-case operating profit. DOE implemented this scenario

[[Page 55176]]

in the GRIM by lowering the manufacturer markups at each TSL to yield 
approximately the same earnings before interest and taxes in the 
standards case as in the no-new-standards case in the year after the 
expected compliance date of the amended energy conservation standards. 
The implicit assumption behind this scenario is that the industry can 
only maintain its operating profit in absolute dollars after the 
standard takes effect. Therefore, operating profit in percentage terms 
is reduced between the no-new-standard case and the standards cases. 
This scenario represents a lower bound of industry profitability under 
an amended energy conservation standard.
    A comparison of industry financial impacts under the two 
manufacturer markup scenarios is presented in section V.B.2 of this 
document.
3. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 45 percent 
of the domestic consumer boiler shipments. Participants included a 
cross-section of domestic-based and foreign-based OEMs. Participants 
included manufacturers with a wide range of market shares and product 
class offerings.
    In interviews, DOE asked manufacturers to describe their major 
concerns regarding potential more-stringent energy conservation 
standards for consumer boilers. The following section highlights 
manufacturer concerns that helped inform the projected potential 
impacts of an amended standard on the industry. Manufacturer interviews 
are conducted by DOE consultants under non-disclosure agreements 
(NDAs), so the Department does not document these discussions in the 
same way that it does public comments, in terms of providing comment 
summaries and DOE's responses throughout the rest of this document.
a. The Replacement Market
    In interviews, several manufacturers discussed the potential 
challenges and benefits of moving to a condensing standard for consumer 
boilers.
    Several manufacturers estimated that, on average, between 80 to 90 
percent of consumer boiler sales are through the replacement market, 
rather than the new construction channel. They noted that since 
condensing and non-condensing products require different venting 
infrastructure, a condensing standard could lead to higher installation 
costs for the consumer, as well as technical and/or safety challenges 
with installation and operation, in certain cases. Some manufacturers 
stated that since the current consumer boiler market is structured 
around the legacy venting infrastructures that exist in most homes, 
raising standards on gas-fired hot water boilers above 84-percent AFUE 
would be very disruptive to the market.
    Other manufacturers noted that while it may be expensive to replace 
a non-condensing boiler with a condensing boiler in some instances, 
there are pathways to complete installations safely. They requested 
that DOE account for the higher installation costs in analyses, rather 
than creating separate product classes for non-condensing consumer 
boilers.
4. Discussion of MIA Comments
    AHRI noted that small OEMs will be impacted by this rulemaking, 
especially with respect to cast-iron boilers. (AHRI, No. 40 at p. 6) 
AHRI recommended that the Department should give more weight to the 
consideration of State-level impact on consumers and small 
manufacturers instead of the use of a national average value for those 
subgroups. (AHRI, No. 40 at p. 2)
    In response, DOE evaluated subgroups of manufacturers that may be 
disproportionately impacted by amended standards, including small 
business manufacturers. DOE identified three small, domestic OEMs of 
covered consumer boilers. Regarding the impact on small manufacturers, 
see section VI.B of this document for a discussion of the potential 
impact of amended energy conservation standards for consumer boilers on 
the three small OEMs identified. The distributional impacts of a 
potential standard, which capture State-level differences, are part of 
the LCC analysis (see section IV.F of this document). Specific 
subgroups, including small businesses, are part of the subgroup 
analysis (see section IV.I of this document). The aggregate national 
impacts are part of the NIA (see section IV.H of this document). All of 
these analyses are considered by DOE when making a determination of 
economic justification, per EPCA requirements.
    In response to the May 2022 Preliminary Analysis, Crown, U.S. 
Boiler, WMT, PB Heat, BWC, and AHRI stated that the adoption of a 
condensing standard will likely have a disproportionate, negative 
impact on domestic manufacturers (Crown, No. 30 at pp. 16-17; U.S. 
Boiler, No. 31 at pp 17-18; WMT, No. 32 at p. 12; PB Heat, No. 34 at p. 
2; BWC, No. 39 at p. 4; AHRI, No. 40 at p. 7) Crown, U.S. Boiler, and 
WMT emphasized that, in particular, manufacturers with foundries would 
be disproportionally affected by potential amended energy conservation 
standards for consumer boilers. (Crown, No. 30 at pp. 16-17; U.S. 
Boiler, No. 31 at pp 17-18; WMT, No. 32 at p. 12) Stakeholders 
commented on a range of potential negative impacts of more stringent 
standards, including: (1) increases in cast-iron prices in other boiler 
types; (2) possible foundry closures; (3) potential job losses 
associated with foundry operation, casting, and assembly, which could 
lead to a reduction in domestic manufacturing employment; and (4) 
significant stranded assets. The following paragraphs discuss these 
stakeholder concerns in detail.
    Crown, U.S. Boiler, WMT, and AHRI commented that raising the gas-
fired hot water standard to a condensing level would result in 
increased manufacturing costs for the other cast-iron product classes, 
even if the standards for those classes were to be left unchanged. 
(Crown, No. 30 at pp. 5-6; U.S. Boiler, No. 31 at pp. 5-6; WMT, No. 32 
at p. 12; AHRI, No. 40 at p. 7) Crown and U.S. Boiler stated that this 
is because the cast-iron foundries producing heat exchangers for non-
condensing boilers have large, fixed costs that would no longer be 
shared with gas-fired hot water consumer boilers. (Crown, No. 30 at pp. 
5-6; U.S. Boiler, No. 31 at pp. 5-6) WMT noted that the cost structure 
of cast-iron boiler manufacturers is different from most other 
businesses. WMT stated that because of the similarity of cast-iron heat 
exchanger designs between product classes, a reduction in the annual 
volume of the larger product class (i.e., gas-fired hot water) will 
have a significant cost impact upon the lower-volume product classes. 
(WMT, No. 32 at p. 12) AHRI claimed that eliminating non-condensing 
gas-fired boilers will cause an increase in the cost of cast-iron heat 
exchangers, which would largely impact the steam boiler replacement 
market. Furthermore, AHRI asserted that due to the similarity of cast 
iron heat exchangers for hot water boilers and steam boilers, a 
reduction in the annual volume of the gas-fired hot water category will 
have a significant cost impact upon the smaller product categories of 
gas-fired steam, oil-fired hot water, and oil-fired steam boilers. 
(AHRI, No. 40 at p. 7)
    As noted in section IV.C.2 of this document, research indicates 
that most consumer boiler OEMs use third-party foundries for their 
boiler castings. For the consumer boiler OEMs that own foundry assets, 
DOE analyzes the disproportionate impacts of a condensing standard on 
those

[[Page 55177]]

manufacturers in section V.B.2.d of this document, ``Impacts on 
Subgroups of Manufacturers.'' As discussed in detail in section V.B.2.d 
of this document, DOE used the engineering analysis to estimate the 
depreciation and overhead associated with an average gas-fired hot 
water cast-iron heat exchanger. Next, DOE used the shipments analysis 
and estimated market share of boilers produced by vertically integrated 
OEMs (i.e., consumer boiler OEMs with foundry assets and in-house 
casting) to estimate the amount depreciation and overhead that would 
potentially need to be reallocated to the remaining cast-iron product 
classes under a condensing standard. DOE then modeled two manufacturer 
markup scenarios to understand the range of potential impacts for 
foundry-owners. This modeling resulted in higher production costs and 
reduced profitability for foundry-owners. See section V.B.2.d of this 
document for further details.
    Crown, U.S. Boiler, and WMT indicated that some foundries may no 
longer be commercially viable under a condensing gas-fired hot water 
standard. (Crown, No. 30 at pp. 5-6; U.S. Boiler, No. 31 at pp. 5-6; 
WMT, No. 32 at p. 12) Crown and U.S. Boiler indicated that foundry 
closure could lead to reduced availability of gas-fired steam, oil-
fired hot water, and/or oil-fired steam boilers and higher costs for 
new boilers and replacement parts. (Crown, No. 30 at pp. 5-6; U.S. 
Boiler, No. 31 at pp. 5-6) WMT stated that an increase in efficiency 
standards would result in, ``closing of at least one cast iron foundry 
within the United States.'' (WMT, No. 32 at p. 12) Crown and U.S. 
Boiler noted that foundries engaged in manufacturing cast-iron boilers 
are almost exclusively located in the U.S., including their casting 
supplier, Casting Solutions, located in Zanesville, Ohio. (Crown, No. 
30 at p. 16; U.S. Boiler, No. 31 at p. 17)
    In response, DOE initially identified three foundries in the United 
States that supply castings for the domestic consumer boiler market. 
DOE identified these foundries using publicly-available information and 
verified the information in confidential manufacturer interviews. Of 
these three foundries, two are owned by consumer boiler OEMs. The 
remaining foundry, located in Waupaca, Wisconsin, provides castings for 
a range of markets (e.g., automotive, rail, industrial). In the GRIM, 
DOE assumes both OEMs maintain their foundries under a condensing 
standard. The subgroup analysis modeling resulted in higher production 
costs and reduced profitability for foundry-owners. DOE discusses the 
potential impacts of amended standards on OEMs that own foundry assets 
in section V.B.2.d of this document.
    Crown, U.S. Boiler, WMT, PB Heat, BWC, and AHRI all asserted that 
amended standards would lead to a loss of American jobs and the need to 
import heat exchangers for consumer boilers from overseas. (Crown, No. 
30 at pp. 16-17; U.S. Boiler, No. 31 at pp. 17-18; WMT, No. 32 at p. 
12; PB Heat, No. 34 at p. 2; BWC, No. 39 at p. 4; AHRI, No. 40 at p. 7)
    Crown and U.S. Boiler stated that raising standards for gas-fired 
hot water consumer boilers would have devasting impacts on cast-iron 
manufacturers. As a specific example, they discussed that their casting 
provider, Casting Solutions (a division of their parent company, 
Burnham Holdings, Inc. (BHI)) currently employs over 100 people, with 
most of them being union manufacturing workers. The commenters argued 
that in addition to potential foundry job losses, there are other 
manufacturing jobs associated with machining castings and assembling 
cast-iron boilers at several BHI divisions that would be at risk, 
including approximately 89 jobs at U.S. Boiler's manufacturing facility 
and approximately 30 jobs at Crown's manufacturing facility, which is 
located in a ``depressed inner-city Philadelphia neighborhood.'' 
(Crown, No. 30 at pp. 16-17; U.S. Boiler, No. 31 at pp. 17-18)
    BWC recommended that DOE should account for the substantial 
percentage of high-efficiency consumer boilers that are produced by 
foreign manufacturers as part of this rulemaking, as well as key 
components in condensing boilers, such as stainless-steel heat 
exchangers. (BWC, No. 39 at p. 4) AHRI urged the Department to examine 
the impact on jobs as a result of a condensing rule, as well as 
examining the cost of importing heat exchangers from foreign sources 
(including increased shipping costs and any tariffs). (AHRI, No. 40 at 
p. 7)
    Regarding the potential job losses associated with a potential 
condensing standard for consumer boilers, DOE analyzes the potential 
impact of amended standards on domestic direct employment as part of 
the MIA. DOE estimates that over 90 percent of non-condensing consumer 
boilers, including key components such as cast-iron heat exchangers, 
are manufactured in the United States, whereas approximately 60 percent 
of condensing consumer boilers are manufactured in the United States. 
DOE recognizes that key components for condensing gas-fired hot water 
boilers, such as stainless-steel condensing heat exchangers are 
manufactured outside of the United States. Furthermore, developing an 
in-house condensing heat exchanger production line would require large 
upfront investments, which may not be cost-effective given the 
relatively low levels of domestic gas-fired boiler sales compared to 
other markets. Therefore, DOE has tentatively concluded that setting a 
condensing standard for gas-fired hot water boilers, which accounts for 
approximately 75 percent of annual boiler shipments, would likely lead 
to a reduction in domestic direct employment in the consumer boiler 
industry in the range of 14 to 61 jobs, depending on the adopted 
standard level. See section V.B.2.b of this document for analysis of 
impacts on direct employment.
    Regarding the cost of importing heat exchangers from foreign 
sources, manufacturers provided feedback on the current cost of 
imported heat exchangers, which includes inbound freight costs and 
tariffs, during manufacturer interviews. DOE incorporated this feedback 
into its analysis when developing its MPCs, and, thus, these impacts 
are accounted for as a portion of the cost for purchased parts. See 
section IV.C.2 of this document for additional details on the cost 
analysis and MPCs.
    Crown, U.S. Boiler, and WMT asserted that adoption of a condensing 
standard, at a minimum, would strand millions of dollars in assets, 
including gas-fired hot water cast-iron section patterns. (Crown, No. 
30 at p. 16; U.S. Boiler, No. 31 at p. 17; WMT, No. 32 at p. 12)
    In response, DOE incorporates the estimated stranded assets (i.e., 
the residual un-depreciated value of tooling and equipment that would 
have enjoyed longer use if amended energy conservation standard had not 
made them obsolete) for each analyzed standard case into its model. In 
the GRIM, the remaining book value of existing tooling and equipment, 
the value of which is affected by the amended energy conservation 
standards, acts as a tax shield that mitigates decreases in cash flow 
from operations in the year of the write-down. To estimate potential 
stranded assets, DOE relied on manufacturer feedback, SEC 10-K filings 
of relevant consumer boiler OEMs, and results of the engineering 
analysis. See chapter 12 of the NOPR TSD for additional details on 
stranded assets.
    WMT indicated that cumulative regulatory burden is experienced from 
rulemakings pertaining to consumer boilers, commercial water heaters, 
small electric motors, furnace fans, and others. (WMT, No. 32 at p. 12) 
AHRI requested that DOE evaluate the regulatory burden

[[Page 55178]]

that will be placed on consumer as well as manufacturers. (AHRI, No. 40 
at p. 2)
    Rheem stated that due to the numerous products facing amended 
standards, an overwhelming majority of manufactures will face increased 
burden in the coming years for product redesigns and compliance. The 
commenter urged DOE to place more emphasis on identifying and 
mitigating manufacturers burden when amending energy conservation 
standards for water heating, boilers, and pool heating products and 
equipment. Rheem also supported AHRI's comments on cumulative burden on 
consumers, noting the increased financial burden placed on them due to 
amended standards (e.g., higher purchase prices, higher repair rates). 
(Rheem, No. 37 at p. 6)
    In response, DOE notes that it analyzes cumulative regulatory 
burden pursuant to section 13(g) of appendix A. See section V.B.2.e of 
this document for a list of DOE regulations that affect consumer boiler 
manufacturers that could take effect approximately three years before 
or after the expected 2030 compliance date of amended energy 
conservation standards for consumer boilers. At the time of 
publication, DOE notes that amended energy conservation standards have 
not been proposed for furnace fans.\136\ Regarding small electric 
motors, as detailed in the notice of proposed determination published 
in the Federal Register on February 6, 2023, DOE has tentatively 
determined that more-stringent energy conservation standards would not 
be cost-effective. 88 FR 7629. If DOE proposes or finalizes any energy 
conservation standards for these products prior to finalizing energy 
conservation standards for consumer boilers, DOE will include the 
energy conservation standards for these other products as part of its 
consideration of cumulative regulatory burden for this consumer 
boiler's rulemaking.
---------------------------------------------------------------------------

    \136\ See www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=54 (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Although DOE does not analyze the cumulative burden on consumers, 
section V.B.1.a of this document discusses the economic impact of 
amended standards on individual consumers, which is the main impact 
consumers will face with a finalized energy conservation standards.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions to emissions of other gases 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion.
    The analysis of electric power sector emissions of CO2, 
NOX, SO2, and Hg uses emissions factors intended 
to represent the marginal impacts of the change in electricity 
consumption associated with amended or new standards. The methodology 
is based on results published for the AEO, including a set of side 
cases that implement a variety of efficiency-related policies. The 
methodology is described in appendix 13A in the NOPR TSD. The analysis 
presented in this document uses projections from AEO 2023. Power sector 
emissions of CH4 and N2O from fuel combustion are 
estimated using Emission Factors for Greenhouse Gas Inventories 
published by the Environmental Protection Agency (EPA).\137\
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    \137\ Available at www.epa.gov/system/files/documents/2023-03/ghg_emission_factors_hub.pdf (Last accessed May 3, 2023).
---------------------------------------------------------------------------

    The on-site operation of consumer boilers requires combustion of 
fossil fuels and results in emissions of CO2, 
NOX, SO2 CH4 and N2O where 
these products are used. Site emissions of these gases were estimated 
using Emission Factors for Greenhouse Gas Inventories and, for 
NOX and SO2 emissions intensity factors from an 
EPA publication.\138\
---------------------------------------------------------------------------

    \138\ 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: www.epa.gov/ttn/chief/ap42/index.html) (Last 
accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    FFC upstream emissions, which include emissions from fuel 
combustion during extraction, processing, and transportation of fuels, 
and ``fugitive'' emissions (direct leakage to the atmosphere) of 
CH4 and CO2, are estimated based on the 
methodology described in chapter 15 of the NOPR TSD.
    The emissions intensity factors are expressed in terms of physical 
units per MWh or MMBtu of site energy savings. For power sector 
emissions, specific emissions intensity factors are calculated by 
sector and end use. Total emissions reductions are estimated using the 
energy savings calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
    DOE's no-new-standards case for the electric power sector reflects 
the AEO, which incorporates the projected impacts of existing air 
quality regulations on emissions. AEO 2023 generally represents current 
legislation and environmental regulations, including recent government 
actions, that were in place at the time of preparation of AEO 2023, 
including the emissions control programs discussed in the following 
paragraphs.\139\
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    \139\ For further information, see the Assumptions to AEO 2023 
report that sets forth the major assumptions used to generate the 
projections in the Annual Energy Outlook (Available at: www.eia.gov/outlooks/aeo/assumptions/) (Last accessed May 3, 2023).
---------------------------------------------------------------------------

    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from numerous States in the eastern half of the United States 
are also limited under the Cross-State Air Pollution Rule (CSAPR). 76 
FR 48208 (August 8, 2011). CSAPR requires these States to reduce 
certain emissions, including annual SO2 emissions, and went 
into effect as of January 1, 2015.\140\ AEO 2023 incorporates 
implementation of CSAPR, including the update to the CSAPR ozone season 
program emission budgets and target dates issued in 2016. 81 FR 74504 
(Oct. 26, 2016). Compliance with CSAPR is flexible among EGUs and is 
enforced through the use of tradable emissions allowances. 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 another regulated EGU.
---------------------------------------------------------------------------

    \140\ CSAPR requires States to address annual emissions of 
SO2 and NOX, precursors to the formation of 
fine particulate matter (PM2.5) pollution, in order to 
address the interstate transport of pollution with respect to the 
1997 and 2006 PM2.5 National Ambient Air Quality 
Standards (NAAQS). CSAPR also requires certain States to address the 
ozone season (May-September) emissions of NOX, a 
precursor to the formation of ozone pollution, in order to address 
the interstate transport of ozone pollution with respect to the 1997 
ozone NAAQS. 76 FR 48208 (August 8, 2011). EPA subsequently 
published a supplemental rule that included an additional five 
States in the CSAPR ozone season program (76 FR 80760 (Dec. 27, 
2011)) (Supplemental Rule).
---------------------------------------------------------------------------

    However, beginning in 2016, SO2 emissions began to fall 
as a result of the Mercury and Air Toxics Standards

[[Page 55179]]

(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 
are being reduced as a result of the control technologies installed on 
coal-fired power plants to comply with the MATS requirements for acid 
gas. In order to continue operating, coal power plants must have either 
flue gas desulfurization or dry sorbent injection systems installed. 
Both technologies, which are used to reduce acid gas emissions, also 
reduce SO2 emissions. Because of the emissions reductions 
under the MATS, 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 
another regulated EGU. Therefore, energy conservation standards that 
decrease electricity generation would generally reduce SO2 
emissions. DOE estimated SO2 emissions reduction using 
emissions factors based on AEO 2023.
    CSAPR also established limits on NOX emissions for 
numerous States in the eastern half of the United States. Energy 
conservation standards would have little effect on NOX 
emissions in those States covered by CSAPR emissions limits if excess 
NOX emissions allowances resulting from the lower 
electricity demand could be used to permit offsetting increases in 
NOX emissions from other EGUs. In such case, NOX 
emissions would remain near the limit even if electricity generation 
goes down. A different case could possibly result, depending on the 
configuration of the power sector in the different regions and the need 
for allowances, such that NOX emissions might not remain at 
the limit in the case of lower electricity demand. In this case, energy 
conservation standards might reduce NOX emissions in covered 
States. Despite this possibility, DOE has chosen to be conservative in 
its analysis and has maintained the assumption that standards will not 
reduce NOX emissions in States covered by CSAPR. Energy 
conservation standards would be expected to reduce NOX 
emissions in the States not covered by CSAPR. DOE used AEO 2023 data to 
derive NOX emissions factors for the group of States not 
covered by CSAPR.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps, and, as such, DOE's energy conservation 
standards would be expected to slightly reduce Hg emissions. DOE 
estimated mercury emissions reduction using emissions factors based on 
AEO 2023, which incorporates the MATS.
    WMT expressed concern over the reliance upon the emissions impact 
analysis in the energy conservation standards rulemaking due to its 
potential to be controversial in light of the Supreme Court ruling on 
West Virginia v. EPA and the ``major question doctrine'' cited therein. 
(WMT, No. 32 at p. 2) In response, DOE maintains that environmental and 
public health benefits associated with the more efficient use of energy 
are important to take into account when considering the need for 
national energy conservation, which is required by EPCA. (42 U.S.C. 
6295(o)(2)(B)(i)(VI)) In addition, DOE's emissions impact analysis is 
consistent with its Procedures, Interpretations, and Policies for 
Consideration in New or Revised Energy Conservation Standards and Test 
Procedures for Consumer Products and Commercial/Industrial 
Equipment.\141\ Furthermore, DOE considers potential emissions and 
related health benefits as a separate analysis from the consumer, 
manufacturer, and national impact analyses. As discussed in section V.C 
of this document, DOE's proposed standards are justified under EPCA 
even without consideration of those additional emissions and health 
benefits.
---------------------------------------------------------------------------

    \141\ See www.regulations.gov/document/EERE-2021-BT-STD-0003-0075.
---------------------------------------------------------------------------

L. Monetizing Emissions Impacts

    As part of the development of this proposed rule, for the purpose 
of complying with the requirements of Executive Order 12866, DOE 
considered the estimated monetary benefits from the reduced emissions 
of CO2, CH4, N2O, NOX, and 
SO2 that are expected to result from each of the TSLs 
considered. In order to make this calculation analogous to the 
calculation of the NPV of consumer benefit, DOE considered the reduced 
emissions expected to result over the lifetime of products shipped in 
the projection period for each TSL. This section summarizes the basis 
for the values used for monetizing the emissions benefits and presents 
the values considered in this NOPR.
    To monetize the benefits of reducing GHG emissions, this analysis 
uses the interim estimates presented in the Technical Support Document: 
Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates 
Under Executive Order 13990 published in February 2021 by the IWG.
1. Monetization of Greenhouse Gas Emissions
    DOE estimates the monetized benefits of the reductions in emissions 
of CO2, CH4, and N2O by using a 
measure of the social cost (SC) of each pollutant (e.g., SC-
CO2). These estimates represent the monetary value of the 
net harm to society associated with a marginal increase in emissions of 
these pollutants in a given year, or the benefit of avoiding that 
increase. These estimates are intended to include (but are not limited 
to) climate-change-related changes in net agricultural productivity, 
human health, property damages from increased flood risk, disruption of 
energy systems, risk of conflict, environmental migration, and the 
value of ecosystem services.
    DOE exercises its own judgment in presenting monetized climate 
benefits as recommended by applicable Executive orders, and DOE would 
reach the same conclusion presented in this proposed rulemaking in the 
absence of the social cost of greenhouse gases. That is, the social 
costs of greenhouse gases, whether measured using the February 2021 
interim estimates presented by the Interagency Working Group on the 
Social Cost of Greenhouse Gases or by another means, did not affect the 
rule ultimately proposed by DOE.
    DOE estimated the global social benefits of CO2, 
CH4, and N2O reductions using SC-GHG values that 
were based on the interim values presented in the Technical Support 
Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim 
Estimates under Executive Order 13990, published in February 2021 by 
the IWG. The SC-GHGs is the monetary value of the net harm to society 
associated with a marginal increase in emissions in a given year, or 
the benefit of avoiding that increase. In principle, SC-GHGs includes 
the value of all climate change impacts, including (but not limited to) 
changes in net agricultural productivity, human health effects, 
property damage from increased flood risk and natural disasters, 
disruption of energy systems, risk of conflict, environmental 
migration, and the value of ecosystem services. The SC-GHGs, therefore, 
reflects the societal value of reducing emissions of the gas in 
question by one metric ton. The SC-GHGs is the theoretically 
appropriate value to use in conducting benefit-cost analyses of 
policies that affect CO2, N2O, and CH4 
emissions. As a member of the IWG involved in the development of the 
February 2021 SC-GHG TSD, DOE

[[Page 55180]]

agrees that the interim SC-GHG estimates represent the most appropriate 
estimate of the SC-GHG until revised estimates have been developed 
reflecting the latest, peer-reviewed science.
    The SC-GHG estimates presented here were developed over many years, 
using transparent process, peer-reviewed methodologies, the best 
science available at the time of that process, and with input from the 
public. Specifically, in 2009, the IWG, that included the DOE and other 
Executive Branch agencies and offices, was established to ensure that 
agencies were using the best available science and to promote 
consistency in the social cost of carbon (SC-CO2) values 
used across agencies. The IWG published SC-CO2 estimates in 
2010 that were developed from an ensemble of three widely cited 
integrated assessment models (IAMs) that estimate global climate 
damages using highly aggregated representations of climate processes 
and the global economy combined into a single modeling framework. The 
three IAMs were run using a common set of input assumptions in each 
model for future population, economic, and CO2 emissions 
growth, as well as equilibrium climate sensitivity--a measure of the 
globally averaged temperature response to increased atmospheric 
CO2 concentrations. These estimates were updated in 2013 
based on new versions of each IAM. In August 2016, the IWG published 
estimates of the social cost of methane (SC-CH4) and nitrous 
oxide (SC-N2O) using methodologies that are consistent with 
the methodology underlying the SC-CO2 estimates. The 
modeling approach that extends the IWG SC-CO2 methodology to 
non-CO2 GHGs has undergone multiple stages of peer review. 
The SC-CH4 and SC-N2O estimates were developed by 
Marten et al.\142\ and underwent a standard double-blind peer review 
process prior to journal publication. In 2015, as part of the response 
to public comments received to a 2013 solicitation for comments on the 
SC-CO2 estimates, the IWG announced a National Academies of 
Sciences, Engineering, and Medicine review of the SC-CO2 
estimates to offer advice on how to approach future updates to ensure 
that the estimates continue to reflect the best available science and 
methodologies. In January 2017, the National Academies released their 
final report, ``Valuing Climate Damages: Updating Estimation of the 
Social Cost of Carbon Dioxide,'' and recommended specific criteria for 
future updates to the SC-CO2 estimates, a modeling framework 
to satisfy the specified criteria, and both near-term updates and 
longer-term research needs pertaining to various components of the 
estimation process (National Academies, 2017).\143\ Shortly thereafter, 
in March 2017, President Trump issued Executive Order 13783, which 
disbanded the IWG, withdrew the previous TSDs, and directed agencies to 
ensure SC-CO2 estimates used in regulatory analyses are 
consistent with the guidance contained in OMB's Circular A-4, 
``including with respect to the consideration of domestic versus 
international impacts and the consideration of appropriate discount 
rates'' (E.O. 13783, Section 5(c)). Benefit-cost analyses following 
E.O. 13783 used SC-GHG estimates that attempted to focus on the U.S.-
specific share of climate change damages as estimated by the models and 
were calculated using two discount rates recommended by Circular A-4, 3 
percent and 7 percent. All other methodological decisions and model 
versions used in SC-GHG calculations remained the same as those used by 
the IWG in 2010 and 2013, respectively.
---------------------------------------------------------------------------

    \142\ Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold, 
and A. Wolverton, Incremental CH4 and N2O mitigation benefits 
consistent with the U.S. Government's SC-CO2 estimates. Climate 
Policy (2015) 15(2): pp. 272-298.
    \143\ National Academies of Sciences, Engineering, and Medicine. 
Valuing Climate Damages: Updating Estimation of the Social Cost of 
Carbon Dioxide (2017) The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

    On January 20, 2021, President Biden issued Executive Order 13990, 
which re-established the IWG and directed it to ensure that the U.S. 
Government's estimates of the social cost of carbon and other 
greenhouse gases reflect the best available science and the 
recommendations of the National Academies (2017). The IWG was tasked 
with first reviewing the SC-GHG estimates currently used in Federal 
analyses and publishing interim estimates within 30 days of the E.O. 
that reflect the full impact of GHG emissions, including by taking 
global damages into account. The interim SC-GHG estimates published in 
February 2021 are used here to estimate the climate benefits for this 
proposed rulemaking. The E.O. instructs the IWG to undertake a fuller 
update of the SC-GHG estimates by January 2022 that takes into 
consideration the advice of the National Academies (2017) and other 
recent scientific literature. The February 2021 SC-GHG TSD provides a 
complete discussion of the IWG's initial review conducted under E.O. 
13990. In particular, the IWG found that the SC-GHG estimates used 
under E.O. 13783 fail to reflect the full impact of GHG emissions in 
multiple ways.
    First, the IWG found that the SC-GHG estimates used under E.O. 
13783 fail to fully capture many climate impacts that affect the 
welfare of U.S. citizens and residents, and those impacts are better 
reflected by global measures of the SC-GHG. Examples of omitted effects 
from the E.O. 13783 estimates include direct effects on U.S. citizens, 
assets, and investments located abroad, supply chains, U.S. military 
assets and interests abroad, and tourism, as well as spillover pathways 
such as economic and political destabilization and global migration 
that can lead to adverse impacts on U.S. national security, public 
health, and humanitarian concerns. In addition, assessing the benefits 
of U.S. GHG mitigation activities requires consideration of how those 
actions may affect mitigation activities by other countries, as those 
international mitigation actions will provide a benefit to U.S. 
citizens and residents by mitigating climate impacts that affect U.S. 
citizens and residents. A wide range of scientific and economic experts 
have emphasized the issue of reciprocity as support for considering 
global damages of GHG emissions. If the United States does not consider 
impacts on other countries, it is difficult to convince other countries 
to consider the impacts of their emissions on the United States. The 
only way to achieve an efficient allocation of resources for emissions 
reduction on a global basis--and so benefit the U.S. and its citizens--
is for all countries to base their policies on global estimates of 
damages. As a member of the IWG involved in the development of the 
February 2021 SC-GHG TSD, DOE agrees with this assessment, and, 
therefore, in this proposed rule, DOE centers attention on a global 
measure of SC-GHG. This approach is the same as that taken in DOE 
regulatory analyses from 2012 through 2016. A robust estimate of 
climate damages that accrue only to U.S. citizens and residents does 
not currently exist in the literature. As explained in the February 
2021 TSD, existing estimates are both incomplete and an underestimate 
of total damages that accrue to the citizens and residents of the U.S. 
because they do not fully capture the regional interactions and 
spillovers discussed above, nor do they include all of the important 
physical, ecological, and economic impacts of climate change recognized 
in the climate change literature. As noted in the February 2021 SC-GHG 
TSD, the

[[Page 55181]]

IWG will continue to review developments in the literature, including 
more robust methodologies for estimating a U.S.-specific SC-GHG value, 
and explore ways to better inform the public of the full range of 
carbon impacts. As a member of the IWG, DOE will continue to follow 
developments in the literature pertaining to this issue.
    Second, the IWG found that the use of the social rate of return on 
capital (7 percent under current OMB Circular A-4 guidance) to discount 
the future benefits of reducing GHG emissions inappropriately 
underestimates the impacts of climate change for the purposes of 
estimating the SC-GHG. Consistent with the findings of the National 
Academies (2017) and the economic literature, the IWG continued to 
conclude that the consumption rate of interest is the theoretically 
appropriate discount rate in an intergenerational context,\144\ and 
recommended that discount rate uncertainty and relevant aspects of 
intergenerational ethical considerations be accounted for in selecting 
future discount rates.
---------------------------------------------------------------------------

    \144\ Interagency Working Group on Social Cost of Carbon, Social 
Cost of Carbon for Regulatory Impact Analysis under Executive Order 
12866 (2010) United States Government (Last accessed Jan. 3, 2023) 
(Available at: www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf); Interagency Working Group on Social Cost of 
Carbon. Technical Update of the Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order 12866 (2013) (Last accessed 
April 15, 2022) (Available at: www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact); Interagency 
Working Group on Social Cost of Greenhouse Gases, United States 
Government. Technical Support Document: Technical Update on the 
Social Cost of Carbon for Regulatory Impact Analysis-Under Executive 
Order 12866 (August 2016) (Last accessed Jan. 3, 2023) (Available 
at: www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf); Interagency Working Group on Social 
Cost of Greenhouse Gases, United States Government. Addendum to 
Technical Support Document on Social Cost of Carbon for Regulatory 
Impact Analysis under Executive Order 12866: Application of the 
Methodology to Estimate the Social Cost of Methane and the Social 
Cost of Nitrous Oxide (August 2016) (Available at: www.epa.gov/sites/default/files/2016-12/documents/addendum_to_sc-ghg_tsd_august_2016.pdf) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    Furthermore, the damage estimates developed for use in the SC-GHG 
are estimated in consumption-equivalent terms, and so an application of 
OMB Circular A-4's guidance for regulatory analysis would then use the 
consumption discount rate to calculate the SC-GHG. DOE agrees with this 
assessment and will continue to follow developments in the literature 
pertaining to this issue. DOE also notes that while OMB Circular A-4, 
as published in 2003, recommends using 3-percent and 7-percent discount 
rates as ``default'' values, Circular A-4 also reminds agencies that 
``different regulations may call for different emphases in the 
analysis, depending on the nature and complexity of the regulatory 
issues and the sensitivity of the benefit and cost estimates to the key 
assumptions.'' On discounting, Circular A-4 recognizes that ``special 
ethical considerations arise when comparing benefits and costs across 
generations,'' and Circular A-4 acknowledges that analyses may 
appropriately ``discount future costs and consumption benefits . . . at 
a lower rate than for intragenerational analysis.'' In the 2015 
Response to Comments on the Social Cost of Carbon for Regulatory Impact 
Analysis, OMB, DOE, and the other IWG members recognized that 
``Circular A-4 is a living document'' and ``the use of 7 percent is not 
considered appropriate for intergenerational discounting. There is wide 
support for this view in the academic literature, and it is recognized 
in Circular A-4 itself.'' Thus, DOE concludes that a 7-percent discount 
rate is not appropriate to apply to value the social cost of greenhouse 
gases in the analysis presented in this analysis.
    To calculate the present and annualized values of climate benefits, 
DOE uses the same discount rate as the rate used to discount the value 
of damages from future GHG emissions, for internal consistency. That 
approach to discounting follows the same approach that the February 
2021 TSD recommends ``to ensure internal consistency--i.e., future 
damages from climate change using the SC-GHG at 2.5 percent should be 
discounted to the base year of the analysis using the same 2.5 percent 
rate.'' DOE has also consulted the National Academies' 2017 
recommendations on how SC-GHG estimates can ``be combined in RIAs with 
other cost and benefits estimates that may use different discount 
rates.'' The National Academies reviewed ``several options,'' including 
``presenting all discount rate combinations of other costs and benefits 
with [SC-GHG] estimates.''
    As a member of the IWG involved in the development of the February 
2021 SC-GHG TSD, DOE agrees with this assessment and will continue to 
follow developments in the literature pertaining to this issue. While 
the IWG works to assess how best to incorporate the latest, peer 
reviewed science to develop an updated set of SC-GHG estimates, it set 
the interim estimates to be the most recent estimates developed by the 
IWG prior to the group being disbanded in 2017. The estimates rely on 
the same models and harmonized inputs and are calculated using a range 
of discount rates. As explained in the February 2021 SC-GHG TSD, the 
IWG has recommended that agencies revert to the same set of four values 
drawn from the SC-GHG distributions based on three discount rates as 
were used in regulatory analyses between 2010 and 2016 and were subject 
to public comment. For each discount rate, the IWG combined the 
distributions across models and socioeconomic emissions scenarios 
(applying equal weight to each) and then selected a set of four values 
recommended for use in benefit-cost analyses: an average value 
resulting from the model runs for each of three discount rates (2.5 
percent, 3 percent, and 5 percent), plus a fourth value, selected as 
the 95th percentile of estimates based on a 3-percent discount rate. 
The fourth value was included to provide information on potentially 
higher-than-expected economic impacts from climate change. As explained 
in the February 2021 SC-GHG TSD, and DOE agrees, this update reflects 
the immediate need to have an operational SC-GHG for use in regulatory 
benefit-cost analyses and other applications that was developed using a 
transparent process, peer-reviewed methodologies, and the science 
available at the time of that process. Those estimates were subject to 
public comment in the context of dozens of proposed rulemakings, as 
well as in a dedicated public comment period in 2013.
    There are a number of limitations and uncertainties associated with 
the SC-GHG estimates. First, the current scientific and economic 
understanding of discounting approaches suggests discount rates 
appropriate for intergenerational analysis in the context of climate 
change are likely to be less than 3 percent, near 2 percent or 
lower.\145\ Second, the IAMs used to produce these interim estimates do 
not include all of the important physical, ecological, and economic 
impacts of climate change recognized in the climate change literature 
and the science underlying their ``damage functions''--i.e., the core 
parts of the IAMs that map global mean temperature changes and other 
physical impacts of climate change into economic (both market and 
nonmarket) damages--lags behind the most recent research. For example, 
limitations include the

[[Page 55182]]

incomplete treatment of catastrophic and non-catastrophic impacts in 
the integrated assessment models, their incomplete treatment of 
adaptation and technological change, the incomplete way in which inter-
regional and intersectoral linkages are modeled, uncertainty in the 
extrapolation of damages to high temperatures, and inadequate 
representation of the relationship between the discount rate and 
uncertainty in economic growth over long time horizons. Likewise, the 
socioeconomic and emissions scenarios used as inputs to the models do 
not reflect new information from the last decade of scenario generation 
or the full range of projections. The modeling limitations do not all 
work in the same direction in terms of their influence on the SC-
CO2 estimates. However, as discussed in the February 2021 
TSD, the IWG has recommended that, taken together, the limitations 
suggest that the interim SC-GHG estimates used in this proposed rule 
likely underestimate the damages from GHG emissions. DOE concurs with 
this assessment.
---------------------------------------------------------------------------

    \145\ Interagency Working Group on Social Cost of Greenhouse 
Gases (IWG) (2021) Technical Support Document: Social Cost of 
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive 
Order 13990. February. United States Government. (Available at 
www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-science-evidence-based-estimates-of-the-benefits-of-reducing-climate-pollution/) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    DOE's derivations of the SC-GHG (i.e., SC-CO2, SC-
N2O, and SC-CH4) values used for this NOPR are 
discussed in the following sections, and the results of DOE's analyses 
estimating the benefits of the reductions in emissions of these GHGs 
are presented in section V.B.8 of this document.
a. Social Cost of Carbon
    The SC-CO2 values used for this NOPR were based on the 
values developed for the IWG's February 2021 TSD, which are shown in 
Table IV.4 in five-year increments from 2020 to 2050. The set of annual 
values that DOE used, which was adapted from estimates published by 
EPA,\146\ is presented in Appendix 14-A of the NOPR TSD. These 
estimates are based on methods, assumptions, and parameters identical 
to the estimates published by the IWG (which were based on EPA 
modeling), and include values for 2051 to 2070. DOE expects additional 
climate benefits to accrue for products still operating after 2070, but 
a lack of available SC-CO2 estimates for emissions years 
beyond 2070 prevents DOE from monetizing these potential benefits in 
this analysis.
---------------------------------------------------------------------------

    \146\ See EPA, Revised 2023 and Later Model Year Light-Duty 
Vehicle GHG Emissions Standards: Regulatory Impact Analysis, 
Washington, DC, December 2021. Available at nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P1013ORN.pdf (last accessed February 21, 2023).
---------------------------------------------------------------------------

    For purposes of capturing the uncertainties involved in regulatory 
impact analysis, DOE has determined it is appropriate include all four 
sets of SC-CO2 values, as recommended by the IWG.\147\
---------------------------------------------------------------------------

    \147\ For example, the February 2021 TSD discusses how the 
understanding of discounting approaches suggests that discount rates 
appropriate for intergenerational analysis in the context of climate 
change may be lower than 3 percent.

                    Table IV.12--Annual SC-CO2 Values From 2021 Interagency Update, 2020-2050
                                           [2020$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate and statistic
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2020............................................              14              51              76             152
2025............................................              17              56              83             169
2030............................................              19              62              89             187
2035............................................              22              67              96             206
2040............................................              25              73             103             225
2045............................................              28              79             110             242
2050............................................              32              85             116             260
----------------------------------------------------------------------------------------------------------------

    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SC-CO2 value for that year in each of the 
four cases. DOE adjusted the values to 2022$ using the implicit price 
deflator for gross domestic product (GDP) from the Bureau of Economic 
Analysis. To calculate a present value of the stream of monetary 
values, DOE discounted the values in each of the four cases using the 
specific discount rate that had been used to obtain the SC-
CO2 values in each case.
b. Social Cost of Methane and Nitrous Oxide
    The SC-CH4 and SC-N2O values used for this 
NOPR were based on the values developed for the February 2021 TSD. 
Table IV.13 shows the updated sets of SC-CH4 and SC-
N2O estimates from the latest interagency update in 5-year 
increments from 2020 to 2050. The full set of annual values used is 
presented in appendix 14-A of the NOPR TSD. To capture the 
uncertainties involved in regulatory impact analysis, DOE has 
determined it is appropriate to include all four sets of SC-
CH4 and SC-N2O values, as recommended by the IWG. 
DOE derived values after 2050 using the approach described above for 
the SC-CO2.

                                                      Table IV.13--Annual SC-CH4 and SC-N2O Values From 2021 Interagency Update, 2020-2050
                                                                                     [2020$ per metric ton]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              SC-CH4                                                          SC-N2O
                                                                 -------------------------------------------------------------------------------------------------------------------------------
                                                                                    Discount rate and statistic                                     Discount rate and statistic
                                                                 -------------------------------------------------------------------------------------------------------------------------------
                              Year                                      5%              3%             2.5%             3%              5%              3%             2.5%             3%
                                                                 -------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       95th                                                            95th
                                                                      Average         Average         Average       percentile        Average         Average         Average       percentile
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2020............................................................             670           1,500           2,000           3,900           5,800          18,000          27,000          48,000
2025............................................................             800           1,700           2,200           4,500           6,800          21,000          30,000          54,000
2030............................................................             940           2,000           2,500           5,200           7,800          23,000          33,000          60,000
2035............................................................           1,100           2,200           2,800           6,000           9,000          25,000          36,000          67,000
2040............................................................           1,300           2,500           3,100           6,700          10,000          28,000          39,000          74,000

[[Page 55183]]

 
2045............................................................           1,500           2,800           3,500           7,500          12,000          30,000          42,000          81,000
2050............................................................           1,700           3,100           3,800           8,200          13,000          33,000          45,000          88,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    DOE multiplied the CH4 and N2O emissions 
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates for that year in each of the cases. DOE 
adjusted the values to 2022$ using the implicit price deflator for 
gross domestic product (GDP) from the Bureau of Economic Analysis. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the cases using the specific discount 
rate that had been used to obtain the SC-CH4 and SC-
N2O estimates in each case.
2. Monetization of Other Emissions Impacts
    For the NOPR, DOE estimated the monetized value of NOX 
and SO2 emissions reductions from electricity generation 
using the latest benefit-per-ton estimates for that sector from the 
EPA's Benefits Mapping and Analysis Program.\148\ DOE used EPA's values 
for PM2.5-related benefits associated with NOX 
and SO2 and for ozone-related benefits associated with 
NOX for 2025, 2030, and 2040, calculated with discount rates 
of 3 percent and 7 percent. DOE used linear interpolation to define 
values for the years not given in the 2025 to 2040 period; for years 
beyond 2040, the values are held constant. DOE combined the EPA 
regional benefit per ton estimates with regional information on 
electricity consumption and emissions from AEO 2023 to define weighted-
average national values for NOX and SO2 (see 
appendix 14B of the NOPR TSD).
---------------------------------------------------------------------------

    \148\ Estimating the Benefit per Ton of Reducing 
PM2.5 Precursors from 17 Sectors, February 2018 
(Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors) (Last 
accessed May 3, 2023).
---------------------------------------------------------------------------

    DOE also estimated the monetized value of NOX and 
SO2 emissions reductions from site use of natural gas in 
consumer boilers using benefit-per-ton estimates from the EPA's 
Benefits Mapping and Analysis Program.\149\ Although none of the 
sectors covered by EPA refers specifically to residential and 
commercial buildings, the sector called ``area sources'' would be a 
reasonable proxy for residential and commercial buildings.\150\ The EPA 
document provides high and low estimates for 2025 and 2030 at 3- and 7-
percent discount rates.\151\ DOE used the same linear interpolation and 
extrapolation as it did with the values for electricity generation.
---------------------------------------------------------------------------

    \149\ Estimating the Benefit per Ton of Reducing 
PM2.5 and Ozone Precursors from 21 Sectors, April 2023 
(Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors) (Last 
accessed May 3, 2023).
    \150\ ``Area sources'' represents all emission sources for which 
States do not have exact (point) locations in their emissions 
inventories. Because exact locations would tend to be associated 
with larger sources, ``area sources'' would be fairly representative 
of small, dispersed sources like homes and businesses.
    \151\ ``Area sources'' are a category in the 2018 document from 
EPA, but are not used in the latest document cited above. See: 
www.epa.gov/sites/default/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf.
---------------------------------------------------------------------------

    DOE multiplied the site 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.

M. Utility Impact Analysis

    The utility impact analysis estimates the changes in installed 
electrical capacity and generation projected to result for each 
considered TSL. The analysis is based on published output from the NEMS 
associated with AEO 2023. 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 in the 
AEO 2023 Reference case and various side cases. Details of the 
methodology are provided in the appendices to chapters 13 and 15 of the 
NOPR TSD.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity, and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of potential new or 
amended energy conservation standards.
    DOE notes that the utility impact analysis as applied to electric 
utilities only estimates the change to capacity and generation as a 
result of a standard, as modeled in NEMS, and there is no gas utility 
analog. DOE further notes that the impact to natural gas utility sales 
is equivalent to the natural gas saved by the proposed standard and 
includes those results in chapter 15 of the NOPR TSD

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a proposed standard. Employment impacts from new or 
amended energy conservation standards include both direct and indirect 
impacts. Direct employment impacts are any changes in the number of 
employees of manufacturers of the products subject to standards. The 
MIA addresses those impacts. Indirect employment impacts are changes in 
national employment that occur due to the shift in expenditures and 
capital investment caused by the purchase and operation of more-
efficient appliances. Indirect employment impacts from standards 
consist of the net jobs created or eliminated in the national economy, 
other than in the manufacturing sector being regulated, caused by: (1) 
reduced spending by consumers on energy; (2) reduced spending on new 
energy supply by the utility industry; (3) increased consumer spending 
on the products to which the new standards apply and other goods and 
services, and (4) the effects of those three factors throughout the 
economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of

[[Page 55184]]

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.\152\ 
There are many reasons for these differences, including wage 
differences and the fact that the utility sector is more capital-
intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. Because reduced consumer expenditures for energy likely lead to 
increased expenditures in other sectors of the economy, the general 
effect of efficiency standards is to shift economic activity from a 
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, the BLS 
data suggest that net national employment may increase due to shifts in 
economic activity resulting from energy conservation standards.
---------------------------------------------------------------------------

    \152\ 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: 
searchworks.stanford.edu/view/8436340) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this NOPR using an input/output model of the U.S. 
economy called Impact of Sector Energy Technologies version 4 
(ImSET).\153\ ImSET is a special-purpose version of the ``U.S. 
Benchmark National Input-Output'' (I-O) model, which was designed to 
estimate the national employment and income effects of energy-saving 
technologies. The ImSET software includes a computer-based I-O model 
having structural coefficients that characterize economic flows among 
187 sectors most relevant to industrial, commercial, and residential 
building energy use.
---------------------------------------------------------------------------

    \153\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W. 
Schultz, ImSET 4.0: Impact of Sector Energy Technologies Model 
Description and User Guide (2015) Pacific Northwest National 
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run for this rule. Therefore, DOE used ImSET only 
to generate results for near-term timeframes (2030-2035), where these 
uncertainties are reduced. For more details on the employment impact 
analysis, see chapter 16 of the NOPR 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 
consumer boilers. It addresses the TSLs examined by DOE, the projected 
impacts of each of these levels if adopted as energy conservation 
standards for consumer boilers, and the standards levels that DOE is 
proposing to adopt in this NOPR. Additional details regarding DOE's 
analyses are contained in the NOPR TSD supporting this document.

A. Trial Standard Levels

    In general, DOE typically evaluates potential new or amended 
standards for products and equipment by grouping individual efficiency 
levels for each class into TSLs. Use of TSLs allows DOE to identify and 
consider manufacturer cost interactions between the product classes, to 
the extent that there are such interactions, and market cross-
elasticity from consumer purchasing decisions that may change when 
different standard levels are set.
    In the analysis conducted for this NOPR, DOE analyzed the benefits 
and burdens of four TSLs for consumer boilers. DOE developed TSLs that 
combine efficiency levels for each analyzed product class. DOE presents 
the results for the TSLs in this document, while the results for all 
efficiency levels that DOE analyzed are in the NOPR TSD.
    Table V.1 presents the TSLs and the corresponding efficiency levels 
that DOE has identified for potential amended energy conservation 
standards for consumer boilers. TSL 4 represents the maximum 
technologically feasible (``max-tech'') energy efficiency for all 
product classes. TSL 3 represents the max-tech energy efficiency for 
oil-fired hot water and steam boilers, condensing technology for gas-
fired hot water boilers (but not max-tech), and baseline energy 
efficiency for gas-fired steam boilers. TSL 3 represents the highest 
efficiency level for each product class with a positive NPV at both 3 
percent and 7 percent discount rate. TSL 2 represents baseline energy 
efficiency for gas-fired and oil-fired steam boilers and an 
intermediate energy efficiency for gas-fired and oil-fired hot water 
boilers. At TSL 2, gas-fired hot water boilers still require condensing 
technology. TSL 1 represents baseline energy efficiency for gas-fired 
and oil-fired steam boilers and the minimum improvement in energy 
efficiency for gas-fired and oil-fired hot water boilers.

                              Table V.1--Trial Standard Levels for Consumer Boilers
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                  Product class                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                                                 ---------------------------------------------------------------
Gas-fired Hot Water.............................               1               2               3               4
Gas-fired Steam.................................        Baseline        Baseline        Baseline               1
Oil-fired Hot Water.............................               1               1               2               2
Oil-fired Steam.................................        Baseline        Baseline               1               1
----------------------------------------------------------------------------------------------------------------

    DOE constructed the TSLs for this NOPR to include ELs 
representative of ELs with similar characteristics (i.e., using similar 
technologies and/or efficiencies, and having roughly comparable 
equipment availability). The use of representative ELs provided for 
greater distinction between the TSLs. While representative ELs were 
included in the TSLs, DOE considered all efficiency levels as part of 
its analysis.\154\
---------------------------------------------------------------------------

    \154\ Efficiency levels that were analyzed for this NOPR are 
discussed in section IV.C.1 of this document. Results by efficiency 
level are presented in chapters 8, 10, and 12 of the NOPR TSD.

---------------------------------------------------------------------------

[[Page 55185]]

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on consumer boiler consumers by 
looking at the effects that potential amended standards at each TSL 
would have on the LCC and PBP. DOE also examined the impacts of 
potential standards on selected consumer subgroups. These analyses are 
discussed in the following sections.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency products affect consumers in two 
ways: (1) purchase price increases and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses product lifetime and a discount rate. Chapter 8 of the NOPR TSD 
provides detailed information on the LCC and PBP analyses.
    Table V.2 through Table V.9 show the LCC and PBP results for the 
TSLs considered for each product class. In the first of each pair of 
tables, the simple payback is measured relative to the baseline 
product. In the second table, impacts are measured relative to the 
efficiency distribution in the no-new-standards case in the compliance 
year (see section IV.F.8 of this document). Because some consumers 
purchase products with higher efficiency in the no-new-standards case, 
the average savings are less than the difference between the average 
LCC of the baseline product and the average LCC at each TSL. The 
savings refer only to consumers who are affected by a standard at a 
given TSL. Those who already purchase a product with efficiency at or 
above a given TSL are not affected. Consumers for whom the LCC 
increases at a given TSL experience a net cost.

                                         Table V.2--Average LCC and PBP Results for Gas-Fired Hot Water Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Average costs (2022$)
                                                                           ----------------------------------------------------
                                                                                            First                                  Simple      Average
                    TSL                            Efficiency level          Installed      year's      Lifetime                  payback      lifetime
                                                                                cost      operating    operating       LCC        (years)      (years)
                                                                                             cost         cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Baseline......................        6,214        1,344       22,808       29,023  ...........         26.9
1.........................................  1.............................        6,483        1,335       22,659       29,141         29.2         26.9
2.........................................  2.............................        6,482        1,265       21,676       28,159          3.4         26.9
3.........................................  3.............................        6,543        1,221       20,956       27,499          2.7         26.9
4.........................................  4.............................        7,506        1,214       20,842       28,348          9.9         26.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


      Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                          Life-cycle cost savings
                                            Efficiency   -------------------------------------------------------
                   TSL                         level        Average LCC savings *   Percentage of consumers that
                                                                   (2022$)               experience net cost
----------------------------------------------------------------------------------------------------------------
1.......................................               1                     (193)                            11
2.......................................               2                       275                            13
3.......................................               3                       768                            11
4.......................................               4                     (526)                            78
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (-) values.


                                           Table V.4--Average LCC and PBP Results for Gas-Fired Steam Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Average costs (2022$)
                                                                           ----------------------------------------------------
                                                                                            First                                  Simple      Average
                    TSL                            Efficiency level          Installed      year's      Lifetime                  payback      lifetime
                                                                                cost      operating    operating       LCC        (years)      (years)
                                                                                             cost         cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1,2,3.....................................  Baseline......................        6,008        1,078       16,872       22,881  ...........         23.7
4.........................................  1.............................        6,192        1,069       16,738       22,930         20.4         23.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


[[Page 55186]]


        Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                         Life-cycle cost savings
                                          Efficiency   ---------------------------------------------------------
                 TSL                        level         Average LCC savings *     Percentage of consumers that
                                                                 (2022$)                experience net cost
----------------------------------------------------------------------------------------------------------------
4....................................               1                       (53)                             56
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (-) values.


                                         Table V.6--Average LCC and PBP Results for Oil-Fired Hot Water Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Average Costs (2022$)
                                                                           ----------------------------------------------------
                                                                                            First                                  Simple      Average
                    TSL                            Efficiency level          Installed      year's      Lifetime                  payback      lifetime
                                                                                cost      operating    operating       LCC        (years)      (years)
                                                                                             cost         cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Baseline......................        6,945        2,783       44,601       51,546  ...........         25.6
1,2.......................................  1.............................        7,042        2,753       44,129       51,171          3.3         25.6
3,4.......................................  2.............................        7,137        2,724       43,667       50,804          3.3         25.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


      Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
                                                                          Life-cycle cost savings
                                            Efficiency   -------------------------------------------------------
                   TSL                         level        Average LCC savings *   Percentage of consumers that
                                                                   (2022$)               experience net cost
----------------------------------------------------------------------------------------------------------------
1,2.....................................               1                       374                             4
3,4.....................................               2                       666                             4
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                           Table V.8--Average LCC and PBP Results for Oil-fired Steam Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Average Costs (2022$)
                                                ------------------------------------------------------------------------  Simple payback      Average
             TSL               Efficiency level                      First year's        Lifetime                            (years)         lifetime
                                                  Installed cost    operating cost    operating cost          LCC                             (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1,2..........................  Baseline........  6,977...........  2,726...........  36,398..........  43,374..........  --.............            19.6
3,4..........................  1...............  7,202...........  2,685...........  35,860..........  43,062..........  5.5............            19.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


        Table V.9--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                                         Life-cycle cost savings
                                          Efficiency   ---------------------------------------------------------
                 TSL                        level         Average LCC savings *     Percentage of consumers that
                                                                 (2022$)                experience net cost
----------------------------------------------------------------------------------------------------------------
3,4..................................               1                        310                             14
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households, senior-only households, and 
small business. Table V.10 through Table V.13 compares the average LCC 
savings and PBP at each efficiency level for the consumer subgroups 
with similar metrics for the entire consumer sample for each product 
class of consumer boilers. Chapter 11 of the NOPR TSD presents the 
complete LCC and PBP results for the subgroups.

[[Page 55187]]



  Table V.10--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired Hot Water
                                                     Boilers
----------------------------------------------------------------------------------------------------------------
                                                    Low-income      Senior-only        Small
                       TSL                          households      households      businesses    All households
----------------------------------------------------------------------------------------------------------------
                                           Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1...............................................           (100)           (267)            (34)           (193)
2...............................................             326             190             530             275
3...............................................             643             545             777             768
4...............................................           (161)           (559)           (541)           (526)
----------------------------------------------------------------------------------------------------------------
                                             Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1...............................................            29.1            41.5            12.8            29.2
2...............................................             0.8             1.5             1.6             3.4
3...............................................             0.9             1.6             1.4             2.7
4...............................................             7.4            11.5             4.4             9.9
----------------------------------------------------------------------------------------------------------------
                                         Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1...............................................              11               9               5              12
2...............................................              13              14               5              14
3...............................................              21              25              17              29
4...............................................              31              18               8              15
----------------------------------------------------------------------------------------------------------------
                                           Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1...............................................               7              14               4              11
2...............................................              10              14               6              13
3...............................................               9              13               6              11
4...............................................              34              70              83              78
----------------------------------------------------------------------------------------------------------------


Table V.11--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                    Low-income      Senior-only        Small
                       TSL                          households      households      businesses    All households
----------------------------------------------------------------------------------------------------------------
                                           Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2,3...........................................              NA              NA              NA              NA
4...............................................              14            (69)              26            (53)
----------------------------------------------------------------------------------------------------------------
                                             Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2,3...........................................              NA              NA              NA              NA
4...............................................            14.7            25.8             7.3            20.4
----------------------------------------------------------------------------------------------------------------
                                         Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2,3...........................................              NA              NA              NA              NA
4...............................................              37              25              64              29
----------------------------------------------------------------------------------------------------------------
                                           Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2,3...........................................              NA              NA              NA              NA
4...............................................              25              58              19              56
----------------------------------------------------------------------------------------------------------------


  Table V.12--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Oil-Fired Hot Water
                                                     Boilers
----------------------------------------------------------------------------------------------------------------
                                                    Low-income      Senior-only        Small
                       TSL                          households      households      businesses    All households
----------------------------------------------------------------------------------------------------------------
                                           Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2.............................................             334             324             438             374
3,4.............................................             603             569             771             666
----------------------------------------------------------------------------------------------------------------
                                             Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2.............................................             1.3             2.9             1.8             3.3

[[Page 55188]]

 
3,4.............................................             1.3             2.9             1.8             3.3
----------------------------------------------------------------------------------------------------------------
                                         Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2.............................................              70              71              61              70
3,4.............................................              85              89              74              86
----------------------------------------------------------------------------------------------------------------
                                           Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2.............................................               1               2              15               4
3,4.............................................               1               2              19               4
----------------------------------------------------------------------------------------------------------------


Table V.13--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
                                                    Low-income      Senior-only        Small
                       TSL                          households      households      businesses    All households
----------------------------------------------------------------------------------------------------------------
                                           Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2.............................................              NA              NA              NA              NA
3,4.............................................             279             284             468             310
----------------------------------------------------------------------------------------------------------------
                                             Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2.............................................              NA              NA              NA              NA
3,4.............................................             3.2             4.7               3             5.5
----------------------------------------------------------------------------------------------------------------
                                         Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2.............................................              NA              NA              NA              NA
3,4.............................................              77              83              65              80
----------------------------------------------------------------------------------------------------------------
                                           Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2.............................................              NA              NA              NA              NA
3,4.............................................               5              10              30              14
----------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section III.G.2 of this document, EPCA establishes 
a rebuttable presumption that an energy conservation standard is 
economically justified if the increased purchase cost for a product 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. In calculating a 
rebuttable presumption payback period for each of the considered TSLs, 
DOE used discrete values, and, as required by EPCA, based the energy 
use calculation on the DOE test procedure for consumer boilers. In 
contrast, the PBPs presented in section V.B.1.a of this document were 
calculated using distributions that reflect the range of energy use in 
the field.
    Table V.14 presents the rebuttable-presumption payback periods for 
the considered TSLs for consumer boilers. While DOE examined the 
rebuttable-presumption criterion, it assessed whether the standard 
levels considered for the NOPR are economically justified through a 
more detailed analysis of the economic impacts of those levels, 
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range 
of impacts to the consumer, manufacturer, Nation, and environment. The 
results of that analysis serve as the basis for DOE to definitively 
evaluate the economic justification for a potential standard level, 
thereby supporting or rebutting the results of any preliminary 
determination of economic justification.

                               Table V.14--Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
                                                   Gas-fired hot     Gas-fired     Oil-fired hot     Oil-fired
                       TSL                             water           steam           water           steam
----------------------------------------------------------------------------------------------------------------
1...............................................            20.2  ..............             2.2  ..............
2...............................................             4.0  ..............             2.2  ..............
3...............................................             2.7  ..............             2.2             5.1
4...............................................             9.7            13.3             2.2             5.1
----------------------------------------------------------------------------------------------------------------


[[Page 55189]]

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on manufacturers of consumer boilers. The 
following section describes the expected impacts on manufacturers at 
each considered TSL. Chapter 12 of the NOPR 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 potential 
standard. The following tables summarize the estimated financial 
impacts (represented by changes in INPV) of potential amended energy 
conservation standards on manufacturers of consumer boilers, as well as 
the conversion costs that DOE estimates manufacturers of consumer 
boilers would incur at each TSL. To evaluate the range of cash-flow 
impacts on the consumer boiler industry, DOE analyzed two 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 operating profit scenario. These are discussed in 
further detail in section IV.J.2.d of this document.
    The preservation of gross margin percentage scenario applies a 
``gross margin percentage'' of 29 percent for all product classes and 
all efficiency levels.\155\ This scenario assumes that a manufacturer's 
per-unit dollar profit would increase as MPCs increase in the standards 
cases and represents the likely upper-bound to industry profitability 
under potential amended energy conservation standards.
---------------------------------------------------------------------------

    \155\ The gross margin percentage of 29 percent is based on a 
manufacturer markup of 1.41.
---------------------------------------------------------------------------

    The preservation of operating profit scenario reflects 
manufacturers' concerns about their inability to maintain margins as 
MPCs increase to reach more-stringent efficiency levels. In this 
scenario, while manufacturers make the necessary investments required 
to convert their facilities to produce compliant products, operating 
profit does not change in absolute dollars and decreases as a 
percentage of revenue. The preservation of operating profit scenario 
represents the likely lower (or more severe) bound to financial impacts 
of potential amended standards on industry.
    Each of the modeled scenario's results in a unique set of cash 
flows and corresponding INPV for each TSL for consumer boiler 
manufacturers. INPV is the sum of the discounted cash flows to the 
industry from the base year through the end of the analysis period 
(2023-2059). The ``change in INPV'' results refer to the difference in 
industry value between the no-new-standards case and standards case at 
each TSL. To provide perspective on the short-run cash-flow impact, DOE 
includes a comparison of free cash flow between the no-new-standards 
case and the standards case at each TSL in the year before amended 
standards would take effect. This figure provides an understanding of 
the magnitude of the required conversion costs relative to the cash 
flow generated by the industry in the no-new-standards case.
    Conversion costs are one-time investments for manufacturers to 
bring their manufacturing facilities (i.e., capital conversion costs) 
and product designs (i.e., product conversion costs) into compliance 
with potential amended standards. As described in section IV.J.2.c of 
this document, conversion cost investments occur between the year of 
publication of the final rule and the year by which manufacturers must 
comply with a new or amended standard. The conversion costs can have a 
significant impact on the short-term cash flow on the industry and 
generally result in lower free cash flow in the period between the 
publication of the final rule and the compliance date of potential 
amended standards. Conversion costs are independent of the manufacturer 
markup scenarios and are not presented as a range in this analysis.
    Table V.15 presents the overall estimated industry MIA results at 
each analyzed TSL. Table V.16, Table V.17, Table V.18, and Table V.19 
present the estimated MIA results at each analyzed TSL for gas-fired 
hot water, gas-fired steam, oil-fired hot water, and oil-fired steam 
product classes, respectively. See chapter 12 of the NOPR TSD for a 
discussion of cash-flow analysis results by product class.

                                      Table V.15--Manufacturer Impact Analysis of Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............           532.0  514.1 to 517.1  487.0 to 504.8  469.7 to 491.2  411.9 to 527.6
Change in INPV *..........................  2022$ millions..............  ..............       (17.9) to       (45.0) to       (62.2) to      (120.0) to
                                            %...........................  ..............          (14.9)          (27.2)          (40.7)           (4.3)
                                                                                          (3.4) to (2.8)  (8.5) to (5.1)       (11.7) to       (22.6) to
                                                                                                                                   (7.7)           (0.8)
Free Cash Flow (2029) *...................  2022$ millions..............            47.2            34.6            17.4             5.5          (22.2)
Change in Free Cash Flow (2029) *.........  %...........................  ..............          (26.7)          (63.2)          (88.4)         (147.0)
Capital Conversion Costs..................  2022$ millions..............  ..............            12.7            55.1            74.5            98.6
Product Conversion Costs..................  2022$ millions..............  ..............            19.6            14.4            23.5            71.5
Total Conversion Costs....................  2022$ millions..............  ..............            32.3            69.5            98.0           170.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.


                            Table V.16--Manufacturer Impact Analysis of Gas-Fired Hot Water Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............           409.4  399.1 to 401.5  371.9 to 389.0  364.6 to 384.4  316.7 to 428.9
Change in INPV *..........................  2022$ millions..............  ..............       (10.3) to       (37.5) to       (44.9) to  (92.8) to 19.5
                                            %...........................  ..............           (8.0)          (20.4)          (25.0)   (22.7) to 4.8
                                                                                          (2.5) to (1.9)  (9.2) to (5.0)       (11.0) to
                                                                                                                                   (6.1)
Capital Conversion Costs..................  2022$ millions..............  ..............             8.1            50.5            62.2            77.9
Product Conversion Costs..................  2022$ millions..............  ..............             9.9             4.7             3.1            39.5

[[Page 55190]]

 
Total Conversion Costs....................  2022$ millions..............  ..............            17.9            55.1            65.2           117.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.


                              Table V.17--Manufacturer Impact Analysis of Gas-Fired Steam Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............            41.7            41.7            41.7            41.7    30.8 to 32.5
Change in INPV *..........................  2022$ millions..............  ..............  ..............  ..............  ..............       (10.9) to
                                            %...........................  ..............  ..............  ..............  ..............           (9.3)
                                                                                                                                               (26.2) to
                                                                                                                                                  (22.2)
Capital Conversion Costs..................  2022$ millions..............  ..............  ..............  ..............  ..............             8.4
Product Conversion Costs..................  2022$ millions..............  ..............  ..............  ..............  ..............            11.5
Total Conversion Costs....................  2022$ millions..............  ..............  ..............  ..............  ..............            19.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.


                            Table V.18--Manufacturer Impact Analysis of Oil-Fired Hot Water Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............            73.5    65.9 to 66.6    65.9 to 66.6    60.0 to 61.4    60.0 to 61.4
Change in INPV *..........................  2022$ millions..............  ..............  (7.6) to (6.9)  (7.6) to (6.9)       (13.6) to       (13.6) to
                                            %...........................  ..............       (10.3) to       (10.3) to          (12.1)          (12.1)
                                                                                                   (9.4)           (9.4)       (18.4) to       (18.4) to
                                                                                                                                  (16.4)          (16.4)
Capital Conversion Costs..................  2022$ millions..............  ..............             4.7             4.7             8.4             8.4
Product Conversion Costs..................  2022$ millions..............  ..............             9.7             9.7            17.2            17.2
Total Conversion Costs....................  2022$ millions..............  ..............            14.4            14.4            25.6            25.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.


                              Table V.19--Manufacturer Impact Analysis of Oil-Fired Steam Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............             7.5             7.5             7.5      3.4 to 3.6      3.4 to 3.6
Change in INPV *..........................  2022$ millions..............  ..............  ..............  ..............  (4.1) to (4.0)  (4.1) to (4.0)
                                            %...........................  ..............  ..............  ..............       (54.6) to       (54.6) to
                                                                                                                                  (52.7)          (52.7)
Capital Conversion Costs..................  2022$ millions..............  ..............  ..............  ..............             3.9             3.9
Product Conversion Costs..................  2022$ millions..............  ..............  ..............  ..............             3.3             3.3
Total Conversion Costs....................  2022$ millions..............  ..............  ..............  ..............             7.2             7.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.

    At TSL 4, the standard represents the max-tech efficiencies for all 
boiler product classes. At this level, DOE estimates the change in INPV 
would range from -22.6 to -0.8 percent. At TSL 4, free cash flow is 
estimated to decrease to -$22.0 million, which represents a decrease of 
approximately 147.0 percent compared to the no-new-standards case value 
of $47.2 million in the year 2029, the year before the anticipated 
compliance date. DOE's shipments analysis estimates approximately 10 
percent of current shipments meet this level. DOE estimates capital 
conversion costs of $98.6 million and product conversion of costs of 
$71.5 million. Industry conversion costs total $170.1 million.
    At TSL 4, the large conversion costs result in a free cash flow 
dropping below zero in the years before the standards year. The 
negative free cash flow calculation indicates manufacturers may need to 
access cash reserves or outside capital to finance conversion efforts.
    At TSL 4, the shipment-weighted average MPC for all consumer 
boilers is expected to increase by 41.4 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers 
in 2030. In the preservation of gross margin percentage scenario (in 
which manufacturers can fully pass along this cost increase), the 
increase in cashflow from the higher MSP is outweighed by the $170.1 
million in conversion costs, causing a slightly negative change in INPV 
at TSL 4 under this scenario. Under the preservation of operating 
profit scenario, the manufacturer markup decreases in 2031, the year 
after the anticipated compliance date. This reduction in the 
manufacturer markup and the $170.1 million in conversion costs incurred 
by manufacturers cause a large negative change in INPV at TSL 4 under 
the preservation of operating profit scenario.
    The design options analyzed at TSL 4 for gas-fired hot water 
boilers, which

[[Page 55191]]

accounts for approximately 75 percent of industry shipments, included 
implementing a condensing stainless-steel heat exchanger with increased 
heat exchanger surface area and improvements in geometry as compared to 
the designs analyzed at TSL 3 (95 percent AFUE) and a premix, 
modulating burner.
    Out of the 24 gas-fired hot water boiler OEMs, only six OEMs offer 
models that meet the efficiencies required by TSL 4. At this level, all 
gas-fired hot water boilers must transition to the max-tech condensing 
technology. This is a significant technological shift and may be 
challenging for many manufacturers. Less than 5 percent of gas-fired 
hot water model listings can meet the 96-percent AFUE required. At this 
level, DOE estimates the change in INPV for the gas-fired hot water 
boiler industry would range from -2.5 to 1.9 percent.
    With approximately 95 percent of all model offerings currently on 
the market rendered obsolete, all 24 manufacturers would need to re-
evaluate and redesign their portfolio of gas-fired hot water product 
offerings. Many OEMs that have extensive condensing gas-fired hot water 
product offerings do not have any models that can meet max-tech. Even 
OEMs that offer some max-tech models today would need to allocate 
extensive technical resources to provide max-tech offerings across the 
full range of capacities to serve their customers. Manufacturers that 
are heavily invested in the non-condensing market would likely need to 
re-orient their role in the market and determine how to compete in a 
marketplace where there is only one efficiency level.
    Traditionally, manufacturers have designed their product lines to 
support a range of models with varying input capacities, and the 
efficiency has varied between models within the line. In reviewing 
available models, DOE found that manufacturers generally only have one 
or two input capacities optimized to achieve 96-percent AFUE within 
each product line, while the remaining input capacities are at a lower 
AFUE. This suggests that manufacturers may have to individually 
redesign each model within product lines to ensure all models can 
achieve the max-tech level. A model-by-model redesign would necessitate 
a significant increase in design effort for manufacturers. 
Additionally, in confidential interviews, some manufacturers who source 
condensing heat exchangers expressed concern that the relatively lower 
shipment volumes of boilers in the U.S. market--compared to 
international markets for boilers--could make it difficult to find 
suppliers willing to produce heat exchanger designs that would allow 
all models within their gas-fired hot water product lines to meet 96-
percent AFUE, as each heat exchanger design would need to be optimized 
for a given input capacity. DOE estimates gas-fired hot water boiler 
product conversion costs of $3.1 million. The push toward new product 
designs would also require changes to the manufacturing facilities. 
Manufacturers would need to extend or add additional assembly lines to 
accommodate the growth in condensing gas-fired hot water boiler sales. 
Furthermore, manufacturers that are heavily invested in the non-
condensing market would likely have need to make the most significant 
capital investments, such as new production lines and updates to the 
factory floor. DOE estimates gas-fired hot water boiler capital 
conversion costs of $65.2 million.
    For the remaining product classes (gas-fired steam, oil-fired hot 
water, oil-fired steam), the design options analyzed mainly included 
increasing heat exchanger surface area relative to lower efficiency 
levels. The max-tech efficiency level at TSL 4 for these three product 
classes does not require a shift to condensing designs and does not 
dramatically alter the manufacturing process. Gas-fired steam shipments 
account for approximately 10 percent of current industry shipments. 
Oil-fired hot water shipments account for approximately 14 percent of 
current industry shipments. Oil-fired steam shipments account for 
approximately 1 percent of current industry shipments.
    All four gas-fired steam boiler OEMs offer some models that meet 
the max-tech efficiencies. However, only 8 percent of gas-fired steam 
model listings meet the efficiencies required by TSL 4. At this level, 
DOE estimates the change in INPV for the gas-fired steam boiler 
industry would range from -26.2 percent and -22.2 percent. DOE 
estimates gas-fired steam boiler capital conversion costs of $8.4 
million and gas-fired steam boiler product conversion of costs of $11.5 
million.
    Out of the 11 oil-fired hot water boiler OEMs, only two OEMs offer 
models that meet the max-tech efficiencies. Approximately 3 percent of 
oil-fired hot water model listings currently meet the TSL 4 
efficiencies. At this level, DOE estimates the change in INPV for the 
oil-fired hot water boiler industry would range from -18.4 percent and 
-16.4 percent. DOE estimates oil-fired hot water boiler capital 
conversion costs of $8.4 million and oil-fired hot water boiler product 
conversion of costs of $17.2 million.
    Out of the four oil-fired steam boiler OEMs, two OEMs offer models 
that meet the max-tech efficiencies. Approximately 22 percent of oil-
fired steam model listings currently meet the TSL 4 efficiencies. At 
this level, DOE estimates the change in INPV for the oil-fired steam 
industry would range from -54.6 percent and -52.7 percent. DOE 
estimates oil-fired steam boiler capital conversion costs of $3.9 
million and oil-fired steam boiler product conversion of costs of $3.3 
million.
    The design options available to increase the efficiency of gas-
fired steam, oil-fired hot water, and oil-fired steam boilers are 
similar. Manufacturers may be able to meet max-tech efficiency for some 
models by adding additional heat exchanger sections. However, where 
additional sections are not sufficient, manufacturers may need to 
invest in the more time-intensive process of redesigning of the heat 
exchanger and in new castings and tooling to achieve max-tech 
efficiencies.
    At TSL 3, the standard represents EL 3 for gas-fired hot water 
boilers, baseline efficiency for gas-fired steam boilers, EL 2 for oil-
fired hot water boilers, and EL 1 for oil-fired steam boiler. At this 
level, DOE estimates the change in INPV would range from -11.7 to -7.7 
percent. At TSL 3, free cash flow is estimated to decrease to -$5.5 
million, which represents a decrease of approximately 88.4 percent 
compared to the no-new-standards case value of $47.2 million in the 
year 2029, the year before the anticipated compliance year. DOE's 
shipments analysis estimates approximately 57 percent of current 
shipments meet this level.
    The decrease in industry conversion costs compared to TSL 4 is 
entirely driven by the lower efficiencies required for gas-fired hot 
water and gas-fired steam boilers. As with TSL 4, manufacturers heavily 
invested in non-condensing gas-fired hot water boilers would need to 
develop or expand their condensing production capacity. However, unlike 
TSL 4, most manufacturers currently offer products that meet the 95 
percent AFUE required at this TSL. DOE estimates capital conversion 
costs of $74.5 million and product conversion of costs of $23.5 
million. Conversion costs total $98.0 million.
    At TSL 3, the large conversion costs result in a free cash flow 
dropping below zero in the years before the standards year. The 
negative free cash flow calculation indicates manufacturers may need to 
access cash reserves or outside capital to finance conversion efforts.

[[Page 55192]]

    At TSL 3, the shipment-weighted average MPC for all consumer 
boilers is expected to increase by 8.0 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers 
in 2030. In the preservation of gross margin percentage scenario, the 
increase in cashflow from the higher MSP is outweighed by the $98.0 
million in conversion costs, causing a negative change in INPV at TSL 3 
under this scenario. Under the preservation of operating profit 
scenario, the manufacturer markup decreases in 2031, the year after the 
anticipated compliance date. This reduction in the manufacturer markup 
and the $98.0 million in conversion costs incurred by manufacturers 
cause a negative change in INPV at TSL 3 under the preservation of 
operating profit scenario.
    The design options analyzed at TSL 3 for gas-fired hot water 
boilers included implementing a condensing stainless-steel heat 
exchanger with a premix modulating burner. Out of the 24 gas-fired hot 
water boiler OEMs, 18 OEMs offer models that meet the efficiencies 
required by TSL 3 (95-percent AFUE). Approximately 40 percent of gas-
fired hot water model listings currently meet TSL 3 efficiencies. At 
this level, DOE estimates the change in INPV for the gas-fired hot 
water industry would range from -11.0 percent and -6.1 percent. DOE 
estimates gas-fired hot water boiler capital conversion costs of $62.2 
million and gas-fired hot water boiler product conversion of costs of 
$3.1 million. As with TSL 4, manufacturers heavily invested in non-
condensing gas-fired hot water boilers would need to develop or expand 
their condensing production capacity, which would necessitate new 
production lines and updates to the factory floor. However, unlike TSL 
4, most manufacturers currently offer products that meet the 95-percent 
AFUE required. Additionally, TSL 3 reduces the need to redesign by 
optimizing design at the individual model level to meet amended 
standards.
    For gas-fired steam boilers, TSL 3 corresponds to the baseline 
efficiency level (82 percent AFUE). As a result, when evaluating this 
product class in isolation, DOE expects that the gas-fired steam 
industry would incur zero conversion costs. For oil-fired hot water and 
oil-fired steam boilers, the efficiency level required at TSL 3 is the 
same as TSL 4. As a result, DOE expects that the estimated changes in 
INPV and associated capital and product conversion costs for oil-fired 
hot water and oil-fired steam boilers at TSL 3 would be the same as TSL 
4.
    At TSL 2, the standard represents EL 2 for gas-fired hot water 
boilers, baseline efficiency for gas-fired steam boilers, EL 1 for oil-
fired hot water boilers, and baseline efficiency for oil-fired steam 
boilers. At this level, DOE estimates the change in INPV would range 
from -8.5 to -5.1 percent. At TSL 2, free cash flow is estimated to 
decrease to $17.4 million, which represents a decrease of approximately 
63.2 percent compared to the no-new-standards case value of $47.2 
million in the year 2029, the year before the anticipated compliance 
date. DOE's shipments analysis estimates approximately 70 percent of 
current shipments meet this level.
    The decrease in conversion costs compared to TSL 3 is entirely 
driven by the lower efficiencies required for gas-fired hot water, oil-
fired hot water, and oil-fired steam boilers, which all together 
account for 90 percent of current industry shipments. As with TSL 3 and 
TSL 4, manufacturers heavily invested in non-condensing gas-fired hot 
water boilers would need to develop or expand their condensing 
production capacity. However, at TSL 2, more manufacturers currently 
offer products that meet the 90-percent AFUE required. DOE estimates 
capital conversion costs of $55.1 million and product conversion of 
costs of $14.4 million. Conversion costs total $69.5 million.
    At TSL 2, the shipment-weighted average MPC for all consumer 
boilers is expected to increase by 6.8 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers 
in 2030. In the preservation of gross margin percentage scenario, the 
increase in cashflow from the higher MSP is slightly outweighed by the 
$69.5 million in conversion costs, causing a negative change in INPV at 
TSL 2 under this scenario. Under the preservation of operating profit 
scenario, the manufacturer markup decreases in 2031, the year after the 
anticipated compliance date. This reduction in the manufacturer markup 
and the $69.5 million in conversion costs incurred by manufacturers 
cause a negative change in INPV at TSL 2 under the preservation of 
operating profit scenario.
    The design options analyzed at TSL 2 for gas-fired hot water 
boilers included implementing a condensing cast aluminum or stainless-
steel heat exchanger and modulating burner. Out of the 24 gas-fired hot 
water boiler OEMs, 21 OEMs offer models that meet the efficiencies 
required by TSL 2. Approximately 54 percent of gas-fired hot water 
model listings currently meet TSL 2 efficiencies. At this level, DOE 
estimates the change in INPV for the gas-fired hot water industry would 
range from -9.2 percent to -5.0 percent. DOE estimates gas-fired hot 
water boiler capital conversion costs of $50.5 million and gas-fired 
hot water boiler product conversion of costs of $4.7 million. As with 
TSL 3 and TSL 4, manufacturers heavily invested in non-condensing gas-
fired hot water boilers would need to develop or expand their 
condensing production capacity. However, at TSL 2, more manufacturers 
currently offer products that meet the 90-percent AFUE required. 
Product conversion costs would be driven by the development and testing 
necessary to develop compliant, cost-competitive products.
    For gas-fired steam boilers and oil-fired steam boilers, TSL 2 
corresponds to the baseline efficiency levels (82 percent AFUE and 85 
percent AFUE, respectively). As a result, when evaluating these product 
classes in isolation, DOE expects that the gas-fired steam and oil-
fired steam industries would incur zero conversion costs.
    For oil-fired hot water boilers, TSL 2 corresponds to EL 1 (87 
percent AFUE). The design options analyzed for oil-fired hot water 
boilers included increasing the heat exchanger surface area beyond what 
was analyzed at baseline but less than what was analyzed at max-tech 
(EL 2). Out of the 11 oil-fired hot water boiler OEMs, 10 OEMs offer 
models that meet the efficiencies required. Approximately 44 percent of 
oil-fired hot water model listings currently meet TSL 2 efficiencies. 
At this level, DOE estimates the change in INPV for the oil-fired hot 
water industry would range from -10.3 percent to -9.4 percent. DOE 
estimates oil-fired hot water boiler capital conversion costs of $4.7 
million and oil-fired hot water boiler product conversion of costs of 
$9.7 million. DOE expects that some manufacturers would need to invest 
in new casting designs and tooling to meet TSL 2 efficiencies.
    At TSL 1, the standard represents EL 1 for gas-fired hot water 
boilers, baseline efficiency for gas-fired steam boilers, EL 1 for oil-
fired hot water boilers, and baseline efficiency for oil-fired steam 
boilers. At this level, DOE estimates the change in INPV would range 
from -3.4 to -2.8 percent. At TSL 1, free cash flow is estimated to 
decrease to $34.6 million, which represents a decrease of approximately 
26.7 percent compared to the no-new-standards case value of $47.2 
million in the year 2029, the year before the anticipated compliance 
date. DOE's shipments analysis estimates approximately 73 percent of 
current shipments meet this level.

[[Page 55193]]

    The decrease in conversion costs compared to TSL 2 is entirely 
driven by the lower efficiency required for gas-fired hot water 
boilers, which accounts for 75 percent of current industry shipments. 
DOE estimates industry capital conversion costs of $12.7 million and 
product conversion of costs of $19.6 million. Conversion costs total 
$32.3 million.
    At TSL 1, the shipment-weighted average MPC for all consumer 
boilers is expected to increase by 1.2 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers 
in 2030. In the preservation of gross margin percentage scenario, the 
increase in cashflow from the higher MSP is slightly outweighed by the 
$32.3 million in conversion costs, causing a slightly negative change 
in INPV at TSL 1 under this scenario. Under the preservation of 
operating profit scenario, the manufacturer markup decreases in 2031, 
the year after the anticipated compliance date. This reduction in the 
manufacturer markup and the $32.3 million in conversion costs incurred 
by manufacturers cause a slightly negative change in INPV at TSL 1 
under the preservation of operating profit scenario.
    The design options analyzed for gas-fired hot water boilers 
included increasing heat exchanger surface area beyond what was 
analyzed at the baseline efficiency. For gas-fired hot water boilers, 
TSL 1 corresponds to EL 1 (85 percent AFUE). Out of the 24 gas-fired 
hot water OEMs, 23 offer models that meet the TSL 1 efficiencies. 
Approximately 67 percent of gas-fired hot water model listings 
currently meet TSL 1 efficiencies. At this level, DOE estimates the 
change in INPV for the gas-fired hot water industry would range from -
2.5 percent to -1.9 percent. DOE estimates gas-fired hot water boiler 
capital conversion costs of $8.1 million and gas-fired hot water boiler 
product conversion of costs of $9.9 million.
    For gas-fired steam boilers and oil-fired steam boilers, TSL 1 
corresponds to the baseline efficiency levels (82 percent AFUE and 85 
percent AFUE, respectively). As a result, when evaluating these product 
classes in isolation, DOE expects that the gas-fired steam and oil-
fired steam industries would incur zero conversion costs.
    For oil-fired hot water boilers, the efficiency level required at 
TSL 1 is the same as TSL 2. As a result, DOE expects that the estimated 
changes in INPV and associated capital and product conversion costs for 
oil-fired hot water boilers at TSL 1 would be the same as TSL 2.
    DOE seeks comments, information, and data on the capital conversion 
costs and product conversion costs estimated for each TSL.
b. Direct Impacts on Employment
    To quantitatively assess the potential impacts of amended energy 
conservation standards on direct employment in the consumer boiler 
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 (i.e., TSLs) during the analysis period. DOE 
calculated these values using statistical data from the 2021 ASM,\156\ 
BLS employee compensation data,\157\ results of the engineering 
analysis, DOE's CCD, and manufacturer interviews.
---------------------------------------------------------------------------

    \156\ U.S. Census Bureau, Annual Survey of Manufactures, 
``Summary Statistics for Industry Groups and Industries in the U.S. 
(2021),'' (Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2021-asm.html) (Last accessed Feb. 14, 2023).
    \157\ U.S. Bureau of Labor Statistics ``Employer Costs for 
Employee Compensation,'' (December 15, 2022) (Available at: 
www.bls.gov/news.release/pdf/ecec.pdf) (Last accessed Feb. 14, 
2023).
---------------------------------------------------------------------------

    Labor expenditures related to product manufacturing depend on the 
labor intensity of the product, the sales volume, and an assumption 
that wages remain fixed in real terms over time. The labor expenditures 
in each year are calculated by multiplying the total MPCs by the labor 
percentage of the MPCs. The labor expenditures in the GRIM were then 
converted to production employment levels by dividing production labor 
expenditures by the average fully-burdened wage multiplied by the 
average number of hours worked per year per production worker. To do 
this, DOE relied on the ASM inputs: Production Workers Annual Wages, 
Production Workers Annual Hours, Production Workers for Pay Period, and 
Number of Employees. DOE also relied on the BLS employee compensation 
data to determine the fully-burdened wage ratio. The fully-burdened 
wage ratio factors in paid leave, supplemental pay, insurance, 
retirement and savings, and legally-required benefits.
    The number of production employees is then multiplied by the U.S. 
labor percentage to convert production employment to domestic 
production employment. The U.S. labor percentage represents the 
industry fraction of domestic manufacturing production capacity for the 
covered product. This value is derived from manufacturer interviews, 
product database analysis, and publicly-available information. Research 
indicates that over 90 percent of non-condensing gas-fired hot water, 
gas-fired steam, oil-fired hot water, and oil-fired steam boilers are 
manufactured in the United States. Research indicates that 
approximately 60 percent of condensing gas-fired hot water boilers are 
manufactured in the United States. Therefore, overall, DOE estimates 
that 75 percent of covered consumer boilers are produced domestically.
    In addition to where the boiler is physically assembled, DOE 
considers whether the principal components (e.g., the heat exchanger) 
are produced in-house and in the United States. For non-condensing gas-
fired hot water, gas-fired steam, oil-fired hot water, and oil-fired 
steam boilers, DOE estimates that over 90 percent of the heat 
exchangers are produced in the United States. However, DOE determined 
that nearly all condensing gas-fired hot water heat exchangers are 
purchased from overseas manufacturers. Therefore, the domestic labor 
associated with condensing heat exchangers is significantly less than 
the domestic labor associated with non-condensing heat exchangers.
    The domestic production employees estimate covers production line 
workers, including line supervisors, who are directly involved in 
fabricating and assembling products within the OEM facility. Workers 
performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor.\158\ DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this proposed rulemaking.
---------------------------------------------------------------------------

    \158\ U.S. Census Bureau's Annual Survey of Manufactures, 
``Definitions and Instructions for the Annual Survey of 
Manufactures, MA-10000'' (Available at: www2.census.gov/programs-surveys/asm/technical-documentation/questionnaire/2021/instructions/MA_10000_Instructions.pdf) (Last accessed March 5, 2023).
---------------------------------------------------------------------------

    Non-production workers account for the remainder of the direct 
employment figure. The non-production employees estimate covers 
domestic workers who are not directly involved in the production 
process, such as sales, engineering, human resources, and 
management.\159\ Using the number of domestic production workers 
calculated above, non-production domestic employees are extrapolated by 
multiplying the ratio of non-production workers in the industry 
compared to production employees. DOE assumes that this employee 
distribution ratio remains constant between the no-new-standards case 
and standards cases.
---------------------------------------------------------------------------

    \159\ Id.
---------------------------------------------------------------------------

    Using the GRIM, DOE estimates that in the absence of new energy

[[Page 55194]]

conservation standards, there would be 526 domestic workers for 
consumer boilers in 2030. Table V.20 shows the range of the impacts of 
energy conservation standards on U.S. manufacturing employment in the 
consumer boiler industry. The following discussion provides a 
qualitative evaluation of the range of potential impacts presented in 
Table V.20.

            Table V.20--Domestic Direct Employment Impacts for Consumer Boiler Manufacturers in 2030
----------------------------------------------------------------------------------------------------------------
                                      No-new-
                                  standards case       TSL 1           TSL 2           TSL 3           TSL 4
----------------------------------------------------------------------------------------------------------------
Direct Employment (Domestic                  526             521      453 to 511      450 to 497      464 to 541
 Production Workers + Domestic
 Non-Production Workers)........
Potential Changes in Direct       ..............             (5)    (15) to (73)    (29) to (76)      15 to (62)
 Employment Workers*............
----------------------------------------------------------------------------------------------------------------
*DOE presents a range of potential direct employment impacts.
Note: Parentheses indicate negative (-) values.

    The direct employment impacts shown in Table V.20 represent the 
potential domestic employment changes that could result following the 
compliance date of amended energy conservation standards for the 
consumer boilers covered in this proposal. The upper bound estimate 
corresponds to a change in the number of domestic workers that results 
from amended energy conservation standards if manufacturers continue to 
produce the same scope of covered products within the United States 
after compliance is required. Under a condensing gas-fired hot water 
boiler standard (i.e., TSL 2 through TSL 4), manufacturers would likely 
shift away from in-house production of heat exchangers, which results 
in a decrease in direct employment at TSL 2 and TSL 3. TSL 4 shows 
potential positive impacts on domestic direct employment levels as max-
tech boilers (96-percent AFUE) are more complex to manufacturer and 
require significant additional production labor.
    Manufacturers could choose to relocate production facilities 
outside of the United States where conversion costs and production 
costs are lower; however, DOE does not expect manufacturers to move 
production to foreign locations as a result of amended energy 
conservation standards due to shipping considerations. Alternatively, 
some manufacturers could choose not to make the necessary investments 
to meet the amended energy conservation standards across all product 
classes. To avoid underestimating the potential job losses that could 
result from an amended energy conservation standard, DOE's lower bound 
scenario assumes domestic manufacturers do not expand their condensing 
production capacity in the standards cases and are only able to 
maintain current sales levels of condensing boilers in the standards 
cases.
    At TSLs that do not require condensing technology (i.e., TSL 1), 
DOE does not expect that there would be significant changes in 
production employment as a direct result of amended conservation 
standards, as manufacturers would likely continue to produce a similar 
scope of non-condensing heat exchangers and consumer boilers in the 
United States. However, under a condensing standard (i.e., TSL 2 
through TSL 4), manufacturers would shift from sourcing or producing 
non-condensing heat exchangers for gas-fired hot water boilers, which 
are typically manufactured in U.S. facilities, to sourcing condensing 
heat exchangers that are typically manufactured in foreign countries.
    Additional detail on the analysis of direct employment can be found 
in chapter 12 of the NOPR TSD. DOE notes that the direct employment 
impacts discussed in this section are independent of the indirect 
employment impacts from the broader U.S. economy, which are documented 
in chapter 16 of the NOPR TSD.
    DOE seeks comments, information, and data on the potential direct 
employment impacts estimated for each TSL.
c. Impacts on Manufacturing Capacity
    Nearly all consumer boiler OEMs currently offer some gas-fired hot 
water boiler models that meet the TSL 3 condensing level proposed (95-
percent AFUE). At TSL 3, 19 out of the 25 gas-fired hot water boiler 
OEMs currently offer models that meet the proposed level or required 
efficiency. DOE interviewed manufacturers representing approximately 45 
percent of industry shipments. In interviews, manufacturers heavily 
invested in non-condensing gas-fired hot water boilers stated that they 
would need to expand their condensing production capacity, which would 
necessitate new production lines and updates to the factory floor. 
However, most manufacturers would be able to add capacity and adjust 
product designs in the 5-year period between the announcement year of 
the amended standard and the compliance year of the amended standard.
    At max-tech, only 9 percent of gas-fired hot water boiler shipments 
currently meet the efficiency required. In interviews, most 
manufacturers stated that they would likely need to work with component 
manufacturers to develop new heat exchanger designs to consistently 
meet the max-tech efficiencies. Some manufacturers expressed concern 
that the 5-year conversion period would be insufficient to develop a 
cost-competitive heat exchanger that could reliably achieve 96-percent 
AFUE.
    DOE seeks comment on whether manufacturers expect that 
manufacturing capacity or engineering resource constraints would limit 
product availability to consumers in the timeframe of the amended 
standards compliance date (2030).
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop industry cash-flow 
estimates may not capture the differential impacts among subgroups of 
manufacturers. Small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that differs substantially from the 
industry average could be affected disproportionately. DOE investigated 
small businesses as a manufacturer subgroup that could be 
disproportionally impacted by amended energy conservation standards and 
could merit additional analysis. DOE also identified OEMs that own 
cast-iron foundries specializing in consumer boiler castings as a 
potential manufacturer subgroup that could be adversely impacted by 
amended energy conservation standards based on the results of the 
industry characterization.

[[Page 55195]]

Small Businesses
    DOE analyzes the impacts on small businesses in a separate analysis 
in section VI.B of this document as part of the Regulatory Flexibility 
Analysis. In summary, the SBA defines a ``small business'' as having 
500 employees or less for North American Industry Classification System 
(NAICS) 333414, ``Heating Equipment (except Warm Air Furnaces) 
Manufacturing.'' Based on this classification, DOE identified three 
domestic OEMs that qualify as a small business. For a discussion of the 
impacts on the small business manufacturer subgroup, see the Regulatory 
Flexibility Analysis in section VI.B of this document and chapter 12 of 
the NOPR TSD.
Manufacturers That Own Domestic Foundries
    In addition to the small business subgroup, DOE identified 
vertically-integrated OEMs that own domestic foundries specializing in 
consumer boiler castings as a subgroup that may experience differential 
impacts under a condensing gas-fired hot water standard (i.e., TSL 2 
through TSL 4).
    Research indicates that most non-condensing boilers use cast-iron 
heat exchangers. Based on manufacturer interviews, the engineering 
analysis, and the database of consumer boilers developed as part of the 
market assessment, DOE estimates that nearly all non-condensing cast-
iron heat exchangers are made in U.S. foundries. Furthermore, DOE 
understands that nearly all condensing heat exchangers are manufactured 
overseas. Under a condensing standard, there will be a significant 
reduction in demand for consumer boiler cast-iron heat exchangers as 
gas-fired hot water boilers account for approximately 45 percent of the 
non-condensing consumer boiler shipments.
    Most consumer boiler manufacturers currently rely on third-party 
foundries for their consumer boiler castings. Based on a review of 
public data and information gathered during confidential interviews, 
DOE found that most boiler OEMs source their consumer boiler castings 
from one third-party foundry in Waupaca, Wisconsin. DOE tentatively 
concluded that this foundry's operations would not be impacted by the 
reduction in cast-iron heat exchanger production since consumer boilers 
account for a minimal part of their casting portfolio. However, 
foundries owned by consumer boiler OEMs typically specialize in 
consumer and commercial boiler casting and would be impacted by the 
reduction in cast-iron heat exchanger production. DOE believes that 15 
to 25 percent of all consumer boilers are produced by OEMs that own 
foundry assets. For the purpose of this subgroup analysis, DOE modeled 
20 percent of all consumer boilers being manufactured by OEMs that own 
foundry assets.
    In response to the May 2022 Preliminary Analysis, stakeholders 
asserted that cast-iron foundries producing heat exchangers for non-
condensing boilers have large, fixed costs that could no longer be 
amortized across gas-fired hot water consumer boilers sales under a 
condensing standard. Stakeholders noted that cast-iron boiler 
manufacturers, particularly those that own a foundry, could face a 
range of potential negative impacts of more-stringent consumer boiler 
standards, including: (1) increases in cast-iron prices in other boiler 
types; (2) stranded assets; (3) potential job losses associated with 
foundry operation, casting, and assembly, which could lead to a 
reduction in domestic manufacturing employment; and (4) possible 
foundry closures.
    DOE used the subgroup analysis GRIM to assess the potential 
financial impacts of a condensing standard on boiler OEMs with 
foundries. In its analysis, DOE evaluated the financial viability of 
these OEMs if the foundries remained operational but at reduced output 
due to the shift away from cast-iron heat exchangers under a condensing 
standard for gas-fired hot water consumer boilers. DOE also evaluated 
potential increases in cast-iron MPCs for gas-fired steam, oil-fired 
hot water, and oil-fired steam products, reduced profitability for 
those products, and stranded assets associated with gas-fired hot water 
products in the subgroup analysis GRIM. Additionally, DOE analyzed 
potential job losses associated with foundry operation, casting, and 
assembly in section V.B.2.b of this document.
    DOE relied on the engineering analysis and the shipments analysis 
to estimate the potential reallocation of fixed foundry overhead to the 
remaining cast-iron shipments under a condensing standard. For foundry 
owners, DOE estimated a potential reallocation of $20 per-unit to gas-
fired steam, oil-fired hot water, and oil-fired steam shipments under a 
condensing standard. DOE also asked manufacturers during confidential 
interviews to estimate the potential reallocation costs but did not 
receive sufficient quantitative feedback to inform the analysis.
    To derive the $20 reallocation cost, DOE first used the engineering 
analysis to estimate the average per-unit overhead and depreciation 
costs associated with gas-fired hot water cast-iron heat exchangers. To 
avoid underestimating the fixed foundry costs, DOE considered all the 
heat exchanger overhead and depreciation as fixed costs. DOE estimates 
that the average per-unit overhead and depreciation costs associated 
with gas-fired hot water cast-iron heat exchangers is approximately 
$24. DOE then used the reference year shipments distribution by product 
class from the shipments analysis, foundry market share assumptions, 
and the product database to calculate the cumulative foundry overhead 
and depreciation costs associated with gas-fired hot water cast-iron 
heat exchangers and reallocated those cumulative costs evenly across 
the remaining cast-iron product class shipments (i.e., gas-fired steam, 
oil-fired hot water, and oil-fired steam). In the subgroup analysis 
GRIM, this $20 reallocation cost was added to the MPCs for gas-fired 
steam, oil-fired hot water, and oil-fired steam in the standards cases 
where gas-fired hot water boilers would need to meet a condensing 
level.
    DOE requests comment on the $20 per-unit reallocation cost for gas-
fired steam, oil-fired hot water, and oil-fired steam boilers under a 
condensing standard for gas-fired hot water boilers, as well as the 
methodology used to derive the estimate.
    As discussed in section IV.J.2.d of this document, the industry 
GRIM included two manufacturer markup scenarios to represent 
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 
scenario; and (2) a preservation of operating profit scenario. For the 
subgroup analysis GRIM, DOE customized these scenarios to account for 
the additional price and profitability impacts for foundry owners under 
a condensing standard.
    To establish an upper-bound to industry profitability under 
potential amended standards, DOE maintained the same scenario, the 
preservation of gross margin percentage scenario, as modeled in the 
industry GRIM. The preservation of gross margin percentage applies a 
``gross margin percentage'' of 29 percent for all product classes and 
all efficiency levels.\160\ This scenario assumes that a foundry 
owner's per-unit dollar profit would increase as MPCs increase in the 
standards cases. Under a condensing standard, foundry owner's

[[Page 55196]]

dollar profit for a cast-iron unit (e.g., oil-fired hot water boiler) 
would increase relative to non-foundry owners due to the $20 increase 
in MPC.
---------------------------------------------------------------------------

    \160\ The gross margin percentage of 29 percent is based on a 
manufacturer markup of 1.41.
---------------------------------------------------------------------------

    DOE modeled the preservation of market MSP scenario to establish 
the conservative lower (or more severe) bound to foundry owner 
profitability. To develop this scenario, DOE used the manufacturer 
markups from the preservation of operating profit scenario developed in 
the industry GRIM as a starting point. As discussed in section IV.J.2.d 
of this document, the preservation of operating profit scenario 
reflects manufacturers' concerns about their inability to maintain 
margins as MPCs increase to reach more-stringent efficiency levels. For 
the subgroup analysis GRIM, as foundry owners' cost of production goes 
up for gas-fired steam, oil-fired hot water, and oil-fired steam 
product classes, foundry owners reduce their manufacturer markups to a 
level that maintains the industry average MSPs calibrated under the 
preservation of operating profit scenario. In essence, foundry owners 
cannot charge more than their competitors that do not have foundry 
assets, and consequently, they have reduced profit on each unit sold. 
DOE implemented this scenario in the subgroup analysis GRIM by lowering 
the manufacturer markups for gas-fired steam, oil-fired hot water, and 
oil-fired steam product classes at TSL 2 through TSL 4 to yield 
approximately the same MSP in the standards case as in the standards 
case in the industry GRIM. The implicit assumptions behind this are 
that foundry owners cannot raise their MSP to offset price increases 
that are a result of the loss of cast-iron gas-fired hot water sales 
and have reduced operating profit in absolute dollars after the amended 
standard takes effect.
    These modeling assumptions are intended to reflect manufacturer 
comments a condensing standard for gas-fired hot water boilers would 
results in increases in cast-iron prices in other boiler types.

                                        Table V.21--Manufacturer Impact Analysis Consumer Boiler Subgroup Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-
                                                        Unit              standards case       TSL 1           TSL 2           TSL 3           TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2022$ millions..............           101.2  097.6 to 098.2  089.5 to 094.3  086.2 to 091.7  074.9 to 098.2
Change in INPV *..........................  2022$ millions..............  ..............  (3.6) to (3.0)  (9.0) to (4.2)       (12.3) to       (23.7) to
                                                                                                                                   (6.9)           (0.3)
                                            %...........................  ..............  (3.5) to (3.0)  (9.2) to (4.3)       (12.5) to       (24.0) to
                                                                                                                                   (7.0)           (0.3)
Free Cash Flow (2029) *...................  2022$ millions..............             8.8             6.2             2.6             0.2           (5.4)
Change in Free Cash Flow (2029) *.........  %...........................  ..............          (28.8)          (70.0)          (98.0)         (162.9)
Capital Conversion Costs..................  2022$ millions..............  ..............             2.5            11.0            14.9            19.7
Product Conversion Costs..................  2022$ millions..............  ..............             3.9             2.9             4.7            14.3
Total Conversion Costs....................  2022$ millions..............  ..............             6.5            13.9            19.6            34.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: Parentheses indicate negative (-) values.

    The subgroup analysis results indicate that manufacturers that own 
domestic foundries would fare worse than competitors that do not own 
domestic foundries under amended standards that require condensing 
levels for gas-fired hot water boilers. This occurs because 
manufacturers that own domestic foundries must recover foundry 
investments over smaller number of sales, given that gas-fired hot 
water boilers currently account for 45 percent of cast-iron boilers 
covered under this rulemaking. That cost recovery takes the form of MPC 
increases for gas-fired steam, oil-fired hot water, and oil-fired steam 
boilers. Manufacturers that own foundries face reduced profitability, 
as DOE assumes they cannot pass the foundry-related MPC increases onto 
their customers. However, even with these additional cost increases, 
DOE's modeling suggests that manufacturers that own foundries would be 
able to continue to operate, albeit with reduced profitability and at 
reduced INPV relative to the overall industry.
    DOE requests comment on the potential impacts on consumer boiler 
manufacturers that own domestic foundry assets including impacts but 
not limited to those vital to national security or critical 
infrastructure at the TSLs analyzed in this NOPR analysis.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves looking at the 
cumulative impact of multiple DOE standards and the product-specific 
regulatory actions of other Federal agencies that affect the 
manufacturers of a covered product or equipment. While any one 
regulation may not impose a significant burden on manufacturers, the 
combined effects of several existing or impending regulations may have 
serious consequences for some manufacturers, groups of manufacturers, 
or an entire industry. Assessing the impact of a single regulation may 
overlook this cumulative regulatory burden. In addition to energy 
conservation standards, other regulations can significantly affect 
manufacturers' financial operations. Multiple regulations affecting the 
same manufacturer can strain profits and lead companies to abandon 
product lines or markets with lower expected future returns than 
competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency.
    DOE evaluates product-specific regulations that will take effect 
approximately three years before or after the estimated 2030 compliance 
date of any amended energy conservation standards for consumer boilers. 
This information is presented in Table V.22.

[[Page 55197]]



Table V.22--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting
                                Consumer Boiler Original Equipment Manufacturers
----------------------------------------------------------------------------------------------------------------
                                                                                                     Industry
                                                    Number of OEMs     Approx.       Industry       conversion
 Federal energy conservation standard   Number of     affected by     standards     conversion     costs/product
                                         OEMs *     today's rule **  compliance  costs (millions    revenue ***
                                                                        year            $)              (%)
----------------------------------------------------------------------------------------------------------------
Commercial Water Heating                       14                11        2026   $34.60 (2020$)             4.7
 Equipment[dagger] 87 FR 30610(May
 19, 2022)...........................
Consumer Furnaces [dagger] 87 FR               15                 4        2029    150.6 (2020$)             1.4
 40590 (July 7, 2022)................
Consumer Clothes Dryers [dagger] 87            15                 1        2027     149.7(2020$)             1.8
 FR 51734 (August 23, 2022)..........
Consumer Conventional Cooking                  34                 1        2027    183.4 (2021$)             1.2
 Products 88 FR 6818 [dagger]
 (February 1, 2023)..................
Residential Clothes Washers [dagger]           19                 1        2027    690.8 (2021$)             5.2
 88 FR 13520 (March 3, 2023).........
Refrigerators, Freezers, and                   49                 1        2027  1,323.6 (2021$)             3.8
 Refrigerator-Freezers [dagger] 88 FR
 12452 (February 27, 2023)...........
Room Air Conditioners 88 FR 34298               8                 1        2026     24.8 (2021$)             0.4
 (May 26, 2023)......................
Microwave Ovens 88 FR 39912 (June 20,          18                 1        2026     46.1 (2021$)             0.7
 2023)...............................
Miscellaneous Refrigeration Products           38                 1        2029    126.9 (2021$)             3.1
 [dagger] 88 FR 19382 (March 31,
 2023)...............................
Dishwashers [dagger] 88 FR 32514 (May          22                 1        2027    125.6 (2021$)             2.1
 19, 2023)...........................
Consumer Pool Heaters 88 FR 34624              20                 3        2028     48.4 (2021$)             1.5
 (May 30, 2023)......................
----------------------------------------------------------------------------------------------------------------
* This column presents the total number of OEMs identified in the energy conservation standard rule that is
  contributing to cumulative regulatory burden.
** This column presents the number of OEMs producing consumer boilers that are also listed as OEMs in the
  identified energy conservation standard that is contributing to cumulative regulatory burden.
*** This column presents industry conversion costs as a percentage of product revenue during the conversion
  period. Industry conversion costs are the upfront investments manufacturers must make to sell compliant
  products/equipment. The revenue used for this calculation is the revenue from just the covered product/
  equipment associated with each row. The conversion period is the time frame over which conversion costs are
  made and lasts from the publication year of the final rule to the compliance year of the energy conservation
  standard. The conversion period typically ranges from 3 to 5 years, depending on the rulemaking.
[dagger] These rulemakings are at the NOPR stage, and all values are subject to change until finalized through
  publication of a final rule.

    DOE requests information regarding the impact of cumulative 
regulatory burden on manufacturers of consumer boilers associated with 
multiple DOE standards or product-specific regulatory actions of other 
Federal agencies in addition to state or local regulations.
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 consumer 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 
products purchased in the 30-year period that begins in the year of 
anticipated compliance with amended standards (2030-2059). Table V.19 
presents DOE's projections of the national energy savings for each TSL 
considered for consumer boilers. The savings were calculated using the 
approach described in section IV.H.2 of this document.

           Table V.23--Cumulative National Energy Savings for Consumer Boilers; 30 Years of Shipments
                                                   [2030-2059]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                              (quads)
                                                 ---------------------------------------------------------------
Primary energy..................................            0.05            0.31            0.61            0.73
FFC energy......................................            0.06            0.36            0.68            0.83
----------------------------------------------------------------------------------------------------------------

    OMB Circular A-4 \161\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE undertook a sensitivity analysis using 9 years, rather than 30 
years, of product shipments. The choice of a 9-year period is a proxy 
for the timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\162\ The review

[[Page 55198]]

timeframe established in EPCA is generally not synchronized with the 
product lifetime, product manufacturing cycles, or other factors 
specific to consumer 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.24. The 
impacts are counted over the lifetime of consumer boilers purchased in 
2030-2038.
---------------------------------------------------------------------------

    \161\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Sept. 17, 2003) (Available at: 
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (Last accessed March 7, 2023).
    \162\ Section 325(m) of EPCA requires DOE to review its 
standards at least once every 6 years, and requires, for certain 
products, a 3-year period after any new standard is promulgated 
before compliance is required, except that in no case may any new 
standards be required within 6 years of the compliance date of the 
previous standards. While adding a 6-year review to the 3-year 
compliance period adds up to 9 years, DOE notes that it may 
undertake reviews at any time within the 6 year period and that the 
3-year compliance date may yield to the 6-year backstop. A 9-year 
analysis period may not be appropriate given the variability that 
occurs in the timing of standards reviews and the fact that for some 
products, the compliance period is 5 years rather than 3 years.

            Table V.24--Cumulative National Energy Savings for Consumer Boilers; 9 Years of Shipments
                                                   [2030-2038]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                              (quads)
                                                 ---------------------------------------------------------------
Primary energy..................................            0.02            0.13            0.24            0.27
FFC energy......................................            0.03            0.15            0.27            0.30
----------------------------------------------------------------------------------------------------------------

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for consumer 
boilers. In accordance with OMB's guidelines on regulatory 
analysis,\163\ DOE calculated NPV using both a 7-percent and a 3-
percent real discount rate. Table V.21 shows the consumer NPV results 
with impacts counted over the lifetime of products purchased in 2030-
2059.
---------------------------------------------------------------------------

    \163\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Sept. 17, 2003) (Available at: 
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (Last accessed March 7, 2023).

    Table V.25--Cumulative Net Present Value of Consumer Benefits for Consumer Boilers; 30 Years of Shipments
                                                   [2030-2059]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
                                                 ---------------------------------------------------------------
3 percent.......................................            0.16            0.73            2.27          (2.15)
7 percent.......................................            0.01            0.19            0.72          (1.55)
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.22. The impacts are counted over the 
lifetime of products purchased in 2030-2038. 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.26--Cumulative Net Present Value of Consumer Benefits for Consumer Boilers; 9 Years of Shipments
                                                   [2030-2038]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
                                                 ---------------------------------------------------------------
3 percent.......................................            0.11            0.47            1.22          (0.41)
7 percent.......................................            0.01            0.15            0.47          (0.72)
----------------------------------------------------------------------------------------------------------------

    The previous results reflect the use of a default trend to estimate 
the change in price for consumer boilers over the analysis period (see 
section IV.F.1 of this document). DOE also conducted a sensitivity 
analysis that considered one scenario with a lower rate of price 
decline than the reference case and one scenario with a higher rate of 
price decline than the reference case. The results of these alternative 
cases are presented in appendix 10C of the NOPR TSD. In the high-price-
decline case, the NPV of consumer benefits is higher than in the 
default case. In the low-price-decline case, the NPV of consumer 
benefits is lower than in the default case.
c. Indirect Impacts on Employment
    It is estimated that that amended energy conservation standards for 
consumer boilers would reduce energy expenditures for consumers of 
those

[[Page 55199]]

products, with the resulting net savings being redirected to other 
forms of economic activity. These expected shifts in spending and 
economic activity could affect the demand for labor. As described in 
section IV.N of this document, DOE used an input/output model of the 
U.S. economy to estimate indirect employment impacts of the TSLs that 
DOE considered. 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 
(2030-2035), where these uncertainties are reduced.
    The results suggest that the proposed standards would be likely to 
have a negligible impact on the net demand for labor in the economy. 
The net change in jobs is so small that it would be imperceptible in 
national labor statistics and might be offset by other, unanticipated 
effects on employment. Chapter 16 of the NOPR TSD presents detailed 
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    As discussed in section III.G.1.d of this document, DOE has 
tentatively concluded that the standards proposed in this NOPR would 
not lessen the utility or performance of the consumer boilers under 
consideration in this proposed rulemaking. Manufacturers of these 
products currently offer units that meet or exceed the proposed 
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.G.1.e 
of this document, the Attorney General determines the impact, if any, 
of any lessening of competition likely to result from a proposed 
standard, and transmits such determination in writing to the Secretary, 
together with an analysis of the nature and extent of such impact. To 
assist the Attorney General in making this determination, DOE has 
provided DOJ with copies of this NOPR and the accompanying TSD for 
review. DOE will consider DOJ's comments on the proposed rule in 
determining whether to proceed to a final rule. DOE will publish and 
respond to DOJ's comments in that document.
    DOE invites comment from the public regarding the competitive 
impacts that are likely to result from this proposed rule. In addition, 
stakeholders may also provide comments separately to DOJ regarding 
these potential impacts. See the ADDRESSES section for information 
regarding how to send comments to DOJ.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Chapter 15 in the 
NOPR TSD presents the estimated impacts on electricity generating 
capacity, relative to the no-new-standards case, for the TSLs that DOE 
considered in this rulemaking.
    Energy conservation resulting from potential energy conservation 
standards for consume boilers is expected to yield environmental 
benefits in the form of reduced emissions of certain air pollutants and 
greenhouse gases. Table V.27 provides DOE's estimate of cumulative 
emissions reductions expected to result from the TSLs considered in 
this rulemaking. The emissions were calculated using the multipliers 
discussed in section IV.K of this document. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the NOPR TSD.

              Table V.27--Cumulative Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................             3.7              18              34              41
CH4 (thousand tons).............................            0.10            0.38            0.75            0.89
N2O (thousand tons).............................            0.05            0.07            0.16            0.17
NOX (thousand tons).............................             3.3              16              30              36
SO2 (thousand tons).............................             1.1             1.0             2.6             2.6
Hg (tons).......................................        (0.0002)         (0.001)         (0.001)         (0.001)
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................             0.6               3               5               6
CH4 (thousand tons).............................              30             241             437             531
N2O (thousand tons).............................            0.00            0.01            0.01            0.02
NOX (thousand tons).............................             7.8              40              75              89
SO2 (thousand tons).............................             0.1             0.1             0.2             0.2
Hg (tons).......................................         0.00001        0.000003         0.00001         0.00001
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................             4.3              21              39              47
CH4 (thousand tons).............................              30             241             438             532
N2O (thousand tons).............................            0.05            0.08            0.17            0.19
NOX (thousand tons).............................              11              57             105             126
SO2 (thousand tons).............................             1.2             1.1             2.7             2.8
Hg (tons).......................................        (0.0002)         (0.001)         (0.001)         (0.001)
----------------------------------------------------------------------------------------------------------------
Note: Negative values in parentheses refer to an increase in emissions.

    As part of the analysis for this proposed rulemaking, DOE estimated 
monetary benefits likely to result from the reduced emissions of 
CO2 that DOE estimated for each of the considered TSLs for 
consumer boilers. Section IV.L

[[Page 55200]]

of this document discusses the SC-CO2 values that DOE used. 
Table V.28 presents the value of CO2 emissions reduction at 
each TSL for each of the SC-CO2 cases. The time-series of 
annual values is presented for the proposed TSL in chapter 14 of the 
NOPR TSD.

         Table V.28--Present Value of CO2 Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CO2 case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       TSL                              5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (million 2022$)
                                                 ---------------------------------------------------------------
1...............................................              39             172             270             522
2...............................................             184             814           1,284           2,467
3...............................................             332           1,482           2,343           4,489
4...............................................             407           1,800           2,840           5,457
----------------------------------------------------------------------------------------------------------------

    As discussed in section IV.L.1.b of this document, DOE estimated 
the climate benefits likely to result from the reduced emissions of 
methane and N2O that DOE estimated for each of the 
considered TSLs for consumer boilers. Table V.29 presents the value of 
the CH4 emissions reduction at each TSL, and Table V.30 
presents the value of the N2O emissions reduction at each 
TSL. The time-series of annual values is presented for the proposed TSL 
in chapter 14 of the NOPR TSD.

       Table V.29--Present Value of Methane Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CH4 case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       TSL                              5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (million 2022$)
                                                 ---------------------------------------------------------------
1...............................................              13              40              56             106
2...............................................              99             306             431             811
3...............................................             174             544             767           1,438
4...............................................             217             671             944           1,778
----------------------------------------------------------------------------------------------------------------


    Table V.30--Present Value of Nitrous Oxide Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
                                                                            SC-N2O case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       TSL                              5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (million 2022$)
                                                 ---------------------------------------------------------------
1...............................................             0.2             0.7             1.1             1.8
2...............................................             0.3             1.1             1.7             2.9
3...............................................             0.6             2.3             3.7             6.2
4...............................................             0.6             2.6             4.0             6.9
----------------------------------------------------------------------------------------------------------------

    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 
global and U.S. economy continues to evolve rapidly. DOE, together with 
other Federal agencies, will continue to review 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. 
DOE notes that the proposed standards would be economically justified 
even without inclusion of monetized benefits of reduced GHG emissions.
    DOE also estimated the monetary value of the health benefits 
associated with NOX and SO2 emissions reductions 
anticipated to result from the considered TSLs for consumer boilers. 
The dollar-per-ton values that DOE used are discussed in section IV.L 
of this document. Table V.31 presents the

[[Page 55201]]

present value for NOX emissions reduction for each TSL 
calculated using 7-percent and 3-percent discount rates, and Table V.32 
presents similar results for SO2 emissions reductions. The 
results in these tables reflect application of EPA's low dollar-per-ton 
values, which DOE used to be conservative. The time-series of annual 
values is presented for the proposed TSL in chapter 14 of the NOPR TSD.

    Table V.31--Present Value of NOX Emissions Reduction for Consumer
                      Boilers Shipped in 2030-2059
------------------------------------------------------------------------
               TSL                 7% Discount rate    3% Discount rate
------------------------------------------------------------------------
                                              (million 2022$)
------------------------------------------------------------------------
1...............................                 132                 359
2...............................                 625               1,791
3...............................               1,102               3,251
4...............................               1,389               3,967
------------------------------------------------------------------------


    Table V.32--Present Value of SO2 Emissions Reduction for Consumer
                      Boilers Shipped in 2030-2059
------------------------------------------------------------------------
               TSL                 7% Discount rate    3% Discount rate
------------------------------------------------------------------------
                                              (million 2022$)
------------------------------------------------------------------------
1...............................                  14                  41
2...............................                  12                  34
3...............................                  34                  94
4...............................                  35                  98
------------------------------------------------------------------------

    Not all the public health and environmental benefits from the 
reduction of greenhouse gases, NOX, and SO2 are 
captured in the values above, and additional unquantified benefits from 
the reductions of those pollutants as well as from the reduction of 
direct PM and other co-pollutants may be significant. DOE has not 
included monetary benefits of the reduction of Hg emissions because the 
amount of reduction is very small.
7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No 
other factors were considered in this analysis.
8. Summary of Economic Impacts
    Table V.33 presents the NPV values that result from adding the 
estimates of the potential economic benefits resulting from reduced 
GHG, NOX, and SO2 emissions to the NPV of 
consumer benefits calculated for each TSL considered in this 
rulemaking. The consumer benefits are domestic U.S. monetary savings 
that occur as a result of purchasing the covered consumer boilers, and 
are measured for the lifetime of products shipped in 2030-2059. The 
climate benefits associated with reduced GHG emissions resulting from 
the adopted standards are global benefits, and are also calculated 
based on the lifetime of consumer boilers shipped in 2030-2059.

          Table V.33--Consumer NPV Combined With Present Value of Climate Benefits and Health Benefits
----------------------------------------------------------------------------------------------------------------
                    Category                           TSL 1           TSL 2           TSL 3           TSL 4
----------------------------------------------------------------------------------------------------------------
                   Using 3% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
5% Average SC-GHG case..........................             0.6             2.8             6.1             2.5
3% Average SC-GHG case..........................             0.8             3.7             7.6             4.4
2.5% Average SC-GHG case........................             0.9             4.3             8.7             5.7
3% 95th percentile SC-GHG case..................             1.2             5.8            11.5             9.2
----------------------------------------------------------------------------------------------------------------
                   Using 7% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
5% Average SC-GHG case..........................             0.2             1.1             2.4             0.5
3% Average SC-GHG case..........................             0.4             2.0             3.9             2.3
2.5% Average SC-GHG case........................             0.5             2.5             5.0             3.7
3% 95th percentile SC-GHG case..................             0.8             4.1             7.8             7.1
----------------------------------------------------------------------------------------------------------------

C. Conclusion

    When considering new or amended energy conservation standards, the 
standards that DOE adopts for any type (or class) of covered product 
must be designed to achieve the maximum improvement in energy 
efficiency that the Secretary determines is technologically feasible 
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining 
whether a standard is economically justified, the Secretary must 
determine whether the benefits of the standard exceed its burdens by, 
to the greatest extent practicable, considering the seven statutory 
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or 
amended standard must also result in significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B))
    For this NOPR, DOE considered the impacts of amended standards for 
consumer boilers at each TSL, beginning with the maximum 
technologically feasible level, to determine whether that

[[Page 55202]]

level was economically justified. Where the max-tech level was not 
justified, DOE then considered the next most efficient level and 
undertook the same evaluation until it reached the highest efficiency 
level that is both technologically feasible and economically justified 
and saves a significant amount of energy. DOE refers to this process as 
the ``walk-down'' analysis.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard and impacts on 
employment.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of: (1) a lack of 
information or informational asymmetries; (2) a lack of sufficient 
salience of the long-term or aggregate benefits; (3) a lack of 
sufficient savings to warrant delaying or altering purchases; (4) 
excessive focus on the short term, in the form of inconsistent 
weighting of future energy cost savings relative to available returns 
on other investments; (5) computational or other difficulties 
associated with the evaluation of relevant tradeoffs, and (6) a 
divergence in incentives (for example, between renters and owners, or 
builders and purchasers, or between current and subsequent owners). 
Having less than perfect foresight and a high degree of uncertainty 
about the future, consumers may trade off these types of investments at 
a higher-than-expected rate between current consumption and uncertain 
future energy cost savings.
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego the 
purchase of a product in the standards case, this decreases sales for 
product manufacturers, and the impact on manufacturers attributed to 
lost revenue is included in the MIA. Second, DOE accounts for energy 
savings attributable only to products actually used by consumers in the 
standards case; if a standard decreases the number of products 
purchased by consumers, this decreases the potential energy savings 
from an energy conservation standard. DOE provides estimates of 
shipments and changes in the volume of product purchases in chapter 9 
of the NOPR TSD. However, DOE's current analysis does not explicitly 
control for heterogeneity in consumer preferences, preferences across 
subcategories of products or specific features, or consumer price 
sensitivity variation according to household income.\164\
---------------------------------------------------------------------------

    \164\ P.C. Reiss and M.W. White. Household Electricity Demand, 
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883. 
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance energy conservation 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\165\ DOE 
welcomes comments on how to more fully assess the potential impact of 
energy conservation standards on consumer choice and how to quantify 
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------

    \165\ Sanstad, A.H., Notes on the Economics of Household Energy 
Consumption and Technology Choice (2010) Lawrence Berkeley National 
Laboratory (Available at: www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf) (Last accessed Jan. 
3, 2023).
---------------------------------------------------------------------------

1. Benefits and Burdens of TSLs Considered for Consumer Boiler 
Standards
    Table V.34 and Table V.35 summarize the quantitative impacts 
estimated for each TSL for consumer boilers. The national impacts are 
measured over the lifetime of consumer boilers purchased in the 30-year 
period that begins in the anticipated year of compliance with amended 
standards (2030-2059). The energy savings, emissions reductions, and 
value of emissions reductions refer to full-fuel-cycle results. DOE is 
presenting monetized benefits in accordance with the applicable 
Executive Orders, and DOE would reach the same conclusion presented in 
this notice of proposed rulemaking in the absence of the social cost of 
greenhouse gases, including the Interim Estimates presented by the 
Interagency Working Group. The efficiency levels contained in each TSL 
are described in section V.A of this document.

              Table V.34--Summary of Analytical Results for Consumer Boilers TSLs: National Impacts
----------------------------------------------------------------------------------------------------------------
                    Category                           TSL 1           TSL 2           TSL 3           TSL 4
----------------------------------------------------------------------------------------------------------------
                                     Cumulative FFC National Energy Savings
----------------------------------------------------------------------------------------------------------------
Quads...........................................            0.06            0.36            0.68            0.83
----------------------------------------------------------------------------------------------------------------
                                       Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................               4              21              39              47
CH4 (thousand tons).............................              30             241             438             532
N2O (thousand tons).............................            0.05            0.08            0.17            0.19
NOX (thousand tons).............................              11              57             105             126
SO2 (thousand tons).............................             1.2             1.1             2.7             2.8
Hg (tons).......................................        (0.0002)        (0.0013)        (0.0010)        (0.0009)
----------------------------------------------------------------------------------------------------------------
                 Present Value of Monetized Benefits and Costs (3% discount rate, billion 2022$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................             0.5             1.3             3.1             3.7

[[Page 55203]]

 
Climate Benefits *..............................             0.2             1.1             2.0             2.5
Health Benefits **..............................             0.4             1.8             3.3             4.1
Total Monetized Benefits [dagger]...............             1.1             4.3             8.5            10.3
Consumer Incremental Product Costs [Dagger].....            0.34            0.62            0.82             5.9
Consumer Net Benefits...........................            0.16            0.73             2.3           (2.2)
Total Net Monetized Benefits....................            0.78             3.7             7.6             4.4
----------------------------------------------------------------------------------------------------------------
                 Present Value of Monetized Benefits and Costs (7% discount rate, billion 2022$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................            0.19            0.51             1.1             1.4
Climate Benefits *..............................            0.21             1.1             2.0             2.5
Health Benefits **..............................            0.15            0.64             1.1             1.4
Total Monetized Benefits [dagger]...............            0.55             2.3             4.3             5.3
Consumer Incremental Product Costs [Dagger].....            0.18            0.32            0.43             2.9
Consumer Net Benefits...........................            0.01            0.19            0.72           (1.6)
Total Net Monetized Benefits....................            0.37             2.0             3.9             2.3
----------------------------------------------------------------------------------------------------------------
Note: This table presents the present value (in 2022) of costs and benefits associated with consumer boilers
  shipped in 2030-2059. These results include benefits which accrue after 2059 from the products shipped in 2030-
  2059.
* Climate benefits are calculated using four different estimates of the SC-CO2, SC-CH4 and SC-N2O. Together,
  these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated
  with the average SC-GHG at a 3 percent discount rate are shown; however, DOE emphasizes the importance and
  value of considering the benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits
  of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support
  Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990
  published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
  (for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
  continue to assess the ability to monetize other effects such as health benefits from reductions in direct
  PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
  of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
  and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
  percent discount rate, but the Department does not have a single central SC-GHG point estimate. DOE emphasizes
  the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as installation costs.


     Table V.35--Summary of Analytical Results for Consumer Boilers TSLs: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
                    Category                          TSL 1 *         TSL 2 *         TSL 3 *         TSL 4 *
----------------------------------------------------------------------------------------------------------------
                                   Manufacturer Impacts: INPV (million 2022$)
----------------------------------------------------------------------------------------------------------------
GHW (No-new-standards case INPV = 409.4)........  399.1 to 401.5  371.9 to 389.0  364.6 to 384.4  316.7 to 428.9
GST (No-new-standards case INPV = 41.7).........            41.7            41.7            41.7    30.8 to 32.5
OHW (No-new-standards case INPV = 73.5).........    65.9 to 66.6    65.9 to 66.6    60.0 to 61.4    60.0 to 61.4
OST (No-new-standards case INPV = 7.5)..........             7.5             7.5      3.4 to 3.6      3.4 to 3.6
Total INPV (No-new-standards case INPV = 532.0).  514.1 to 517.1  487.0 to 504.8  469.7 to 491.2  411.9 to 527.6
----------------------------------------------------------------------------------------------------------------
                                      Manufacturer Impacts: INPV (% change)
----------------------------------------------------------------------------------------------------------------
GHW.............................................  (2.5) to (1.9)  (9.2) to (5.0)       (11.0) to   (22.7) to 4.8
                                                                                           (6.1)
GST.............................................             0.0             0.0             0.0       (26.2) to
                                                                                                          (22.2)
OHW.............................................       (10.3) to       (10.3) to       (18.4) to       (18.4) to
                                                           (9.4)           (9.4)          (16.4)          (16.4)
OST.............................................             0.0             0.0       (54.6) to       (54.6) to
                                                                                          (52.7)          (52.7)
Total INPV......................................  (3.4) to (2.8)  (8.5) to (5.1)       (11.7) to       (22.6) to
                                                                                           (7.7)           (0.8)
----------------------------------------------------------------------------------------------------------------
                                      Consumer Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
GHW.............................................           (193)             275             768           (526)
GST.............................................              NA              NA              NA            (53)
OHW.............................................             374             374             666             666
OST.............................................              NA              NA             310             310
Shipment-Weighted Average *.....................            (50)             296             737           (380)
----------------------------------------------------------------------------------------------------------------
                                           Consumer Simple PBP (years)
----------------------------------------------------------------------------------------------------------------
GHW.............................................            29.2             3.4             2.7             9.9
GSTs............................................              NA              NA              NA            20.4
OHW.............................................             3.3             3.3             3.3             3.3
OST.............................................              NA              NA             5.5             5.5
Shipment-Weighted Average *.....................            22.9             2.9             2.4             9.7
----------------------------------------------------------------------------------------------------------------
                                 Percent of Consumers that Experience a Net Cost
----------------------------------------------------------------------------------------------------------------
GHW.............................................              11              13              11              78

[[Page 55204]]

 
GST.............................................              NA              NA              NA              56
OHW.............................................               4               4               4               4
OST.............................................              NA              NA              14              14
Shipment-Weighted Average *.....................               9              10               9              66
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative (-) values. The entry ``n.a.'' means not applicable because there is no
  change in the standard at certain TSLs (i.e., standard remains at the baseline).
* Weighted by shares of each product class in total projected shipments in 2030.

    DOE first considered TSL 4, which represents the max-tech 
efficiency levels for all product classes. These levels include 96-
percent AFUE for consumer gas-fired hot water boilers (representing 
condensing operation), 83-percent AFUE for consumer gas-fired steam 
boilers, 88-percent AFUE for consumer oil-fired hot water boilers, and 
86-percent AFUE for consumer oil-fired steam boilers. Gas-fired hot 
water, gas-fired steam, oil-fired hot water, and oil-fired steam 
boilers account for approximately 78 percent, 8 percent, 13 percent, 
and 1 percent of current industry shipments, respectively. At this TSL, 
the Secretary has determined that the benefits are outweighed by the 
burdens, as discussed in detail in the following paragraphs.
    TSL 4 would save an estimated 0.83 quads of energy, an amount DOE 
considers significant, primarily driven by the savings associated with 
condensing operation for gas-fired hot water boilers, the largest 
product class of consumer boilers. Consumer gas-fired hot water boilers 
save an estimated 0.73 quads. Consumer gas-fired steam boilers save an 
estimated 0.02 quads. Consumer oil-fired hot water boilers save an 
estimate 0.08 quads of energy. Consumer oil-fired steam boilers save an 
estimate 0.003 quads of energy.
    Under TSL 4, the NPV is negative, indicating that consumer costs 
exceed consumer benefits. The NPV would be -$1.55 billion using a 
discount rate of 7 percent, and -$2.15 billion using a discount rate of 
3 percent. Much of the consumer costs are driven by consumer gas-fired 
boilers, which have the largest share of shipments and a significant 
increase in total installed costs at the max-tech efficiency level to 
accommodate 96-percent AFUE compared to other product classes. The NPV 
for consumer gas-fired hot water boilers would be -$1.76 billion using 
a 7-percent discount rate, and -$2.80 billion using a 3-percent 
discount rate. The NPV for consumer gas-fired steam boilers would be -
$0.02 billion using a 7-percent discount rate, and -$0.02 billion using 
a 3-percent discount rate. For consumer oil-fired boilers, the NPV is 
positive, indicating that consumer benefits exceed consumer costs. The 
NPV for consumer oil-fired hot water boilers would be $0.22 billion at 
a 7-percent discount rate and $0.65 billion at a 3-percent discount 
rate. The NPV for consumer oil-fired boilers (hot water and steam) 
would be $0.01 billion at a 7-percent discount rate and $0.02 billion 
at a 3-percent discount rate.
    The cumulative emissions reductions at TSL 4 are 47 million metric 
tons of CO2, 532 thousand tons of CH4, 0.19 
thousand tons of N2O, and 126 thousand tons of 
NOX, 2.8 thousand tons of SO2, and an increase of 
0.001 tons of Hg due to slightly higher electricity consumption. The 
estimated monetary value of the climate benefits from reduced GHG 
emissions (associated with the average SC-GHG at a 3-percent discount 
rate) at TSL 4 is $2.5 billion. The estimated monetary value of the 
health benefits from reduced NOX and SO2 
emissions at TSL 4 is $1.4 billion using a 7-percent discount rate and 
$4.1 billion using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 4 is $2.3 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 4 is $4.4 billion. The estimated total 
NPV is provided for additional information; however, DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
proposed standard level is economically justified.
    At TSL 4, the average LCC impact is a cost of $526 for consumer 
gas-fired hot water boilers, a cost of $53 for consumer gas-fired steam 
boilers, a savings of $666 for consumer oil-fired hot water boilers, 
and a savings of $310 for consumer oil-fired steam boilers. The average 
consumer costs exceed the benefits for gas-fired boilers and the 
average consumer benefits exceed the costs for oil-fired boilers at TSL 
4. For example, the average total installed costs for gas-fired hot 
water boilers are $1,292 higher at max-tech compared to the baseline 
efficiency level, with only a corresponding savings of $130 in first-
year operating costs. In contrast, the average total installed costs 
for oil-fired hot water boilers are only $192 higher at max-tech 
compared to the baseline efficiency level, with a corresponding savings 
of $59 in first-year operating costs. The fraction of consumers 
experiencing a net LCC cost is 78 percent for consumer gas-fired hot 
water boilers, 56 percent for consumer gas-fired steam boilers, 4 
percent for consumer oil-fired hot water boilers, and 14 percent for 
consumer oil-fired steam boilers. For a majority of gas-fired boiler 
consumers, the costs exceed the benefits.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$120.0 million to a decrease of $4.3 million, which corresponds to 
decreases of 22.6 percent and 4.3 percent, respectively. Industry 
conversion costs could reach $170.1 million as gas-fired hot water 
boiler manufacturers develop or expand their production capacity for 
condensing models and work with suppliers to develop new condensing 
heat exchangers that can meet the max-tech efficiency of 96-percent 
AFUE, and as manufacturers of other product classes invest in higher-
efficiency non-condensing designs.
    At TSL 4, all gas-fired hot water boilers must transition to the 
max-tech condensing technology. This is a significant technological 
shift and may be challenging for many manufacturers. Out of the 24 gas-
fired hot water boiler OEMs, only six OEMs offer models that meet the 
efficiencies required by TSL 4. Less than 5 percent of gas-fired hot 
water model listings can meet the 96-percent AFUE required. The 
projected change in INPV for the gas-fired hot water industry ranges 
from a decrease of $92.8 million to an increase of $19.5 million, which 
correspond to -22.7 percent and 4.8 percent, respectively. The lower 
bound is driven by the

[[Page 55205]]

industry conversion costs of $117.4 million.
    With 95 percent of all model offerings now on the market rendered 
obsolete, all 24 manufacturers would need to re-evaluate and redesign 
their portfolio of product offerings. Many OEMs that have extensive 
condensing gas-fired hot water product offerings do not have any models 
that can meet max-tech. Even OEMs that offer some max-tech models today 
would need to allocate extensive technical resources to provide max-
tech offerings across the full range of capacities to serve their 
customers. Manufacturers that are heavily invested in the non-
condensing market would likely need to re-orient their role in the 
market and determine how to compete in a marketplace where there is 
only one efficiency level.
    Traditionally, manufacturers have designed their product lines to 
support a range of models with varying input capacities, and the 
efficiency has varied between models within the line. In reviewing 
available models, DOE found that manufacturers generally only have one 
or two input capacities optimized to achieve 96-percent AFUE within 
product lines, while the remaining input capacities are at a lower 
AFUE. This suggests that manufacturers would have to individually 
redesign each model within product lines to ensure all models can 
achieve the max-tech level. Redesign by individual model would 
necessitate a significant increase in design effort for manufacturers. 
Additionally, for manufacturers who source condensing heat exchangers 
(which is the majority of OEMs producing condensing boilers), there is 
concern that the relatively lower shipment volumes of boilers in the 
U.S. market (relative to international markets for boilers) will make 
it difficult to find suppliers willing to produce heat exchanger 
designs that would allow all models within their gas-fired hot water 
product lines to meet 96-percent AFUE, as each heat exchanger design 
would need to be optimized for a given input capacity. The need for 
gas-fired hot water manufacturers to invest heavily in redesign drives 
the industry's product conversion costs to $39.5 million.
    The push toward new product designs would also require changes to 
the manufacturing facilities. While most manufacturer offer some 
condensing models today, a max-tech standard would accelerate the 
market shift to condensing products, and all manufacturers would likely 
need to make capital investments to extend or add production lines for 
gas-fired hot water boilers. Industry capital conversion costs could 
reach $77.9 million.
    Gas-fired steam shipments account for approximately 10 percent of 
current industry shipments. Oil-fired hot water shipments account for 
approximately 14 percent of current industry shipments. Oil-fired steam 
shipments account for approximately 1 percent of current industry 
shipments. The technology options to improve efficiency are similar 
across the three product classes. The max-tech efficiency level at TSL 
4 for these three product classes does not require a shift to 
condensing designs and does not dramatically alter the manufacturing 
process.
    All four gas-fired steam boiler OEMs offer at least one model that 
meets max-tech. However, only 8 percent of gas-fired steam model 
listings meet the efficiencies required by TSL 4. The projected change 
in INPV for the gas-fired steam industry ranges from a decrease of 
$10.9 million to a decrease of $9.3 million, which correspond to -22.6 
percent and -22.2 percent, respectively. The potential losses in INPV 
are driven by the industry conversion costs of $19.9 million.
    Out of the 11 oil-fired hot water boiler OEMs, two OEMs offer 
models that can meet max-tech. Approximately 3 percent of oil-fired hot 
water model listings are at max-tech. The projected change in INPV for 
the oil-fired hot water industry ranges from a decrease of $13.6 
million to a decrease of $12.1 million, which correspond to -18.4 
percent and -16.4 percent, respectively. The decrease in INPV is driven 
by the industry conversion costs of $25.6 million.
    Of the four oil-fired steam boiler OEMs, two OEMs offer max-tech 
models. Approximately 22 percent of oil-fired steam model listings can 
meet TSL 4. The projected change in INPV for the oil-fired steam 
industry ranges from a decrease of $4.1 million to a decrease of $4.0 
million, which correspond to -54.6 percent and -52.7 percent, 
respectively. The decrease in INPV is driven by the industry conversion 
costs of $7.2 million.
    The design options available to increase the efficiency of gas-
fired steam, oil-fired hot water, and oil-fired steam boilers are 
similar. Manufacturers may be able to meet max-tech efficiency for some 
models by adding additional heat exchanger sections. However, where 
additional sections are not sufficient, manufacturers may need to 
invest in the more time-intensive process of redesigning of the heat 
exchanger and in new castings and tooling to achieve max-tech 
efficiencies.
    The Secretary tentatively concludes that at TSL 4 for consumer 
boilers, the benefits of energy savings, positive NPV of consumer 
benefits for the oil-fired boiler product classes, emission reductions, 
and the estimated monetary value of the emissions reductions would be 
outweighed by the economic burden on some consumers (particularly the 
majority of gas-fired boiler consumers) and the impacts on 
manufacturers of gas-fired hot water boilers, including the potentials 
for large conversion costs, for reduced product availability, and for 
substantial reductions in INPV. In particular, DOE notes that TSL 4 
could lead to substantial upfront investments for the gas-fired hot 
water products, which account for the largest portion of shipments by 
product class. At max-tech, 95 percent of all model offerings would be 
made obsolete. All 24 manufacturers would need to re-evaluate and 
redesign their portfolio of product lines. Although the max-tech 
efficiency level has been demonstrated to be achievable for a wide 
range of input capacities, most product lines only have one or two 
models meeting the max-tech level, while the remaining input capacities 
are at a lower AFUE level. This suggests that even manufacturers who 
currently offer max-tech models would have to individually redesign 
each model within product lines to ensure all models can achieve the 
max-tech level. Additionally, manufactures would need to ramp up 
production capacity of max-tech condensing units, through expansion of 
existing production lines or addition of new lines. Furthermore, 
manufacturer raised concerns about their ability to source the custom 
heat exchangers necessary to optimize models at every input capacity to 
meet a standard set at 96-percent AFUE. The average LCC impact is 
negative for consumer gas-fired hot water and steam boilers, indicating 
that the consumer costs exceed the benefits. Consequently, the 
Secretary has tentatively concluded that the current record does not 
provide a clear and convincing basis to conclude that TSL 4 is 
economically justified.
    DOE then considered TSL 3, which represents the max-tech efficiency 
levels for consumer oil-fired boilers, 95-percent AFUE for consumer 
gas-fired hot water boilers (representing condensing operation), and 
baseline efficiency levels (which would result in no amendment to the 
energy conservation standard) for consumer gas-fired steam boilers.
    TSL 3 would save an estimated 0.69 quads of energy, an amount DOE 
considers significant, primarily driven by the savings associated with

[[Page 55206]]

condensing operation for gas-fired hot water boilers, which are the 
largest product class of consumer boilers. Consumer gas-fired hot water 
boilers save an estimated 0.61 quads. Consumer oil-fired hot water 
boilers save an estimated 0.08 quads of energy. Consumer oil-fired 
steam boilers save an estimated 0.003 quads of energy. There are no 
savings from consumer gas-fired steam boilers at TSL 3, as DOE is not 
considering amendments to the energy conservation standard at this TSL.
    Under TSL 3, the NPV is positive, indicating that consumer benefits 
exceed consumer costs across all product classes. The NPV would be 
$0.72 billion using a discount rate of 7 percent, and $2.27 billion 
using a discount rate of 3 percent. The NPV for consumer gas-fired hot 
water boilers would be $0.49 billion using a 7-percent discount rate, 
and $1.60 billion using a 3-percent discount rate. The NPV for consumer 
oil-fired hot water boilers would be $0.22 billion at a 7-percent 
discount rate and $0.65 billion at a 3-percent discount rate. The NPV 
for consumer oil-fired boilers (hot water and steam) would be $0.01 
billion at a 7-percent discount rate and $0.02 billion at a 3-percent 
discount rate.
    The cumulative emissions reductions at TSL 3 are 39 million metric 
tons of CO2, 438 thousand tons of CH4, 0.17 
thousand tons of N2O, 105 thousand tons of NOX, 
and 2.7 thousand tons of SO2, and an increase of 0.001 tons 
of Hg due to slightly higher electricity consumption. The estimated 
monetary value of the climate benefits from reduced GHG emissions 
(associated with the average SC-GHG at a 3-percent discount rate) at 
TSL 3 is $2.0 billion. The estimated monetary value of the health 
benefits from reduced NOX and SO2 emissions at 
TSL 3 is $1.1 billion using a 7-percent discount rate and $3.3 billion 
using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 3 is $3.9 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 3 is $7.6 billion. The estimated total 
NPV is provided for additional information; however, DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
proposed standard level is economically justified.
    At TSL 3, the average LCC impact is a savings of $768 for consumer 
gas-fired hot water boilers, a savings of $666 for consumer oil-fired 
hot water boilers, and a savings of $310 for consumer oil-fired steam 
boilers. The average consumer benefits exceed the costs for these 
impacted product classes at TSL 3. There is no LCC impact for consumer 
gas-fired steam boilers at TSL 3, as the energy conservation standard 
is not being amended. The fraction of consumers experiencing a net LCC 
cost is 11 percent for consumer gas-fired hot water boilers, 4 percent 
for consumer oil-fired hot water boilers, and 14 percent for consumer 
oil-fired steam boilers. For a majority of boiler consumers of these 
impacted product classes, the benefits exceed the costs. There are no 
consumers with a net LCC cost for consumer gas-fired steam boilers at 
TSL 3, as the energy conservation standard is not being amended. Low-
income consumers are not disproportionately impacted, as many are 
renters that either do not pay for equipment costs or energy costs. As 
such, the proportion of low-income consumers that are not impacted or 
who experience a net benefit are higher than in the main LCC analysis. 
Specifically, the fraction of low-income consumers experiencing a net 
LCC cost is 6 percent for consumer gas-fired hot water boilers, 1 
percent for consumer oil-fired hot water boilers, and 4 percent for 
consumer oil-fired steam boilers. For a majority of low-income boiler 
consumers of these impacted product classes, the benefits exceed the 
costs. There are no low-income consumers with a net LCC cost for 
consumer gas-fired steam boilers at TSL 3, as the energy conservation 
standard is not being amended.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$62.2 million to a decrease of $40.7 million, which correspond to 
decreases of 11.7 percent and 7.7 percent, respectively. Industry 
conversion costs could reach $98.0 million. Gas-fired hot water boiler 
manufacturers develop or expand their production capacity for 
condensing models; however, DOE expects significantly lower product 
conversion costs than would be required at TSL 4. Manufacturers of oil-
fired hot water and oil-fired steam boilers would need to invest in 
higher-efficiency non-condensing designs.
    Out of the 24 gas-fired hot water OEMs, 18 OEMs offer products that 
meet the 95-percent AFUE required. Approximately 40 percent of gas-
fired hot water model listings can meet TSL 3. The projected change in 
INPV for the gas-fired hot water industry ranges from a decrease of 
$44.9 million to a decrease of $25.0 million, which correspond to -11.0 
percent and -6.1 percent, respectively. The lower bound is driven by 
the industry conversion costs of $65.2 million. The design options 
analyzed at TSL 3 for gas-fired hot water boilers included implementing 
a condensing stainless-steel heat exchanger with a premix modulating 
burner. As with TSL 4, manufacturers heavily invested in non-condensing 
gas-fired hot water boilers would need to develop or expand their 
condensing production capacity, which would necessitate new production 
lines and updates to the factory floor. However, unlike TSL 4, most 
manufacturers currently offer products that meet the 95-percent AFUE 
required. Additionally, TSL 3 reduces the need to redesign by 
optimizing design at the individual model level to meet amended 
standards. At TSL 3, industry product conversion costs decrease to $3.1 
million.
    At TSL 3, the efficiency level for gas-fired steam boilers is the 
baseline efficiency (82-percent AFUE). Therefore, all gas-fired steam 
shipments can meet TSL 3. When evaluating this product class in 
isolation, DOE expects minimal change in INPV for the gas-fired steam 
industry and zero conversion costs.
    At TSL 3, the efficiency level for oil-fired hot water and oil-
fired steam boilers is identical to TSL 4. The projected change in INPV 
for the oil-fired hot water industry ranges from a decrease of $13.6 
million to a decrease of $12.1 million, which correspond to -18.4 
percent and -16.4 percent, respectively. The decrease in INPV is driven 
by the industry conversion costs of $25.6 million. At TSL 3, the 
efficiency level for oil-fired steam boilers identical to TSL 4. The 
projected change in INPV for the oil-fired steam industry ranges from a 
decrease of $4.1 million to a decrease of $4.0 million, which 
correspond to -54.6 percent and -52.7 percent, respectively. The 
decrease in INPV is driven by the industry conversion costs of $7.2 
million.
    Oil-fired hot water and oil-fired steam manufacturers would need to 
redesign a large portion of their products. However, the redesign would 
rely on existing technologies. DOE expect manufactures to meet max-tech 
efficiency for some models by adding additional heat exchanger sections 
and vent dampers. However, where additional sections are not 
sufficient, manufacturers may need to invest in the more time-intensive 
process of redesigning the heat exchanger and in new castings and 
tooling to achieve max-tech efficiencies.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary tentatively concludes that a

[[Page 55207]]

standard set at TSL 3 for consumer boilers would be economically 
justified. At this TSL, the average LCC savings for consumer gas-fired 
hot water boilers, consumer oil-fired hot water boilers, and consumer 
oil-fired steam boilers are positive. The FFC national energy savings 
are significant. The NPV of consumer benefits is positive for each 
impacted product classes using both a 3-percent and 7-percent discount 
rate. Notably, the benefits to consumers substantially outweigh the 
cost to manufacturers. At TSL 3, with regard to gas-fired hot water 
boilers, which account for approximately 75 percent of current industry 
shipments, most manufacturers offer a range of models that meet the 
efficiency level required. Out of the 24 gas-fired hot water OEMs, 18 
OEMs offer around 252 models (accounting for 40 percent of gas-fired 
hot water model listings) that meet the 95-percent AFUE required. At 
TSL 3, the NPV of consumer benefits, even measured at the more 
conservative discount rate of 7 percent, is more than 900 percent 
higher than the maximum of manufacturers' loss in INPV. The positive 
average LCC savings--a different way of quantifying consumer benefits--
reinforces this conclusion. The economic justification for TSL 3 is 
clear and convincing even without weighing the estimated monetary value 
of emissions reductions. When those emissions reductions are included--
representing $2.0 billion in climate benefits (associated with the 
average SC-GHG at a 3-percent discount rate), and $3.3 billion (using a 
3-percent discount rate) or $1.1 billion (using a 7-percent discount 
rate) in health benefits--the rationale becomes stronger still.
    As stated, DOE conducts the walk-down analysis to determine the TSL 
that represents the maximum improvement in energy efficiency that is 
technologically feasible and economically justified, as required under 
EPCA. Although DOE has not conducted a comparative analysis to select 
the amended energy conservation standards, DOE notes that at TSL 3, the 
efficiency levels result in the largest LCC savings for each product 
class and the largest NPV for each product class compared to any other 
efficiency level. Additionally, the conversion costs for gas-fired hot 
water and gas-fired steam boiler at substantially lower at TSL 3.
    Although DOE considered proposed amended standard levels for 
consumer boilers by grouping the efficiency levels for each product 
class into TSLs, DOE evaluates all analyzed efficiency levels for all 
product classes in its analysis.
    For consumer gas-fired hot water boilers, TSL 3 includes an 
efficiency level (i.e., EL 3) that is one level below the max-tech 
efficiency level. As discussed previously, at the max-tech efficiency 
level for gas-fired hot water boilers, there is an average LCC cost of 
$526 and a majority of consumers (78 percent) with a net LCC cost. 
Furthermore, for low-income consumers of gas-fired hot water boilers, 
there is an average LCC cost of $161 and 34 percent with a net LCC cost 
at the max-tech efficiency level. Additionally, conversion costs could 
reach $117.4 million for industry. At EL 4 (i.e., the max-tech 
efficiency level for gas-fired hot water boilers), less than 5 percent 
of industry models would meet the amended standard. However, at EL 3 
(i.e., the efficiency level below max-tech), approximately 40 percent 
of industry models would meet the standard. Furthermore, redesign 
efforts for gas-fired hot water boilers would be significantly less at 
EL 3, as manufacturer would not need to optimize performance for every 
product line and input capacity individually to achieve the proposed 
efficiency level. This difference in redesign effort is the primary 
driver that reduces conversion costs down from $117.4 million at max-
tech to $65.2 million at EL 3. The benefits of the max-tech efficiency 
level for consumer gas-fired hot water boilers do not outweigh the 
negative impacts to consumers and manufacturers. Therefore, DOE 
tentatively concludes that the max-tech efficiency level is not 
justified for consumer gas-fired hot water boilers. In contrast, EL 3 
for consumer gas-fired hot water boilers results in positive average 
LCC savings of $768 and a minority of consumers (11 percent) with a net 
LCC cost. Similarly, for low-income consumers, the efficiency level 
below max-tech for consumer gas-fired hot water boilers results in 
positive average LCC savings of $643 and 9 percent with a net LCC cost. 
Additionally, greater than 50 percent of the shipments for consumer 
gas-fired hot water boilers is at or above EL 3, clearly supporting the 
viability of products at this efficiency level in the market. At this 
level, industry conversion costs are significantly lower at 65.2 
million. Therefore, DOE tentatively concludes that EL 3 is justified 
for consumer gas-fired hot water boilers.
    For consumer gas-fired steam boilers, TSL 3 includes the baseline 
efficiency level. The only efficiency level above baseline that was 
analyzed for consumer gas-fired steam boilers is the max-tech 
efficiency level, which results in an average LCC cost and a majority 
of consumers with a net LCC costs. The benefits of the max-tech 
efficiency level for consumer gas-fired steam boilers do not outweigh 
the negative impacts to consumers and manufacturers. Therefore, DOE 
tentatively concludes that the max-tech efficiency level is not 
justified and is not proposing to amend the energy conservation 
standard for consumer gas-fired steam boilers.
    For consumer oil-fired hot water boilers, TSL 3 includes the max-
tech efficiency level, which is the maximum level determined to be 
technologically feasible. The max-tech efficiency level for consumer 
oil-fired hot water boilers results in an average LCC savings of $666 
and a minority of consumers (4 percent) with a net LCC cost. Similarly, 
for low-income consumers, the efficiency level below max-tech for 
consumer oil-fired hot water boilers results in positive average LCC 
savings of $603 and 1 percent with a net LCC cost. The benefits of max-
tech efficiency levels for consumer oil-fired hot water boilers 
outweigh the negative impacts to consumers and manufacturers. 
Therefore, DOE tentatively concludes that the max-tech efficiency level 
is justified for consumer oil-fired hot water boilers.
    For consumer oil-fired steam boilers, TSL 3 includes the max-tech 
efficiency level, which is the maximum level determined to be 
technologically feasible. The max-tech efficiency level for consumer 
oil-fired steam boilers results in an average LCC savings of $310 and a 
minority of consumers (14 percent) with a net LCC cost. Similarly, for 
low-income consumers, the efficiency level below max-tech for consumer 
oil-fired steam boilers results in positive average LCC savings of $279 
and 5 percent with a net LCC cost. The benefits of max-tech efficiency 
levels for consumer oil-fired hot water and steam boilers outweigh the 
negative impacts to consumers and manufacturers. Therefore, DOE 
tentatively concludes that the max-tech efficiency level is justified 
for consumer oil-fired hot water and steam boilers.
    Therefore, based on the previous considerations, DOE proposes 
amended energy conservation standards for consumer boilers at TSL 3. 
The amended energy conservation standards for consumer boilers, which 
are expressed as an annual fuel utilization efficiency, are shown in 
Table V.32 of this document.

[[Page 55208]]



 Table V.36--Proposed Amended Energy Conservation Standards for Consumer
                                 Boilers
------------------------------------------------------------------------
                      Product class                          AFUE (%)
------------------------------------------------------------------------
Gas-fired Hot Water.....................................              95
Gas-fired Steam.........................................              82
Oil-fired Hot Water.....................................              88
Oil-fired Steam.........................................              86
------------------------------------------------------------------------

2. Annualized Benefits and Costs of the Proposed Standards
    The benefits and costs of the proposed standards can also be 
expressed in terms of annualized values. The annualized net benefit is: 
(1) the annualized national economic value (expressed in 2022$) of the 
benefits from operating products that meet the proposed standards 
(consisting primarily of operating cost savings from using less energy, 
minus increases in product purchase costs), and (2) the annualized 
monetary value of the climate and health benefits from emission 
reductions. Table V.37 shows the annualized values for consumer boilers 
under TSL 3, expressed in 2022$. The results under the primary estimate 
are as follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced NOX and SO2 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated cost of the standards 
proposed in this rule is $52 million per year in increased equipment 
costs, while the estimated annual benefits are $139 million in reduced 
equipment operating costs, $124 million in climate benefits, and $137 
million in health benefits. In this case, the net benefit would amount 
to $348 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the proposed standards is $50 million per year in 
increased equipment costs, while the estimated annual benefits are $188 
million in reduced operating costs, $124 million in climate benefits, 
and $204 million in health benefits. In this case, the net benefit 
would amount to $466 million per year.

   Table V.37--Annualized Monetized Benefits and Costs of Proposed Energy Conservation Standards for Consumer
                                                     Boilers
                                                     [TSL 3]
----------------------------------------------------------------------------------------------------------------
                                                                                Million 2022$/year
                                                                 -----------------------------------------------
                                                                                     Low-net-        High-net-
                                                                      Primary        benefits        benefits
                                                                     estimate        estimate        estimate
----------------------------------------------------------------------------------------------------------------
                                                3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................................             188             175             233
Climate Benefits *..............................................             124             121             144
Health Benefits **..............................................             204             200             237
Total Monetized Benefits [dagger]...............................             516             496             613
Consumer Incremental Product Costs [Dagger].....................              50              58              38
Net Monetized Benefits..........................................             466             438             575
Change in Producer Cashflow [Dagger][Dagger]....................         (6)-(4)         (6)-(4)         (6)-(4)
----------------------------------------------------------------------------------------------------------------
                                                7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................................             139             129             169
Climate Benefits * (3% discount rate)...........................             124             121             144
Health Benefits **..............................................             137             135             158
Total Monetized Benefits [dagger]...............................             400             385             470
Consumer Incremental Product Costs [Dagger].....................              52              59              41
Net Monetized Benefits..........................................             348             326             430
Change in Producer Cashflow [Dagger][Dagger]....................         (6)-(4)         (6)-(4)         (6)-(4)
----------------------------------------------------------------------------------------------------------------
Note: This table presents the present value (in 2022) of the costs and benefits associated with consumer boilers
  shipped in 2030-2059. These results include benefits which accrue after 2059 from the products shipped in 2030-
  2059. The Primary, Low-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from
  the AEO 2022 Reference case, Low-Economic-Growth case, and High-Economic-Growth case, respectively. In
  addition, incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline
  rate in the Low-Net-Benefits Estimate, and a high decline rate in the High-Net-Benefits Estimate. The methods
  used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that
  the Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
  document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
  at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the
  benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits of reducing GHG
  emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social Cost
  of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021
  by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
  (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
  continue to assess the ability to monetize other effects such as health benefits from reductions in direct
  PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
  of this document for more details.
[dagger] Total benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
  percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs, as well as installation costs.

[[Page 55209]]

 
[Dagger][Dagger] Operating Cost Savings are calculated based on the life cycle costs analysis and national
  impact analysis as discussed in detail below. See sections IV.F and IV.H of this document. DOE's NIA includes
  all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the
  manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE
  also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of
  this document. In the detailed MIA, DOE models manufacturers' pricing decisions based on assumptions regarding
  investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule's
  expected impact on the INPV. The change in INPV is the present value of all changes in industry cash flow,
  including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized
  change in INPV is calculated using the industry weighted average cost of capital value of 9.7% that is
  estimated in the MIA (see chapter 12 of the NOPR TSD for a complete description of the industry weighted
  average cost of capital). For consumer boilers, those values are -$6 million and -$4 million. DOE accounts for
  that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this
  document. DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of
  Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating
  Cost Savings in this table, and the Preservation of Operating Profit Markup scenario, where DOE assumed
  manufacturers would not be able to increase per-unit operating profit in proportion to increases in
  manufacturer production costs. DOE includes the range of estimated annualized change in INPV in the above
  table, drawing on the MIA explained further in section IV.J of this document, to provide additional context
  for assessing the estimated impacts of this proposal to society, including potential changes in production and
  consumption, which is consistent with OMB's Circular A-4 and E.O. 12866. If DOE were to include the INPV into
  the annualized net benefit calculation for this proposed rule, the annualized net benefits would range from
  $460 million to $462 million at 3-percent discount rate and would range from $342 million to $344 million at 7-
  percent discount rate. DOE seeks comment on this approach.

D. Reporting, Certification, and Sampling Plan

    Manufacturers, including importers, must use product-specific 
certification templates to certify compliance to DOE. For consumer 
boilers, the certification template reflects the general certification 
requirements specified at 10 CFR 429.12 and the product-specific 
requirements specified at 10 CFR 429.18. As discussed in the previous 
paragraphs, DOE is not proposing to amend the product-specific 
certification requirements for these products.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Executive Order (E.O.) 12866, ``Regulatory Planning and Review,'' 
58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by E.O. 
13563, ``Improving Regulation and Regulatory Review,'' 76 FR 3821 (Jan. 
21, 2011), requires agencies, to the extent permitted by law, to (1) 
propose or adopt a regulation only upon a reasoned determination that 
its benefits justify its costs (recognizing that some benefits and 
costs are difficult to quantify); (2) tailor regulations to impose the 
least burden on society, consistent with obtaining regulatory 
objectives, taking into account, among other things, and to the extent 
practicable, the costs of cumulative regulations; (3) select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity); (4) to the extent feasible, specify performance 
objectives, rather than specifying the behavior or manner of compliance 
that regulated entities must adopt; and (5) identify and assess 
available alternatives to direct regulation, including providing 
economic incentives to encourage the desired behavior, such as user 
fees or marketable permits, or providing information upon which choices 
can be made by the public. DOE emphasizes as well that E.O. 13563 
requires agencies to use the best available techniques to quantify 
anticipated present and future benefits and costs as accurately as 
possible. In its guidance, the Office of Information and Regulatory 
Affairs (OIRA) in the Office of Management and Budget (OMB) 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, 
this proposed regulatory action is consistent with these principles.
    Section 6(a) of E.O. 12866 also requires agencies to submit 
``significant regulatory actions'' to OIRA for review. OIRA has 
determined that this proposed regulatory action constitutes a 
``significant regulatory action'' under section 3(f)(1) of E.O. 12866, 
as amended by E.O. 14094. Accordingly, pursuant to section 6(a)(3)(C) 
of E.O. 12866, DOE has provided to OIRA an assessment, including the 
underlying analysis, of benefits and costs anticipated from the 
proposed regulatory action, together with, to the extent feasible, a 
quantification of those costs; and an assessment, including the 
underlying analysis, of costs and benefits of potentially effective and 
reasonably feasible alternatives to the planned regulation, and an 
explanation why the planned regulatory action is preferable to the 
identified potential alternatives. These assessments are summarized in 
this preamble and further detail can be found in the technical support 
document for this proposed rulemaking.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) and a 
final regulatory flexibility analysis (FRFA) for any rule that by law 
must be proposed for public comment, unless the agency certifies that 
the rule, if promulgated, will not have a significant economic impact 
on a substantial number of small entities. As required by E.O. 13272, 
``Proper Consideration of Small Entities in Agency Rulemaking,'' 67 FR 
53461 (August 16, 2002), DOE published procedures and policies on 
February 19, 2003, to ensure that the potential impacts of its rules on 
small entities are properly considered during the rulemaking process. 
68 FR 7990. DOE has made its procedures and policies available on the 
Office of the General Counsel's website (www.energy.gov/gc/office-general-counsel). DOE reviewed this proposed rule under the provisions 
of the Regulatory Flexibility Act and the policies and procedures 
published on February 19. 2003.
    DOE has prepared the following IRFA for the products that are the 
subject of this proposed energy conservation standard rulemaking.
    For manufacturers of consumer boilers, the Small Business 
Administration (SBA) has set a size threshold, which defines those 
entities classified as ``small businesses'' for the purposes of the 
statute. DOE used the SBA's small business size standards to determine 
whether any small entities would be subject to the requirements of the 
rule. (See 13 CFR part 121.) The size standards are listed by North 
American Industry Classification System (NAICS) code and industry 
description and are available at www.sba.gov/document/support--table-
size-standards. Manufacturing of consumer boilers is classified under 
NAICS 333414, ``Heating Equipment (except Warm Air Furnaces) 
Manufacturing.'' The SBA

[[Page 55210]]

sets a threshold of 500 employees or fewer for an entity to be 
considered as a small business for this category. For the products 
under review, the SBA bases its small business definition on the total 
number of employees for a business, including the total number of 
employees of its parent company and any subsidiaries. An aggregated 
business entity with fewer employees than the listed limit is 
considered a small business.
1. Description of Reasons Why Action Is Being Considered
    DOE is proposing amended energy conservation standards for consumer 
boilers. In a final rule published in the Federal Register on January 
15, 2016 (January 2016 Final Rule), DOE prescribed the current energy 
conservation standards for consumer boilers manufactured on and after 
January 15, 2021. 81 FR 2320, 2416-2417. EPCA provides that, not later 
than six years after the issuance of any final rule establishing or 
amending a standard, DOE must publish either a notice of determination 
that standards for the product do not need to be amended, or a NOPR 
including new proposed energy conservation standards (proceeding to a 
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
2. Objectives of, and Legal Basis for, Rule
    EPCA authorizes DOE to regulate the energy efficiency of a number 
of consumer products and certain industrial equipment. Title III, Part 
B of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. These products include consumer 
boilers, the subject of this document. (42 U.S.C. 6292(a)(5)) EPCA 
prescribed energy conservation standards for these products (42 U.S.C. 
6295(f)(3)), and directs DOE to conduct future rulemakings to determine 
whether to amend these standards. (42 U.S.C. 6295(f)(4)(C)) EPCA 
further provides that, not later than six years after the issuance of 
any final rule establishing or amending a standard, DOE must publish 
either a notice of determination that standards for the product do not 
need to be amended, or a NOPR including new proposed energy 
conservation standards (proceeding to a final rule, as appropriate). 
(42 U.S.C. 6295(m)(1))
3. Description on Estimated Number of Small Entities Regulated
    DOE conducted a market survey to identify potential small 
manufacturers of consumer boilers. DOE began its assessment by 
reviewing its Compliance Certification Database (CCD),\166\ 
supplemented by information in California Energy Commission's 
Modernized Appliance Efficiency Database System (MAEDbS),\167\ AHRI's 
Directory of Certified Product Performance,\168\ U.S. Environmental 
Protection Agency's ENERGY STAR product finder dataset,\169\ individual 
company websites, and prior consumer boiler rulemakings to identify 
manufacturers of the covered product. DOE then consulted publicly-
available data, such as manufacturer websites, manufacturer 
specifications and product literature, import/export logs (e.g., bills 
of lading from Panjiva \170\), and basic model numbers, to identify 
original equipment manufacturers (OEMs) of covered consumer boilers. 
DOE further relied on public data and subscription-based market 
research tools (e.g., Dun & Bradstreet reports \171\) to determine 
company, location, headcount, and annual revenue. DOE also asked 
industry representatives if they were aware of any small manufacturers 
during manufacturer interviews. DOE screened out companies that do not 
offer products covered by this rulemaking, do not meet the SBA's 
definition of a ``small business,'' or are foreign-owned and operated.
---------------------------------------------------------------------------

    \166\ U.S. Department of Energy's Compliance Certification 
Database is available at: www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (Last accessed Jan. 3, 2023).
    \167\ California Energy Commission's Modernized Appliance 
Efficiency Database System is available at: 
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (Last 
accessed Jan. 3, 2023).
    \168\ AHRI's Directory of Certified Product Performance is 
available at: www.ahridirectory.org/Search/SearchHome (Last accessed 
Jan. 3, 2023).
    \169\ U.S. Environmental Protection Agency's ENERGY STAR product 
finder dataset is available at: www.energystar.gov/products/products_list (Last accessed Dec. 27, 2022).
    \170\ S&P Global. Panjiva Market Intelligence is available at: 
panjiva.com/import-export/United-States (Last accessed Feb. 28, 
2023).
    \171\ D&B Hoovers subscription login is accessible at: 
app.dnbhoovers.com/ (Last accessed August 24, 2022).
---------------------------------------------------------------------------

    DOE initially identified 24 OEMs that sell consumer boilers in the 
United States. Of the 24 OEMs identified, DOE tentatively determined 
that three companies qualify as small businesses and are not foreign-
owned and operated.
4. Description and Estimate of Compliance Requirements Including 
Differences in Cost, if Any, for Different Groups of Small Entities
    AHRI stated that small OEMs will be impacted by this rulemaking, 
especially with respect to cast-iron boilers. (AHRI, No. 40 at p. 6)
    Of the three small domestic OEMs identified, DOE tentatively 
determined that all three OEMs manufacture both gas-fired hot water and 
oil-fired hot water boilers. DOE identified these manufacturers through 
a review of EPA's ENERGY STAR dataset, prior DOE consumer boiler 
rulemakings, and DOE's CCD.
    The first small OEM (``Manufacturer A'' in Table VI.1 and Table 
VI.2) offers seven gas-fired hot water basic models and five oil-fired 
hot water basic models. DOE identified these models through the company 
website and available product literature. Of the seven gas-fired hot 
water basic models, five meet the efficiency required by TSL 3. Of the 
five oil-fired hot water basic models, four meet the efficiency 
required by TSL 3. Given the company's small market share in the U.S. 
consumer boiler market and existing range of high-efficiency boilers, 
this manufacturer may choose to discontinue the non-compliant models. 
Alternatively, the manufacturer may choose to redesign models in order 
to maintain a diversified portfolio with cost-competitive baseline 
models. To avoid underestimating the conversion costs this manufacturer 
could incur as a result of amended standards, DOE assumed this small 
business would choose to redesign or replace the non-compliant models. 
DOE used basic model counts (i.e., the manufacturer's proportion of 
industry basic models) to scale the industry conversion costs, 
described in section IV.J.2.c of the proposed rule's notice of proposed 
rulemaking. Product conversion costs are investments in research, 
development, testing, marketing, and other non-capitalized costs 
necessary to make product designs comply with amended energy 
conservation standards. Product conversion costs would be driven by the 
development and testing necessary to develop compliant products. 
Capital conversion costs are investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new compliant product designs can be fabricated and 
assembled. For gas-fired hot water boilers, the design options analyzed 
at TSL 3 included implementing a condensing stainless-steel heat 
exchanger with a premix modulating burner. This small manufacturer may 
need to expand their condensing production capacity, which could 
necessitate updates to production lines and the factory floor. For oil-
fired hot water boilers, DOE expects that some manufacturers would need 
to invest in new casting designs and tooling to meet TSL 3 
efficiencies. Based on this manufacturer's model share,

[[Page 55211]]

DOE estimates product conversion costs of $80,000 and capital 
conversion costs of $370,000. For this small manufacturer, total 
conversion costs are approximately 1.0 percent of company revenue over 
the 5-year conversion period.\172\
---------------------------------------------------------------------------

    \172\ According to D&B Hoovers, this small business has an 
estimated annual revenue of $8.8 million. DOE calculated total 
conversion costs as a percent of revenue over the 5-year conversion 
period using the following calculation: ($370,000 + $80,000)/(5 
years x $8,800,000).
---------------------------------------------------------------------------

    The second small OEM (``Manufacturer B'' in Table VI.1 and Table 
VI.2) offers one gas-fired hot water model and six oil-fired hot water 
models based on their website information. According to the company's 
website, they do not offer any condensing gas-fired hot water boilers 
or max-tech (88 percent AFUE) oil-fired hot water boilers. Similarly, 
the third small OEM (``Manufacturer C'' in Table VI.1 and Table VI.2) 
offers three gas-fired hot water models and 18 oil-fired hot water 
models, does not have any condensing gas-fired hot water boilers or 
max-tech oil-fired hot water boilers. Thus, neither small business 
offers any models that meet the efficiencies required by TSL 3. To 
offer condensing gas-fired hot water boilers, these small OEMs would 
have to decide whether to develop their own condensing heat exchanger 
production, source heat exchangers from Europe or Asia and assemble 
higher-efficiency products, or leave the market entirely. DOE believes 
both small OEMs currently source their non-condensing heat exchangers 
from third-party foundries. Given the high upfront cost of in-house 
development of condensing heat exchangers, DOE expects these small 
businesses will continue to source their heat exchangers. These 
manufacturers would need to develop their condensing production 
capacity, which would necessitate updated production lines. DOE used 
basic model counts to scale the industry conversion costs. DOE 
estimates that the second small OEM, with seven consumer boiler models, 
would incur product conversion costs of $402,000 and capital conversion 
costs of $360,000. For this small manufacturer, total conversion costs 
are approximately 3.4 percent of company revenue over the 5-year 
conversion period.\173\ DOE estimates that the third small OEM, with 21 
consumer boiler models, would incur product conversion costs of $1.2 
million and capital conversion costs of $1.1 million. For this small 
manufacturer, total conversion costs are approximately 13.8 percent of 
company revenue over the 5-year conversion period.\174\
---------------------------------------------------------------------------

    \173\ According to D&B Hoovers, this small business has an 
estimated annual revenue of $4.5 million. DOE calculated total 
conversion costs as a percent of revenue over the 5-year conversion 
period using the following calculation: ($402,000 + $360,000)/(5 
years x $4,500,000).
    \174\ According to D&B Hoovers, this small business has an 
estimated annual revenue of $3.3 million. DOE calculated total 
conversion costs as a percent of revenue over the 5-year conversion 
period using the following calculation: ($1,200,000 + $1,100,000)/(5 
years x $3,300,000).

                                  Table VI.1--Potential Small Business Impacts
                                                     [TSL 3]
----------------------------------------------------------------------------------------------------------------
                                                                                    Conversion      Conversion
                                     Number of      Conversion        Annual          period       costs as a %
             Company               unique basic      costs  ($      revenue  ($     revenue  ($    of conversion
                                      models         millions)       millions)       millions)    period revenue
----------------------------------------------------------------------------------------------------------------
Manufacturer A..................              12            0.45             8.8            44.0             1.0
Manufacturer B..................               7            0.76             4.5            22.5             3.4
Manufacturer C..................              21            2.29             3.3            16.5            13.8
----------------------------------------------------------------------------------------------------------------


                     Table VI.2--Estimated Small Business Conversion Costs by Product Class
                                                     [TSL 3]
----------------------------------------------------------------------------------------------------------------
                                                                                      Product         Capital
                                                                     Number of      conversion      conversion
                Company                       Product class        unique basic      costs ($        costs ($
                                                                      models         millions)       millions)
----------------------------------------------------------------------------------------------------------------
Manufacturer A........................  Gas-fired Hot Water.....               7            0.02            0.34
                                        Oil-fired Hot Water.....               5            0.07            0.03
Manufacturer B........................  Gas-fired Hot Water.....               1            0.01            0.17
                                        Oil-fired Hot Water.....               6            0.39            0.19
Manufacturer C........................  Gas-fired Hot Water.....               3            0.02            0.50
                                        Oil-fired Hot Water.....              18            1.18            0.58
----------------------------------------------------------------------------------------------------------------

    DOE seeks comments, information, and data on the number of small 
businesses in the industry, the names of those small businesses, and 
their market shares by product class. DOE also requests comment on the 
potential impacts of the proposed standards on small manufacturers.
5. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the proposed rule.
6. Significant Alternatives to the Rule
    The discussion in the previous section analyzes impacts on small 
businesses that would result from DOE's proposed rule, represented by 
TSL 3. In reviewing alternatives to the proposed rule, DOE examined 
energy conservation standards set at lower efficiency levels. While TSL 
1 and TSL 2 would reduce impacts on small business manufacturers, it 
would come at the expense of a reduction in energy savings. TSL 1 
achieves 91 percent lower energy savings compared to the energy savings 
at TSL 3. TSL 2 achieves 48 percent lower energy savings compared to 
energy savings at TSL 3.
    Based on the presented discussion, establishing standards at TSL 3 
balances the benefits of the energy savings at TSL 3 with the potential 
burdens place on consumer boiler manufacturers, including small 
business manufacturers. Accordingly, DOE does not propose one of the 
other TSLs considered in this analysis, or the other policy 
alternatives examined as part of the regulatory

[[Page 55212]]

impact analysis and included in chapter 17 of the NOPR TSD.
    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. (42 U.S.C. 6295(t)) Additionally, 
manufacturers subject to DOE's energy efficiency standards may apply to 
DOE's Office of Hearings and Appeals for exception relief under certain 
circumstances. 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 of 1995

    Manufacturers of consumer boilers must certify to DOE that their 
products comply with any applicable energy conservation standards. In 
certifying compliance, manufacturers must test their products according 
to the DOE test procedures for consumer boilers, including any 
amendments adopted for those test procedures. DOE has established 
regulations for the certification and recordkeeping requirements for 
all covered consumer products and commercial equipment, including 
consumer boilers. (See generally 10 CFR part 429). The collection-of-
information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). This requirement has been approved by OMB under OMB control 
number 1910-1400. Public reporting burden for the certification is 
estimated to average 35 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    DOE is not proposing to amend the certification or reporting 
requirements for consumer boilers in this proposed rulemaking. Instead, 
DOE may consider proposals to amend the certification requirements and 
reporting for consumer boilers under a separate rulemaking regarding 
appliance and equipment certification. DOE will address changes to OMB 
Control Number 1910-1400 at that time as necessary.
    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

    DOE is analyzing this proposed regulation in accordance with the 
National Environmental Policy Act of 1969 (NEPA) and DOE's NEPA 
implementing regulations (10 CFR part 1021). DOE's regulations include 
a categorical exclusion for rulemakings that establish energy 
conservation standards for consumer products or industrial equipment. 
10 CFR part 1021, subpart D, appendix B5.1. DOE anticipates that this 
rulemaking qualifies for categorical exclusion B5.1 because it is a 
rulemaking that establishes energy conservation standards for consumer 
products or industrial equipment, none of the exceptions identified in 
categorical exclusion B5.1(b) apply, no extraordinary circumstances 
exist that require further environmental analysis, and it otherwise 
meets the requirements for application of a categorical exclusion. See 
10 CFR 1021.410. Therefore, DOE has initially determined that 
promulgation of this proposed rule is not a major Federal action 
significantly affecting the quality of the human environment within the 
meaning of NEPA, and does not require an environmental assessment or an 
environmental impact statement. DOE will complete its NEPA review 
before issuing the final rule.

E. Review Under Executive Order 13132

    E.O. 13132, ``Federalism,'' 64 FR 43255 (August 10, 1999), imposes 
certain requirements on Federal agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and to carefully assess 
the necessity for such actions. The Executive order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined this proposed rule and has 
tentatively determined that it would not have a substantial direct 
effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. EPCA governs 
and prescribes Federal preemption of State regulations as to energy 
conservation for the products that are the subject of this proposed 
rule. States can petition DOE for exemption from such preemption to the 
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) 
Therefore, no further action is required by Executive Order 13132.

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act of 1995

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

[[Page 55213]]

to result in a rule that may cause the expenditure by State, local, and 
Tribal governments, in the aggregate, or by the private sector of $100 
million or more in any one year (adjusted annually for inflation), 
section 202 of UMRA requires a Federal agency to publish a written 
statement that estimates the resulting costs, benefits, and other 
effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also 
requires a Federal agency to develop an effective process to permit 
timely input by elected officers of State, local, and Tribal 
governments on a proposed ``significant intergovernmental mandate,'' 
and requires an agency plan for giving notice and opportunity for 
timely input to potentially affected small governments before 
establishing any requirements that might significantly or uniquely 
affect them. On March 18, 1997, DOE published a statement of policy on 
its process for intergovernmental consultation under UMRA. 62 FR 12820. 
DOE's policy statement is also available at www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    Although this proposed rule does not contain a Federal 
intergovernmental mandate, it may require expenditures of $100 million 
or more in any one year by the private sector. Such expenditures may 
include: (1) investment in research and development and in capital 
expenditures by consumer boilers manufacturers in the years between the 
final rule and the compliance date for the newly amended standards and 
(2) incremental additional expenditures by consumers to purchase 
higher-efficiency consumer 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 proposed rule. (2 U.S.C. 1532(c)) The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of this NOPR and the TSD for this 
proposed rule respond to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m), 
this proposed rule would establish amended energy conservation 
standards for consumer boilers that are designed to achieve the maximum 
improvement in energy efficiency that DOE has determined to be both 
technologically feasible and economically justified, as required by 42 
U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B). A full discussion of 
the alternatives considered by DOE is presented in chapter 17 of the 
TSD for this proposed rule.

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

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

I. Review Under Executive Order 12630

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

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

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review 
most disseminations of information to the public under information 
quality guidelines established by each agency pursuant to general 
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 
(Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, ``Improving 
Implementation of the Information Quality Act'' (April 24, 2019), DOE 
published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has 
reviewed this NOPR under the OMB and DOE guidelines and has concluded 
that it is consistent with applicable policies in those guidelines.

K. Review Under Executive Order 13211

    E.O. 13211, ``Actions Concerning Regulations That Significantly 
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22, 
2001), requires Federal agencies to prepare and submit to OIRA at OMB, 
a Statement of Energy Effects for any proposed significant energy 
action. A ``significant energy action'' is defined as any action by an 
agency that promulgates or is expected to lead to promulgation of a 
final rule, and that: (1) is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
proposes amended energy conservation standards for consumer boilers, is 
not a significant energy action because the proposed standards are not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy, nor has it been designated as such by 
the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects for this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can

[[Page 55214]]

determine will have, or does have, a clear and substantial impact on 
important public policies or private sector decisions.'' Id. at 70 FR 
2667.
    In response to OMB's Bulletin, DOE conducted formal peer reviews of 
the energy conservation standards development process and the analyses 
that are typically used and has prepared a Peer Review report 
pertaining to the energy conservation standards rulemaking 
analyses.\175\ 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. 
Because available data, models, and technological understanding have 
changed since 2007, DOE has engaged with the National Academy of 
Sciences to review DOE's analytical methodologies to ascertain whether 
modifications are needed to improve the Department's analyses. DOE is 
in the process of evaluating the resulting December 2021 NAS 
report.\176\
---------------------------------------------------------------------------

    \175\ The 2007 ``Energy Conservation Standards Rulemaking Peer 
Review Report'' is available at the following website: energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0 (Last accessed Jan. 3, 2023).
    \176\ The December 2021 NAS report is available at 
www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards (Last accessed Jan. 3, 
2023).
---------------------------------------------------------------------------

VII. Public Participation

A. Participation in the Public Meeting Webinar

    The time and date of the webinar meeting are listed in the DATES 
section at the beginning of this document. Webinar registration 
information, participant instructions, and information about the 
capabilities available to webinar participants will be published on 
DOE's website:www.energyenergy.gov/eere/buildings/public-meetings-and-comment-deadlines. Participants are responsible for ensuring their 
systems are compatible with the webinar software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

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

C. Conduct of the Webinar

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

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting webinar, but no later 
than the date provided in the DATES section at the beginning of this 
proposed rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the website will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section.
    DOE processes submissions made through www.regulations.gov before

[[Page 55215]]

posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or postal 
mail. Comments and documents submitted via email, hand delivery/
courier, or postal mail also will be posted to www.regulations.gov. If 
you do not want your personal contact information to be publicly 
viewable, do not include it in your comment or any accompanying 
documents. Instead, provide your contact information in a cover letter. 
Include your first and last names, email address, telephone number, and 
optional mailing address. The cover letter will not be publicly 
viewable as long as it does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via postal mail 
or hand delivery/courier, please provide all items on a CD, if 
feasible, in which case it is not necessary to submit printed copies. 
No telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption, and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email two well-marked copies: one copy of the document marked 
``confidential'' including all the information believed to be 
confidential, and one copy of the document marked ``non-confidential'' 
with the information believed to be confidential deleted. DOE will make 
its own determination about the confidential status of the information 
and treat it according to its determination.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:

    1. DOE requests comment on the methodology used to present the 
change in producer cashflow (INPV) in the monetized benefits and 
cost tables I.3, I.4, and V.37 of this document.
    2. DOE requests information on the market share of weatherized 
consumer boilers and the typical jacket losses of such products.
    3. DOE requests further information on the potential future 
adoption of hydrogen-ready consumer boilers in the United States and 
any data demonstrating potential impacts of these burner systems on 
AFUE.
    4. DOE requests comment on the tentative determination that 
condensing operation in oil-fired hot water boilers, pulse 
combustion, burner derating, low-pressure air-atomized oil burners, 
and control relays for models with BPM motors should be screened out 
from further analysis.
    5. DOE requests comment on whether an increase in MPCs for gas-
fired steam, oil-fired hot water, and oil-fired steam boilers would 
result from an amended standard requiring condensing technology for 
gas-fired hot water boilers and, if so, how much of an increase 
would occur. DOE also requests comment on whether the potential 
increase in cast-iron boiler MPCs would only be applicable to 
consumer boiler manufacturers that operate their own foundries.
    6. DOE requests comment on the cost-efficiency results in this 
engineering analysis. DOE also seeks input on the design options 
that would be implemented to achieve the selected efficiency levels.
    7. DOE requests comment on DOE's space heating and water heating 
energy use methodology. DOE would also appreciate feedback, 
information, and data on these additional system types and processes 
that use consumer boilers (such as snow melt systems, pool or spa 
heating, or steam or hot water production for industrial or 
commercial processes).
    8. DOE requests comment on DOE's methodology for determining the 
fraction of consumer boilers used in commercial buildings. DOE also 
seeks input regarding the fraction of consumer boilers in commercial 
buildings larger than 10,000 square feet.
    9. DOE requests comments, information, and data regarding the 
relationship between boiler efficiency and return water temperature.
    10. DOE requests comment on DOE's updated methodology for 
determining energy use for condensing boilers in different return 
water temperature applications.
    11. DOE requests comments, information, and data showing the 
relationship between boiler efficiency and excess air during AFUE 
testing and in the field.
    12. DOE requests comments on the default constant price trend 
for consumer boilers. DOE seeks comments on how material prices and 
technological advancement would be expected to impact future prices 
of consumer boilers.
    13. DOE requests comments on its approach for taking into 
account electrification efforts in its shipment analysis. DOE also 
requests comments on other local, State, and Federal policies that 
may impact the shipments projection of consumer boilers.
    14. DOE requests comments on its approach for developing 
efficiency trends beyond 2030.
    15. DOE requests comments and any data on the potential for 
direct rebound.
    16. DOE requests comments on its approach to monetizing the 
impact of the rebound effect.
    17. DOE seeks comments, information, and data on the capital 
conversion costs and product conversion costs estimated for each 
TSL.
    18. DOE seeks comments, information, and data on the potential 
direct employment impacts estimated for each TSL.
    19. DOE seeks comment on whether manufacturers expect that 
manufacturing capacity or engineering resource constraints would 
limit product availability to consumers in the timeframe of the 
amended standards compliance date (2030).
    20. DOE requests comment on the $20 per-unit reallocation cost 
for gas-fired steam, oil-fired hot water, and oil-fired steam 
boilers under a condensing standard for gas-fired hot water boilers, 
as well as the methodology used to derive the estimate.
    21. DOE requests comment on the potential impacts on consumer 
boiler manufacturers that own domestic foundry assets including 
impacts but not limited to those vital to national security or 
critical infrastructure at the TSLs analyzed in this NOPR analysis.
    22. DOE requests information regarding the impact of cumulative 
regulatory burden on manufacturers of consumer boilers associated 
with multiple DOE standards or product-specific regulatory actions 
of other Federal agencies in addition to state or local regulations.
    23. DOE seeks comments, information, and data on the number of 
small businesses in the industry, the names of those small 
businesses, and their market shares by product class. DOE also 
requests comment on the potential impacts of the proposed standards 
on small manufacturers.

    Additionally, DOE welcomes comments on other issues relevant to the 
conduct of this rulemaking that may not specifically be identified in 
this document.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking and request for comment.

[[Page 55216]]

List of Subjects in 10 CFR Part 430

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

Signing Authority

    This document of the Department of Energy was signed on July 27, 
2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for 
Energy Efficiency and Renewable Energy, pursuant to delegated authority 
from the Secretary of Energy. That document with the original signature 
and date is maintained by DOE. For administrative purposes only, and in 
compliance with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register Liaison Officer has been authorized to 
sign and submit the document in electronic format for publication, as 
an official document of the Department of Energy. This administrative 
process in no way alters the legal effect of this document upon 
publication in the Federal Register.

    Signed in Washington, DC, on July 28, 2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

    For the reasons set forth in the preamble, DOE proposes to amend 
part 430 of chapter II, subchapter D, of title 10 of the Code of 
Federal Regulations, as set forth below:

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

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

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

0
2. Amend Sec.  430.32 by revising paragraph (e)(2) to read as follows:


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

* * * * *
    (e) * * *
    (2) Boilers. (i) Except as provided in paragraph (e)(2)(iii) of 
this section, residential boilers manufactured on and after January 15, 
2021, and before [date 5 years after publication of the final rule in 
the Federal Register], shall comply with the requirements as follows:

                                         Table 14 to Paragraph (e)(2)(i)
----------------------------------------------------------------------------------------------------------------
                                         Minimum         Maximum         Maximum
           Product class                 AFUE\1\        PW,SB\2\        PW,OFF\3\       Design requirements\4\
                                        (percent)        (watts)         (watts)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water................              84               9               9  Constant-burning pilot not
                                                                                      permitted. Automatic means
                                                                                      for adjusting water
                                                                                      temperature required
                                                                                      (except for boilers
                                                                                      equipped with tankless
                                                                                      domestic water heating
                                                                                      coils).
Gas-Fired Steam....................              82               8               8  Constant-burning pilot not
                                                                                      permitted.
Oil-fired Hot Water................              86              11              11  Automatic means for
                                                                                      adjusting temperature
                                                                                      required (except for
                                                                                      boilers equipped with
                                                                                      tankless domestic water
                                                                                      heating coils).
Oil-fired Steam....................              85              11              11  None.
Electric Hot Water.................            None               8               8  Automatic means for
                                                                                      adjusting temperature
                                                                                      required (except for
                                                                                      boilers equipped with
                                                                                      tankless domestic water
                                                                                      heating coils).
Electric Steam.....................            None               8               8  None.
----------------------------------------------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.   430.23(n)(2) of this part.
\2\ Standby Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\3\ Off Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\4\ See paragraph (e)(2)(iv) of this section.

    (ii) Except as provided in paragraph (e)(2)(iii) of this section, 
residential boilers manufactured on and after [date five years after 
publication of the final rule amending standards], shall comply with 
the requirements as follows:

                                        Table 15 to Paragraph (e)(2)(ii)
----------------------------------------------------------------------------------------------------------------
                                         Minimum         Maximum         Maximum
           Product class                 AFUE\1\        PW,SB\2\        PW,OFF\3\       Design requirements\4\
                                        (percent)        (watts)         (watts)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water................              95               9               9  Constant-burning pilot not
                                                                                      permitted. Automatic means
                                                                                      for adjusting water
                                                                                      temperature required
                                                                                      (except for boilers
                                                                                      equipped with tankless
                                                                                      domestic water heating
                                                                                      coils).
Gas-Fired Steam....................              82               8               8  Constant-burning pilot not
                                                                                      permitted.
Oil-fired Hot Water................              88              11              11  Automatic means for
                                                                                      adjusting temperature
                                                                                      required (except for
                                                                                      boilers equipped with
                                                                                      tankless domestic water
                                                                                      heating coils).
Oil-fired Steam....................              86              11              11  None.
Electric Hot Water.................            None               8               8  Automatic means for
                                                                                      adjusting temperature
                                                                                      required (except for
                                                                                      boilers equipped with
                                                                                      tankless domestic water
                                                                                      heating coils).
Electric Steam.....................            None               8               8  None.
----------------------------------------------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.   430.23(n)(2) of this part.
\2\ Standby Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\3\ Off Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\4\ See paragraph (e)(2)(iv) of this section.


[[Page 55217]]

    (iii) A boiler that is manufactured to operate without any need for 
electricity or any electric connection, electric gauges, electric 
pumps, electric wires, or electric devices is not required to meet the 
AFUE or design requirements in paragraphs (e)(2)(i) or (2)(ii) of this 
section, but must meet the following requirements, as applicable:

                    Table 16 to Paragraph (e)(2)(iii)
------------------------------------------------------------------------
                                                              Minimum
                      Product class                           AFUE\1\
                                                             (percent)
------------------------------------------------------------------------
Gas-fired Steam.........................................              75
Boilers Other Than Gas-fired Steam......................              80
------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.
  430.23(n)(2) of this part.

    (iv) Automatic means for adjusting water temperature. (A) The 
automatic means for adjusting water temperature as required under 
paragraphs (e)(2)(i) and (2)(ii) of this section must automatically 
adjust the temperature of the water supplied by the boiler to ensure 
that an incremental change in inferred heat load produces a 
corresponding incremental change in the temperature of water supplied.
    (B) For boilers that fire at a single input rate, the automatic 
means for adjusting water temperature requirement may be satisfied by 
providing an automatic means that allows the burner or heating element 
to fire only when the means has determined that the inferred heat load 
cannot be met by the residual heat of the water in the system.
    (C) When there is no inferred heat load with respect to a hot water 
boiler, the automatic means described in this paragraph shall limit the 
temperature of the water in the boiler to not more than 140 degrees 
Fahrenheit.
    (D) A boiler for which an automatic means for adjusting water 
temperature is required shall be operable only when the automatic means 
is installed.
* * * * *
[FR Doc. 2023-16476 Filed 8-11-23; 8:45 am]
BILLING CODE 6450-01-P