[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Rules and Regulations]
[Pages 38762-38835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08001]
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Vol. 89
Tuesday,
No. 89
May 7, 2024
Part VIII
Department of Energy
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10 CFR Part 430
Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products; Direct Final Rule
Federal Register / Vol. 89 , No. 89 / Tuesday, May 7, 2024 / Rules
and Regulations
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DEPARTMENT OF ENERGY
10 CFR Part 430
[EERE-2020-BT-STD-0039]
RIN 1904-AF62
Energy Conservation Program: Energy Conservation Standards for
Miscellaneous Refrigeration Products
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Direct final rule.
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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
miscellaneous refrigeration products. In this direct final rule, the
U.S. Department of Energy (``DOE'') is adopting amended energy
conservation standards for miscellaneous refrigeration products. DOE
has determined that the amended energy conservation standards for these
products would result in significant conservation of energy, and are
technologically feasible and economically justified.
DATES: The effective date of this rule is September 4, 2024. If adverse
comments are received by August 26, 2024 and DOE determines that such
comments may provide a reasonable basis for withdrawal of the direct
final rule under 42 U.S.C. 6295(o), a timely withdrawal of this rule
will be published in the Federal Register. If no such adverse comments
are received, compliance with the amended standards established for
miscellaneous refrigeration products in this direct final rule is
required on and after January 31, 2029. Comments regarding the likely
competitive impact of the standards contained in this direct final rule
should be sent to the Department of Justice contact listed in the
ADDRESSES section on or before June 6, 2024.
ADDRESSES: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
comments, and other supporting documents/materials, is available for
review at www.regulations.gov. All documents in the docket are listed
in the www.regulations.gov index. However, not all documents listed in
the index may be publicly available, such as information that is exempt
from public disclosure.
The docket web page can be found at www.regulations.gov/docket/EERE-2020-BT-STD-0039. The docket web page contains instructions on how
to access all documents, including public comments, in the docket.
For further information on how to submit a comment or review other
public comments and the docket, contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
[email protected].
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 standards contained in this direct
final rule. Interested persons may contact the Antitrust 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 direct final rule.
FOR FURTHER INFORMATION CONTACT:
Mr. Lucas Adin, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone:
(202) 287-5904. Email: [email protected].
Ms. Kristin Koernig, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (240) 243-3383. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Direct Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. Current Test Procedures
3. History of Standards Rulemaking for MREFs
4. The Joint Agreement
III. General Discussion
A. Scope of Coverage
B. Fairly Representative of Relevant Point of View
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price (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. Product Classes With Automatic Icemakers
b. Addition of Product Class C-5-BI
2. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Analysis
a. Built-In Classes
b. Baseline Efficiency/Energy Use
c. Higher Efficiency Levels
d. Variable-Speed Compressor Supply Chain
2. Cost Analysis
3. Cost-Efficiency Results
D. Markups Analysis
E. Energy Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
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. 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
c. Sensitivity Analysis Using Updated 2023 SC-GHG Estimates
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
O. Other Comments
V. Analytical Results and Conclusions
A. Trial Standard Levels
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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 MREF Standards
2. Annualized Benefits and Costs of the Adopted Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563, and 14094
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Information Quality
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Synopsis of the Direct Final Rule
The Energy Policy and Conservation Act, Public Law 94-163, as
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency
of a number of consumer products and certain industrial equipment. (42
U.S.C. 6291-6317, as codified) Title III, Part B of EPCA \2\
established the Energy Conservation Program for Consumer Products Other
Than Automobiles. (42 U.S.C. 6291-6309, as codified) These products
include miscellaneous refrigeration products (``MREFs''), the subject
of this direct final rule.
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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.
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Pursuant to EPCA, any new or amended energy conservation standard
must, among other things, be designed to achieve the maximum
improvement in energy efficiency that DOE determines is technologically
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A))
Furthermore, the new or amended standard must result in significant
conservation of energy. (42 U.S.C. 6295(o)(3)(B))
In light of the statutory authority above and under the authority
provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule
amending the energy conservation standards for MREFs.
The adopted standard levels in this direct final rule were proposed
in a letter submitted to DOE jointly by groups representing
manufacturers, energy and environmental advocates, consumer groups, and
a utility. This letter, titled ``Energy Efficiency Agreement of 2023''
(hereafter, the ``Joint Agreement'' \3\), recommends specific energy
conservation standards for MREFs that, in the commenters' view, would
satisfy the EPCA requirements in 42 U.S.C. 6295(o). DOE subsequently
received letters of support from states, including California,
Massachusetts, and New York,\4\ as well as San Diego Gas and Electric
(``SDG&E'') and Southern California Edison (``SCE'') advocating for the
adoption of the recommended standards.\5\
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\3\ This document is available in the docket at:
www.regulations.gov/document/EERE-2020-BT-STD-0039-0034.
\4\ This document is available in the docket at:
www.regulations.gov/document/EERE-2020-BT-STD-0039-0035.
\5\ This document is available in the docket at:
www.regulations.gov/document/EERE-2020-BT-STD-0039-0036.
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In accordance with the direct final rule provisions at 42 U.S.C.
6295(p)(4), DOE has determined that the recommendations contained
therein are compliant with 42 U.S.C. 6295(o). As required by 42 U.S.C.
6295(p)(4)(A)(i), DOE is also simultaneously publishing a notice of
proposed rulemaking (``NOPR'') that contains the identical standards to
those adopted in this direct final rule. Consistent with the statute,
DOE is providing a 110-day public comment period on the direct final
rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any comments
received may provide a reasonable basis for withdrawal of the direct
final rule under 42 U.S.C. 6295(o), or any other applicable law, DOE
will publish the reasons for withdrawal and continue the rulemaking
under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A of this
document for more details on DOE's statutory authority.
The amended standards that DOE is adopting in this direct final
rule are the efficiency levels recommended in the Joint Agreement
(shown in Table I.1) expressed in terms of kilowatt hours per year
(``kWh/yr'') as measured according to DOE's current MREF test procedure
codified at title 10 of the Code of Federal Regulations (``CFR'') part
430, subpart B, appendix A (``appendix A'').
The amended standards recommended in the Joint Agreement are
represented as trial standard level (``TSL'') 4 in this document
(hereinafter the ``Recommended TSL'') and are described in section V.A
of this document. The Joint Agreement's standards for MREFs apply to
all products listed in Table I.1 and manufactured in or imported into
the United States starting on January 31, 2029.
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A. Benefits and Costs to Consumers
Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted standards on consumers of MREFs, as measured by the average
life-cycle cost (``LCC'') savings and the simple payback period
(``PBP'') \6\ The average LCC savings are positive for all product
classes, and the PBP is less than the average lifetime of MREFs, which
varies by product class (see section IV.F of this document).
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\6\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of new or amended standards
(see section IV.F.9 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).
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BILLING CODE 6450-01-C
DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document.
B. Impact on Manufacturers \7\
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\7\ All monetary values in this document are expressed in 2022
dollars. unless indicated otherwise. For purposes of discounting
future monetary values, the present year in the analysis was 2024.
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The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the base year through the
end of the analysis period (2024-2058). Using a real discount rate of
7.7 percent, DOE estimates that the INPV for manufacturers of MREFs in
the case without amended standards is $807.7 million. Under the adopted
standards, which align with the Recommended TSL (i.e., TSL 4) for
MREFs, DOE estimates the change in INPV to range
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from -11.4 percent to -7.5 percent, which is approximately -$92.1
million to -$60.3 million. In order to bring products into compliance
with amended standards, it is estimated that industry will incur total
conversion costs of $130.7 million.
DOE's analysis of the impacts of the adopted standards on
manufacturers is described in sections IV.J and V.B.2 of this document.
C. National Benefits and Costs
DOE's analyses indicate that the adopted energy conservation
standards for MREFs would save a significant amount of energy. Relative
to the case without amended standards, the lifetime energy savings for
MREFs purchased in the 30-year period that begins in the anticipated
year of compliance with the amended standards (2029-2058) amount to
0.32 quadrillion British thermal units (``Btu''), or quads.\8\ This
represents a savings of 26 percent relative to the energy use of these
products in the case without amended standards (referred to as the
``no-new-standards case'').
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\8\ 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 standards for MREFs ranges from $0.17 billion (at a 7-
percent discount rate) to $0.77 billion (at a 3-percent discount rate).
This NPV expresses the estimated total value of future operating-cost
savings minus the estimated increased product costs for MREFs purchased
in 2029-2058.
In addition, the adopted standards for MREFs are projected to yield
significant environmental benefits. DOE estimates that the standards
will result in cumulative emission reductions (over the same period as
for energy savings) of 5.85 million metric tons (``Mt'') \9\ of carbon
dioxide (``CO2''), 1.84 thousand tons of sulfur dioxide
(``SO2''), 10.77 thousand tons of nitrogen oxides
(``NOX''), 48.64 thousand tons of methane
(``CH4''), 0.06 thousand tons of nitrous oxide
(``N2O''), and 0.01 tons of mercury (``Hg'').\10\
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\9\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons.
\10\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2023 (``AEO2023''). AEO2023 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 affect 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 (in terms of benefit
per ton of GHG avoided) developed by an Interagency Working Group on
the Social Cost of Greenhouse Gases (``IWG'').\11\ 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 are estimated to be $0.32
billion. DOE does not have a single central SC-GHG point estimate and
it emphasizes the value of considering the benefits calculated using
all four sets of SC-GHG estimates. DOE notes, however, that the adopted
standards would be economically justified even without inclusion of the
estimated monetized benefits of reduced GHG emissions.
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\11\ 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
(last accessed November 29, 2023.)
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DOE estimated the monetary health benefits of SO2 and
NOX emissions reductions, using benefit per ton estimates
from the Environmental Protection Agency (``EPA''),\12\ as discussed in
section IV.L of this document. DOE estimated the present value of the
health benefits would be $0.24 billion using a 7-percent discount rate,
and $0.62 billion using a 3-percent discount rate.\13\ DOE is currently
only monetizing health benefits from changes in ambient fine
particulate matter (``PM2.5'') concentrations from two
precursors (SO2 and NOX), and from changes in
ambient ozone from one precursor (for 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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\12\ U.S. EPA. Estimating the Benefit per Ton of Reducing
Directly Emitted PM2.5, PM2.5 Precursors and
Ozone Precursors from 21 Sectors. Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors (last
accessed November 29, 2023.)
\13\ DOE estimates the economic value of these emissions
reductions resulting from the considered 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 amended standards for MREFs. 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.
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The benefits and costs of the adopted 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 value of climate and health benefits
of emission reductions, all annualized.\14\
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\14\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2022, 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 2022. Using the present value, DOE then calculated the fixed
annual payment over a 30-year period, starting in the compliance
year, that yields the same present value.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products and are measured for the lifetime of MREFs shipped
during the period 2029-2058. The benefits associated with reduced
emissions achieved as a result of the adopted standards are also
calculated based on the lifetime of MREFs shipped during the period
2029-2058. 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 of this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the standards adopted in this direct final rule,
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 cost of the standards adopted
in this direct final rule is $72.7 million per year in increased
equipment costs, while the estimated annual benefits are $90.6 million
in reduced equipment operating costs, $18.3 million in climate
benefits, and $25.6 million in health benefits. In this case, the net
benefit would amount to $61.7 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the standards is $70.8 million per year in increased
equipment costs, while the estimated annual benefits are $115 million
in reduced operating costs, $18.3 million in climate benefits, and
$35.6 million in health benefits. In this case, the net benefit amounts
to $98.0 million per year.
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DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
DOE has determined that the Joint Agreement was submitted jointly
by interested persons that are fairly representative of relevant points
of view, in accordance with 42 U.S.C. 6295(p)(4)(A). After considering
the analysis and weighing the benefits and burdens, DOE has determined
that the recommended standards are in accordance with 42 U.S.C.
6295(o), which contains the criteria for prescribing new or amended
standards. Specifically, the Secretary has determined that the adoption
of the recommended standards would result in the significant
conservation of energy and is technologically feasible and economically
justified. In determining whether the recommended standards are
economically justified, the Secretary has determined that the benefits
of the recommended standards exceed the burdens. The Secretary has
concluded that the recommended standards, when considering the benefits
of energy savings, positive NPV of consumer benefits, emission
reductions, the estimated monetary value of the emissions reductions,
and positive average LCC savings, would yield benefits outweighing the
negative impacts on some consumers and on manufacturers, including the
conversion costs that could result in a reduction in INPV for
manufacturers.
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 cost of the standards for
MREFs is $72.7 million per year in increased product costs, while the
estimated annual benefits are $90.6 million in reduced product
operating costs, $18.3 million in climate benefits, and $25.6 million
in health benefits. The net benefit amounts to $61.7 million per year.
DOE notes that the net benefits are substantial even in the absence of
the climate benefits,\15\ and DOE would adopt the same standards in the
absence of such benefits.
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\15\ The information on climate benefits is provided in
compliance with Executive Order 12866.
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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.\16\ 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.
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\16\ 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).
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As previously mentioned, the standards are projected to result in
estimated national energy savings of 0.32 quads full-fuel-cycle
(``FFC''), the equivalent of the primary annual energy use of 2.1
million homes. In addition, they are projected to reduce cumulative
CO2 emissions by 5.85 million metric tons. Based on these
findings, DOE has determined the energy savings from the standard
levels adopted in this direct final rule are ``significant'' within the
meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the
basis for
[[Page 38770]]
these conclusions is contained in the remainder of this document and
the accompanying technical support document (``TSD'').\17\
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\17\ The direct final rule TSD is available in the docket for
this rulemaking at www.regulations.gov/docket/EERE-2020-BT-STD-0039/document.
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Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule amending the energy conservation
standards for MREFs. Consistent with this authority, DOE is also
simultaneously publishing elsewhere in this issue of the Federal
Register a NOPR proposing standards that are identical to those
contained in this direct final rule. See 42 U.S.C. 6295(p)(4)(A)(i).
II. Introduction
The following section briefly discusses the statutory authority
underlying this direct final rule, as well as some of the relevant
historical background related to the establishment of standards for
MREFs.
A. Authority
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA \18\ established the Energy Conservation Program for Consumer
Products Other Than Automobiles, which, in addition to identifying
particular consumer products and commercial equipment as covered under
the statute, permits the Secretary of Energy to classify additional
types of consumer products as covered products. (42 U.S.C. 6292(a)(20))
DOE added MREFs as covered products through a final determination of
coverage published in the Federal Register on July 18, 2016 (the ``July
2016 Final Coverage Determination''). 81 FR 46768. MREFs are consumer
refrigeration products other than refrigerators, refrigerator-freezers,
or freezers, which include coolers and combination cooler refrigeration
products. 10 CFR 430.2. MREFs include refrigeration products such as
coolers (e.g., wine chillers and other specialty products) and
combination cooler refrigeration products (e.g., wine chillers and
other specialty compartments combined with a refrigerator,
refrigerator-freezers, or freezers). EPCA further provides that, not
later than 6 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)) Not later than 3
years after issuance of a final determination not to amend standards,
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)(3)(B))
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\18\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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The energy conservation program under EPCA, consists essentially of
four parts: (1) testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of the 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 instances 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 42 U.S.C. 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 6295(s)) Similarly, DOE must use
these test procedures to determine whether the products comply with
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test
procedure for MREFs appears at appendix A (Uniform Test Method for
Measuring the Energy Consumption of Refrigerators, Refrigerator-
Freezers, and Miscellaneous Refrigeration Products).
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including MREFs. Any new or
amended standard for a covered product must be designed to achieve the
maximum improvement in energy efficiency that the Secretary of Energy
determines is technologically feasible and economically justified. (42
U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may
not adopt any standard that would not result in the significant
conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard (1) for certain
products, including MREFs, if no test procedure has been established
for the product, or (2) if DOE determines by rule that the standard is
not technologically feasible or economically justified. (42 U.S.C.
6295(o)(3)(A)-(B)) In deciding whether a proposed standard is
economically justified, DOE must determine whether the benefits of the
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make
this determination after receiving comments on the proposed standard,
and by considering, to the greatest extent practicable, the following
seven statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (``Secretary'') considers
relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified if the Secretary finds that
the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
[[Page 38771]]
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe
an amended or new standard if interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
EPCA specifies requirements when promulgating an energy
conservation standard for a covered product that has two or more
subcategories. A rule prescribing an energy conservation standard for a
type (or class) of product must specify a different standard level for
a type or class of products that has the same function or intended use
if DOE determines that products within such group (A) consume a
different kind of energy from that consumed by other covered products
within such type (or class); or (B) have a capacity or other
performance-related feature which other products within such type (or
class) do not have and such feature justifies a higher or lower
standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-
related feature justifies a different standard for a group of products,
DOE considers such factors as the utility to the consumer of such a
feature and other factors DOE deems appropriate. (Id.) Any rule
prescribing such a standard must include an explanation of the basis on
which such higher or lower level was established. (42 U.S.C.
6295(q)(2))
Additionally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, final rules for new or amended energy conservation standards
promulgated after July 1, 2010, are 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 procedure for MREFs addresses
standby mode and off mode energy use, as do the amended standards
adopted in this direct final rule.
Finally, EISA 2007 amended EPCA, in relevant part, to grant DOE
authority to issue a final rule (i.e., a ``direct final rule'')
establishing an energy conservation standard upon receipt of a
statement submitted jointly by interested persons that are fairly
representative of relevant points of view (including representatives of
manufacturers of covered products, States, and efficiency advocates),
as determined by the Secretary, that contains recommendations with
respect to an energy or water conservation standard. (42 U.S.C.
6295(p)(4)) Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also
determine whether a jointly-submitted recommendation for an energy or
water conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C.
6313(a)(6)(B), as applicable.
The direct final rule must be published simultaneously with a NOPR
that proposes an energy or water conservation standard that is
identical to the standard established in the direct final rule, and DOE
must provide a public comment period of at least 110 days on this
proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) While DOE typically provides a
comment period of 60 days on proposed standards, for a NOPR
accompanying a direct final rule, DOE provides a comment period of the
same length as the comment period on the direct final rule--i.e., 110
days. Based on the comments received during this period, the direct
final rule will either become effective, or DOE will withdraw it not
later than 120 days after its issuance if: (1) one or more adverse
comments is received, and (2) DOE determines that those comments, when
viewed in light of the rulemaking record related to the direct final
rule, may provide a reasonable basis for withdrawal of the direct final
rule under 42 U.S.C. 6295(o). (42 U.S.C. 6295(p)(4)(C)) Receipt of an
alternative joint recommendation may also trigger a DOE withdrawal of
the direct final rule in the same manner. (Id.)
DOE has previously explained its interpretation of its direct final
rule authority. In a final rule amending the Department's ``Procedures,
Interpretations and Policies for Consideration of New or Revised Energy
Conservation Standards for Consumer Products'' at 10 CFR part 430,
subpart C, appendix A (``Process Rule''), DOE noted that it may issue
standards recommended by interested persons that are fairly
representative of relative points of view as a direct final rule when
the recommended standards are in accordance with 42 U.S.C. 6295(o) or
42 U.S.C. 6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13,
2021). But the direct final rule provision in EPCA does not impose
additional requirements applicable to other standards rulemakings,
which is consistent with the unique circumstances of rules issued as
consensus agreements under DOE's direct final rule authority. Id. DOE's
discretion remains bounded by its statutory mandate to adopt a standard
that results in the maximum improvement in energy efficiency that is
technologically feasible and economically justified--a requirement
found in 42 U.S.C. 6295(o). Id. As such, DOE's review and analysis of
the Joint Agreement is limited to whether the recommended standards
satisfy the criteria in 42 U.S.C. 6295(o).
B. Background
1. Current Standards
In a direct final rule published on October 28, 2016 (``October
2016 Final Rule''), DOE prescribed the current energy conservation
standards for MREFs manufactured on and after October 28, 2019. 81 FR
75194. These standards are set forth in DOE's regulations at 10 CFR
430.32(aa)(1)-(2). These standards are consistent with a negotiated
term sheet submitted to DOE by interested parties representing
manufacturers, energy and environmental advocates, and consumer
groups.\19\
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\19\ The negotiated term sheets are available in docket ID EERE-
2011-BT-STD-0043 on www.regulations.gov.
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2. Current Test Procedures
On October 12, 2021, DOE published a test procedure final rule
(``October 2021 TP Final Rule'') amending the test procedure for MREFs,
at appendix A. 86 FR 56790. The test procedure amendments included
adopting the latest version of the relevant industry standard published
by the Association of Home Appliance Manufacturers (``AHAM''), updated
in 2019, AHAM Standard HRF-1, ``Energy and Internal Volume of
Refrigerating Appliances'' (``HRF-1-2019''). 10 CFR 430.3(i)(4). The
standard levels adopted in this direct final rule are based on the
annual energy use (``AEU'') metrics as measured according to appendix
A.
[[Page 38772]]
3. History of Standards Rulemaking for MREFs
On April 1, 2015, DOE published a notice announcing its intention
to establish a negotiated rulemaking working group under the Appliance
Standards Rulemaking Advisory Committee (``ASRAC'') to negotiate energy
conservation standards for refrigeration products such as wine
chillers. 80 FR 17355. DOE then created a working group of interested
parties to develop a series of recommended energy conservation
standards for MREFs. On July 18, 2016, DOE published the July 2016
Final Coverage Determination that added MREFs as covered products. 81
FR 46768. In that determination, DOE noted that MREFs, on average,
consume more than 150 kilowatt hours per year (``kWh/yr'') and that the
aggregate annual national energy use of these products exceeds 4.2
terawatt hours (``TWh''). 81 FR 46768, 46775. In addition to
establishing coverage, the July 2016 Final Coverage Determination
established definitions for ``miscellaneous refrigeration products,''
``coolers,'' and ``combination cooler refrigeration products'' in 10
CFR 430.2. 81 FR 46768, 46791-46792.
On October 28, 2016, a negotiated term sheet containing a series of
recommended standards and other related recommendations were submitted
to ASRAC for approval and, subsequently, DOE published the October 2016
Direct Final Rule adopting energy conservation standards consistent
with the recommendations contained in the term sheet. 81 FR 75194.
Concurrent with the October 2016 Direct Final Rule, DOE published a
NOPR in which it proposed and requested comments on the standards set
forth in the direct final rule. 81 FR 74950. On May 26, 2017, DOE
published a notice in the Federal Register in which it determined that
the comments received in response to the October 2016 Direct Final Rule
did not provide a reasonable basis for withdrawing the rule and,
therefore, confirmed the adoption of the energy conservation standards
established in that direct final rule. 82 FR 24214.
4. The Joint Agreement
On September 25, 2023, DOE received a joint statement of
recommended standards (i.e., the Joint Agreement) for various consumer
products, including MREFs, submitted jointly by groups representing
manufacturers, energy and environmental advocates, consumer groups, and
a utility.\20\ In addition to the recommended standards for MREFs, the
Joint Agreement also included separate recommendations for several
other covered products.\21\ And, while acknowledging that DOE may
implement these recommendations in separate rulemakings, the Joint
Agreement also stated that the recommendations were recommended as a
complete package and each recommendation is contingent upon the other
parts being implemented. DOE understands this to mean that the Joint
Agreement is contingent upon DOE initiating rulemaking processes to
adopt all of the recommended standards in the agreement. That is
distinguished from an agreement where issuance of an amended energy
conservation standard for a covered product is contingent on issuance
of amended energy conservation standards for the other covered
products. If the Joint Agreement were so construed, it would conflict
with the anti-backsliding provision in 42 U.S.C. 6295(o)(1), because it
would imply the possibility that, if DOE were unable to issue an
amended standard for a certain product, it would have to withdraw a
previously issued standard for one of the other products. The anti-
backsliding provision, however, prevents DOE from withdrawing or
amending an energy conservation standard to be less stringent. As a
result, DOE will be proceeding with individual rulemakings that will
evaluate each of the recommended standards separately under the
applicable statutory criteria. The Joint Agreement recommends amended
standard levels for MREFs as presented in Table II.3. (Joint Agreement,
No. 34 at p. 4) Details of the Joint Agreement recommendations for
other products are provided in the Joint Agreement posted in the
docket.\22\
---------------------------------------------------------------------------
\20\ The signatories to the Joint Agreement include AHAM,
American Council for an Energy-Efficient Economy, Alliance for Water
Efficiency, Appliance Standards Awareness Project, Consumer
Federation of America, Consumer Reports, Earthjustice, National
Consumer Law Center, Natural Resources Defense Council, Northwest
Energy Efficiency Alliance, and Pacific Gas and Electric Company.
Members of AHAM's Major Appliance Division that manufacture the
affected products include: Alliance Laundry Systems, LLC; Asko
Appliances AB; Beko US Inc.; Brown Stove Works, Inc.; BSH; Danby
Products, Ltd.; Electrolux Home Products, Inc.; Elicamex S.A. de
C.V.; Faber; Fotile America; GEA, a Haier Company; L'Atelier Paris
Haute Design LLG; LGEUSA; Liebherr USA, Co.; Midea America Corp.;
Miele, Inc.; Panasonic Appliances Refrigeration Systems (PAPRSA)
Corporation of America; Perlick Corporation; Samsung; Sharp
Electronics Corporation; Smeg S.p.A; Sub-Zero Group, Inc.; The
Middleby Corporation; U-Line Corporation; Viking Range, LLC; and
Whirlpool.
\21\ The Joint Agreement contained recommendations for 6 covered
products: refrigerators, refrigerator-freezers, and freezers;
clothes washers; clothes dryers; dishwashers; cooking products; and
miscellaneous refrigeration products.
\22\ The term sheet is available in the docket at:
www.regulations.gov/document/EERE-2020-BT-STD-0039-0034.
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BILLING CODE 6450-01-P
[[Page 38773]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.007
BILLING CODE 6450-01-C
When the Joint Agreement was submitted, DOE was conducting a
rulemaking to consider amending the standards for MREFs. As part of
that process, DOE published a NOPR and announced a public meeting on
March 31, 2023 (``March 2023 NOPR'') seeking comment on its proposed
amended standards to inform its decision consistent with its
obligations under EPCA and the Administrative Procedure Act (``APA'').
88 FR 19382. DOE held a public webinar on May 2, 2023, to discuss and
receive comments on the March 2023 NOPR and NOPR TSD (``May 2, 2023,
public meeting''). The NOPR TSD is available at: www.regulations.gov/document/EERE-2020-BT-STD-0039-0026. The March 2023 NOPR proposed
amended standards defined in terms of the AEU metrics as measured
according to appendix A. Id. at 88 FR 19383-19384.
Although DOE is adopting the Joint Agreement as a direct final rule
and no longer proceeding with its prior rulemaking, DOE did consider
relevant comments, data, and information obtained during that
rulemaking process in determining whether the recommended standards
from the Joint Agreement are in accordance with 42 U.S.C. 6295(o). Any
discussion of comments, data, or information in this direct final rule
that were obtained during DOE's prior rulemaking will include a
parenthetical reference that provides the location of the item in the
public record.\23\
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\23\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for MREFs. (Docket No. EERE-2020-BT-
STD-0039, which is maintained at www.regulations.gov). The
references are arranged as follows: (commenter name, comment docket
ID number, page of that document).
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III. General Discussion
DOE is issuing this direct final rule after determining that the
recommended standards submitted in the Joint Agreement meet the
requirements in 42 U.S.C. 6295(p)(4). More specifically, DOE has
determined that the recommended standards were submitted by interested
persons that are fairly representative of relevant points of view and
the recommended standards satisfy the criteria in 42 U.S.C. 6295(o).
A. Scope of Coverage
This direct final rule covers those consumer products that meet the
definition of ``miscellaneous refrigeration product,'' as codified at
10 CFR 430.2, which states that it is a consumer refrigeration product
other than a refrigerator, refrigerator-freezer, or freezer, which
includes coolers and combination cooler refrigeration products.
The differences between miscellaneous refrigeration products and
other consumer refrigeration products, which were addressed in a
separate rulemaking for refrigerators, refrigerator-freezers, and
freezers, are largely in compartment temperature capability.
Refrigerators are broadly defined as a cabinet capable of maintaining a
compartment temperature above 32 [deg]F and below 39 [deg]F. Freezers
are broadly defined as a cabinet capable of maintaining compartment
temperature of 0 [deg]F or below. Refrigerator-freezers have two or
more compartments, with one capable of maintaining compartment
temperatures above 32 [deg]F and below 39 [deg]F (i.e., a fresh food or
refrigerator compartment), and the other capable of maintaining a
compartment temperature of 8 [deg]F with adjustability down to 0 [deg]F
or below (i.e., a frozen food or freezer compartment). Miscellaneous
refrigeration products generally include a cooler compartment that is
incapable of maintaining the low temperatures achieved by
refrigerators, refrigerator-freezers, and freezers.
[[Page 38774]]
Coolers (and cooler compartments) have temperature ranges that either
extend no lower than 39 [deg]F, or no lower than 37 [deg]F but at least
as high as 60 [deg]F. Combination-coolers contain a fresh food and/or
frozen food compartment in addition to one or more cooler compartments.
See 10 CFR 430.2 for more information regarding consumer refrigeration
products definitions.
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used, or by capacity, or based upon performance-related features that
justify a higher or lower 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 Joint Agreement proposed approach for MREF product classes
embeds within the energy use equations the difference between classes
for MREFs that are otherwise identical except for presence of an
icemaker, using a logical variable I (equal to 1 for a product with an
icemaker and equal to 0 for a product without an icemaker) multiplied
by the constant icemaker energy use adder.
The product class representation simplification in the Joint
Agreement is consistent with what was proposed by DOE in the March 2023
NOPR. Based on the comments received in response to the March 2023 NOPR
and DOE's evaluation of the Joint Agreement, this direct final rule
adopts this change. See section IV.A.1 of this document for further
detail and discussion regarding the product classes analyzed in this
direct final rule.
B. Fairly Representative of Relevant Point of View
Under the direct final rule provision in EPCA, recommended energy
conservation standards must be submitted by interested persons that are
fairly representative of relevant points of view (including
representatives of manufacturers of covered products, States, and
efficiency advocates) as determined by DOE. (42 U.S.C. 6295(p)(4)(A))
With respect to this requirement, DOE notes that the Joint Agreement
included a trade association, AHAM, which represents 15 manufacturers
of MREFs.\24\ The Joint Agreement also included environmental and
energy-efficiency advocacy organizations, consumer advocacy
organizations, and a gas and electric utility company. As a result, DOE
has determined that the Joint Agreement was submitted by interested
persons who are fairly representative of relevant points of view.
Additionally, DOE received a letter in support of the Joint Agreement
from the States of New York, California, and Massachusetts. (See
NYSERDA, et al., No. 35 at p. 2) DOE also received a letter in support
of the Joint Agreement from the gas and electric utility, SDG&E, and
the electric utility, SCE (See SDG&E, et al., No. 36 at p. 1).
---------------------------------------------------------------------------
\24\ Manufacturers listed in the Joint Agreement include: Asko
Appliances AB, BSH Home Appliances Corporation, Danby Products,
Ltd., Electrolux Home Products, Inc, GE Appliances, a Haier Company,
Liebherr USA, Co., Electronics America Inc., LG Electronics, Midea
America Corp., Miele, Inc., Panasonic Appliances Refrigeration
Systems (PAPRSA) Corporation of America, Smeg S.p.A, Sub-Zero Group,
Inc., The Middleby Corporation (listed with subsidiaries U-Line
Corporation and Viking Range, LLC).
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C. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the 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
to 10 CFR part 430, subpart C (``Process Rule'').
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 7(b)(2)-(5) of the Process Rule. Section IV.B of this document
discusses the results of the screening analysis for MREFs, particularly
the designs DOE considered, those it screened out, and those that are
the basis for the standards considered in this rulemaking. For further
details on the screening analysis for this rulemaking, see chapter 4 of
the direct final rule TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt a new or amended standard for a type or
class of covered product, it must determine the maximum improvement in
energy efficiency or maximum reduction in energy use that is
technologically feasible for such product. (42 U.S.C. 6295(o)(2)(A))
Accordingly, in the engineering analysis, DOE determined the maximum
technologically feasible (``max-tech'') improvements in energy
efficiency for MREFs, using the design parameters for the most
efficient products available on the market or in working prototypes.
The max-tech levels that DOE determined for this rulemaking are
described in section IV.C of this document and in chapter 5 of the
direct final rule TSD.
D. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to MREFs purchased in the 30-year period that begins in the year of
compliance with the amended standards (2029-2058).\25\ The savings are
measured over the entire lifetime of products purchased in the 30-year
analysis period. DOE quantified the energy savings attributable to each
TSL as the difference in energy consumption between each standards case
and the no-new-standards case. The no-new-standards case represents a
projection of energy consumption that reflects how the market for a
product would likely evolve in the absence of amended energy
conservation standards.
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\25\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
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DOE used its national impact analysis (``NIA'') spreadsheet models
to estimate national energy savings (``NES'') from potential amended
standards for MREFs. 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
[[Page 38775]]
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.\26\ DOE's
approach is based on the calculation of an FFC multiplier for each of
the energy types used by covered products or equipment. For more
information on FFC energy savings, see section IV.H.2 of this document.
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\26\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------
2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
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. 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.
As stated, the standard levels adopted in this direct final rule
are projected to result in national energy savings of 0.32 quads (FFC),
the equivalent of the primary annual energy use of 2.1 million homes.
Based on the amount of FFC savings, the corresponding reduction in
emissions, and need to confront the global climate crisis, DOE has
determined the energy savings from the standard levels adopted in this
direct final rule are ``significant'' within the meaning of 42 U.S.C.
6295(o)(3)(B).
E. 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 rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of potential amended standards 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 cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels are calculated relative to the case that reflects projected
market trends in the absence of new or amended standards. DOE's LCC and
PBP analysis is discussed in further detail in section IV.F of this
document.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section IV.H of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes, and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards adopted in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the
[[Page 38776]]
Attorney General, that is likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine
the impact, if any, of any lessening of competition likely to result
from a standard and to transmit such determination to the Secretary
within 60 days of the publication of a proposed rule, together with an
analysis of the nature and extent of the impact. (42 U.S.C.
6295(o)(2)(B)(ii)) DOE will transmit a copy of this direct final rule
to the Attorney General with a request that the Department of Justice
(``DOJ'') provide its determination on this issue. DOE will consider
DOJ's comments on the rule in determining whether to withdraw the
direct final rule. DOE will also publish and respond to the DOJ's
comments in the Federal Register in a separate notice.
f. Need for National Energy Conservation
DOE also considers the need for national energy 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 adopted standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
system. DOE conducts a utility impact analysis to estimate how
standards may affect the Nation's needed power generation capacity, as
discussed in section IV.M of this document.
DOE finds that environmental and public health benefits associated
with the more efficient use of energy are important to take into
account when considering the need for national energy conservation. The
adopted standards are likely to result in environmental benefits in the
form of reduced emissions of air pollutants and greenhouse gases
(``GHGs'') associated with energy production and use. DOE conducts an
emissions analysis to estimate how potential standards may affect these
emissions, as discussed in section IV.K of this document; the estimated
emissions impacts are reported in section V.B.6 of this 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 effect potential amended
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F of this document.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to MREFs. Separate subsections address each
component of DOE's analyses, including relevant comments DOE received
in its separate rulemaking to amend the energy conservation standards
for MREFs prior to receiving the Joint Agreement.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended energy
conservation standards. The national impacts analysis uses a second
spreadsheet set that provides shipments projections and calculates
national energy savings and net present value of total consumer costs
and savings expected to result from potential energy conservation
standards. DOE uses the third spreadsheet tool, the Government
Regulatory Impact Model (``GRIM''), to assess manufacturer impacts of
potential standards. These three spreadsheet tools are available on the
DOE website for this rulemaking: www.regulations.gov/docket/EERE-2020-BT-STD-0039. Additionally, DOE used output from the latest version of
the Energy Information Administration's (``EIA's'') Annual Energy
Outlook (``AEO'') for the emissions and utility impact analyses.
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly-available
information. The subjects addressed in the market and technology
assessment for this rulemaking include (1) a determination of the scope
of the rulemaking and product classes, (2) manufacturers and industry
structure, (3) existing efficiency programs, (4) shipments information,
(5) market and industry trends, and (6) technologies or design options
that could improve the energy efficiency of MREFs. The key findings of
DOE's market assessment are summarized in the following sections. See
chapter 3 of the direct final rule TSD for further discussion of the
market and technology assessment.
1. Product Classes
The Joint Agreement specifies 11 product classes for MREFs. (Joint
Agreement, No. 34 at p. 7) In particular, the Joint Agreement
recommends a consolidated product class representation, which
incorporates icemaker energy adders and door allowances into the energy
use equations for product classes in which they are applicable. As
discussed further in section IV.A.1.a of this document, DOE notes that
the consolidation of product class representation in the Joint
Agreement does not combine the product classes, but rather serves to
simplify the list of classes, in particular for those product classes
with and without icemakers, and facilitates the implementation of a
single equation for representation of their maximum allowable energy
use. In this direct final rule, DOE is adopting the product classes
from the Joint Agreement, as listed in Table IV.1.
[[Page 38777]]
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DOE further notes that product classes established through EPCA's
direct final rule authority are not subject to the criteria specified
at 42 U.S.C. 6295(q)(1) for establishing product classes. Nevertheless,
in accordance with 42 U.S.C. 6295(o)(4)--which is applicable to direct
final rules--DOE has concluded that the standards adopted in this
direct final rule will not result in the unavailability in any covered
product type (or class) of performance characteristics, features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States currently.\27\ DOE's findings
in this regard are discussed in detail in section V.B.4 of this
document.
---------------------------------------------------------------------------
\27\ EPCA specifies that DOE may not prescribe an amended or new
standard if the Secretary finds (and publishes such finding) that
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 at the time of the
Secretary's finding. (42 U.S.C. 6295(o)(4))
---------------------------------------------------------------------------
a. Product Classes With Automatic Icemakers
The Joint Agreement includes a proposed simplification of maximum
allowable energy and expresses the maximum allowable energy use for
both icemaking and non-icemaking classes in the same equation, thus
consolidating the presentation of classes and their energy conservation
standards. The energy use equations will, for those classes that may or
may not have an icemaker, include a term equal to the icemaking energy
use adder multiplied by a factor that is defined to equal 1 for
products with icemakers and to equal 0 for products without icemakers.
This approach does not combine classes that are the same other than the
presence of an icemaker but does simplify the list of classes and
representation of their maximum allowable energy use, providing for
each set of classes with and without ice makers a single equation for
maximum energy use. This simplification is consistent with the approach
proposed in the March 2023 NOPR. See 88 FR 19382, 19395.
In this direct final rule, DOE is adopting the Joint Agreement
proposal to express the maximum allowable energy use for any set of
classes differing only in whether the class includes an icemaker or not
within a single equation. The single equation does this by including
the icemaker energy use adder multiplied by logical variable I that is
set equal to 1 for a product with an icemaker present and 0 for a
product without an icemaker.
b. Addition of Product Class C-5-BI
The Joint Agreement recommends the addition of a new product class
C-5-BI (i.e., built-in combination cooler-refrigerator-freezers with
bottom-mounted freezers and automatic icemakers) and specific energy
efficiency standards for the new product class (``PC''). (Joint
Agreement, No. 34 at p. 7) The current energy conservation standards
for MREFs do not include a separate product class for products of this
configuration. However, DOE has previously proposed establishing a
separate product class for C-5-BI configurations in the March 2023
NOPR, with a baseline level of 6.08AV + 246 kWh/yr, based in part on
input from commenters, and considered increased efficiency levels using
PC C-3A-BI as a proxy. 88 FR 19382, 19395.
The Joint Agreement recommends a standard equation of 5.47AV +
196.2 + 28I kWh/yr for product class C-5-BI. DOE notes that this
recommended level is consistent with the level proposed in the March
2023 NOPR for product class C-5-BI, which represents a 10 percent more
stringent level than the baseline level identified in the March 2023
NOPR.
Considering that the recommendation is consistent with the proposed
level in the March 2023 NOPR and carries support from a broad cross-
section of interests, including trade associations representing these
manufactures, environmental and energy-efficiency advocacy
organizations, consumer advocates, and electric utility providers as
well as the support of several States, DOE believes it appropriate to
adopt this new product class, C-5-BI, and the recommended standard
equation. DOE's direct rulemaking authority under 42 U.S.C. 6295(p)(4)
is constrained only by the requirements of 42 U.S.C. 6295(o), which
does not include the product class requirements in 42 U.S.C. 6295(q).
However, DOE notes that the addition of a PC C-5-BI is warranted as the
application of bottom-mounted freezer and icemaker on a built-in cooler
with refrigerator-freezer provides consumers the utility of storage
compartments at freezing, fresh food, and cooler temperature levels,
whereas the current classes combine a cooler compartment with either a
freezer or fresh food compartment, but not both. In addition,
establishing separate classes of this configuration both with and
without automatic icemaking addresses the unique utility of icemaking
that may be
[[Page 38778]]
included as part of the product. As a result of this additional
utility, the application of a bottom-mounted freezer and icemaker
constitutes a performance related feature.
Given the indication from the Joint Agreement that such a product
class standard would be beneficial in its implementation, the
classification of a bottom-mounted freezer and icemaker as performance
related features, and the recommendation's consistency with the other
adopted standards, DOE is adopting a PC C-5-BI standard in this direct
final rule.
See section V of this document for more information regarding the
TSL configuration and discussion of the adopted level for this product
class. See chapter 5 of the direct final rule TSD for more discussion
regarding the addition of this product class.
2. Technology Options
In the preliminary market analysis and technology assessment, DOE
identified 36 technology options initially determined to improve the
efficiency of MREFs, as measured by the DOE test procedure. In this
direct final rule, DOE considered the technology options listed in
Table IV.2, consistent with the table of technology options presented
in the March 2023 NOPR. 88 FR 19382, 19395-19396. Chapter 3 of the
direct final rule TSD includes a detailed list and descriptions of all
technology options identified for MREFs.
BILLING CODE 6450-01-P
[[Page 38779]]
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BILLING CODE 6450-01-C
[[Page 38780]]
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 result in the unavailability of any covered
product type with performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as products generally available in the United States at the time,
it will not be considered further.
(4) 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 sum, 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 sections include DOE's evaluation of each technology
option against the screening analysis criteria and whether DOE
determined that a technology option should be excluded (``screened
out'') based on the screening criteria.
1. Screened-Out Technologies
In this direct final rule, DOE screened out the technologies
presented in Table IV.3 on the basis of technological feasibility,
practicability to manufacture, install, and service, adverse impacts on
utility or availability, adverse impacts on health and safety, and/or
unique-pathway proprietary technologies. Chapter 4 of the direct final
rule TSD includes a detailed description of the screening analysis for
each of these technology options.
[GRAPHIC] [TIFF OMITTED] TR07MY24.010
2. Remaining Technologies
Through a review of each technology, DOE concludes that all of the
other identified technologies listed in section IV.B.2 of this document
met all five screening criteria to be examined further as design
options in DOE's direct final rule analysis. In summary, DOE did not
screen out the following technology options:
[[Page 38781]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.011
BILLING CODE 6450-01-C
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture, install, and service and do
not result in adverse impacts on consumer utility, product
availability, health, or safety). For additional details, see chapter 4
of the direct final rule TSD.
C. Engineering Analysis
The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of MREFs. 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 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/equipment 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).
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
[[Page 38782]]
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 interpolate to define ``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).
The approach used for this direct final rule to define the
efficiency levels for analysis is largely the same as the approach DOE
had used for the March 2023 NOPR analysis.
For its analysis in this direct final rule, DOE used a combined
efficiency level and design option approach to directly analyze five
products classes: freestanding compact coolers, freestanding coolers,
and combination cooler classes C-13A, C-3A, and C-9. First, an
efficiency-level approach was used to establish an analysis tied to
existing products on the market. Several products from the cooler class
(compact and standard size) and one product from the combination cooler
class (C-13A) were used in physical teardowns. Additional analyses were
conducted on classes C-3A and C-9; however, a lack of physical teardown
products for these classes led DOE to rely heavily on adjusted analyses
from the consumer refrigerator, refrigerator-freezer, and freezers
(``RF'') classes 3 and 9, respectively. Then, a design option approach
was used to extend the analysis through ``built-down'' efficiency
levels and ``built-up'' efficiency levels where there were gaps in the
range of efficiencies of products that were reverse engineered. As
discussed in the section that follows, DOE applied its direct analyses
of freestanding products to the corresponding built-in product classes.
DOE's direct analysis informed the adopted standards for those product
classes that were not directly analyzed. See section 5.4.1 of the
direct final rule TSD for more discussion on DOE's efficiency analysis.
a. Built-in Classes
In this direct final rule analysis, DOE used the freestanding MREF
classes as proxies for built-in classes. DOE conducted analysis of the
current market for miscellaneous refrigeration products and found that
built-in and freestanding products occupy the same range of
efficiencies, and DOE did not identify any unique characteristic that
would inhibit efficiency improvements for built-in products relative to
freestanding products based on a review on the market. As a result, DOE
chose to apply its freestanding products analyses to built-in classes.
In response to the March 2023 NOPR, AHAM and Sub-zero Group Inc.
(``Sub-zero'') argued that freestanding product classes are not a proxy
for built-in product classes and DOE should evaluate them separately.
(AHAM, No. 31 at p. 6; Sub-zero, No. 30 at p. 1) AHAM and Sub-zero
stated that built-in products have constraints, such as incorporation
into kitchen designs and needing to be flush with cabinetry, that
affect that the technology options for achieving higher efficiency
levels. (AHAM, No. 31 at pp. 6-7; Sub-zero, No. 30 at p. 2) AHAM and
Sub-Zero also stated that different testing requirements for built-ins
(e.g., two inches or less of rear clearance for freestanding products
as opposed to no rear clearance for built-in products) creates inherent
design differences between the freestanding and built-in products. Id.
AHAM and Sub-zero encouraged DOE to revise its analysis to separately
analyze freestanding and built-in products, contending that these
products are fundamentally different. (AHAM, No. 31 at p. 7; Sub-zero,
No. 30 at p. 2)
As discussed in section IV.C.1.c of this document, the efficiency
levels analyzed for this direct final rule represent a percentage
reduction in energy use below the currently applicable standard for
each product class. DOE's analysis of the freestanding product classes
as a proxy for the built-in product classes does not presume that the
two product types have the same nominal costs at each higher efficiency
level, but rather reflects that incremental design changes associated
with reducing energy use on a percentage basis--relative to the
currently applicable standard for each respective product type--are
substantially similar between freestanding and built-in products. To
reflect the inherent design differences between built-in products
compared to free-standing products, as described by commenters, DOE
applied a $30, $50, or $150 adder (depending on product size) to the
baseline costs for the built-in product classes compared to their
freestanding counterparts. See chapter 5 of the direct final rule TSD
for further details regarding the engineering analysis conducted for
each product class.
b. Baseline Efficiency/Energy Use
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/equipment 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. When selecting units for the analysis, DOE selects units at
baseline from various manufacturers for each directly analyzed product
class.
For this direct final rule, DOE chose baseline efficiency levels
represented by the current Federal energy conservation standards,
expressed as maximum annual energy consumption as a function of the
product's adjusted volume. The baseline levels differ for coolers and
combination coolers to account for design differences; all coolers
share the same baseline level, i.e., the baseline is the same function
of adjusted volume for both freestanding and built-in models, for both
compact and standard-size models. The current standards incorporate an
allowance of a constant 84 kWh/yr icemaker adder for product classes
with automatic icemakers, consistent with the current test procedure,
which requires adding this amount of annual energy use to the products
tested performance if the product has an automatic icemaker. DOE
adjusted the baseline energy usage levels for each class to account for
the planned revision in the test procedure to reduce the icemaker
energy use adder to 28 kWh/yr.\28\
---------------------------------------------------------------------------
\28\ See the October 12, 2021, test procedure final rule for
refrigeration products for more information regarding the adoption
of the 28 kWh/yr icemaker adder. 86 FR 56790.
---------------------------------------------------------------------------
[[Page 38783]]
DOE directly analyzed a sample of market representative models from
within five product classes from multiple manufacturers. Directly
analyzed classes include three different AV coolers (AVs of 3 ft\3\, 5
ft\3\, and 15 ft\3\) and three combination cooler classes (C-13A, C-9
and C-3A). In conducting these analyses, eight teardown units were used
in construction of cost curves, and their characteristics were
determined in large part by testing and reverse-engineering. Further
information on the design characteristics of specific analyzed baseline
models is summarized in section 5.4.1 of the direct final rule TSD.
c. 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 direct final rule, DOE analyzed up to five incremental
efficiency levels beyond the baseline for each of the analyzed product
classes. The efficiency levels begin at EL 1, which was 10 percent more
efficient than the current MREF energy conservation standards. For the
compact coolers analysis, DOE extended the efficiency levels in steps
of 10 percent of the current energy conservation standard up to EL 4 at
40 percent; for full-size coolers, EL 4 is analyzed at 35 percent. For
combination coolers (excluding C-9) efficiency levels above EL 1 are in
steps of roughly 5 percent up to EL 4. Finally, EL 5 represents maximum
technology (``max-tech''), which uses design option analysis to extend
the analysis beyond EL 4 by using all applicable design options,
including max efficiency variable-speed compressors and maximum
practical use of vacuum-insulated panels (``VIPs''). For compact
coolers, max tech stands at either 59 percent or 50 percent for the two
directly analyzed AVs--3.1 ft\3\ and 5.1 ft\3\ respectively; full-size
coolers max-tech stands at 38 percent. For combination coolers C-13A
and C-3A, max tech stands at 28 percent and 24 percent, respectively.
DOE conducted analysis for product class C-9 starting with analysis
for a class 9 upright freezer with comparable total refrigerated
volume. In its analysis, DOE concluded that application of all of the
design options being considered at max-tech would be required for the
product to be compliant with the current energy conservation standards.
Currently, the Compliance Certification Database (``CCD'') includes
only one product that is certified as C-9--an LG product certified with
energy use 17 percent below the standard. DOE did not purchase, test,
and reverse-engineer this product, in-part because of the limited
product offering and expected insignificant potential for energy
savings for the class. Thus, DOE is relying primarily on its analysis
of the RF product class 9 freezer, to suggest that opportunities for
energy savings are likely limited and likely not cost-effective, even
if improved efficiency is technically feasible. DOE has not analyzed
efficiency levels beyond baseline for this product class in this direct
final rule but has taken into consideration all design options applied
at max-tech in its analysis.
DOE notes the current Energy Star specifications correspond to EL 1
for freestanding full-size coolers (10 percent), EL 2 for freestanding
compact coolers (20 percent), and EL 3 for both classes of built-in
coolers (30 percent).\29\
---------------------------------------------------------------------------
\29\ See EnergyStar, ``Refrigerators & Freezers Key Product
Criteria,'' Available at www.energystar.gov/products/appliances/refrigerators/key_product_criteria (last accessed July 14, 2023).
---------------------------------------------------------------------------
The efficiency levels analyzed beyond the baseline are shown in
Table IV.5 as follows.
[GRAPHIC] [TIFF OMITTED] TR07MY24.012
d. Variable-Speed Compressor Supply Chain
In response to the March 2023 NOPR, AHAM suggested that DOE
evaluate the robustness of the supply chains for variable-speed
compressors (``VSCs'') while considering the growing demand given more
stringent standards for cooling appliances, including both air
conditioning and refrigeration. (AHAM, No. 31 at p. 5)
In considering this comment and comments provided in response to
the RF rulemaking, DOE interviewed relevant compressor manufacturers to
gather information regarding the level of VSC implementation that would
be required at the efficiency levels analyzed in this direct final
rule, the current and predicted supply of VSCs into the U.S. market,
the predicted time to ramp up production of VSCs, and pricing of VSCs
and components. None of the compressor manufacturers interviewed
expressed any concerns regarding the ability to ramp-up VSC capacity in
response to more stringent MREF standards. Compressor manufacturers
additionally noted that any previous bottlenecks in the VSC supply
chain are no longer a factor at this time, and that they have been
modifying sourcing strategies to ensure a reliable supply of VSCs going
forward. DOE concluded from these interviews that compressor
manufacturers will be able to readily meet any increased demand for
VSCs as a result of the adopted standards within the 5-year
[[Page 38784]]
timeframe between publication of this direct final rule and the
compliance date. DOE further notes that the amended standards adopted
in this final rule reflect the recommendations of the Joint Agreement,
of which AHAM was a signatory.
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, the availability and timeliness of purchasing the product on
the market. The cost approaches are summarized as follows:
[ballot] Physical teardowns: Under this approach, DOE physically
dismantles a commercially available product, component-by-component, to
develop a detailed bill of materials for the product.
[ballot] 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.
[ballot] 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 primarily
physical teardowns. Where possible, physical teardowns were used to
provide a baseline of technology options and pricing for a specific
product class at a specific EL. Then with technology option
information, DOE estimated the cost of various design options including
compressors, VIPs, and insulation, by extrapolating the costs from
price surveys. With specific costs for technology options, DOE was then
able to ``build-up'' or ``build-down'' from the various teardown models
to finish the cost-efficiency curves. DOE used this approach to
calibrate the analysis to certified or measured energy use of specific
available models where possible, while allowing a broader range of
potential efficiency levels to be considered.
The resulting bill of materials provides the basis for the
manufacturer production cost (``MPC'') estimates.
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 corporate annual reports
and Securities and Exchange Commission (``SEC'') 10-K reports \30\
filed by publicly traded manufacturers in primarily engaged in
appliance manufacturing and whose combined product range includes
MREFs. DOE then compared the manufacturer markups derived from the
financials to the manufacturer markups estimated in the October 2016
Direct Final Rule. 81 FR 75194, 75224-75225. See chapter 12 of the
direct final rule TSD for additional detail on the manufacturer markup.
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\30\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. Available at
www.sec.gov/edgar/search/ (last accessed January 30, 2024).
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3. Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of AEU (in kWh) versus MPC
(in dollars), which form the basis for subsequent analyses.
DOE developed estimates of MPCs for each unit in the teardown
sample, and also performed additional modeling for each of the teardown
samples, to extend the analysis to cover the range of efficiency levels
appropriate for a representative product. To estimate the MPCs
necessary to achieve higher efficiency levels, in particular those
beyond the highest-efficiency products in the test sample, DOE
considered design options that were most likely to be considered and
implemented by manufacturers to achieve the higher efficiency levels.
Based on input from manufacturers and an understanding of the markets,
DOE then estimated the costs associated with those design options to
determine the MPCs at each of the analyzed efficiency levels.
The resulting weighted average incremental design option by
efficiency level and cost curves for each directly analyzed product
class are (i.e., the additional costs manufacturers would likely incur
by producing miscellaneous refrigeration products at each efficiency
level compared to the baseline) are provided in Tables IV.6 and IV.7 as
follows. See chapter 5 of the direct final rule TSD for additional
detail on the engineering analysis and formulation of cost curves.
BILLING CODE 6450-01-P
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[[Page 38786]]
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[GRAPHIC] [TIFF OMITTED] TR07MY24.015
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BILLING CODE 6450-01-C
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 MREFs, DOE identified two distribution channels: (1)
manufacturers to retailers to consumers, and (2) manufacturers to
wholesalers to dealers/retailers to consumers. The parties involved in
the distribution channel are retailers, wholesalers, and dealers.
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.\31\
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\31\ 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.
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DOE relied on economic data from the U.S. Census Bureau to estimate
average baseline and incremental markups. Specifically, DOE used the
2017 Annual Retail Trade Survey for the ``electronics and appliance
stores'' sector to develop retailer markups,\32\ and the 2017 Annual
Wholesaler Trade Survey for the ``household appliances, and electrical
and electronics goods merchant wholesalers'' sector to estimate
wholesaler markups.\33\ For the wholesaler to dealer/retailer channel,
DOE assumed that the dealer markups are half of the retailer markups in
the retailer channel.
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\32\ U.S. Census Bureau, Annual Retail Trade Survey. 2017.
Available at www.census.gov/programs-surveys/arts.html.
\33\ U.S. Census Bureau, Annual Wholesale Trade Survey. 2017.
Available at www.census.gov/awts.
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For this direct final rule, DOE considered comments it had received
regarding the markups analysis conducted for the March 2023 NOPR. The
approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented on DOE's
reliance on the concept of incremental markups, stating that it is
based on discredited theory, and it is in contradiction to empirical
evidence provided by AHAM during a 2014 proposed rulemaking for energy
conservation standards for residential dishwashers. (AHAM, No. 31 at p.
9)
DOE's incremental markup approach assumes that an increase in
profitability, which is implied by keeping a fixed markup when the
product price goes up due to higher efficiency standards, is unlikely
to be viable over time in a reasonably competitive market like
household appliance retailers. The Herfindahl-Hirschman Index (``HHI'')
reported by the 2017 Economic Census indicates that the household
appliance stores sector (NAICS 443141) is a highly competitive
marketplace.\34\ DOE recognizes that actors in the distribution chains
are likely to seek to maintain the same markup on appliances in
response to changes in manufacturer selling prices after an amendment
to energy conservation standards. However, DOE believes that retail
pricing is likely to adjust over time as those actors are forced to
readjust their markups to reach a medium-term equilibrium in which per-
unit profit is relatively unchanged before and after standards are
implemented.
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\34\ 2017 Economic Census, Selected sectors: Concentration of
largest firms for the U.S. Available at www.census.gov/data/tables/2017/econ/economic-census/naics-sector-44-45.html. The Herfindahl-
Hirschman Index value can be found by navigating to the
``Concentration of largest firms for the U.S.'' table and then
filtering the industry code to NAICS 443141.The Herfindahl-Hirschman
Index reported for the largest 50 firms in household appliance
stores sector, is 123.8. Generally, a market with an HHI value of
under 1,000 is considered to be competitive.
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DOE acknowledges that markup practices in response to amended
standards are complex and vary with business conditions. However, DOE's
analysis necessarily only considers changes in appliance offerings that
occur in response to amended standards and isolate the effect of
amended standards from other factors. Obtaining data on markup
practices in the situation described previously is very challenging.
Hence, DOE continues to maintain that its assumption that standards do
not facilitate a sustainable increase in profitability is reasonable.
Chapter 6 of the direct final rule TSD provides details on DOE's
development of markups for MREFs.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of MREFs at different efficiencies in representative
U.S. households, and to assess the energy savings potential of
increased MREF efficiency. The energy use analysis estimates the range
of energy use of MREFs in the field (i.e., as they are actually used by
consumers). The energy use analysis provides the basis for other
analyses DOE performed, particularly assessments of the energy savings
and the savings in consumer operating costs that could result from
adoption of amended or new standards.
DOE determined a range of annual energy use of MREFs as a function
of unit volume. As shown in Table IV.8, DOE developed distributions of
adjusted volume of product classes with more than one representative
unit base on the capacity distributions reported in the
TraQline[supreg] wine chiller data spanning from 2020 Q1 to 2022
Q1.\35\ DOE also developed a sample of households that use MREFs based
on the TraQline wine chiller data (see section IV.F of this document
for details). For each volume and considered efficiency level, DOE
derived the energy consumption as measured by the DOE MREF test
procedure at appendix A.
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\35\ TraQline is a market research company that specialized in
tracking consumer purchasing behavior across a wide range of
products using quarterly online surveys.
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[[Page 38788]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.016
For this direct final rule, DOE considered comments it had received
regarding the energy use analysis conducted for the March 2023 NOPR.
The approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM commented that DOE relies
heavily on the EIA's Residential Energy Consumption Survey (``RECS'')
data for estimating energy use and how consumption varies at the
household level. Specifically, AHAM expressed concern that the use of
RECS data to estimate energy consumption at the household level may
introduce ``outlier values,'' resulting in uncertainty and inaccuracies
(AHAM, No. 31 at p. 11) In this direct final rule, as well as in the
March 2023 NOPR, DOE did not tie the energy consumption of MREFs to
RECS survey data. 87 FR 35678. No household or demographic information
from RECS was used in the energy use analysis for MREFs. Instead, as
mentioned above, DOE used the TraQline wine chiller data to develop a
sample of households representing MREF purchasers and derived the
energy consumption of MREFs as measured by the DOE MREF test procedure.
DOE further notes that AHAM is a party to the Joint Agreement and is
supportive of the recommended standards adopted in this direct final
rule.
Chapter 7 of the direct final rule TSD provides details on DOE's
energy use analysis for MREFs.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
MREFs. The effect of new or amended energy conservation standards on
individual consumers usually involves a reduction in operating cost and
an increase in purchase cost. DOE used the following two metrics to
measure consumer impacts:
[squ] 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.
[squ] 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 MREFs 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 this direct final rule, DOE considered comments it had received
regarding the LCC analysis conducted for the March 2023 NOPR. The LCC
approach used for this direct final rule is largely the same as the
approach DOE had used for the March 2023 NOPR analysis.
During the May 2, 2023, public meeting, Edison Electric Institute
(``EEI'') questioned the cost-effectiveness of the proposed TSL (TSL
4), due to the high percentage of consumers experiencing a net LCC cost
and the simple payback period results ranging from 6.8 to 8 years, and
urged DOE to consider selecting another TSL that may be more cost-
effective for consumers. (May 2, 2023, Public Meeting Transcript, No.
33 at pp. 5-6). In response, DOE notes that when deciding whether a
proposed standard is economically justified, DOE determines whether the
benefits of the standard exceed its burdens by considering the seven
statutory factors discussed in section II.A of this document. DOE
considered the seven statutory factors when evaluating the Recommended
TSL in the Joint Agreement. As discussed in section V.C.1 of this
document, overall, the LCC savings would be positive for all MREF
product classes, and, while 43.7 percent of MREF consumers would
experience a net cost, slightly more than half of MREF consumers would
experience a net benefit (52.9 percent). DOE provides a detailed
comparative discussion and rigorous justification on the adopted
[[Page 38789]]
TSL (the Recommended TSL) in section V.C.1 of this document.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of MREF
purchasers. As stated previously, DOE developed purchaser samples based
on TraQline wine chiller survey data. The survey panel is weighted
against the U.S. Census based on their demographic characteristics to
make the sample representative of the U.S. population. The wine chiller
survey asked respondents about the product features of the wine
chillers they recently purchased, as well as the purchasing channel of
the products. To account for the more recent MREF consumers, DOE used
the last 2 years of survey data (2020 Q1 to 2022 Q1) to construct the
household sample used in this direct final rule.
For each sample purchaser, DOE determined the energy consumption
for the MREFs and the appropriate energy price. By developing a
representative sample of purchasers, the analysis captured the
variability in energy consumption and energy prices associated with the
use of MREFs.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product 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 MREF user samples. The model
calculated the LCC for products at each efficiency level for 10,000
MREF purchasers 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.
DOE calculated the LCC for consumers of MREFs as if each were to
purchase a new product in the first year of required compliance with
amended standards. As discussed earlier in this document, the
compliance date of amended standards is January 31, 2029, for TSL 4
(the Recommended TSL detailed in the Joint Agreement). For all other
TSLs considered in this direct final rule, standards apply to MREFs
manufactured 5 years after the date on which any amended standard is
published. (42 U.S.C. 6295(l)(2)) Therefore, DOE used 2029 as the first
year of compliance with any amended standards for MREFs for all TSLs.
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 direct final rule TSD and its appendices.
[GRAPHIC] [TIFF OMITTED] TR07MY24.017
In response to the March 2023 NOPR, AHAM commented that should be
conducting a purchase decision analysis in its LCC model to reflect the
actual conditions and expectations of the purchaser rather than relying
on an outcome modeling approach. (AHAM, No. 31 at pp. 8-9) In the
current setup of LCC analysis, DOE is not explicitly modeling the
purchase decision made by purchasers when the standard becomes
effective. DOE's analysis is intended to model the range of individual
outcomes likely to result from a hypothetical amended energy
[[Page 38790]]
conservation standard at various levels of efficiency. DOE does not
discount the consumer decision theory established in the broad
behavioral economics field but rather notes that its methodological
decision was made after considering the existence of various systematic
market failures and their implication in rational versus actual
purchase behavior. Furthermore, the outcome of the LCC is not
considered in isolation, but in the context of the broader set of
analyses, including the NIA. Moreover, the type of data required to
facilitate a robust consumer choice modeling of a specific household
appliance at the individual household level is currently lacking and
AHAM did not provide much data. DOE further notes that AHAM is a party
to the Joint Agreement and is supportive of the recommended standard
adopted in this direct final rule.
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.
Economic literature and historical data suggest that the real costs
of many products may trend downward over time according to ``learning''
or ``experience'' curves. Experience curve analysis implicitly includes
factors such as efficiencies in labor, capital investment, automation,
materials prices, distribution, and economies of scale at an industry-
wide level.\36\ In the experience curve method, the real cost of
production is related to the cumulative production or ``experience''
with a manufactured product. As MREFs use similar technologies to RF,
DOE applied the same experience curve developed for RF to MREFs. DOE
used inflation-adjusted historical Producer Price Index (``PPI'') data
for ``household refrigerator and home freezer manufacturing'' from the
Bureau of Labor Statistics' (``BLS'') spanning the time period between
1981 and 2022,\37\ along with the cumulative production of RF to derive
the experience curve. The estimated learning rate (defined as the
fractional reduction in price expected from each doubling of cumulative
production) is 39.4 1.9 percent.
---------------------------------------------------------------------------
\36\ Taylor, M. and Fujita, K.S. Accounting for Technological
Change in Regulatory Impact Analyses: The Learning Curve Technique.
LBNL-6195E. Lawrence Berkeley National Laboratory, Berkeley, CA.
April 2013. Available at escholarship.org/uc/item/3c8709p4#page-1.
\37\ Household refrigerator and home freezer manufacturing PPI
series ID: PCU3352203352202. Available at www.bls.gov/ppi/.
---------------------------------------------------------------------------
DOE included variable-speed compressors as a technology option for
higher efficiency levels. To develop future prices specific for that
technology, DOE applied a different price trend to the controls portion
of the variable-speed compressor, which represents part of the price
increment when moving from an efficiency level achieved with the
highest efficiency single-speed compressor to an efficiency level with
variable-speed compressor. DOE used PPI data on ``semiconductors and
related device manufacturing'' between 1967 and 2022 to estimate the
historic price trend of electronic components in the control.\38\ The
regression, performed as an exponential trend line fit, results in an
R-square of 0.99, with an annual price decline rate of 6.3 percent. See
chapter 8 of the TSD for further details on this topic.
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\38\ Semiconductors and related device manufacturing PPI series
ID: PCU334413334413. Available at www.bls.gov/ppi/.
---------------------------------------------------------------------------
In response to the March 2023 NOPR, AHAM commented that there is no
theoretical underpinning for the implementation of an experience or
learning curve and the functional form it should take. In addition,
AHAM stated that the data that DOE used merely represents an empirical
relationship, and a clear connection between the actual products in
question and the data used needs to be made. AHAM noted that there is
little reason to support the concept that price learning through
manufacturing efficiencies should extend beyond the labor and materials
in the product itself, and that such a relationship should not hold for
other cost components. (AHAM, No. 31 at p. 10)
DOE notes that there is considerable empirical evidence of
consistent price declines for appliances in the past few decades.
Several studies examined retail prices of a wide range of household
appliances during different periods of time and showed that prices had
been steadily falling while efficiency had been increasing, for example
Dale, et al. (2009) \39\ and Taylor, et al. (2015).\40\ As mentioned in
Taylor and Fujita (2013),\41\ Federal agencies have adopted different
approaches to account for ``the changing future compliance costs that
might result from technological innovation or anticipated behavioral
changes.'' Given the limited data availability on historical
manufacturing costs broken by different components, DOE utilized the
PPI published by the BLS as a proxy for manufacturing costs to
represent the analyzed product as a whole.\42\ While products may
experience varying degrees of price learning during different product
stages, given that MREFs share similar cooling technologies with RF,
DOE applied the same learning rate developed for RF to MREFs. DOE
modeled the average learning rate based on the full historical PPI
series for ``household refrigerator and home freezer manufacturing'' to
capture the overall price evolution in relation to the cumulative
shipments. DOE also conducted sensitivity analyses that are based on a
particular segment of the PPI data to investigate the impact of
alternative product price projections (low price learning and high
price learning) in the NIA of this direct final rule. DOE further notes
that AHAM is a party to the Joint Agreement and is supportive of the
recommended standard adopted in this direct final rule.
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\39\ Dale, L., C. Antinori, M. McNeil, James E. McMahon, and
K.S. Fujita. Retrospective evaluation of appliance price trends.
Energy Policy. 2009. 37 pp. 597-605.
\40\ Taylor, M., C.A. Spurlock, and H.-C. Yang. Confronting
Regulatory Cost and Quality Expectations. An Exploration of
Technical Change in Minimum Efficiency Performance Standards. 2015.
Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United
States). Report No. LBNL-1000576. (last accessed June 30, 2023.)
Available at www.osti.gov/biblio/1235570/ (last accessed June 30,
2023).
\41\ Taylor, M. and K.S. Fujita. Accounting for Technological
Change in Regulatory Impact Analyses: The Learning Curve Technique.
2013. Lawrence Berkeley National Lab (LBNL), Berkeley, CA (United
States). Report No. LBNL-6195E. Available at https://escholarship.org/uc/item/3c8709p4 (last accessed March 24, 2024).
\42\ PPI is a proxy for manufacturing costs as certain effects
(such as market structure and competitive effects) could influence
PPI in a way that would not be reflected in manufacturing costs.
---------------------------------------------------------------------------
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. DOE is not aware of
any data that suggest the cost of installation changes as a function of
efficiency for MREFs. DOE therefore assumed that installation costs are
the same regardless of EL and do not impact the LCC or PBP. As a
result, DOE did not include installation costs in the LCC and PBP
analysis.
3. Annual Energy Consumption
For each sampled consumer, DOE determined the energy consumption
for MREFs at different efficiency levels using the approach described
previously in section IV.E of this document.
[[Page 38791]]
4. Energy Prices
Because marginal electricity price more accurately captures the
incremental savings associated with a change in energy use from higher
efficiency, it provides a better representation of incremental change
in consumer costs than average electricity prices. Therefore, DOE
applied average electricity prices for the energy use of the product
purchased in the no-new-standards case, and marginal electricity prices
for the incremental change in energy use associated with the other
efficiency levels considered.
DOE derived electricity prices in 2022 using data from EEI Typical
Bills and Average Rates reports. Based upon comprehensive, industry-
wide surveys, this semi-annual report presents typical monthly electric
bills and average kilowatt-hour costs to the customer as charged by
investor-owned utilities. For the residential sector, DOE calculated
electricity prices using the methodology described in Coughlin and
Beraki (2018).\43\
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\43\ Coughlin, K. and B. Beraki.2018. Residential Electricity
Prices: A Review of Data Sources and Estimation Methods. Lawrence
Berkeley National Lab. Berkeley, CA. Report No. LBNL-2001169.
Available at https://ees.lbl.gov/publications/residential-electricity-prices-review.
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DOE's methodology allows electricity prices to vary by sector,
region, and season. In the analysis, variability in electricity prices
is chosen to be consistent with the way the consumer economic and
energy use characteristics are defined in the LCC analysis. See chapter
8 of the direct final rule TSD for details.
To estimate energy prices in future years, DOE multiplied the 2022
energy prices by the projection of annual average price changes from
the Reference case in AEO2023, which has an end year of 2050.\44\ To
estimate price trends after 2050, the 2046-2050 average was used for
all years.
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\44\ EIA. Annual Energy Outlook 2023. Available at www.eia.gov/outlooks/aeo/ (last accessed November 29, 2023).
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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 entail no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products. DOE is not aware of any data that suggest the cost
of repair or maintenance for MREFs changes as a function of efficiency.
DOE therefore assumed that these costs are the same regardless of EL
and do not impact the LCC or PBP. As a result, DOE did not include
maintenance and repair costs in the LCC and PBP analysis.
6. Product Lifetime
For MREFs, DOE used lifetime estimates from products that operate
using the same refrigeration technology: covered refrigerators and
refrigerator-freezers, based on the Refrigerators, Refrigerator-
Freezers, and Freezers direct final rule analysis. 89 FR 3026 (January
17, 2024). DOE estimated a maximum lifetime of 40 years for all product
classes and an average lifetime of 10.6 years for compact coolers and
14.6 years for full-size coolers. The weighted average lifetime over
the sample population, considering the market distribution, was 12.6
years. DOE also assumed that the probability function for the annual
survival of MREFs would take the form of a Weibull distribution. See
chapter 8 of the direct final rule TSD for a more detailed discussion.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households to estimate the present value of future operating cost
savings. DOE estimated a distribution of discount rates for MREFs based
on consumer financing costs and the opportunity cost of consumer funds.
DOE applies weighted average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\45\ 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, 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.
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\45\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: transaction costs; risk premiums and
response to uncertainty; time preferences; interest rates at which a
consumer is able to borrow or lend. 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.
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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
\46\ (``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. See chapter 8 of the direct final rule TSD for further details
on the development of consumer discount rates.
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\46\ U.S. Board of Governors of the Federal Reserve System.
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010,
2013, 2016, and 2019. Available at https://www.federalreserve.gov/econresdata/scf/scfindex.htm (last accessed November 29, 2023).
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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).
For this direct final rule, DOE is using the efficiency
distribution by product class as provided by AHAM in response to a
notice of public meeting and availability of the preliminary technical
support document for MREFS. 87 FR 3229 (Jan. 21, 2022) (See AHAM, No.
18, pp. 2-5) DOE understands that this approach inherently assumes that
the rest of the MREF market has a similar distribution of efficiencies.
However, due to lack of efficiency data from non-AHAM members, DOE has
no reason to question that assumption. DOE also assumed that the
current distribution of product efficiencies would remain constant in
2029, and during the
[[Page 38792]]
analysis period, in the no-new-standards case.
The estimated market shares for the no-new-standards case for MREFs
are shown in Table IV.10. See chapter 8 of the direct final rule TSD
for further information on the derivation of the efficiency
distributions.
[GRAPHIC] [TIFF OMITTED] TR07MY24.018
The LCC Monte Carlo simulations draw from the efficiency
distributions and randomly assign an efficiency to the MREF purchased
by each sample household in the no-new-standards case. The resulting
percent shares within the sample match the market shares in 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.\47\
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.
---------------------------------------------------------------------------
\47\ 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 defined two broad MREF product categories (coolers and
combination cooler refrigeration products) and developed models to
estimate shipments for each category. DOE used various data and
assumptions to develop the shipments for each product class considered
in this rulemaking.
Given the limited available data sources on historical shipments of
coolers, DOE assumed a constant penetration rate of 13.3 percent in the
U.S. households throughout the analysis period based on online surveys
\48\ to estimate the annual shipments starting from
2016.49 50 DOE multiplied the estimated penetration by the
total number of households from the AEO2023, and then determined the
number of new shipments by dividing the total stock by the mean product
lifetime. DOE projected the annual shipments by incorporating the
lifetime distributions by product class and assuming that the growth of
new sales is consistent with the housing
[[Page 38793]]
projections from AEO2023. To estimate shipments prior to 2016, DOE
assumed a flat historical shipment trend at the 2016 level. With even
more limited available data sources on historical shipments of
combination cooler refrigeration products, DOE estimated total
shipments of combination cooler refrigeration products in 2014 to be
36,000 units, based on feedback from manufacturers from the October
2016 Direct Final Rule. DOE assumed sales would increase in line with
the increase in the number of households in AEO2023. Finally, DOE
incorporated the 2021 shipment data provided by AHAM (see AHAM, No. 18
at pp. 3, 5) \51\ to re-calibrate total shipments for each product
class considered in this rulemaking.
---------------------------------------------------------------------------
\48\ DOE also reviewed the recent release of the EIA 2020 RECS
(``RECS 2020''), which identified wine chillers in representative
U.S. households. DOE found that the penetration rate of wine
chillers in RECS 2020 is significantly lower compared to that
estimated by DOE for MREFs based on previous market surveys. Due to
the uncertainty on the breakdown of MREFs between wine chillers and
other miscellaneous refrigeration applications in the U.S. market,
DOE continued to use the 13.3 percent penetration rate for MREFs in
this direct final rule. However, DOE also modeled an alternative
shipments scenario based on the lower penetration rate of MREFs in
American homes derived from the RECS 2020 data. For more details on
this alternative scenario and the resulting NES and NPV results, see
chapter 9 and appendix 10C of the direct final rule TSD,
respectively.
\49\ Greenblatt, J.B., S.J. Young, H.-C. Yang, T. Long, B.
Beraki, S.K. Price, S. Pratt, H. Willem, L.-B. Desroches, and S.M.
Donovan. U.S. Residential Miscellaneous Refrigeration Products:
Results from Amazon Mechanical Turk Surveys. 2014. Lawrence Berkeley
National Laboratory: Berkeley, CA. Report No. LBNL-6537E.
\50\ Donovan, S.M., S.J. Young, and J.B. Greenblatt. Ice-Making
in the U.S.: Results from an Amazon Mechanical Turk Survey. Lawrence
Berkeley National Laboratory. Report No. LBNL-183899.
\51\ This shipments information was provided by AHAM in a
confidential document. The reference points to the public version of
this document, where confidential business information is redacted.
---------------------------------------------------------------------------
DOE used the efficiency distributions by product class to match the
data submitted by AHAM. DOE also assumed that the market share of each
product class (in relation to the total MREF shipments) matched the
market shares provided by AHAM. To estimate total MREF shipments, DOE
utilized the AHAM shipments data and AHAM-member information and
reviewed the TraQline data from 2020 Q1 to 2022 Q1 to estimate non-
AHAM-member shipments.\52\ Based on this approach, DOE's estimate of
the MREF shipments for the whole market was consistent with the total
number of shipments estimated using DOE's approach discussed earlier
and used in the March 2023 NOPR. Hence, DOE continued using the same
approach to develop the total MREF shipments in this direct final rule
but incorporated the product class breakdown provided by AHAM to re-
distribute the total shipments by product class.
---------------------------------------------------------------------------
\52\ DOE also collected and reviewed manufacturer interview data
but was unable to collect a representative sample that would allow
it to estimate non-AHAM-member shipments data.
---------------------------------------------------------------------------
H. National Impact Analysis
The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific efficiency levels.\53\
(``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 MREFs sold from 2029
through 2058.
---------------------------------------------------------------------------
\53\ The NIA accounts for impacts in the United 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. DOE compares the no-new-standards case with projections
characterizing the market for each product class if DOE adopted new or
amended standards at specific energy efficiency levels (i.e., the TSLs
or standards cases) for that class. For the standards cases, DOE
considers how a given standard would likely affect the market shares of
products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses typical values
(as opposed to probability distributions) as inputs.
Table IV.11 summarizes the inputs and methods DOE used for the NIA
analysis for this direct final rule. Discussion of these inputs and
methods follows the table. See chapter 10 of the direct final rule TSD
for further details.
[GRAPHIC] [TIFF OMITTED] TR07MY24.019
1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.8 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes for the year of anticipated compliance with
an amended standard.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the
[[Page 38794]]
shipment-weighted efficiency for the year that standards are assumed to
become effective (2029). 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.
In the absence of data on trends in efficiency, DOE assumed no
efficiency trend over the analysis period for both the no-new-standards
and standards cases. For a given case, market shares by efficiency
level were held fixed to their 2029 distribution.
2. National Energy Savings
The NES analysis involves a comparison of national energy
consumption of the considered products between each potential standards
case (``TSL'') and the case with no new or amended energy conservation
standards. DOE calculated the 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 MREFs that would indicate that
consumers would alter their utilization of their product due to an
increase in efficiency. MREFs are typically plugged in and operate
continuously; therefore, DOE assumed a rebound rate of 0. DOE did not
receive any comments regarding this assumption in response to the March
2023 NOPR.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and
greenhouse gas and other emissions in the national impact analyses and
emissions analyses included in future energy conservation standards
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the
approaches discussed in the August 18, 2011 notice, DOE published a
statement of amended policy in which DOE explained its determination
that EIA's National Energy Modeling System (``NEMS'') is the most
appropriate tool for its FFC analysis and its intention to use NEMS for
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain,
multi-sector, partial equilibrium model of the U.S. energy sector \54\
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 direct final rule TSD.
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\54\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009.
Available at www.eia.gov/analysis/pdfpages/0581(2009)index.php (last
accessed November 29, 2023).
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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 MREF
price trends based on an experience curve calculated using historical
PPI data. DOE applied the same trends to project prices for each
product class at each considered efficiency level including baseline.
By 2058, which is the end date of the projection period, the average
price of single-speed compressor MREFs is projected to drop 33.2
percent and the average price of MREFs with a variable-speed compressor
is projected to drop about 33.8 percent relative to 2029.
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 MREFs. In
addition to the default price trend, DOE considered high and low-price-
decline sensitivity cases. For the single-speed compressor MREFs and
the non-variable- speed controls portion of MREFs, DOE estimated the
high- price- decline and the low- price- decline scenarios based on
household refrigerator and home freezer PPI data limited to the period
between the period 1981-2008 and 2009-2022, respectively. For the
variable-speed controls portion of MREFs, DOE estimated the high price
decline and the low- price- decline scenarios based on an exponential
trend line fit of the semiconductor PPI between the period 1994-2022
and 1967-1993, respectively. The derivation of these price trends is
described in Chapter 8 and the results of these sensitivity cases are
given in appendix 10C of the direct final rule 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 energy price changes in the Reference case from
AEO2023, which has an end year of 2050. To estimate price trends after
2050, the 2046-2050 average was used for all years. As part of the NIA,
DOE also analyzed scenarios that used inputs from variants of the
AEO2023 Reference case that have lower and higher economic growth.
Those cases have lower and higher energy price trends compared to the
Reference case. The resulting consumer NPV for the low-economic growth
scenario, combined with the low-price-decline scenario is up to 24%
lower compared to the Reference case scenario, while the consumer NPV
for the high-economic growth scenario combined with the high-price-
decline scenario is up to 12% higher compared to the Reference case.
See appendix 10C of the direct final rule TSD for more details.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
direct final rule, DOE estimated the NPV of consumer benefits using
both a 3-percent and a 7-percent real discount rate. DOE uses these
discount rates in accordance with guidance provided by the Office of
Management and Budget (``OMB'') to Federal agencies on the development
of regulatory analysis.\55\
[[Page 38795]]
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.
---------------------------------------------------------------------------
\55\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at
https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (last accessed November 10, 2023).
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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 direct final rule,
DOE analyzed the impacts of the considered standard levels on senior-
only households. Low-income consumers were not considered in the
subgroup analysis, as MREFs are not products generally used by this
subgroup. Based on the TraQline wine chiller data, less than 4 percent
of MREF owners are below the Federal household income threshold for
poverty. The analysis used a subset of the TraQline consumer sample
composed of households that meet the criteria for this subgroup. DOE
used the LCC and PBP computer model to estimate the impacts of the
considered efficiency levels on senior-only households. Chapter 11 in
the direct final rule 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 MREFs and to estimate
the potential impacts of such standards on employment and manufacturing
capacity. The MIA has both quantitative and qualitative aspects and
includes analyses of projected industry cash flows, the INPV,
investments in research and development (``R&D'') and manufacturing
capital, and domestic manufacturing employment. Additionally, the MIA
seeks to determine how amended energy conservation standards might
affect manufacturing employment, capacity, and competition, as well as
how standards contribute to overall regulatory burden. Finally, the MIA
serves to identify any disproportionate impacts on manufacturer
subgroups, including small business manufacturers.
The quantitative part of the MIA primarily relies on the GRIM, an
industry cash flow model with inputs specific to this rulemaking. The
key GRIM inputs include data on the industry cost structure, unit
production costs, product shipments, manufacturer markups, and
investments in R&D and manufacturing capital required to produce
compliant products. The key GRIM outputs are the INPV, which is the sum
of industry annual cash flows over the analysis period, discounted
using the industry-weighted average cost of capital, and the impact on
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 direct final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the MREF manufacturing industry
based on the market and technology assessment and publicly-available
information. This included a top-down analysis of MREF manufacturers
that DOE used to derive preliminary financial inputs for the GRIM
(e.g., revenues; materials, labor, overhead, and depreciation expenses;
selling, general, and administrative expenses (``SG&A''); and R&D
expenses). DOE also used public sources of information to further
calibrate its initial characterization of the MREF manufacturing
industry, including corporate annual reports filed by publicly traded
manufacturers in primarily home appliance manufacturing and MREFs, the
U.S. Census Bureau's Annual Survey of Manufactures (``ASM''),\56\ and
reports from D&B Hoovers.\57\
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\56\ 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/programs-surveys/asm/data.html
(last accessed July 5, 2023).
\57\ The D&B Hoovers login is available at app.dnbhoovers.com
(last accessed November 29, 2023).
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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 MREFs in order to develop other key GRIM
inputs, including product and capital conversion costs, and to gather
additional information on the anticipated effects of energy
conservation standards on revenues, direct employment, capital assets,
industry competitiveness, and subgroup impacts.
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. 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 one subgroup for a separate impact analysis:
[[Page 38796]]
small business manufacturers. The small business subgroup is discussed
in chapter 12 of the direct final rule TSD.
2. Government Regulatory Impact Model and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to new
or amended standards that result in a higher or lower industry value.
The GRIM uses a standard, annual discounted cash-flow analysis that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from an amended energy conservation standard. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2024 (the base year of the analysis) and continuing to
2058. DOE calculated INPVs by summing the stream of annual discounted
cash flows during this period. For manufacturers of MREFs, DOE used a
real discount rate of 7.7 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 new or
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis, 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 of this
document. Additional details about the GRIM, the discount rate, and
other financial parameters can be found in chapter 12 of the direct
final rule TSD.
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 its analysis in this
direct final rule, DOE used a combined efficiency level and design
option approach. First, an efficiency-level approach was used to
establish an analysis tied to existing products on the market. A design
option approach was then used to extend the analysis through ``built-
down'' efficiency levels and ``built-up'' efficiency levels where there
were gaps in the range of efficiencies of products that were reverse
engineered.
For a complete description of the MPCs, see section IV.C of this
document and chapter 5 of the direct final rule TSD.
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 2024 (the base year) to 2058 (the end year of
the analysis period). See section IV.G of this document and chapter 9
of the direct final rule TSD for additional details.
c. Product and Capital Conversion Costs
New or 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 new or amended energy conservation standards.
Capital conversion costs are investments in property, plant, and
equipment necessary to adapt or change existing production facilities
such that new compliant product designs can be fabricated and
assembled.
Product Conversion Costs
DOE based its estimates of the product conversion costs necessary
to meet the varying efficiency levels on information from manufacturer
interviews, the design paths analyzed in the engineering analysis, the
prior MREF rulemaking analysis (see 81 FR 75194), and market share and
model count information. Generally, manufacturers indicated a
preference to meet amended standards with design options that were
direct and relatively straightforward component swaps. However, at
higher efficiency levels, manufacturers anticipated the need for
platform redesigns. Efficiency levels that significantly altered
cabinet construction would require very large investments to update
designs. Manufacturers noted that increasing foam thickness would
require complete redesign of the cabinet, liner, and shelving due to
loss of interior volume. Additionally, extensive use of VIPs would
require redesign of the cabinet to maximize the benefits of VIPs.
Capital Conversion Costs
DOE relied on information from manufacturer interviews and the
engineering analysis to evaluate the level of capital conversion costs
would likely incur at the considered standard levels. During
interviews, manufacturers provided estimates and descriptions of the
required tooling changes that would be necessary to upgrade product
lines to meet the various efficiency levels. Based on these inputs, DOE
modeled incremental capital conversion costs for efficiency levels that
could be reached with individual components swaps. However, based on
feedback, DOE modeled higher capital conversion costs when
manufacturers would have to redesign their existing product platforms.
DOE used information from manufacturer interviews to determine the cost
of the manufacturing equipment and tooling necessary to implement
complete redesigns.
Increases in foam thickness require either reductions to interior
volume or increases to exterior volume. Many MREFs are sized to fit
standard widths, meaning any increase in foam thickness would likely
result in the loss of interior volume. Additionally, many MREFs are
sized to maximize storage of specific products (e.g., canned beverages
or wine bottles) and small changes in wall thickness could dramatically
decrease the unit storage capacity for those products. The reduction of
interior volume has significant consequences for manufacturing.
Redesigning the cabinet to increase the effectiveness of insulation
likely requires manufacturers to update designs and tooling associated
with the interior of the product. This could require investing in new
tooling to accommodate changes to the liner, shelving, drawers, and
doors.
To minimize reductions to interior volume, manufacturers may choose
to adopt VIP technology. Extensive incorporation of VIPs into designs
requires significant upfront capital due to differences in the
handling, storing, and manufacturing of VIPs as compared to typical
polyurethane foams. VIPs are
[[Page 38797]]
relatively fragile and must be protected from punctures and rough
handling. If VIPs have leaks of any size, the panel will eventually
lose much of its thermal insulative properties and structural strength.
If already installed within a cabinet wall, a punctured VIP may
significantly reduce the structural strength of the MREF cabinet. As a
result, VIPs require careful handling and installation. Manufacturers
noted the need to allocate special warehouse space to ensure the VIPs
are not jostled or roughly handled in the manufacturing environment.
VIPs require significantly more warehouse space than polyurethane
foams. The application of VIPs can be difficult and may require
investment in hard-tooling or robotic systems to ensure the panels are
positioned properly within the cabinet or door. Manufacturers noted
that producing cabinets with VIPs are much more labor and time
intensive than producing cabinets with typical polyurethane foams and
the increase in labor can affect total production capacity.
To develop industry conversion cost estimates, DOE estimated the
number of product platforms in DOE's CCD \58\ and California Energy
Commission's Modernized Appliance Efficiency Database System
(``MAEDbS'') \59\ and scaled up the product and capital conversion
costs associated with the number of product platforms that would
require updating at each efficiency level. DOE adjusted the conversion
cost estimates developed in support of the March 2023 NOPR to 2022$ for
this analysis.
---------------------------------------------------------------------------
\58\ 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 August 17, 2023).
\59\ California Energy Commission's Modernized Appliance
Efficiency Database System is available at
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (last
accessed August 17, 2023). DOE used this database to gather product
information not provided in DOE's CCD (e.g., manufacturer names).
---------------------------------------------------------------------------
DOE acknowledges that manufacturers may follow different design
paths to reach the various efficiency levels analyzed. An individual
manufacturer's investments depend on a range of factors, including the
company's current product offerings and product platforms, existing
production facilities and infrastructure, and make vs. buy decisions
for components. DOE's conversion cost methodology incorporated feedback
from all manufacturers that took part in interviews and extrapolated
industry values. While industry average values may not represent any
single manufacturer, DOE's model provides reasonable estimates of
industry-level investments.
In general, DOE assumes all conversion-related investments occur
between the year of publication of the direct final rule and the year
by which manufacturers must comply with the new standard. The
conversion cost figures used in the GRIM can be found in section V.B.2
of this document. For additional information on the estimated product
and capital conversion costs, see chapter 12 of the direct final rule
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.
Under the preservation-of-gross-margin-percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within a product class. As manufacturer production
costs increase with efficiency, this scenario implies that the per-unit
dollar profit will increase. DOE assumed a gross margin percentage of
20 percent for FCC and 28 percent for all other product classes.\60\
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.
---------------------------------------------------------------------------
\60\ The gross margin percentages of 20 percent and 28 percent
are based on manufacturer markups of 1.25 and 1.38 percent,
respectively.
---------------------------------------------------------------------------
In 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 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 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.
A comparison of industry financial impacts under the two
manufacturer markup scenarios is presented in section V.B.2.a of this
document.
3. Discussion of MIA Comments
For this direct final rule, DOE considered comments it had received
regarding its MIA presented in the March 2023 NOPR. The approach used
for this direct final rule is largely the same approach DOE had used
for the March 2023 NOPR analysis.
In response to the March 2023 NOPR, AHAM stated that it cannot
comment on the accuracy of DOE's approach for including how
manufacturers might or might not recover potential investments (i.e.,
the accuracy of DOE's manufacturer markup scenarios) but that AHAM
supports DOE's intent in the microwave ovens supplemental notice of
proposed rulemaking (``SNOPR'') (``August 2022 SNOPR'') energy
conservation standards rulemaking to include those costs and
investments in the actual costs of products and retail prices. (AHAM,
No. 31 at p. 12) AHAM urged DOE to apply the same conceptual approach
used in the August 2022 SNOPR in the MREF rulemaking and all future
rulemakings (i.e., to analyze a conversion-cost-recovery manufacturer
markup scenario). (Id.)
As discussed in section IV.J.2.d of this document, DOE modeled two
standards-case manufacturer markup scenarios to represent the
uncertainty regarding the potential impacts on prices and profitability
for manufacturers following the implementation of amended energy
conservation standards. For the March 2023 NOPR, DOE applied the
preservation-of-gross-margin-percentage scenario to reflect an upper
bound of industry profitability and a preservation-of-operating-profit
scenario
[[Page 38798]]
to reflect a lower bound of industry profitability under amended
standards. DOE used these scenarios to reflect the range of realistic
profitability impacts under more stringent standards. Manufacturing
more efficient MREFs is generally more expensive than manufacturing
baseline MREFs, as reflected by the MPCs estimated in the engineering
analysis. Under the preservation-of-gross-margin scenario for MREFs,
incremental increases in MPCs at higher efficiency levels result in an
increase in per-unit dollar profit per unit sold. In interviews,
manufacturers stated the industry relies on competitive pricing, so
they would likely not increase their manufacturer markups that would
allow them to recover their full investments. The preservation-of-
gross-margin-scenario reflects an upper bound of industry profitability
in which manufacturers would be able to maintain the same amount of
profit as a percentage of revenues at all efficiency levels within a
product class. Applying the approach used in the August 2022 SNOPR
(i.e., a conversion-cost-recovery scenario) would result in the MREF
industry increasing manufacturer markups under amended standards. Based
on information gathered during confidential interviews in support of
the March 2023 NOPR, DOE does not expect that the MREF industry would
increase manufacturer markups under an amended standard. Furthermore,
in response to the March 2023 NOPR, DOE did not receive any public or
confidential data indicating that industry would increase manufacturer
markups in response to more stringent standards. Therefore, DOE used
the same manufacturer markup scenarios from the March 2023 NOPR for
this direct final rule analysis.
In response to the March 2023 NOPR, AHAM commented the cumulative
regulatory burden is significant for home appliance manufacturers when
needing to redesign products and product lines for the proposed levels
for MREFs, for consumer clothes dryers, residential clothes washers,
consumer conventional cooking products, dishwashers, RF, and the
finalized levels for room air conditioners and microwave ovens. (Id. at
p. 13). AHAM asserted that engineers will therefore need to spend all
their time redesigning products to meet more stringent energy
efficiency standards, pulling resources from other development efforts
and business priorities. AHAM suggested that DOE could reduce
cumulative regulatory burden by spacing out the timing of final rules,
allowing more lead time by delaying the publication of final rules in
the Federal Register after they have been issued, and reducing the
stringency of standards such that fewer products would require
redesign. (Id. at p. 14)
DOE analyzes cumulative regulatory burden in accordance with
section 13(g) of the Process Rule. DOE details the rulemakings and
expected conversion expenses of Federal energy conservation standards
that could impact MREF original equipment manufacturers (``OEMs'') that
take effect approximately 3 years before and after the 2029 compliance
date in section V.B.2.e of this document. As shown in Table V.23 in
section V.B.2.e of this document, DOE considers the potential
cumulative regulatory burden from other DOE energy conservation
standard rulemakings for consumer clothes dryers, residential clothes
washers, consumer conventional cooking products, dishwashers, RF, room
air conditioners, and microwave ovens in this direct final rule
analysis.
Regarding AHAM's suggestion about spacing out the timing of final
rules for home appliance rulemakings, DOE has statutory requirements
under EPCA on the timing of rulemakings. For consumer clothes dryers,
residential clothes washers, consumer conventional cooking products,
dishwashers, RF, room air conditioners, and microwave ovens, amended
standards apply to covered products manufactured 3 years after the date
on which any new or amended standards are published. (42 U.S.C.
6295(m)(4)(A)(i)) For MREFs, amended standards apply 5 years after the
date on which any new or amended standard is published. (42 U.S.C.
6295(l)(2)) And the multi-product Joint Agreement, where stakeholders
can recommend different compliance dates under DOE's direct final rule
authority, stated ``jointly recommended compliance dates will achieve
the overall energy and economic benefits of this agreement while
allowing necessary lead-times for manufacturers to redesign products
and retool manufacturing plants to meet the recommended standards
across product categories.'' (Joint Agreement, No. 34 at p. 2) The
staggered compliance dates between the statutorily-required dates and
the dates recommended in the Joint Agreement help mitigate
manufacturers' concerns resource allocation and concurrent amended
standards. See section II.B.4 of this document for compliance dates of
rulemakings recommended in the Joint Agreement.
In response to the March 2023 NOPR, the Appliance Standards
Awareness Project (``ASAP'') et al.\61\ commented that DOE may have
overestimated the decrease in INPV, and described some perceived
inconsistencies. ASAP et al. pointed out that although DOE estimated a
10 percent reduction in shipments based on a 10 percent increase in
production cost, ignoring the efficiency elasticity, the shipments
decline should be no more than 4.5 percent at the compliance year.
(ASAP et al., No. 32 at pp. 1-2) In response to this comment, DOE re-
evaluated its base assumptions and corrected its shipments estimates.
The reduction in shipments in the projected compliance year for the
Recommended TSL (i.e., TSL 4) is now estimated to be 3.4 percent. For
more details, see chapter 9 of the direct final rule TSD.
---------------------------------------------------------------------------
\61\ ``ASAP et al.'' refers to a joint comment from Appliance
Standards Awareness Project, American Council for an Energy-
Efficient Economy, National Consumer Law Center, New York State
Energy Research and Development Authority, and Northwest Energy
Efficiency Alliance.
---------------------------------------------------------------------------
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 in 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 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 direct final rule TSD. The analysis
presented in this document uses projections from AEO2023. Power sector
emissions of CH4 and N2O from fuel combustion are
estimated using Emission Factors for Greenhouse Gas Inventories
published by the EPA.\62\
---------------------------------------------------------------------------
\62\ Available at www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf (last accessed November 12,
2023).
---------------------------------------------------------------------------
FFC upstream emissions, which include emissions from fuel
combustion during extraction, processing, and transportation of fuels,
and ``fugitive''
[[Page 38799]]
emissions (direct leakage to the atmosphere) of CH4 and
CO2, are estimated based on the methodology described in
chapter 15 of the direct final rule 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. AEO2023 reflects, to the extent
possible, laws and regulations adopted through mid-November 2022,
including the emissions control programs discussed in the following
paragraphs, and the Inflation Reduction Act.\63\ 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 (Aug. 8, 2011). CSAPR requires these States to reduce
certain emissions, including annual SO2 emissions, and went
into effect as of January 1, 2015.\64\ The AEO 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, for states subject to SO2
emissions limits under CSAPR, 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.
---------------------------------------------------------------------------
\63\ For further information, see the Assumptions to AEO2023
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 Nov. 22, 2023).
\64\ 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 (Aug. 8, 2011). EPA subsequently issued a
supplemental rule that included an additional five states in the
CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011)
(Supplemental Rule), and EPA issued the CSAPR Update for the 2008
ozone NAAQS. 81 FR 74504 (Oct. 26, 2016).
---------------------------------------------------------------------------
However, beginning in 2016, SO2 emissions began to fall
as a result of the Mercury and Air Toxics Standards (``MATS'') for
power plants.\65\ 77 FR 9304 (Feb. 16, 2012). The final rule
establishes power plant emission standards for mercury, acid gases, and
non-mercury metallic toxic pollutants. 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 will generally reduce
SO2 emissions. DOE estimated SO2 emissions
reduction using emissions factors based on AEO2023.
---------------------------------------------------------------------------
\65\ 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.
---------------------------------------------------------------------------
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. Depending on the configuration of the power sector in the
different regions and the need for allowances, however, NOX
emissions might not remain at the limit in the case of lower
electricity demand. That would mean that 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. Standards would be expected to reduce
NOX emissions in the States not covered by CSAPR. DOE used
AEO2023 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
AEO2023, which incorporates the MATS.
L. Monetizing Emissions Impacts
As part of the development of this direct final 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 direct final rule.
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'').
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 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 estimated benefits from reductions in GHG emissions.
That is, the social
[[Page 38800]]
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 (``February 2021 SC-GHG TSD''). The SC-GHG 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, the SC-GHG 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-GHG therefore, reflects the societal value of reducing emissions
of the gas in question by one metric ton. The SC-GHG 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 agreed that the
interim SC-GHG estimates represent the most appropriate estimate of the
SC-GHG until revised estimates were developed reflecting the latest,
peer-reviewed science. See 87 FR 78382, 78406-78408 for discussion of
the development and details of the IWG SC-GHG estimates.
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.\66\ 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 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 SC-GHG TSD, the IWG has recommended
that, taken together, the limitations suggest that the interim SC-GHG
estimates used in this final rule likely underestimate the damages from
GHG emissions. DOE concurs with this assessment.
---------------------------------------------------------------------------
\66\ Interagency Working Group on Social Cost of Greenhouse
Gases. 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/.
---------------------------------------------------------------------------
In the February 2021 SC-GHG TSD, the IWG stated that the models
used to produce the interim estimates do not include all of the
important physical, ecological, and economic impacts of climate change
recognized in the climate change literature. For these same impacts,
the science underlying their ``damage functions'' lags behind the most
recent research. In the judgment of the IWG, these and other
limitations suggest that the range of four interim SC-GHG estimates
presented in the TSD likely underestimate societal damages from GHG
emissions. The IWG is in the process of assessing how best to
incorporate the latest peer-reviewed science and the recommendations of
the National Academies to develop an updated set of SC-GHG estimates,
and DOE remains engaged in that process.
DOE is aware that in December 2023, EPA issued a new set of SC-GHG
estimates in connection with a final rulemaking under the Clean Air
Act.\67\ As DOE had used the IWG interim values in proposing this rule
and is currently reviewing the updated 2023 SC-GHG values, for this
final rule, DOE used these updated 2023 SC-GHG values to conduct a
sensitivity analysis of the value of GHG emissions reductions. DOE
notes that because EPA's estimates are considerably higher than the
IWG's interim SC-GHG values applied for this direct final rule, an
analysis that uses the EPA's estimates results in significantly greater
climate-related benefits. However, such results would not affect DOE's
decision in this direct final rule. As stated elsewhere in this
document, DOE would reach the same conclusion regarding the economic
justification of the standards presented in this direct final rule
without considering the IWG's interim SC-GHG values, which DOE agrees
are conservative estimates. For the same reason, if DOE were to use
EPA's higher SC-GHG estimates, they would not change DOE's conclusion
that the standards are economically justified.
---------------------------------------------------------------------------
\67\ See www.epa.gov/environmental-economics/scghg.
---------------------------------------------------------------------------
DOE's derivations of the 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.6 of this document.
a. Social Cost of Carbon
The SC-CO2 values used for this final rule were based on
the values developed for the February 2021 SC-GHG TSD, which are shown
in Table IV.12 in 5-year increments from 2020 to 2050. The set of
annual values that DOE used, which was adapted from estimates published
by EPA,\68\ is presented in appendix 14A of the direct final rule 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.
---------------------------------------------------------------------------
\68\ 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 November 21, 2023).
---------------------------------------------------------------------------
[[Page 38801]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.020
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
direct final rule were based on the values developed for the February
2021 SC-GHG 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 direct final
rule 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 previously
described for the SC-CO2.
[GRAPHIC] [TIFF OMITTED] TR07MY24.021
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 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.
c. Sensitivity Analysis Using Updated 2023 SC-GHG Estimates
In December 2023 EPA issued a new set of SC-GHG estimates (2023 SC-
GHG) in connection with a final rulemaking under the Clean Air Act.\69\
These estimates incorporate recent research and address recommendations
of the National Academies (2017) and comments from a 2023 external peer
review of the accompanying technical report. For this rulemaking, DOE
used these updated 2023 SC-GHG values to conduct a sensitivity analysis
of the value of GHG emissions reductions associated with alternative
standards for circulator pumps. This sensitivity analysis provides an
expanded range of potential climate benefits associated with amended
standards. The final year of EPA's new 2023 SC-GHG estimates is 2080;
therefore, DOE did not monetize the climate benefits of GHG emissions
reductions occurring after 2080.
---------------------------------------------------------------------------
\69\ See www.epa.gov/environmental-economics/scghg.
---------------------------------------------------------------------------
The overall climate benefits are greater when using the higher,
updated SC-GHG 2023 estimates, compared to the climate benefits using
the older IWG SC-GHG estimates. The results of the sensitivity analysis
are presented in appendix 14C of the direct final rule TSD.
2. Monetization of Other Emissions Impacts
For this direct final rule, DOE estimated the monetized value of
NOX and SO2 emissions reductions from electricity
generation using benefit per ton estimates for that sector from the
[[Page 38802]]
EPA's Benefits Mapping and Analysis Program.\70\ 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 and 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 range; 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 AEO2023 to define weighted-
average national values for NOX and SO2 (see
appendix 14B of the direct final rule TSD).
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\70\ U.S. Environmental Protection Agency. Estimating the
Benefit per Ton of Reducing Directly-Emitted PM2.5,
PM2.5 Precursors and Ozone Precursors from 21 Sectors.
Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors (last
accessed December 4, 2023).
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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 AEO2023. 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
AEO2023 Reference case and various side cases. Details of the
methodology are provided in the appendices to chapters 13 and 15 of the
direct final rule TSD.
The output of this analysis is a set of time-dependent coefficients
that capture the change in electricity generation, primary fuel
consumption, installed capacity and power sector emissions due to a
unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of potential new or
amended energy conservation standards.
N. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a standard. Employment impacts from new or amended
energy conservation standards include both direct and indirect impacts.
Direct employment impacts are any changes in the number of employees of
manufacturers of the products subject to standards. 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 BLS. BLS
regularly publishes its estimates of the number of jobs per million
dollars of economic activity in different sectors of the economy, as
well as the jobs created elsewhere in the economy by this same economic
activity. Data from BLS indicate that expenditures in the utility
sector generally create fewer jobs (both directly and indirectly) than
expenditures in other sectors of the economy.\71\ 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.
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\71\ 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 https://apps.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf (last accessed November 29,
2023).
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DOE estimated indirect national employment impacts for the standard
levels considered in this direct final rule using an input/output model
of the U.S. economy called Impact of Sector Energy Technologies version
4 (``ImSET'').\72\ 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.
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\72\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W.
Schultz. ImSET 4.0: Impact of Sector Energy Technologies Model
Description and User's Guide. 2015. Pacific Northwest National
Laboratory: Richland, WA. PNNL-24563.
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DOE notes that ImSET is not a general equilibrium forecasting
model, and that the uncertainties involved in projecting employment
impacts, especially changes in the later years of the analysis. Because
ImSET does not incorporate price changes, the employment effects
predicted by ImSET may over-estimate actual job impacts over the long
run for this direct final rule. Therefore, DOE used ImSET only to
generate results for near-term timeframes (2029-2033), where these
uncertainties are reduced. For more details on the employment impact
analysis, see chapter 16 of the direct final rule TSD.
O. Other Comments
As discussed previously, DOE considered relevant comments, data,
and information obtained through the 2023 NOPR public comment process
in determining whether the recommended standards from the Joint
Agreement are in accordance with 42 U.S.C. 6295(o). And while some of
those comments were directed at specific aspects of DOE's analysis of
the Joint Agreement under 42 U.S.C. 6295(o), others were more generally
applicable to DOE's energy conservation standards rulemaking program as
a whole. The ensuing discussion focuses on these general comments
concerning energy conservation standards issued under EPCA.
The National Academies of Sciences, Engineering, and Medicine
(``NAS'') periodically appoint a committee to peer review the
assumptions, models, and methodologies that DOE uses in setting energy
conservation standards
[[Page 38803]]
for covered products and equipment. The most recent such peer review
was conducted in a series of meetings in 2020, and NAS issued the
report \73\ in 2021 detailing its findings and recommendations on how
DOE can improve its analyses and align them with best practices for
cost-benefit analysis.
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\73\ National Academies of Sciences, Engineering, and Medicine.
2021. Review of Methods Used by the U.S. Department of Energy in
Setting Appliance and Equipment Standards. Washington, DC: The
National Academies Press. Available at doi.org/10.17226/25992 (last
accessed August 2, 2023).
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In response to the March 2023 NOPR, AHAM stated that despite
previous requests from AHAM and others, DOE has failed to review and
incorporate the recommendations of the NAS report, instead indicating
that it will conduct a separate rulemaking process without such a
process having been initiated. (AHAM, No. 31 at p. 8) AHAM further
stated that DOE seems to be ignoring the recommendations in the NAS
Report and even conducting analysis that is opposite to the
recommendations. AHAM commented that DOE cannot continue to perpetuate
the errors in its analytical approach that have been pointed out by
stakeholders and the NAS report as to do so will lead to arbitrary and
capricious rules. (Id.)
As discussed, the rulemaking process for establishing new or
amended standards for covered products and equipment are specified at
appendix A to subpart C of 10 CFR part 430 (the Process Rule). DOE
periodically examines and revises these provisions in separate
rulemaking proceedings. The recommendations provided in the NAS Report,
which pertain to the processes by which DOE analyzes energy
conservation standards, will be considered by DOE in a separate,
forthcoming rulemaking process.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for MREFs.
It addresses the TSLs examined by DOE, the projected impacts of each of
these levels if adopted as energy conservation standards for MREFs, and
the standards levels that DOE is adopting in this direct final rule.
Additional details regarding DOE's analyses are contained in the direct
final rule TSD supporting this 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 price elasticity of
consumer purchasing decisions that may change when different standard
levels are set.
In the analysis conducted for this direct final rule, DOE analyzed
the benefits and burdens of five TSLs for MREFs. DOE developed TSLs
that combine efficiency levels for each analyzed product class. TSL 1
represents a 10 percent increase in efficiency, corresponding to the
lowest analyzed efficiency level above the baseline for each analyzed
product class. TSL 2 represents efficiency levels consistent with
Energy Star requirements for coolers, which in most cases except
freestanding coolers (``FC'') represent an increase compared to TSL 1,
and a modest increase in efficiency for certain combination cooler
product classes compared to TSL 1. TSL 3 increases the efficiency for
FC by an additional 10 percent compared to TSLs 1 and 2 and built-in
coolers (``BIC'') by an additional 10 percent compared to TSL 1 \74\,
while maintaining the same efficiency levels as TSL 2 for combination
coolers. TSL 4 (the recommended TSL) further increases the standard
level adopted in this direct final rule for all product classes except
built-in compact cooler (``BICC''), BIC, C-3A and C-3A-BI, which remain
at the same level as in TSL 3. TSL 5 represents max-tech for each
product class, which represents an increase from TSL 4 in all cases.
DOE presents the results for the TSLs in this document, while the
results for all efficiency levels that DOE analyzed are in the direct
final rule TSD.
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\74\ For BIC, the considered EL is lower at TSL 3 than TSL 2 due
to the relatively high Energy Star level included in TSL 2.
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Table V.1 presents the TSLs and the corresponding efficiency levels
that DOE has identified for potential amended energy conservation
standards for MREFs.
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[[Page 38804]]
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on MREF consumers by looking at
the effects that potential 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 direct
final rule TSD provides detailed information on the LCC and PBP
analyses.
Tables V.2 through V.17 show the LCC and PBP results for the TSLs
considered for each product class. In the first of each pair of tables,
the simple payback is measured relative to the baseline product. In the
second table, the impacts are measured relative to the efficiency
distribution in the 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.
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b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on senior-only households, which account for 8.7% of
the total MREF household sample. DOE did not consider low-income
consumers in this direct final rule because MREFs are not products
generally used by this subgroup, as they typically cost more than
comparable compact refrigerators, which are able to maintain lower
temperatures compared to MREFs, and therefore serve a wider range of
applications. Based on the TraQline wine chiller data, less than 4
percent of MREF owners are below the federal household income threshold
for poverty. Table V.18 compares the average LCC savings and PBP at
each efficiency level for the senior-only consumer subgroup with
similar metrics for the entire consumer sample for all product classes.
In most cases, the average LCC savings and PBP for senior-only
households at the considered efficiency levels are improved (i.e.,
higher LCC savings and equal or lesser payback periods) from the
average for all households. Chapter 11 of the direct final rule TSD
presents the complete LCC and PBP results for the subgroup.
[[Page 38809]]
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BILLING CODE 6450-01-C
c. Rebuttable Presumption Payback
As discussed in section IV.F.9 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. (42 U.S.C.
6295(o)(2)(B)(iii)) 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 MREFs. 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.19 presents the rebuttable-presumption payback periods for
the considered TSLs for MREFs. While DOE examined the rebuttable-
presumption criterion, it considered whether the standard levels
considered for this rule are economically justified through a
[[Page 38810]]
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.
[GRAPHIC] [TIFF OMITTED] TR07MY24.040
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on manufacturers of MREFs. The next section
describes the expected impacts on manufacturers at each considered TSL.
Chapter 12 of the direct final rule TSD explains the analysis in
further detail.
a. Industry Cash Flow Analysis Results
In this section, DOE provides GRIM results from the analysis, which
examines changes in the industry that would result from a standard. The
following tables summarize the estimated financial impacts (represented
by changes in INPV) of potential amended energy conservation standards
on manufacturers of MREFs, as well as the conversion costs that DOE
estimates manufacturers of MREFs would incur at each TSL.
The impact of amended energy conservation standards was analyzed
under two scenarios: (1) the preservation-of-gross-margin percentage;
and (2) the preservation-of-operating-profit, as discussed in section
IV.J.2.d of this document. The preservation-of-gross-margin percentages
applies a ``gross margin percentage'' of 20 percent for FCC and 28
percent for all other product classes.\75\ This scenario assumes that a
manufacturer's per-unit dollar profit would increase as MPCs increase
in the standards cases and represents the upper-bound to industry
profitability under potential new or amended energy conservation
standards.
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\75\ The gross margin percentages of 20 percent and 28 percent
are based on manufacturer markups of 1.25 and 1.38 percent,
respectively.
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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
results in the lower (or more severe) bound to impacts of potential
amended standards on industry.
Each of the modeled scenarios results in a unique set of cash flows
and corresponding INPV for each TSL. INPV is the sum of the discounted
cash flows to the industry from the base year through the end of the
analysis period. The ``change in INPV'' refers 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 and product designs 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 direct final rule and the year by which
manufacturers must comply with the amended standards. The conversion
costs can have a significant impact on the short-term cash flow of the
industry and generally result in lower free cash flow in the period
between the publication of the direct 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.
[[Page 38811]]
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The following cash flow discussion refers to product classes as
defined in Table I.1 in section I of this document and the efficiency
levels and design options as detailed in Table IV.4 in section IV.C.3
of this document.
At TSL 1, the standard represents a modest increase in efficiency,
corresponding to the lowest analyzed efficiency level above baseline
for all classes, except product classes C-9 and C-9-BI at baseline
efficiency. The change in INPV is expected to range from -4.2 to -3.8
percent. At this level, the free cash flow is estimated to decrease by
41.5 percent compared to the no-new-standards case value of $60.4
million in the year 2028, the year before the standards year.
Currently, 24.4 percent of MREF shipments meet the efficiencies
required at TSL 1. See Table V.21 for the percentage of shipments that
meet each TSL by product class.
DOE analyzed implementing various design options for the range of
directly analyzed product classes. These design options could include
implementing more efficient single-speed compressors, tube and fin
evaporators and/or condensers, hot walls, and argon-filled glass. At
TSL 1, capital conversion costs are minimal because most manufacturers
can incorporate design options with component changes. Product
conversion costs may be necessary for sourcing components, building
prototypes, and testing new components. DOE estimates capital
conversion costs of $1.3 million and product conversion costs of $54.0
million. Conversion costs total $55.3 million.
At TSL 1, the shipment-weighted average MPC for all MREFs is
expected to increase by 0.7 percent relative to the no-new-standards
case shipment-weighted average MPC for all MREFs in 2029. Given the
relatively small increase in production costs, DOE does not project a
notable drop in shipments in the year the standard takes effect. In the
preservation-of-gross-margin percentage scenario, the minor increase in
cashflow from the higher MSP is slightly outweighed by the $55.3
million in conversion costs, causing a small negative change in INPV at
TSL 1 under this scenario. Under the preservation-of-operating-profit
scenario, manufacturers earn the same per-unit operating profit as
would be earned in the no-new-standards case, but manufacturers do not
earn additional profit from their investments. In this scenario, the
manufacturer markup decreases in 2030, the year after the analyzed 2029
compliance year. This reduction in the manufacturer markup and the
$55.3 million in conversion costs incurred by manufacturers cause a
slightly negative change in INPV at TSL 1 under the preservation-of-
operating-profit scenario. See section IV.J.2.d of this document for
details on the manufacturer markup scenarios.
TSL 2 represents efficiency levels consistent with ENERGY STAR
requirements for coolers and a modest increase in efficiency for
certain combination cooler product classes. The change in INPV is
expected to range from -6.1 to -4.6 percent. At this level, the free
cash flow is estimated to decrease by 43.1 percent compared to the no-
new-standards case value of $60.4 million in the year 2028, the year
before the standards year. Currently, 12.6 percent of MREF shipments
meet the efficiencies required at TSL 2.
The design options DOE analyzed for most product classes include
implementing similar design options as TSL 1, such as more efficient
single-speed compressors. For FCC, C-13A, and C-13A-BI, TSL 2
corresponds to EL 2. For BICC and BIC, TSL 2 corresponds to EL 3. For
the remaining product classes, the efficiencies required at TSL 2 are
the same as TSL 1. The increase in conversion costs compared to TSL 1
are largely driven by the higher efficiencies required for BICs, which
account for 3.5 percent of MREF shipments. For BIC products that do not
[[Page 38812]]
meet this level, increasing insulation thickness would likely mean new
cabinets, liners, and fixtures as well as new shelf designs.
Implementing variable-speed compressors could require more advanced
controls and electronics and new test stations. DOE estimates capital
conversion costs of $6.4 million and product conversion costs of $68.4
million. Conversion costs total $74.8 million.
At TSL 2, the shipment-weighted average MPC for all MREFs is
expected to increase by 3.4 percent relative to the no-new-standards
case shipment-weighted average MPC for all MREFs in 2029. In the
preservation-of-gross-margin percentage scenario, the minor increase in
cashflow from the higher MSP is slightly outweighed by the $74.8
million in conversion costs, causing a small negative change in INPV at
TSL 2 under this scenario. Under the preservation-of-operating-profit
scenario, manufacturers earn the same per-unit operating profit as
would be earned in the no-new-standards case, but manufacturers do not
earn additional profit from their investments. In this scenario, the
manufacturer markup decreases in 2030, the year after the analyzed
compliance year. This reduction in the manufacturer markup and the
$74.8 million in conversion costs incurred by manufacturers cause a
negative change in INPV at TSL 2 under the preservation-of-operating-
profit scenario.
TSL 3 increases the efficiency for FCs by an additional 10 percent
compared to TSL 2, and TSL 3 decreases the efficiency for BICs by 10
percent. Combination coolers are at the same efficiency levels as TSL
2. The change in INPV is expected to range from -5.7 to -4.4 percent.
At this level, free cash flow is estimated to decrease by 40.7 percent
compared to the no-new-standards case value of $60.4 million in the
year 2028, the year before the standards year. Currently, approximately
5.8 percent of domestic MREF shipments meet the efficiencies required
at TSL 3.
At this level, DOE analyzed similar design options as TSL 1 and TSL
2, such as implementing incrementally more efficient single-speed
compressors. For all product classes except FC and BIC, the
efficiencies required at TSL 3 are the same as TSL 2. For FC, TSL 3
corresponds to EL 2. For BIC, TSL 3 reflects a lower efficiency level
(EL 2) as compared to TSL 2 (EL 3). Industry capital conversion costs
decrease at TSL 3 as compared to TSL 2 due to the lower efficiency
level required for BIC. As previously discussed, DOE expects
manufacturers of BIC would likely need to increase insulation thickness
at TSL 2 (EL 3) and incorporate variable-speed compressors. However, at
TSL 3, DOE's engineering analysis and manufacturer feedback indicate
that manufacturers could achieve EL 2 efficiencies for BIC with
relatively straightforward component swaps versus a larger product
redesign associated with increasing insulation. DOE estimates capital
conversion costs of $1.3 million and product conversion costs of $70.8
million. Conversion costs total $72.1 million.
At TSL 3, the shipment-weighted average MPC for all MREFs is
expected to increase by 3.2 percent relative to the no-new-standards
case shipment-weighted average MPC for all MREFs in 2029. In the
preservation-of-gross-margin-percentage scenario, the slight increase
in cashflow from the higher MSP is outweighed by the $72.1 million in
conversion costs, causing a slightly negative change in INPV at TSL 3
under this scenario. Under the preservation-of-operating-profit
scenario, the manufacturer markup decreases in 2030, the year after the
analyzed compliance year. This reduction in the manufacturer markup and
the $72.1 million in conversion costs incurred by manufacturers cause a
slightly negative change in INPV at TSL 3 under the preservation-of-
operating-profit scenario.
At the Recommended TSL (i.e., TSL 4), the standard reflects an
increase in efficiency level for the product classes that make up the
vast majority of MREF shipments (FCC, FC, C-13A). The Recommended TSL
further increases the standard level adopted in this direct final rule
for all product classes except BICC, BIC, C-3A, and C-3A-BI. The change
in INPV is expected to range from -11.4 to -7.5 percent. At this level,
free cash flow is estimated to decrease by 78.2 percent compared to the
no-new-standards case value of $60.4 million in the year 2028, the year
before the standards year. Currently, approximately 3.9 percent of
domestic MREF shipments meet the efficiencies required at the
Recommended TSL.
At the Recommended TSL, all product classes correspond to EL 3,
except BIC, C-3A, C-3A-BI, C-9, and C-9-BI. For BIC, the Recommended
TSL corresponds to EL 2. For C-3A, the efficiencies required at the
Recommended TSL are the same as TSL 3 (EL 1). For C-3A-BI, the
Recommended TSL corresponds to EL 1. Both C-9 and C-9-BI correspond to
baseline efficiency. At this level, conversion costs are largely driven
by the efficiencies required for FC, which accounts for approximately
11.8 percent of industry shipments. DOE's shipments analysis estimates
that no FC shipments currently meet the efficiencies required at the
Recommended TSL. All manufacturers would need to update their product
platforms, which could include increasing insulation thickness and
implementing variable-speed compressors. Increasing insulation
thickness would likely result in the loss of interior volume or an
increase in exterior product dimensions. A decrease of interior volume
would require redesign of the cabinet as well as the designs and
tooling associated with the interior of the product, such as the liner,
shelving, racks, and drawers. DOE estimates capital conversion costs of
$26.6 million and product conversion costs of $104.1 million.
Conversion costs total $130.7 million.
At the Recommended TSL, the shipment-weighted average MPC for all
MREFs is expected to increase by 8.1 percent relative to the no-new-
standards case shipment-weighted average MPC for all MREFs in 2029.
Given the projected increase in production costs, DOE expects an
estimated 4 percent drop in shipments in the year the standard takes
effect relative to the no-new-standards case. In the preservation-of-
gross-margin-percentage scenario, the increase in cashflow from the
higher MSP is outweighed by the $130.7 million in conversion costs and
the drop in annual shipments, causing a negative change in INPV at the
Recommended TSL under this scenario. Under the preservation-of-
operating-profit scenario, the manufacturer markup decreases in 2030,
the year after the analyzed compliance year. This reduction in the
manufacturer markup, the $130.7 million in conversion costs incurred by
manufacturers, and the drop in annual shipments cause a negative change
in INPV at the Recommended TSL under the preservation-of-operating-
profit scenario.
TSL 5 represents max-tech efficiency levels for all product
classes. The change in INPV is expected to range from -52.1 to -35.1
percent. At this level, free cash flow is estimated to decrease by
381.5 percent compared to the no-new-standards case value of $60.4
million in the year 2028, the year before the standards year.
Currently, approximately 2.9 percent of domestic MREF shipments meet
the efficiencies required at TSL 5.
DOE's shipments analysis estimates that no shipments meet the
efficiencies required across all product classes except for BICC, which
account for only 4 percent of industry shipments. A max-tech standard
would necessitate significant investment to redesign
[[Page 38813]]
nearly all product platforms and incorporate design options such as the
most efficient variable-speed compressors, triple-pane glass, increased
foam insulation thickness, and VIP technology. Capital conversion costs
may be necessary for new tooling for VIP placement as well as new
testing stations for high-efficiency components. Increasing insulation
thickness would likely result in the loss of interior volume or an
increase in exterior product dimensions. Loss of interior volume would
require redesign of the cabinet as well as the designs and tooling
associated with the interior of the product, such as the liner,
shelving, racks, and drawers. Product conversion costs at max-tech are
significant as manufacturers work to completely redesign their product
platforms. For products implementing VIPs, product conversion costs may
be necessary for prototyping and testing for VIP placement, design, and
sizing. Manufacturers implementing triple-pane glass may need to
redesign the door frame and hinges to support the added thickness and
weight. DOE estimates capital conversion costs of $179.7 million and
product conversion costs of $375.3 million. Conversion costs total
$555.1 million.
At TSL 5, 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 5, the shipment-weighted average MPC for all MREFs is
expected to increase by 32.7 percent relative to the no-new-standards
case shipment-weighted average MPC for all MREFs in 2029. Given the
projected increase in production costs, DOE expects an estimated 13
percent drop in shipments in the year the standard takes effect
relative to the no-new-standards case. In the preservation-of-gross-
margin-percentage scenario, the increase in cashflow from the higher
MSP is outweighed by the $555.1 million in conversion costs and drop in
annual shipments, causing a significant negative change in INPV at TSL
5 under this scenario. Under the preservation-of-operating-profit
scenario, the manufacturer markup decreases in 2030, the year after the
analyzed compliance year. This reduction in the manufacturer markup,
the $555.1 million in conversion costs incurred by manufacturers, and
the drop in annual shipments cause a significant decrease in INPV at
TSL 5 under the preservation-of-operating-profit scenario.
[GRAPHIC] [TIFF OMITTED] TR07MY24.042
b. Direct Impacts on Employment
To quantitatively assess the potential impacts of amended energy
conservation standards on direct employment in the MREF 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 during the analysis period. For this direct final rule,
DOE used the most up-to-date information available. DOE calculated
these values using statistical data from the 2021 ASM,\76\ BLS employee
compensation data,\77\ results from the engineering analysis, and
manufacturer interviews conducted in support of the March 2023 NOPR.
---------------------------------------------------------------------------
\76\ 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/programs-surveys/asm/data.html
(last accessed July 5, 2023).
\77\ U.S. Bureau of Labor Statistics. Employer Costs for
Employee Compensation--June 2023. September 12, 2023. Available at
www.bls.gov/news.release/pdf/ecec.pdf (last accessed October 30,
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 total labor
expenditures in each year are calculated by multiplying the total MPCs
by the labor percentage of MPCs. The total labor expenditures in the
GRIM were then converted to total 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 total production employment to total
domestic production employment. The U.S. labor percentage represents
the industry fraction of domestic manufacturing
[[Page 38814]]
production capacity for the covered product. This value is derived from
manufacturer interviews, product database analysis, and publicly
available information. Consistent with the March 2023 NOPR, DOE
estimates that 7.8 percent of MREFs are produced domestically.
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. DOE's estimates only account for
production workers who manufacture the specific products covered by
this rulemaking.
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.\78\ Using the amount 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.
---------------------------------------------------------------------------
\78\ The comprehensive description of production and non-
production workers is available at ``Definitions and Instructions
for the Annual Survey of Manufacturers, MA-10000'' (pp. 13-14)
www2.census.gov/programs-surveys/asm/technical-documentation/questionnaire/2021/instructions/MA_10000_Instructions.pdf (last
accessed September 9, 2023).
---------------------------------------------------------------------------
Using the GRIM, DOE estimates in the absence of amended energy
conservation standards there would be 211 domestic production and non-
production workers for MREFs in 2029. Table V.22 shows the range of the
impacts of energy conservation standards on U.S. manufacturing
employment in the MREF industry. The following discussion provides a
qualitative evaluation of the range of potential impacts presented in
Table V.22.
[GRAPHIC] [TIFF OMITTED] TR07MY24.043
The direct employment impacts shown in Table V.22 represent the
potential domestic employment changes that could result following the
compliance date for the MREF product classes in this direct final rule.
The upper bound estimate corresponds to a change in the number of
domestic workers that would result from amended energy conservation
standards if manufacturers continue to produce the same scope of
covered products within the United States after compliance takes
effect. The lower bound estimate represents the maximum decrease in
production workers if manufacturing moved to lower labor-cost
countries. At lower TSLs, DOE believes the likelihood of changes in
production location due to amended standards are low due to the
relatively minor production line updates required. However, as amended
standards increase in stringency and both the complexity and cost of
production facility updates increases, manufacturers may reevaluate
domestic production siting options. Specifically, implementing VIPs
could necessitate additional labor content and significant capital
investment. However, at the Recommended TSL (i.e., TSL 4), none of the
analyzed product classes would likely require VIPs to meet the
recommended efficiency levels. Furthermore, DOE notes that of the six
manufacturers with U.S. manufacturing facilities producing MREFs, five
manufacturers are AHAM members, a key signatory of the Joint Agreement.
Additional detail on the analysis of direct employment can be found
in chapter 12 of the direct final rule TSD. Additionally, the
employment impacts discussed in this section are independent of the
employment impacts from the broader U.S. economy, which are documented
in chapter 16 of the direct final rule TSD.
c. Impacts on Manufacturing Capacity
In interviews, manufacturers noted that the majority of MREFs--
namely FCC--are manufactured in Asia and rebranded by home appliance
manufacturers. Manufacturers had few concerns about manufacturing
constraints below the max-tech level and the implementation of VIPs.
However, at max-tech, some manufacturers expressed technical
uncertainty about industry's ability to meet the efficiencies required
as few OEMs offer products at max-tech today. For example, DOE is not
aware of any OEMs that currently offer FCC that meet TSL 5
efficiencies. DOE's shipments analysis estimates that except for BICC,
which only accounts for 4 percent of MREF shipments, no shipments of
other product classes meet the max-tech efficiencies.
Some low-volume domestic and European-based OEMs offer niche or
high-end MREFs (i.e., built-ins, combination coolers, FCCs that can be
integrated into kitchen cabinetry). In interviews, these manufacturers
stated that, due to their low volume and wide range of product
offerings, they could face engineering resource constraints
[[Page 38815]]
should amended standards necessitate a significant redesign, such as
requiring insulation thickness changes for FCs at the Recommended TSL
(i.e., TSL 4) or requiring VIPs for all product classes at TSL 5. These
manufacturers further stated that the extent of their resource
constraints depend, in part, on the outcome of other ongoing DOE energy
conservation standards rulemakings that impact related products, in
particular, the energy conservation standards for RF. DOE notes that
the January 2024 RF Direct Final Rule amending the energy conservation
standards for RF was published in the Federal Register on January 17,
2024. 89 FR 3026. In that direct final rule, compliance with amended
standards would be required in 2029 or 2030, depending on the product
class, instead of 2027, as analyzed in the RF NOPR published in the
Federal Register on February 27, 2023. See 88 FR 12452. Thus,
manufacturers will have more time to redesign RF products to meet
amended standards, compared to the EPCA-specified compliance period.
Additionally, for OEMs that manufacture both MREFs and RFs, DOE expects
that the alignment of the compliance dates for these covered products
would help mitigate regulatory burden by reducing the number of times
manufacturers would need to reorganize production lines.
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 energy conservation standards and could
merit additional analysis.
DOE analyzes the impacts on small businesses in a separate analysis
for the standards proposed in the NOPR published elsewhere in this
issue of the Federal Register and in chapter 12 of the direct final
rule TSD. In summary, the SBA defines a ``small business'' as having
1,500 employees or less for NAICS 335220, ``Major Household Appliance
Manufacturing'' or as having 1,250 employees of less for the secondary
NAICS code of 333415: ``Air-Conditioning and Warm Air Heating Equipment
and Commercial and Industrial Refrigeration Equipment Manufacturing.''
Using the more conservative (i.e., more inclusive) threshold of 1,500
employees, DOE identified one domestic OEM that qualifies as small
business and is not foreign-owned and operated. For a discussion of the
impacts on the small business manufacturer group, see chapter 12 of the
direct final rule TSD.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the regulatory actions
of other Federal agencies and States that affect the manufacturers of a
covered product or equipment. While any one regulation may not impose a
significant burden on manufacturers, the combined effects of several
existing or impending regulations may have serious consequences for
some manufacturers, groups of manufacturers, or an entire industry.
Multiple regulations affecting the same manufacturer can strain profits
and lead companies to abandon 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.
For the cumulative regulatory burden analysis, DOE examines
Federal, product-specific regulations that could affect MREF
manufacturers that take effect approximately 3 years before and after
2029 the compliance date. This information is presented in Table V.23.
BILLING CODE 6450-01-P
[[Page 38816]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.044
[[Page 38817]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.045
BILLING CODE 6450-01-C
As shown in Table V.23, most of the rulemakings with the largest
overlap of MREF OEMs include RFs, consumer conventional cooking
products, residential clothes washers, consumer clothes dryers, and
MREFs, which are all part of the multi-product Joint Agreement
submitted by interested parties.\79\ The multi-product Joint Agreement
states the ``jointly recommended compliance dates will achieve the
overall energy and economic benefits of this agreement while allowing
necessary lead-times for manufacturers to redesign products and retool
manufacturing plants to meet the recommended standards across product
categories.'' (Joint Agreement, No. 34 at p. 2) As discussed
previously, the staggered compliance dates help mitigate manufacturers'
concerns about their ability to allocate sufficient resources to comply
with multiple concurrent amended standards and about the need to align
compliance dates for products that are typically designed or sold as
matched pairs. See section IV.J.3 of this document for stakeholder
comments about cumulative regulatory burden. See Table V.24 for a
comparison of the estimated compliance dates based on EPCA-specified
timelines and the compliance dates detailed in the Joint Agreement.
---------------------------------------------------------------------------
\79\ The microwave ovens energy conservation standards final
rule (88 FR 39912), which has 8 overlapping OEMs, was published
prior to the joint submission of the multi-product Joint Agreement.
---------------------------------------------------------------------------
[[Page 38818]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.046
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 MREFs, 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 (2029-2058). Table V.25 presents
DOE's projections of the national energy savings for each TSL
considered for MREFs. The savings were calculated using the approach
described in section IV.H.2 of this document.
[GRAPHIC] [TIFF OMITTED] TR07MY24.047
OMB Circular A-4 \80\ 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.\81\ The review timeframe established in EPCA is generally
not synchronized with the product lifetime, product manufacturing
cycles, or other factors specific to MREFs. Thus, such results are
presented for informational purposes only and are not indicative of any
change in DOE's analytical methodology. The NES sensitivity analysis
results based on a 9-year analytical period are presented in Table
V.26. The impacts are counted over the lifetime of MREFs purchased in
2029-2037.
---------------------------------------------------------------------------
\80\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. Available at www.whitehouse.gov/omb/information-for-agencies/circulars/ (last accessed January 5, 2024).
DOE used the prior version of Circular A-4 (2003) as a result of the
effective date of the new version.
\81\ 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. (42 U.S.C.
6295(m)) 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.
---------------------------------------------------------------------------
[[Page 38819]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.048
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the TSLs considered for MREFs. In
accordance with OMB's guidelines on regulatory analysis,\82\ DOE
calculated NPV using both a 7-percent and a 3-percent real discount
rate. Table V.27 shows the consumer NPV results with impacts counted
over the lifetime of products purchased in 2029-2058.
---------------------------------------------------------------------------
\82\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. Available at www.whitehouse.gov/omb/information-for-agencies/circulars/ (last accessed January 5, 2024).
DOE used the prior version of Circular A-4 (2003) as a result of the
effective date of the new version.
[GRAPHIC] [TIFF OMITTED] TR07MY24.049
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.28. The impacts are counted over the
lifetime of products purchased in 2029-2037. 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.
[GRAPHIC] [TIFF OMITTED] TR07MY24.050
The previous results reflect the use of a default trend to estimate
the change in price for MREFs over the analysis period (see section
IV.H.3 of this document). DOE also conducted a sensitivity analysis
that considered a low benefits scenario which combines a lower rate of
price decline and AEO 2023 Low Economic Growth, as well as a high
benefits scenario which combines a higher rate of price decline and AEO
2023 High Economic Growth. The results of these alternative cases are
presented in appendix 10C of the direct final rule TSD. In the high
benefits scenario where high-price-decline case is applied, the NPV of
consumer benefits is higher than in the default case. In the low
benefits scenario where low-price-decline case is applied, the NPV of
consumer benefits is lower than in the default case.
c. Indirect Impacts on Employment
DOE estimates that amended energy conservation standards for MREFs
will reduce energy expenditures for consumers of those products, with
the resulting net savings being redirected to other forms of economic
activity. These expected shifts in spending and economic activity could
affect the demand for labor. As described in section IV.N of this
document, DOE used an input/output model of the U.S. economy to
estimate indirect employment impacts of the TSLs that DOE considered.
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 (2029-2033), where these
uncertainties are reduced.
The results suggest that the adopted standards are likely to have a
negligible impact on the net demand for labor in the economy. The net
change in jobs is so small that it would be imperceptible in national
labor statistics and might be offset by other, unanticipated effects on
employment. Chapter 16 of the direct final rule TSD presents detailed
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
As discussed in section III.E.1.d of this document, DOE has
concluded that the standards adopted in this direct final rule will not
lessen the utility or performance of the MREFs under consideration in
this rulemaking. Manufacturers of these products
[[Page 38820]]
currently offer units that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
DOE considered any lessening of competition that would be likely to
result from amended standards. As discussed in section III.E.1.e of
this document, EPCA directs the Attorney General of the United States
(``Attorney General'') to determine the impact, if any, of any
lessening of competition likely to result from a proposed standard and
to transmit such determination in writing to the Secretary within 60
days of the publication of a proposed rule, together with an analysis
of the nature and extent of the impact. To assist the Attorney General
in making this determination, DOE is providing DOJ with copies of this
direct final rule and the direct final rule TSD for review.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Reduced electricity
demand due to energy conservation standards is also likely to reduce
the cost of maintaining the reliability of the electricity system,
particularly during peak-load periods. Chapter 15 in the direct final
rule 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 MREFs is expected to yield environmental benefits in the
form of reduced emissions of certain air pollutants and greenhouse
gases. Table V.29 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 direct final
rule TSD.
[GRAPHIC] [TIFF OMITTED] TR07MY24.051
As part of the analysis for this direct final rule, DOE estimated
monetary benefits likely to result from the reduced emissions of
CO2 that DOE estimated for each of the considered TSLs for
MREFs. Section IV.L of this document discusses the estimated SC-
CO2 values that DOE used. Table V.30 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 selected TSL in chapter 14 of the direct final rule TSD.
[[Page 38821]]
[GRAPHIC] [TIFF OMITTED] TR07MY24.052
As discussed in section IV.L.2 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 MREFs. Table V.31 presents the value of the CH4
emissions reduction at each TSL, and Table V.32 presents the value of
the N2O emissions reduction at each TSL. The time-series of
annual values is presented for the selected TSL in chapter 14 of the
direct final rule TSD.
[GRAPHIC] [TIFF OMITTED] TR07MY24.053
[GRAPHIC] [TIFF OMITTED] TR07MY24.054
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, however, that the adopted standards in this direct final
rule would be economically justified even without inclusion of
monetized benefits of reduced GHG emissions.
DOE also estimated the monetary value of the economic benefits
associated with NOX and SO2 emissions reductions
anticipated to result from the considered TSLs for MREFs. The dollar-
per-ton values that DOE used are discussed in section IV.L of this
document. Table V.33 presents the
[[Page 38822]]
present value for NOX emissions reduction for each TSL
calculated using 7-percent and 3-percent discount rates, and Table V.34
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 selected TSL in chapter 14 of the direct
final rule TSD.
[GRAPHIC] [TIFF OMITTED] TR07MY24.055
[GRAPHIC] [TIFF OMITTED] TR07MY24.056
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.35 presents the NPV values that result from adding the
estimates of the economic benefits resulting from reduced GHG and
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 MREFs and are measured for the
lifetime of products shipped in 2029-2058. 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 MREFs shipped in 2029-2058.
[GRAPHIC] [TIFF OMITTED] TR07MY24.057
[[Page 38823]]
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 direct final rule, DOE considered the impacts of amended
standards for MREFs at each TSL, beginning with the maximum
technologically feasible level, to determine whether that level was
economically justified. Where the max-tech level was not justified, DOE
then considered the next most efficient level and undertook the same
evaluation until it reached the highest efficiency level that is both
technologically feasible and economically justified and saves a
significant amount of energy.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, tables in this section present a summary of the results of
DOE's quantitative analysis for each TSL. In addition to the
quantitative results presented in the tables, DOE also considers other
burdens and benefits that affect economic justification. 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, an issue known as the ``energy
efficiency gap''. There is evidence that consumers undervalue future
energy savings as a result of (1) a lack of information; (2) a lack of
sufficient salience of the long-term or aggregate benefits; (3) a lack
of sufficient savings to warrant delaying or altering purchases; (4)
excessive focus on the short term, in the form of inconsistent
weighting of future energy cost savings relative to available returns
on other investments; (5) computational or other difficulties
associated with the evaluation of relevant tradeoffs; and (6) a
divergence in incentives (for example, between renters and owners, or
builders and purchasers).\83\ 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.
---------------------------------------------------------------------------
\83\ Gillingham and Palmer (2014), Gerarden et al. (2015) and
Allcott and Greenstone (2012) discuss a wide range of potential
factors contributing to the energy efficiency gap.
---------------------------------------------------------------------------
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 forgo 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 direct final rule TSD. However, DOE's current analysis does not
explicitly control for heterogeneity in consumer preferences,
preferences across subcategories of products or specific features, or
consumer price sensitivity variation according to household income.\84\
---------------------------------------------------------------------------
\84\ 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.
---------------------------------------------------------------------------
DOE continues to explore additional potential updates to the
quantifiable framework for estimating the benefits and costs of changes
in consumer purchase decisions due to an energy conservation standard,
and 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.\85\ 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.
---------------------------------------------------------------------------
\85\ 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
November 29, 2023).
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1. Benefits and Burdens of TSLs Considered for MREF Standards
Tables V.36 and V.37 summarize the quantitative impacts estimated
for each TSL for MREFs. The national impacts are measured over the
lifetime of MREFs purchased in the 30-year period that begins in the
anticipated year of compliance with amended standards (2029-2058). The
energy savings, emissions reductions, and value of emissions reductions
refer to full-fuel-cycle results. DOE is presenting monetized benefits
of GHG emissions reductions in accordance with the applicable Executive
orders and DOE would reach the same conclusion presented in this
document in the absence of the estimated benefits from reductions in
GHG emissions, 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.
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BILLING CODE 6450-01-C
DOE first considered TSL 5, which represents the max-tech
efficiency levels. For coolers (i.e., FCC, FC, BICC, and BIC), which
account for approximately 82 percent of MREF shipments, DOE expects
that products would require use of VIPs, VSCs, and triple-glazed doors
at this TSL. DOE expects that VIPs would be used in the products' side
walls. In addition, the products would use the best-available-
efficiency variable-speed compressors, forced-convection heat
exchangers with multi-speed brushless-DC (``BLDC'') fans, and increase
in cabinet wall thickness as compared to most baseline products. TSL 5
would save an estimated 0.55 quads of energy, an amount which DOE
considers significant. Under TSL 5, the NPV of consumer benefit would
be negative, i.e., -$1.36 billion using a discount rate of 7 percent,
and -$1.68 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 5 are 10.0 Mt of
CO2, 3.15 thousand tons of SO2, 18.5 thousand
tons of NOX, 0.02 tons of Hg, 83.4 thousand tons of
CH4, and 0.10 thousand tons of N2O. 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 5 is $0.6 billion. The estimated monetary value of the health
benefits from
[[Page 38826]]
reduced SO2 and NOX emissions at TSL 5 is $0.4
billion using a 7-percent discount rate and $1.1 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 5 is -$0.4
billion. Using a 3-percent discount rate for all benefits and costs,
the estimated total NPV at TSL 5 is -$0.07 billion. The estimated total
monetized NPV is provided for additional information, however,
consistent with the statutory factors and framework for along with
appropriate consideration of its full range of statutory factors when
determining whether a proposed standard level is economically
justified, DOE considers a range of quantitative and qualitative
benefits and burdens, including the costs and cost savings for
consumers, impacts to consumer subgroups, energy savings, emission
reductions, and impacts on manufacturers.
At TSL 5, for the product classes with the largest market share,
which are FCC, FC, and C-13A and together account for approximately 92
percent of annual shipments, the LCC savings are all negative (-$45.3,
-$178.8, and -$73.4, respectively) and their payback periods are 13.0
years, 29.9 years, and 19.5 years, respectively, which are all longer
than their corresponding average lifetimes. For these product classes,
the fraction of consumers experiencing a net LCC cost is 81.6 percent,
98.2 percent, and 93.9 percent due to increases in first cost of
$185.0, $420.5, and $167.5, respectively. Overall, a majority of MREF
consumers (84.5 percent) would experience a net cost and the average
LCC savings would be negative for all analyzed product classes.
At TSL 5, the projected change in INPV ranges from a decrease of
$421.0 million to a decrease of $283.2 million, which corresponds to
decreases of 51.2 percent and 35.1 percent, respectively. DOE estimates
that industry must invest $555.1 million to comply with standards set
at TSL 5.
DOE estimates that approximately 2.9 percent of current MREF
shipments meet the max-tech levels. For FCC, FC, and C-13A, which
together account for approximately 92 percent of annual shipments, DOE
estimates that zero shipments currently meet max-tech efficiencies.
At TSL 5, manufacturers would likely need to implement all the most
efficient design options analyzed in the engineering analysis.
Manufacturers that do not currently offer products that meet TSL 5
efficiencies would need to develop new product platforms, which would
require significant investment. Conversion costs are driven by the need
for changes to cabinet construction, such as increasing foam insulation
thickness and/or incorporating VIP technology. Increasing insulation
thickness could result in a loss of interior volume or an increase in
exterior volume. If manufacturers chose to maintain exterior
dimensions, increasing insulation thickness would require redesign of
the cabinet as well as the designs and tooling associated with the
interior of the product, such as the liner, shelving, racks, and
drawers. Incorporating VIPs into MREF designs could also require
redesign of the cabinet to maximize the efficiency benefit of this
technology. In addition to insulation changes, manufacturers may need
to implement triple-pane glass, which could require implementing
reinforced hinges and redesigning the door structure.
At this level, DOE estimates a 13-percent drop in shipments in the
year the standard takes effect compared to the no-new-standards case,
as some consumers may forgo purchasing a new MREF due to the increased
upfront cost of baseline models.
At TSL 5 for MREFs, the Secretary concludes that the benefits of
energy savings, emission reductions, and the estimated monetary value
of the emissions reductions would be outweighed by the economic burden
on many consumers, negative NPV of consumer benefits, and the impacts
on manufacturers, including the significant potential reduction in
INPV. A majority of MREF consumers (84.5 percent) would experience a
net cost and the average LCC savings would be negative. Additionally,
manufacturers would need to make significant upfront investments to
update product platforms. The potential reduction in INPV could be as
high as 52.1 percent. Consequently, the Secretary has concluded that
TSL 5 is not economically justified.
DOE then considered the Recommended TSL (i.e., TSL 4), which
represents EL 3 for all analyzed product classes except for C-3A and C-
3A-BI, for which this TSL corresponds to EL 1 and BIC, for which this
TSL corresponds to EL 2. At the Recommended TSL, products of most
classes would use high-efficiency single-speed compressors with forced-
convection evaporators and condensers using brushless DC fan motors.
Doors would be double-glazed with low-conductivity gas fill (e.g.,
argon) and a single low-emissivity glass layer. Products would not
require use of VIPs, but the FC product class would require thicker
walls than corresponding baseline products. The Recommended TSL would
save an estimated 0.32 quads of energy, an amount DOE considers
significant. Under the Recommended TSL, the NPV of consumer benefit
would be $0.17 billion using a discount rate of 7 percent, and $0.77
billion using a discount rate of 3 percent.
The cumulative emissions reductions at the Recommended TSL are 5.9
Mt of CO2, 1.8 thousand tons of SO2, 10.8
thousand tons of NOX, 0.01 tons of Hg, 48.6 thousand tons of
CH4, and 0.06 thousand tons of N2O. 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
the Recommended TSL is $0.3 billion. The estimated monetary value of
the health benefits from reduced SO2 and NOX
emissions at the Recommended TSL is $0.2 billion using a 7-percent
discount rate and $0.6 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 the Recommended
TSL is $0.7 billion. Using a 3-percent discount rate for all benefits
and costs, the estimated total NPV at the Recommended TSL is $1.7
billion. The estimated total monetized NPV is provided for additional
information, however, consistent with the statutory factors and
framework for determining whether a standard level is economically
justified, DOE considers a range of quantitative and qualitative
benefits and burdens, including the costs and cost savings for
consumers, impacts to consumer subgroups, energy savings, emission
reductions, and impacts on manufacturers.
At the Recommended TSL, for the product classes with the largest
market share, which are FCC, FC, and C-13A, the LCC savings are $12.6,
$28.0, and $12.0, respectively, and their payback periods are 6.8
years, 8.5 years, and 7.3 years, respectively, which are all shorter
than their corresponding average lifetimes. For these product classes,
the fraction of consumers experiencing a net LCC cost is 46.8 percent,
44.0 percent, and 47.2 percent, and increases in first cost for these
classes are $91.7, $360.9, and $124.3, respectively. Overall, the LCC
savings would be positive for all MREF product classes, and, while 43.7
[[Page 38827]]
percent of MREF consumers would experience a net cost, slightly more
than half of MREF consumers would experience a net benefit (52.9
percent).
At the Recommended TSL (i.e., TSL 4), the projected change in INPV
ranges from a decrease of $92.1 million to a decrease of $60.3 million,
which correspond to decreases of 11.4 percent and 7.5 percent,
respectively. DOE estimates that industry must invest $130.7 million to
comply with standards set at Recommended TSL.
DOE estimates that approximately 3.9 percent of shipments currently
meet the required efficiencies at the Recommended TSL. For most product
classes (i.e., FCC, BICC, BIC, C-13A, C-13A-BI, C-3A, C-3A-BI), DOE
expects manufacturers could reach the required efficiencies with
relatively straightforward component swaps, such as implementing
incrementally more efficient compressors, rather than the full platform
redesigns required at max-tech. DOE expects that FC manufacturers would
need to increase foam insulation thickness and incorporate variable-
speed compressor systems at this level. At the Recommended TSL, DOE
estimates a 4-percent drop in shipments in the year the standard takes
effect compared to the no-new-standards case, as some consumers may
forgo purchasing a new MREF due to the increased upfront cost of
baseline models.
After considering the analysis and weighing the benefits and
burdens, the Secretary has concluded that at a standard set at the
recommended TSL for MREFs would be economically justified. At this TSL,
the average LCC savings are positive for all product classes for which
an amended standard is considered, with a shipment-weighted average of
$15.2 savings. The FFC national energy savings are significant and the
NPV of consumer benefits is positive using both a 3-percent and 7-
percent discount rate. The standard levels at TSL 4 are economically
justified even without weighing the estimated monetary value of
emissions reductions. When those emissions reductions are included--
representing $0.3 billion in climate benefits (associated with the
average SC-GHG at a 3-percent discount rate), and $0.6 billion (using a
3-percent discount rate) or $0.2 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. The walk-down is not a comparative analysis, as a comparative
analysis would result in the maximization of net benefits instead of
energy savings that are technologically feasible and economically
justified, which would be contrary to the statute. See 86 FR 70892,
70908. Although DOE has not conducted a comparative analysis to select
the adopted energy conservation standards, DOE notes that the
Recommended TSL represents the option with positive LCC savings ($15.2)
for all product classes compared to TSL 5 (-$99.5). Further, when
comparing the cumulative NPV of consumer benefit using a 7% discount
rate, TSL 4 ($0.7 billion) has a higher benefit value than TSL 5 (-$0.4
billion), while for a 3-percent discount rate, TSL 4 ($1.7 billion) is
also higher than TSL 5 (-$0.07 billion), which yields negative NPV in
both cases. These additional savings and benefits at the Recommended
TSL are significant. DOE considers the impacts to be, as a whole,
economically justified at the Recommended TSL.
Although DOE considered amended standard levels for MREFs by
grouping the efficiency levels for each product class into TSLs, DOE
evaluates all analyzed efficiency levels in its analysis. For all
product classes, except for BIC and C-3A-BI, the amended standard level
represents the maximum energy savings that does not result in negative
LCC savings. DOE did not include efficiency levels with negative LCC
savings in any TSLs with the exception of TSL 5, which represents the
max-tech efficiency levels. Specifically, for FC, FCC, BICC, C-13 A,
and C13-A-BI, DOE did not include EL4 in a TSL due to negative LCC
savings, and for C-3A, DOE did not include EL 2 or 3, and for C-3A-BI,
DOE did not include EL 3 for the same reason. For BIC and C-3A-BI, the
standard level represents the maximum energy savings that is
economically justified. For BIC, DOE did not include EL4 in any TSL due
to negative LCC savings. TSL 4, the Recommended TSL and the one adopted
here, includes an EL for BIC that is lower than the EL at TSL 2. That
is because TSL 2 represents ENERGY STAR for all product classes for
which an ENERGY STAR criterion exists, including EL 3 for BIC. As such,
DOE analyzed TSL 2 with a higher efficiency level for BIC than TSL 4
because of the ENERGY STAR criterion. TSL 4 also includes an EL for C-
3A-BI, EL1, that is lower than another EL, EL2, that has positive LCC
savings. DOE has considered standards at those ELs for those products
and found them not to be economically justified. Although these ELs
have positive LCC savings, they would result in a majority of
purchasers experiencing a net cost (53% and 57%, respectively).
Further, for BIC products, DOE expects some manufacturers would likely
need to increase insulation thickness to meet efficiency levels above
EL 2, which could require new cabinet designs and fixtures. Due to the
high percentage of consumers with a net cost and the extensive
redesigns that would be needed to support EL3, DOE has concluded that
this efficiency level for BIC is not economically justified. However,
at the Recommended TSL (EL 2 for BIC), DOE expects manufacturers could
likely meet the efficiency level required for BIC without significant
redesign. The ELs at the amended standard level result in positive LCC
savings for all product classes and reduce the decrease in INPV and
conversion costs to the point where DOE has concluded they are
economically justified, as discussed for the Recommended TSL in the
preceding paragraphs.
Therefore, based on the previous considerations, DOE adopts the
energy conservation standards for MREFs at the Recommended TSL.
While DOE considered each potential TSL under the criteria laid out
in 42 U.S.C. 6295(o) as discussed in the preceding paragraphs, DOE
notes that the Recommended TSL for MREFs in this direct final rule is
part of a multi-product Joint Agreement covering six rulemakings (RFs;
MREFs; conventional cooking products; residential clothes washers;
consumer clothes dryers; and dishwashers). The signatories indicate
that the Joint Agreement for the six rulemakings should be considered
as a joint statement of recommended standards, to be adopted in its
entirety. As discussed in section V.B.2.e of this document, many MREF
OEMs also manufacture RFs, conventional cooking products, residential
clothes washers, consumer clothes dryers, and dishwashers. Rather than
requiring compliance with five amended standards in a single year
(2027),\86\ the negotiated multi-product Joint Agreement staggers the
compliance dates for the five amended standards
[[Page 38828]]
over a 4-year period (2027-2030). In response to the March 2023 NOPR,
AHAM expressed concerns about the timing of ongoing home appliance
rulemakings. Specifically, AHAM commented that the combination of the
stringency of DOE's proposals, the short lead-in time required under
EPCA to comply with standards, and the overlapping timeframe of
multiple standards affecting the same manufacturers represents
significant cumulative regulatory burden for the home appliance
industry. (AHAM, No. 31 at p. 13) AHAM has submitted similar comments
to other ongoing consumer product rulemakings.\87\ However, as AHAM is
a key signatory of the Joint Agreement, DOE understands that the
compliance dates recommended in the Joint Agreement would help reduce
cumulative regulatory burden. These compliance dates help relieve
concern on the part of some manufacturers about their ability to
allocate sufficient resources to comply with multiple concurrent
amended standards, about the need to align compliance dates for
products that are typically designed or sold as matched pairs, and
about the ability of their suppliers to ramp up production of key
components. The Joint Agreement also provides additional years of
regulatory certainty for manufacturers and their suppliers while still
achieving the maximum improvement in energy efficiency that is
technologically feasible and economically justified.
---------------------------------------------------------------------------
\86\ The refrigerators, refrigerator-freezers, and freezers
rulemaking (88 FR 12452); consumer conventional cooking products
rulemaking (88 FR 6818); residential clothes washers rulemaking (88
FR 13520); consumer clothes dryers rulemaking (87 FR 51734); and
dishwashers rulemaking (88 FR 32514) utilized a 2027 compliance year
for analysis at the proposed rule stage. The miscellaneous
refrigeration products rulemaking (88 FR 12452) utilized a 2029
compliance year for the NOPR analysis.
\87\ AHAM has submitted written comments regarding cumulative
regulatory burden for the other five rulemakings included in the
multi-product Joint Agreement. AHAM's written comments on cumulative
regulatory burden are available at: www.regulations.gov/document/EERE-2017-BT-STD-0003-0069 (pp. 19-22) for refrigerators,
refrigerator-freezers, and freezers; www.regulations.gov/comment/EERE-2014-BT-STD-0005-2285 (pp. 44-47) for consumer conventional
cooking products; www.regulations.gov/comment/EERE-2017-BT-STD-0014-0464 (pp. 40-44) for residential clothes washers;
www.regulations.gov/comment/EERE-2014-BT-STD-0058-0046 (pp. 12-13)
for consumer clothes dryers; and www.regulations.gov/comment/EERE-2019-BT-STD-0039-0051 (pp. 21-24) for dishwashers.
---------------------------------------------------------------------------
The amended energy conservation standards for MREFs, which are
expressed in kWh/yr, are shown in Table V.38.
BILLING CODE 6450-01-P
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[[Page 38829]]
2. Annualized Benefits and Costs of the Adopted Standards
The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The annualized net benefit is
(1) the annualized national economic value (expressed in 2022$) of the
benefits from operating products that meet the adopted standards
(consisting primarily of operating cost savings from using less
energy), minus increases in product purchase costs, and (2) the
annualized monetary value of the climate and health benefits.
Table V.39 shows the annualized values for MREFs under the
Recommended TSL, expressed in 2022$. The results under the primary
estimate are as follows.
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 cost of the
standards for MREFs is $72.7 million per year in increased product
costs, while the estimated annual benefits are $90.6 million in reduced
product operating costs, $18.3 million in climate benefits, and $25.6
million in health benefits. The net benefit amounts to $61.7 million
per year. Using a 3-percent discount rate for all benefits and costs,
the estimated cost of the adopted standards for MREFs is $70.8 million
per year in increased equipment costs, while the estimated annual
benefits are $115 million in reduced operating costs, $18.3 million in
climate benefits, and $35.6 million in health benefits. The net benefit
amounts to $98 million per year.
[[Page 38830]]
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[[Page 38831]]
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BILLING CODE 6450-01-C
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866, 13563, and 14094
Executive Order (``E.O.'') 12866, ``Regulatory Planning and
Review,'' as supplemented and reaffirmed by E.O. 13563, ``Improving
Regulation and Regulatory Review,'' 76 FR 3821 (Jan. 21, 2011) and
amended by E.O. 14094, ``Modernizing Regulatory Review,'' 88 FR 21879
(April 11, 2023), 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 this
preamble, this final 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 final regulatory action constitutes a
``significant regulatory action'' within the scope of section 3(f)(1)
of E.O. 12866. DOE has provided to OIRA an assessment, including the
underlying analysis, of benefits and costs anticipated from the final
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 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,
[[Page 38832]]
``Proper Consideration of Small Entities in Agency Rulemaking,'' 67 FR
53461 (Aug. 16, 2002), DOE published procedures and policies on
February 19, 2003, to ensure that the potential impacts of its rules on
small entities are properly considered during the rulemaking process.
68 FR 7990. DOE has made its procedures and policies available on the
Office of the General Counsel's website (www.energy.gov/gc/office-general-counsel).
DOE is not obligated to prepare a regulatory flexibility analysis
for this rulemaking because there is not a requirement to publish a
general notice of proposed rulemaking under the Administrative
Procedure Act. See 5 U.S.C. 601(2), 603(a). As discussed previously,
DOE has determined that the Joint Agreement meets the necessary
requirements under EPCA to issue this direct final rule for energy
conservation standards for MREFs under the procedures in 42 U.S.C.
6295(p)(4). DOE notes that the NOPR for energy conservation standards
for MREFs published elsewhere in this Federal Register contains an
IRFA.
C. Review Under the Paperwork Reduction Act
Manufacturers of MREFs 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 MREFs, including any amendments adopted for those
test procedures. DOE has established regulations for the certification
and recordkeeping requirements for all covered consumer products and
commercial equipment, including MREFs. (See generally 10 CFR part 429).
The collection-of-information requirement for the certification and
recordkeeping is subject to review and approval by OMB under the
Paperwork Reduction Act (``PRA''). This requirement has been approved
by OMB under OMB control number 1910-1400. Public reporting burden for
the certification is estimated to average 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.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act of 1969
(``NEPA''), DOE has analyzed this proposed action rule in accordance
with NEPA and DOE's NEPA implementing regulations (10 CFR part 1021).
DOE has determined that this rule qualifies for categorical exclusion
under 10 CFR part 1021, subpart D, appendix B5.1 because it is a
rulemaking that establishes energy conservation standards for consumer
products or industrial equipment, none of the exceptions identified in
B5.1(b) apply, no extraordinary circumstances exist that require
further environmental analysis, and it meets the requirements for
application of a categorical exclusion. See 10 CFR 1021.410. Therefore,
DOE has determined that promulgation of this direct final 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.
E. Review Under Executive Order 13132
E.O. 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), imposes
certain requirements on Federal agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. The Executive order requires agencies to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and to carefully assess
the necessity for such actions. The Executive order also requires
agencies to have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications. On March 14, 2000, DOE
published a statement of policy describing the intergovernmental
consultation process it will follow in the development of such
regulations. 65 FR 13735. DOE has examined this direct final rule and
has determined that it would not have a substantial direct effect on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. EPCA governs and prescribes Federal
preemption of State regulations as to energy conservation for the
products that are the subject of this direct final rule. States can
petition DOE for exemption from such preemption to the extent, and
based on criteria, set forth in EPCA. (42 U.S.C. 6297) Therefore, no
further action is required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil
Justice Reform,'' imposes on Federal agencies the general duty to
adhere to the following requirements: (1) eliminate drafting errors and
ambiguity, (2) write regulations to minimize litigation, (3) provide a
clear legal standard for affected conduct rather than a general
standard, and (4) promote simplification and burden reduction. 61 FR
4729 (Feb. 7, 1996). Regarding the review required by section 3(a),
section 3(b) of E.O. 12988 specifically requires that Executive
agencies make every reasonable effort to ensure that the regulation (1)
clearly specifies the preemptive effect, if any, (2) clearly specifies
any effect on existing Federal law or regulation, (3) provides a clear
legal standard for affected conduct while promoting simplification and
burden reduction, (4) specifies the retroactive effect, if any, (5)
adequately defines key terms, and (6) addresses other important issues
affecting clarity and general draftsmanship under any guidelines issued
by the Attorney General. Section 3(c) of E.O. 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. DOE has completed the
required review and determined that, to the extent permitted by law,
this direct final rule meets the relevant standards of E.O. 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a
[[Page 38833]]
``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.
DOE has concluded that this direct final rule may require
expenditures of $100 million or more in any one year by the private
sector. Such expenditures may include (1) investment in research and
development and in capital expenditures by MREF manufacturers in the
years between the direct final rule and the compliance date for the new
standards and (2) incremental additional expenditures by consumers to
purchase higher-efficiency MREFs, 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 direct final rule. (2 U.S.C. 1532(c)) The content
requirements of section 202(b) of UMRA relevant to a private sector
mandate substantially overlap the economic analysis requirements that
apply under section 325(o) of EPCA and Executive Order 12866. This
SUPPLEMENTARY INFORMATION section and the TSD for this direct final
rule respond to those requirements.
Under section 205 of UMRA, DOE is obligated to identify and
consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. (2 U.S.C. 1535(a)) DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the rule unless DOE publishes an
explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m),
this direct final rule establishes amended energy conservation
standards for MREFs that are designed to achieve the maximum
improvement in energy efficiency that DOE has determined to be both
technologically feasible and economically justified, as required by
6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives
considered by DOE is presented in chapter 17 of the TSD for this direct
final rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule or policy that may affect
family well-being. Although this direct final rule would not have any
impact on the autonomy or integrity of the family as an institution as
defined, this rule could impact a family's well-being. When developing
a Family Policymaking Assessment, agencies must assess whether: (1) the
action strengthens or erodes the stability or safety of the family and,
particularly, the marital commitment; (2) the action strengthens or
erodes the authority and rights of parents in the education, nurture,
and supervision of their children; (3) the action helps the family
perform its functions, or substitutes governmental activity for the
function; (4) the action increases or decreases disposable income or
poverty of families and children; (5) the proposed benefits of the
action justify the financial impact on the family; (6) the action may
be carried out by State or local government or by the family; and (7)
the action establishes an implicit or explicit policy concerning the
relationship between the behavior and personal responsibility of youth,
and the norms of society.
DOE has considered how the proposed benefits of this direct final
rule compare to the possible financial impact on a family (the only
factor listed that is relevant to this rule). As part of its rulemaking
process, DOE must determine whether the energy conservation standards
contained in this direct final rule are economically justified. As
discussed in section V.C.1 of this document, DOE has determined that
the standards are economically justified because the benefits to
consumers far outweigh the costs to manufacturers. Families will also
see LCC savings as a result of this direct final rule. Further, the
standards will also result in climate and health benefits for families.
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 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 direct final rule under the OMB and DOE guidelines and
has concluded that it is consistent with applicable policies in those
guidelines.
K. Review Under Executive Order 13211
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 significant energy action. A
``significant energy action'' is defined as any action by an agency
that promulgates or is expected to lead to promulgation of a final
rule, and that (1) is a significant regulatory action under Executive
Order 12866, or any successor order; and (2) is likely to have a
significant adverse effect on the supply, distribution, or use of
energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any significant energy action, the
agency must give a detailed statement of any adverse effects on energy
supply, distribution, or use should the proposal be implemented, and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use.
DOE has concluded that this regulatory action, which sets forth
amended energy conservation standards for MREFs, is not a significant
energy action because the standards are not likely to have a
significant adverse effect on the supply, distribution, or use of
energy, nor has it been designated as such by the Administrator at
OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects
on this direct final rule.
[[Page 38834]]
L. Information Quality
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (``OSTP''), issued its Final Information
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan.
14, 2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the Bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' 70 FR 2664, 2667.
In response to OMB's Bulletin, DOE conducted formal peer reviews of
the energy conservation standards development process and the analyses
that are typically used and prepared a report describing that peer
review.\88\ 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 DOE's analyses. DOE is in the
process of evaluating the resulting report.\89\
---------------------------------------------------------------------------
\88\ 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 November 29, 2023).
\89\ The report is available at www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards (last accessed November 29, 2023).
---------------------------------------------------------------------------
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this direct final rule prior to its effective date. The
report will state that the Office of Information and Regulatory Affairs
has determined that this action meets the criteria set forth in 5
U.S.C. 804(2).
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this direct
final rule.
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
Small businesses.
Signing Authority
This document of the Department of Energy was signed on April 10,
2024, by Jeffrey Marootian, Principal Deputy 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 April 11, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
For the reasons set forth in the preamble, DOE amends part 430 of
chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, as set forth below:
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
1. The authority citation for part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
2. Amend Sec. 430.32 by revising paragraph (aa) to read as follows:
Sec. 430.32 Energy and water conservation standards and their
compliance dates.
* * * * *
(aa) Miscellaneous refrigeration products. The energy standards as
determined by the equations of the following table(s) shall be rounded
off to the nearest kWh per year. If the equation calculation is halfway
between the nearest two kWh per year values, the standard shall be
rounded up to the higher of these values.
(1) Coolers. (i) Coolers manufactured on or after October 28, 2019,
and before January 31, 2029, shall have an Annual Energy Use (AEU) no
more than:
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
(A) Freestanding compact............................. 7.88AV + 155.8
(B) Freestanding..................................... 7.88AV + 155.8
(C) Built-in compact................................. 7.88AV + 155.8
(D) Built-in......................................... 7.88AV + 155.8
------------------------------------------------------------------------
Note: AV = Total adjusted volume, expressed in ft\3\, as determined in
appendix A to subpart B of this part.
(ii) Coolers manufactured on or after January 31, 2029, shall have
an Annual Energy Use (AEU) no more than:
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
(A) Freestanding compact............................. 5.52AV + 109.1
(B) Freestanding..................................... 5.52AV + 109.1
(C) Built-in compact................................. 5.52AV + 109.1
(D) Built-in......................................... 6.30AV + 124.6
------------------------------------------------------------------------
Note: AV = Total adjusted volume, expressed in ft\3\, as determined in
appendix A to subpart B of this part.
(2) Combination cooler refrigeration products. (i) Combination
cooler refrigeration products manufactured on or after October 28,
2019, and before January 31, 2029, shall have an Annual Energy Use
(AEU) no more than:
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
(A) C-3A. Cooler with all-refrigerator--automatic 4.57AV + 130.4
defrost.............................................
(B) C-3A-BI. Built-in cooler with all-refrigerator-- 5.19AV + 147.8
automatic defrost...................................
(C) C-9. Cooler with upright freezer with automatic 5.58AV + 147.7
defrost without an automatic icemaker...............
(D) C-9-BI. Built-in cooler with upright freezer with 6.38AV + 168.8
automatic defrost without an automatic icemaker.....
(E) C-9I. Cooler with upright freezer with automatic 5.58AV + 231.7
defrost with an automatic icemaker..................
[[Page 38835]]
(F) C-9I-BI. Built-in cooler with upright freezer 6.38AV + 252.8
with automatic defrost with an automatic icemaker...
(G) C-13A. Compact cooler with all-refrigerator-- 5.93AV + 193.7
automatic defrost...................................
(H) C-13A-BI. Built-in compact cooler with all- 6.52AV + 213.1
refrigerator--automatic defrost.....................
------------------------------------------------------------------------
Note: AV = Total adjusted volume, expressed in ft\3\, as determined in
appendix A to subpart B of this part.
(ii) Combination cooler refrigeration products manufactured on or
after January 31, 2029, shall have an Annual Energy Use (AEU) no more
than:
------------------------------------------------------------------------
Product class AEU (kWh/yr)
------------------------------------------------------------------------
(A) C-3A. Cooler with all-refrigerator-- 4.11AV + 117.4
automatic defrost.............................
(B) C-3A-BI. Built-in cooler with all- 4.67AV + 133.0
refrigerator--automatic defrost...............
(C) C-5-BI. Built-in cooler with refrigerator- 5.47AV + 196.2 + 28I
freezer with automatic defrost with bottom-
mounted freezer...............................
(D) C-9. Cooler with upright freezer with 5.58AV + 147.7 + 28I
automatic defrost without an automatic
icemaker......................................
(E) C-9-BI. Built-in cooler with upright 6.38AV + 168.8 + 28I
freezer with automatic defrost without an
automatic icemaker............................
(F) C-13A. Compact cooler with all- 4.74AV + 155.0
refrigerator--automatic defrost...............
(G) C-13A-BI. Built-in compact cooler with all- 5.22AV + 170.5
refrigerator--automatic defrost...............
------------------------------------------------------------------------
Note: AV = Total adjusted volume, expressed in ft\3\, as determined in
appendix A to subpart B of this part. I = 1 for a product with an
automatic icemaker and = 0 for a product without an automatic
icemaker.
* * * * *
[FR Doc. 2024-08001 Filed 5-6-24; 8:45 am]
BILLING CODE 6450-01-P