[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Rules and Regulations]
[Pages 44052-44142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08546]



[[Page 44051]]

Vol. 89

Monday,

No. 98

May 20, 2024

Part III





Department of Energy





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10 CFR Part 431





Energy Conservation Program: Energy Conservation Standards for Air-
Cooled Commercial Package Air Conditioners and Heat Pumps; Final Rule

  Federal Register / Vol. 89 , No. 98 / Monday, May 20, 2024 / Rules 
and Regulations  

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DEPARTMENT OF ENERGY

10 CFR Part 431

[EERE-2022-BT-STD-0015]
RIN 1904-AF34


Energy Conservation Program: Energy Conservation Standards for 
Air-Cooled Commercial Package Air Conditioners and Heat Pumps

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 air-cooled 
commercial package air conditioners and heat pumps with a rated cooling 
capacity greater than or equal to 65,000 Btu/h. In this direct final 
rule, DOE is adopting amended energy conservation standards, based on 
clear and convincing evidence, for air-cooled commercial package air 
conditioners and heat pumps with a rated cooling capacity greater than 
or equal to 65,000 Btu/h, which it has determined satisfy the relevant 
statutory criteria.

DATES: The effective date of this rule is September 17, 2024, unless 
adverse comment is received by September 9, 2024. If adverse comments 
are received that DOE determines may provide a reasonable basis for 
withdrawal of the direct final rule, 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 
air-cooled commercial package air conditioners and heat pumps with a 
rated cooling capacity greater than or equal to 65,000 Btu/h in this 
direct final rule is required on and after January 1, 2029.

ADDRESSES: Interested persons are encouraged to submit comments using 
the Federal eRulemaking Portal at www.regulations.gov under docket 
number EERE-2022-BT-STD-0015. Follow the instructions for submitting 
comments. Alternatively, interested persons may submit comments, 
identified by docket number EERE-2022-BT-STD-0015, by any of the 
following methods:
    Email: [email protected]. Include the docket 
number EERE-2022-BT-STD-0015 in the subject line of the message.
    Postal Mail: Appliance and Equipment Standards Program, U.S. 
Department of Energy, Building Technologies Office, Mailstop EE-5B, 
1000 Independence Avenue SW, Washington, DC 20585-0121. If possible, 
please submit all items on a compact disc (``CD''), in which case it is 
not necessary to include printed copies.
    Hand Delivery/Courier: Appliance and Equipment Standards Program, 
U.S. Department of Energy, Building Technologies Office, 950 L'Enfant 
Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202) 287-1445. 
If possible, please submit all items on a CD, in which case it is not 
necessary to include printed copies.
    No telefacsimiles (``faxes'') will be accepted.
    Docket: 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-2022-BT-STD-0015. The docket web page contains instructions on how 
to access all documents, including public comments, in the docket.

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].
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-4798. Email: [email protected].
    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].

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. History of Standards Rulemaking for ACUACs and ACUHPs
    3. 2022-2023 ASRAC ACUAC/HP Working Group Recommended Standard 
Levels
III. General Discussion
    A. General Comments
    B. Scope of Coverage
    C. Test Procedure and Metrics
    D. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    E. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    F. 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 Equipment
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Equipment Classes
    2. Market Post-2023
    3. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Levels in Terms of Existing Metrics
    a. Baseline Efficiency
    b. Higher Efficiency Levels
    2. Efficiency Levels in Terms of New Metrics
    a. IVEC
    b. IVHE
    3. Energy Modeling
    4. Impact of Low-GWP Refrigerants
    5. Cost Analysis
    a. MPC Estimates
    b. MSP Estimates, Manufacturer Markup, and Shipping Costs
    6. Cost-Efficiency Results
    D. Markups Analysis
    1. Distribution Channels
    2. Markups and Sales Tax
    E. Energy Use Analysis
    1. System-Level Calculations
    2. Generalized Building Sample
    3. Energy Use Adjustment Factors
    4. Comments
    F. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Equipment Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis

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    G. Shipments Analysis
    1. New Shipments
    2. Replacement Shipments
    3. Stock Calculation
    4. Comments
    H. National Impact Analysis
    1. Equipment 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. Capital and Product 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 Dioxide
    b. Social Cost of Methane and Nitrous Oxide
    c. Sensitivity Analysis Using EPA's New SC-GHG Estimates
    2. Monetization of Other Emissions Impacts
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    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 Equipment
    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 ACUACs and ACUHPs 
Standards
    2. Annualized Benefits and Costs of the 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 of 1995
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
    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 C \2\ of EPCA 
established the Energy Conservation Program for Certain Industrial 
Equipment. (42 U.S.C. 6311-6317) This covered equipment includes small, 
large, and very large commercial package air conditioning and heating 
equipment. (42 U.S.C. 6311(1)(B)-(D)) Such equipment includes as 
equipment categories air-cooled commercial unitary air conditioners 
with a rated cooling capacity greater than or equal to 65,000 Btu/h 
(``ACUACs'') and air-cooled commercial unitary heat pumps with a rated 
cooling capacity greater than or equal to 65,000 Btu/h (``ACUHPs''), 
which are the subject of this rulemaking.\3\ The current energy 
conservation standards are found in the Code of Federal Regulations 
(``CFR'') at 10 CFR 431.97(b).
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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 C was re-designated Part A-1.
    \3\ While ACUACs and ACUHPs with rated cooling capacity less 
than 65,000 Btu/h are included in the broader category of commercial 
unitary air conditioners and heat pumps (``CUACs and CUHPs''), they 
are not addressed in this direct final rule. The standards for 
ACUACs and ACUHPs with rated cooling capacity less than 65,000 Btu/h 
have been addressed in a separate rulemaking (see Docket No. EERE-
2022-BT-STD-0008). Accordingly, all references within this direct 
final rule to ACUACs and ACUHPs exclude equipment with rated cooling 
capacity less than 65,000 Btu/h.
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    In accordance with the authority provided by 42 U.S.C. 6295(p)(4) 
and 42 U.S.C. 6316(b)(1), DOE is issuing this direct final rule 
amending the energy conservation standards for ACUACs and ACUHPs.\4\ 
The amended standards levels outlined in this document reflect the 
culmination of a negotiated rulemaking that included the following 
notices and stakeholder comments thereon: May 2020 energy conservation 
standards request for information (``May 2020 ECS RFI'') (85 FR 27941 
(May 12, 2020); May 2022 test procedure (``TP'')/ECS RFI (87 FR 31743 
(May 25, 2022)); and the 2022 Appliance Standards and Rulemaking 
Federal Advisory Committee (``ASRAC'') commercial unitary air 
conditioners and heat pumps working group negotiations, hereinafter 
referred to as ``the 2023 ECS Negotiations'' (87 FR 45703 (July 29, 
2022). Participants in the 2023 ECS Negotiations included stakeholders 
representing manufacturers, energy-efficiency and environmental 
advocates, States, and electric utility companies. See section II.B.2 
of this document for a detailed history of the current rulemaking.
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    \4\ See 42 U.S.C. 6316(b) (applying 42 U.S.C. 6295(p)(4)) to 
energy conservation standard rulemakings involving a variety of 
industrial equipment, including ACUACs and ACUHPs.
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    The consensus reached by the ACUAC/HP ASRAC Working Group 
(hereinafter referred to as ``the ACUAC/HP Working Group'') on amended 
energy conservation standards (``ECS'') is outlined in the ASRAC 
Working Group Term Sheet (hereinafter referred to as ``the ACUAC/HP 
Working Group ECS Term Sheet''). (ASRAC Working Group Term Sheet, 
Docket No. EERE-2022-BT-STD-0015, No. 87) In accordance with the direct 
final rule provisions at 42 U.S.C. 6295(p)(4), DOE has determined that 
the recommendations contained in the ACUAC/HP Working Group ECS Term 
Sheet are compliant with 42 U.S.C. 6313(a)(6)(B). As required by EPCA, 
DOE is also simultaneously publishing a notice of proposed rulemaking 
(``NOPR'') that contains 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); 42 U.S.C. 6316(b)(1))) If DOE determines that any 
adverse comments received provide a reasonable basis for withdrawal of 
the direct final rule under 42 U.S.C. 6313(a)(6)(B) or any other 
applicable law, DOE will withdraw the direct final rule and continue 
the rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C); 42 U.S.C. 
6316(b)(1)) 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 ACUAC/HP Working 
Group ECS Term Sheet (shown in Table I.1) as measured according to 
DOE's amended test procedure for commercial unitary air conditioners 
and heat pumps codified at title 10 of the Code of Federal Regulations 
(``CFR''), part 431, subpart F, appendix A1 (``appendix A1'').

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    The amended standards recommended in the Joint Agreement are 
represented as trial standard level (``TSL'') 3 in this document 
(hereinafter the ``Recommended TSL'') and are described in section V.A 
of this document. These standards apply to all equipment listed in 
Table I.1 and manufactured in, or imported into the United States 
starting on January 1, 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 ACUACs and ACUHPs, as measured by 
the average life-cycle cost (``LCC'') savings and the simple payback 
period (``PBP'').\5\ The average LCC savings are positive for all 
equipment classes, and the PBP is less than the average lifetime of the 
equipment, which is estimated to be 21-30 years, depending on equipment 
class (see sections IV.F and V.B.1 of this document).
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    \5\ 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 equipment (see section IV.C of this document). 
[GRAPHIC] [TIFF OMITTED] TR20MY24.071

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

B. Impact on Manufacturers

    The industry net present value (``INPV'') is the sum of the 
discounted cash flows to the industry from the reference year through 
the end of the analysis period (2024-2058). Using a real discount rate 
of 5.9 percent, DOE estimates that the INPV for manufacturers of ACUACs 
and ACUHPs in the case without amended standards is $2,653.0 million in 
2022$. Under the adopted standards, DOE estimates the change in INPV to 
range from -7.3. percent to -3.0 percent, which is approximately -
$193.9 million to -$79.5 million. In order to bring this equipment into 
compliance with amended standards, it is estimated that industry will 
incur total conversion costs of $288.0 million.
    DOE's analysis of the impacts of the adopted standards on 
manufacturers is

[[Page 44055]]

described in sections IV.J and V.B.2 of this document.

C. National Benefits and Costs 6
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    \6\ All monetary values in this document are expressed in 2022 
dollars and, where appropriate, are discounted to 2022 unless 
explicitly stated otherwise.
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    DOE's analyses indicate that the adopted energy conservation 
standards for ACUACs and ACUHPs would save a significant amount of 
energy. Relative to the case without amended standards, the lifetime 
energy savings for ACUACs and ACUHPs purchased in the 30-year period 
that begins in the anticipated year of compliance with the amended 
standards (2029-2058), amount to 5.5 quadrillion British thermal units 
(``Btu''), or quads.\7\ This represents a savings of 10.0 percent 
relative to the energy use of this equipment in the case without 
amended standards (referred to as the ``no-new-standards case'').
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    \7\ 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.2 of this document.
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    The cumulative net present value (``NPV'') of total consumer 
benefits of the standards for ACUACs and ACUHPs ranges from $4.39 
billion (at a 7-percent discount rate) to $15.30 billion (at a 3-
percent discount rate). This NPV expresses the estimated total value of 
future operating-cost savings minus the estimated increased equipment 
and installation costs for ACUACs and ACUHPs purchased in 2029-2058.
    In addition, the adopted standards for ACUACs and ACUHPs are 
projected to yield significant environmental benefits. DOE estimates 
that the adopted standards will result in cumulative emission 
reductions (over the same period as for energy savings) of 108.7 
million metric tons (``Mt'') \8\ of carbon dioxide 
(``CO2''), 25.3 thousand tons of sulfur dioxide 
(``SO2''), 185.1 thousand tons of nitrogen oxides 
(``NOX''), 845.6 thousand tons of methane 
(``CH4''), 0.8 thousand tons of nitrous oxide 
(``N2O''), and 0.2 tons of mercury (``Hg'').\9\ The 
estimated cumulative reduction in CO2 emissions through 2030 
amounts to 0.32 Mt, which is equivalent to the emissions resulting from 
the annual electricity use of more than 0.23 million homes.
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    \8\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \9\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy 
Outlook 2023 (``AEO 2023''). AEO 2023 reflects, to the extent 
possible, laws and regulations adopted through mid-November 2022, 
including the Inflation Reduction Act. See section IV.K of this 
document for further discussion of AEO 2023 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'').\10\ 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 $4.9 
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 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 rule 
in the absence of the estimated benefits from reductions in GHG 
emissions.
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    \10\ 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'') (available at: 
www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf) 
(last accessed Dec. 4, 2023).
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    DOE also estimated the monetized health benefits of SO2 
and NOX emissions reductions associated with energy savings, 
using benefit-per-ton estimates from the U.S. Environmental Protection 
Agency,\11\ as discussed in section IV.L of this document. DOE 
estimates the present value of the health benefits would be $3.0 
billion using a 7-percent discount rate, and $8.8 billion using a 3-
percent discount rate.\12\ 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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    \11\ 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 Dec. 4, 2023).
    \12\ 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 (``E.O.'') 12866.
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    Table I.3 summarizes the monetized benefits and costs expected to 
result from the amended standards for ACUACs and ACUHPs. 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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BILLING CODE 6450-01-C
    The benefits and costs of the considered 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 equipment purchase prices and 
installation costs, plus (3) the value of climate and health benefits 
of emission reductions, all annualized.\13\
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    \13\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2024, 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 2024. Using the present value, DOE then calculated the fixed 
annual payment over a 30-year period, starting in the compliance 
year, that yields the same present value.
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    The national operating cost savings are domestic private U.S. 
consumer monetary savings that occur as a result of purchasing the 
covered equipment and are measured for the lifetime of ACUACs and 
ACUHPs shipped in 2029-2058. The health benefits associated with 
reduced emissions achieved as a result of the adopted standards are 
also calculated based on the lifetime of ACUACs and ACUHPs shipped in 
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.\14\ Estimates of SC-GHG values are presented for all 
four discount rates in section V.B of this document.
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    \14\ As discussed in section IV.L.1 of this document, DOE agrees 
with the IWG that using consumption-based discount rates (e.g., 3 
percent) is appropriate when discounting the value of climate 
impacts. Combining climate effects discounted at an appropriate 
consumption-based discount rate with other costs and benefits 
discounted at a capital-based rate (e.g., 7 percent) is reasonable 
because of the different nature of the types of benefits being 
measured.
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    Table I.4 presents the total estimated monetized benefits and costs 
associated with the adopted standard, expressed in terms of annualized 
values. The results under the primary estimate are as follows.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the adopted standards is $493.2 million per year in 
increased equipment costs, while the estimated annual benefits are 
$1,371.6 million in reduced equipment operating costs, $279.2 million 
in climate benefits, and $507.9 million in health benefits. In this 
case, the net benefit would amount to $1.7 billion per year.
    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 rule is 
$481.3 million per year in increased equipment costs, while the 
estimated annual benefits are $944.7 million in reduced equipment 
operating costs, $279.2 million in climate benefits, and $317.2 million 
in health benefits. In this case, the net benefit amounts to $1.1 
billion per year.
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[GRAPHIC] [TIFF OMITTED] TR20MY24.075

BILLING CODE 6450-01-C
    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 ACUAC/ACUHP Working Group statement 
containing recommendations with respect to energy conservation 
standards for ACUACs and ACUHPs 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).\15\ 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. 
6313(a)(6)(B), which contains criteria for adopting a uniform national 
standard more stringent than the levels contained in the American 
Society of Heating, Refrigerating, and Air-Conditioning Engineers 
(``ASHRAE'') Standard 90.1, as amended,\16\ for the equipment 
considered in this document. Specifically, the Secretary has 
determined, supported by clear and convincing evidence, 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. Namely, 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.
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    \15\ See 42 U.S.C. 6316(b) (applying 42 U.S.C. 6295(p)(4) to 
energy conservation standard rulemakings involving a variety of 
industrial equipment, including ACUACs and ACUHPs.
    \16\ As discussed in section II.B.2, ASHRAE 90.1-2019 updated 
the minimum efficiency levels for ACUACs and ACUHPs to align with 
those adopted by DOE in the January 2016 Direct Final Rule--i.e., 
ASHRAE 90.1-2019 includes minimum efficiency levels that are aligned 
with the current Federal energy conservation standards. The most 
recent version of ASHRAE Standard 90.1, ASHRAE 90.1-2022, includes 
the same minimum efficiency levels for ACUACs and ACUHPs as ASHRAE 
90.1-2019.
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    Using a 7-percent discount rate for consumer benefits and costs and 
NOX and SO2 emissions reduction benefits, and a 
3-percent discount rate case for GHG social costs, the estimated cost 
of the standards for ACUACs and ACUHPs is $481.3 million per year in 
increased equipment costs, while the estimated annual benefits are 
$944.7 million in reduced equipment operating costs, $279.2 million in 
climate benefits, and $317.2 million in health benefits. The net 
benefit amounts to $1.1 billion per year. DOE notes that the net 
benefits are substantial even in the absence of climate benefits,\17\ 
and DOE would adopt the same standards in the absence of such benefits.
---------------------------------------------------------------------------

    \17\ The information on climate benefits is provided in 
compliance with Executive Order 12866.
---------------------------------------------------------------------------

    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.\18\ 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.
---------------------------------------------------------------------------

    \18\ Procedures, Interpretations, and Policies for Consideration 
in New or Revised Energy Conservation Standards and Test Procedures 
for Consumer Products and Commercial/Industrial Equipment, 86 FR 
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------

    As previously mentioned, the standards are projected to result in 
estimated national energy savings of 5.5 quads (FFC), the equivalent of 
the primary annual energy use of 59.1 million homes. In addition, they 
are projected to reduce CO2 emissions by 108.7 Mt. 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. 6313(a)(6)(A)(ii)(II). A more detailed discussion 
of the basis for these conclusions is contained in the remainder of 
this document and the accompanying TSD.
    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 ACUACs and ACUHPs. Consistent with this authority, DOE is 
also 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); 42 U.S.C. 
6316(b)(1))

[[Page 44060]]

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 energy 
conservation standards for ACUACs and ACUHPs.

A. Authority

    EPCA, Public Law 94-163, as amended, authorizes DOE to regulate the 
energy efficiency of certain consumer products and industrial 
equipment. Title III, Part C of EPCA, added by Public Law 95-619, Title 
IV, section 441(a) (42 U.S.C. 6311-6317, as codified), established the 
Energy Conservation Program for Certain Industrial Equipment, which 
sets forth a variety of provisions designed to improve energy 
efficiency. This equipment includes ACUACs and ACUHPs, which are a 
category of small, large, and very large commercial package air 
conditioning and heating equipment and the subject of this rulemaking. 
(42 U.S.C. 6311(1)(B)-(D)) EPCA prescribed initial standards for this 
equipment. (42 U.S.C. 6313(a)(1)-(2))
    Pursuant to EPCA, DOE must amend the energy conservation standards 
for certain types of commercial and industrial equipment, including the 
equipment at issue in this document, whenever ASHRAE amends the 
standard levels or design requirements prescribed in ASHRAE Standard 
90.1, ``Energy Standard for Buildings Except Low-Rise Residential 
Buildings'' (``ASHRAE Standard 90.1''). DOE must adopt the amended 
ASHRAE Standard 90.1 levels for these equipment (hereafter ``ASHRAE 
equipment''), unless the Secretary of Energy (``the Secretary'') 
determines by rule published in the Federal Register and supported by 
clear and convincing evidence that adoption of a more-stringent uniform 
national standard would result in significant additional conservation 
of energy and is technologically feasible and economically justified. 
(42 U.S.C. 6313(a)(6)(A)-(B))
    In addition, EPCA contains a review requirement for this same 
equipment (the six-year-lookback review), which requires DOE to 
consider the need for amended standards every six years. To adopt more-
stringent standards under that provision, DOE must once again have 
clear and convincing evidence to show that such standards would be 
technologically feasible and economically justified and would save a 
significant additional amount of energy. (42 U.S.C. 6313(a)(6)(C)); see 
id. 6313(a)(6)(A)(ii)(II) & (a)(6)(B)(i))
    In deciding whether a more-stringent standard is economically 
justified, under either the provisions of 42 U.S.C. 6313(a)(6)(A) or 42 
U.S.C. 6313(a)(6)(C), DOE must determine whether the benefits of the 
standard exceed its burdens. DOE must make this determination after 
receiving comments on the proposed standard, and by considering, to the 
maximum extent practicable, the following seven factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of equipment subject to the standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered equipment in the type (or class) compared to any 
increase in the price, initial charges, or maintenance expenses for the 
covered equipment that are likely to result from the standard;
    (3) The total projected amount of energy savings likely to result 
directly from the standard;
    (4) Any lessening of the utility or the performance of the covered 
equipment likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary of Energy considers relevant.
    (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
    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. 6311), energy conservation standards (42 U.S.C. 
6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 
6315), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6316; 42 U.S.C. 6296(a), (b) and (d)).
    Federal energy efficiency requirements for covered equipment 
established under EPCA generally supersede State laws and regulations 
concerning energy conservation testing, labeling, and standards. (42 
U.S.C. 6316(a) and (b); 42 U.S.C. 6297) 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. (42 U.S.C. 6316(b)(2)(D))
    Under 42 U.S.C. 6314, EPCA sets forth the criteria and procedures 
DOE is required to follow when prescribing or amending test procedures 
for covered equipment. EPCA requires that any test procedure prescribed 
or amended under this section must be reasonably designed to produce 
test results which reflect energy efficiency, energy use, or estimated 
annual operating cost of covered equipment during a representative 
average use cycle and requires that the test procedure not be unduly 
burdensome to conduct. (42 U.S.C. 6314(a)(2)) Manufacturers of covered 
equipment must use the Federal test procedures as the basis for: (1) 
certifying to DOE that their equipment complies with the applicable 
energy conservation standards adopted pursuant to EPCA (42 U.S.C. 
6316(b); 42 U.S.C. 6296), and (2) making representations about the 
efficiency of that equipment (42 U.S.C. 6314(d)). Similarly, DOE uses 
these test procedures to determine whether the equipment complies with 
relevant standards promulgated under EPCA. The current DOE test 
procedure for ACUACs and ACUHPs appear at title 10 of the Code of 
Federal Regulations (``CFR''), part 431, subpart F, appendix A.
    EPCA also contains what is known as an ``anti-backsliding'' 
provision, which prevents the Secretary from prescribing any amended 
standard that either increases the maximum allowable energy use or 
decreases the minimum required energy efficiency of a covered product. 
(42 U.S.C. 6313(a)(6)(B)(iii)(I)) 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 equipment type 
(or class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa))
    Finally, the Energy Independence and Security Act of 2007 (``EISA 
2007''), Public Law 110-140, amended EPCA, in relevant part, to grant 
DOE authority to issue a final rule (i.e., a ``direct final rule'' or 
``DFR'') 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 that are in 
accordance with the

[[Page 44061]]

provisions of 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as 
applicable. (42 U.S.C. 6295(p)(4); 42 U.S.C. 6316(b)(1)) 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); 42 U.S.C. 6316(b)(1)) While DOE 
typically provides a comment period of 60 days on proposed energy 
conservation 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. 
6313(a)(6)(B), or any other applicable law. (42 U.S.C. 6295(p)(4)(C); 
42 U.S.C. 6316(b)(1)) Receipt of an alternative joint recommendation 
may also trigger a DOE withdrawal of the direct final rule in the same 
manner. (Id.) After withdrawing a direct final rule, DOE must proceed 
with the notice of proposed rulemaking published at the same time as 
the direct final rule and publish in the Federal Register the reasons 
why the direct final rule was withdrawn. (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, 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 significant conservation of energy and is 
technologically feasible and economically justified--a requirement 
found in 42 U.S.C. 6313(a)(6)(B). 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. 6313(a)(6)(B).
    Additionally, DOE notes that the direct final rule authority in 
EPCA is permissive. If DOE determines that recommended standards 
satisfy the applicable criteria, the Department ``may issue a final 
rule.'' (42 U.S.C. 6295(p)(4)(A)(i)) This discretion is particularly 
relevant for ASHRAE equipment where the applicable statutory criteria 
require that an amended standard be technologically feasible and 
economically justified and result in significant conservation of 
energy. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) This is in contrast to the 
applicable criteria for covered products and non-ASHRAE equipment, 
where, in addition to requiring significant conservation of energy, an 
amended standard must also represent the maximum improvement in energy 
efficiency that is technologically feasible and economically justified. 
Thus, there may be situations where the recommended standards for 
ASHRAE equipment satisfy the criteria in 42 U.S.C. 6313(a)(6)(B), but 
do not represent that maximum improvement in energy efficiency that is 
technologically feasible and economically justified. In those 
situations, DOE has discretion on whether to proceed with a direct 
final rule or propose its own, more-stringent standard. In order to 
inform that decision, DOE conducts its typical walk-down analysis when 
evaluating all direct final rules, including those for ASHRAE 
equipment. Under that approach, DOE starts from the most stringent 
possible standard (``max-tech'') and ``walks-down'' through the TSLs 
until arriving at the first TSL that meets all of the statutory 
criteria.

B. Background

1. Current Standards
    In a direct final rule published in the Federal Register on January 
15, 2016 (``January 2016 Direct Final Rule''), DOE prescribed the 
current energy conservation standards for ACUACs and ACUHPs 
manufactured on and after January 1, 2023. 81 FR 2420. These standards 
are set forth in DOE's regulations at 10 CFR 431.97(b) and are repeated 
in Table II.1.

[[Page 44062]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.076

2. History of Standards Rulemaking for ACUACs and ACUHPs
    Since publication of the January 2016 Direct Final Rule, ASHRAE 
published an updated version of ASHRAE Standard 90.1 (``ASHRAE 90.1-
2019''), which updated the minimum efficiency levels for ACUACs and 
ACUHPs to align with those adopted by DOE in the January 2016 Direct 
Final Rule (i.e., specifying two tiers of minimum levels for ACUACs and 
ACUHPs, with a January 1, 2023 compliance date for the second tier). 
ASHRAE published another version of ASHRAE Standard 90.1 in January 
2023 (``ASHRAE 90.1-2022''), which includes the same minimum efficiency 
levels for ACUACs and ACUHPs as those included in ASHRAE Standard 90.1-
2019.
    On May 12, 2020, DOE began its six-year-lookback review with for 
ACUACs and ACUHPs by publishing in the Federal Register the May 2020 
ECS RFI.\19\ 85 FR 27941. The May 2020 ECS RFI sought information to 
help DOE inform its decisions, consistent with its obligations under 
EPCA. DOE received multiple comments from interested stakeholders in 
response to the May 2020 ECS RFI, which prompted DOE to publish the May 
2022 TP/ECS RFI in the Federal Register on May 25, 2022, to investigate 
additional aspects of the ACUAC and ACUHP TP and standards. 87 FR 
31743. In the latter document, DOE identified several issues that it 
determined would benefit from further comment. DOE discussed these 
topics (including any comments received in response to the May 2020 ECS 
RFI that are related to these topics) in the May 2022 TP/ECS RFI. Once 
again, DOE received a number of written comments from interested 
parties related to standards for CUACs and CUHPs in response to the May 
2020 ECS RFI and the May 2022 TP/ECS RFI. DOE considered these comments 
in preparation of this direct final rule. Table II.2 and Table II.3 
list the stakeholders whose comments were related to standards for 
ACUACs and ACUHPs and have been considered in this rulemaking. Relevant 
comments, and DOE's responses, are provided in the appropriate sections 
of this document.
---------------------------------------------------------------------------

    \19\ The May 2020 ECS RFI also addressed commercial warm air 
furnaces, a separate type of covered equipment which was 
subsequently handled in a different rulemaking proceeding (see 
Docket No. EERE-2019-BT-STD-0042 in www.regulations.gov).

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[[Page 44063]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.077

[GRAPHIC] [TIFF OMITTED] TR20MY24.078

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\20\ 
For comments received in response to the May 2020 ECS RFI and May 2022 
TP/ECS RFI (which are contained within two different dockets \21\), 
parenthetical references in this direct final rule include the full 
docket number (rather than just the document number).
---------------------------------------------------------------------------

    \20\ The parenthetical reference provides a reference for 
information located in the relevant docket for this rulemaking, 
which is maintained at www.regulations.gov. The references are 
arranged as follows: (commenter name, comment docket ID number, page 
of that document).
    \21\ Comments submitted in response to the May 2020 ECS RFI are 
available in Docket No. EERE-2019-BT-STD-0042. Comments submitted in 
response to the May 2022 TP/ECS RFI are available in Docket No. 
EERE-2022-BT-STD-0015.
---------------------------------------------------------------------------

    On July 29, 2022, DOE published in the Federal Register a notice of 
intent to establish a working group for commercial unitary air 
conditioners and heat pumps to negotiate proposed test procedures and 
amended energy conservation standards for this equipment (``July 2022 
Notice of Intent''). 87 FR 45703. The ACUAC/HP Working Group was 
established under ASRAC in accordance with the Federal Advisory 
Committee Act (``FACA'') (5 U.S.C. App 2) and the Negotiated Rulemaking 
Act (``NRA'') (5 U.S.C. 561-

[[Page 44064]]

570, Pub. L. 104-320). The purpose of the ACUAC/HP Working Group was to 
discuss, and if possible, reach consensus on recommended amendments to 
the test procedures and energy conservation standards for ACUACs and 
ACUHPs. The ACUAC/HP Working Group consisted of 14 voting members, 
including DOE. (See appendix A, Working Group Members, Document No. 65 
in Docket No. EERE-2022-BT-STD-0015) On December 15, 2022, the ACUAC/HP 
Working Group signed a Term Sheet (``ACUAC/HP Working Group TP Term 
Sheet'') of recommendations regarding ACUAC and ACUHP test procedures, 
including two new efficiency metrics: integrated ventilation, 
economizing, and cooling (``IVEC'') and integrated ventilation and 
heating efficiency (``IVHE''). (See Id.)
    The ACUAC/HP Working Group met five times to discuss energy 
conservation standards for ACUACs and ACUHPs. These meetings took place 
on February 22-23, March 21-22, April 12-13, April 26-27, and May 1, 
2023. As a result of these efforts, the ACUAC/HP Working Group 
successfully reached consensus on recommended energy conservation 
standards in terms of the new IVEC and IVHE metrics for CUACs and 
CUHPs. On May 1, 2023, the ACUAC/HP Working Group signed the ACUAC/HP 
Working Group ECS Term Sheet outlining its recommendations which ASRAC 
approved on October 17, 2023. These recommendations are discussed 
further in section II.B.3 of this direct final rule.\22\
---------------------------------------------------------------------------

    \22\ The ACUAC/HP Working Group ECS Term Sheet is available at 
www.regulations.gov/document/EERE-2022-BT-STD-0015-0087.
---------------------------------------------------------------------------

3. 2022-2023 ASRAC ACUAC/HP Working Group Recommended Standard Levels
    This section summarizes the standard levels recommended in the Term 
Sheet submitted by the ACUAC/HP Working Group for ACUAC/HP energy 
conservation standards and the subsequent procedural steps taken by 
DOE. Recommendation #1 of the ACUAC/HP Working Group ECS Term Sheet 
recommends standard levels for ACUACs and ACUHPs with a recommended 
compliance date of January 1, 2029. (ASRAC Term Sheet, No. 87 at p. 2) 
These recommended standard levels are presented in Table II.4. 
Recommendation #2 of the ACUAC/HP Working Group ECS Term Sheet 
recommends revising existing certification requirements to support the 
new metrics and standards presented in Table II.4, specifically 
requesting that manufacturers be required to certify the following 
information publicly to DOE for each basic model: (1) crankcase heat 
wattage for each compressor stage, and (2) 5 [deg]F heating capacity 
and COP, if applicable. DOE will address recommendation #2 regarding 
certification in a separate rulemaking.
[GRAPHIC] [TIFF OMITTED] TR20MY24.079

    After carefully considering the consensus recommendations for 
amending the energy conservation standards for ACUACs and ACUHPs 
submitted by the ACUAC/HP Working Group and adopted by ASRAC, DOE has 
determined that these recommendations are in accordance with the 
statutory requirements of 42 U.S.C. 6295(p)(4) and 42 U.S.C. 6316(b)(1) 
for the issuance of a direct final rule. The following paragraphs 
explain DOE's rationale in making this determination.
    First, with respect to the requirement that recommended energy 
conservation standards be submitted by interested persons that are 
fairly representative of relevant points of view, DOE notes that the 
ACUAC/HP Working Group ECS Term Sheet was signed and submitted by a 
broad cross-section of interests, including the manufacturers who 
produce the subject equipment. To satisfy this requirement, DOE has 
generally found that the group submitting a joint statement must, where 
appropriate, include larger concerns and small businesses in the 
regulated industry/manufacturer community, energy advocates, energy 
utilities, consumers, and States. However, the Department has explained 
that it will be necessary to evaluate the meaning of ``fairly 
representative'' on a case-by-case basis, subject to the circumstances 
of a particular rulemaking, to determine whether additional parties 
must be part of a joint statement beyond the required ``manufacturers 
of covered products, States, and efficiency advocates'' specifically 
called out by EPCA at 42 U.S.C. 6295(p)(4)(A). In this case, in 
addition to manufacturers, the ACUAC/HP Working Group ECS Term Sheet 
also included environmental and energy-efficiency advocacy 
organizations, and electric utility companies. Although States were not 
direct signatories to the ACUAC/HP Working Group ECS Term Sheet, the 
ASRAC Committee approving

[[Page 44065]]

the ACUAC/HP Working Group's recommendations included at least two 
members representing States--one representing the State of New York and 
one representing the State of California. As a result, DOE has 
determined that these recommendations were submitted by interested 
persons who are fairly representative of relevant points of view on 
this matter, including those specifically identified by Congress: 
manufacturers of covered equipment, States, and efficiency advocates. 
(42 U.S.C. 6295(p)(4)(A); 42 U.S.C. 6316(b)(1))
    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. In making this determination, DOE 
conducted an analysis to evaluate whether the potential energy 
conservation standards under consideration achieve significant energy 
savings and are technologically feasible and economically justified. 
The evaluation is similar to the comprehensive approach that DOE 
typically conducts whenever it considers potential new or amended 
energy conservation standards for a given type of product or equipment. 
DOE applies the same principles to any consensus recommendations it may 
receive to satisfy its statutory obligations. Upon review, the 
Secretary determined that the ACUAC/HP Working Group ECS Term Sheet 
comports with the standard-setting criteria set forth under 42 U.S.C. 
6313(a)(6)(B). Accordingly, the consensus-recommended efficiency levels 
were included as the recommended TSL for ACUACs and ACUHPs (see section 
V.A of this document for description of all of the considered TSLs). 
The details regarding how the consensus-recommended TSL complies with 
the standard-setting criteria are discussed and demonstrated in the 
relevant sections throughout this document.
    In sum, the Secretary has determined that the relevant criteria 
under 42 U.S.C. 6295(p)(4) and 42 U.S.C. 6316(b)(1) have been 
satisfied, such that it is appropriate to adopt the consensus-
recommended amended energy conservation standards for ACUACs and ACUHPs 
through this direct final rule based on the clear and convincing 
evidence discussed throughout this final rule. Also, in accordance with 
the provisions described in section II.A of this document, DOE is 
simultaneously publishing a NOPR proposing that the identical standard 
levels contained in this direct final rule be adopted.

III. General Discussion

A. General Comments

    In response to the May 2020 ECS RFI, DOE received multiple comments 
from stakeholders generally expressing support for DOE evaluating and 
amending standards for ACUACs and ACUHPs. (ASAP, ACEEE, et al., EERE-
2019-BT-STD-0042-0023 at p. 1; CA IOUs EERE-2019-BT-STD-0042-0020 at p. 
1; NEEA, EERE-2019-BT-STD-0042-0024 at p. 9; PGE, EERE-2019-BT-STD-
0042-0009, pp. 1-2) ASAP, ACEEE, et al. stated that very large energy 
savings could result from amended standards for ACUACs and ACUHPs, 
citing the max-tech efficiency levels analyzed in the January 2016 
Direct Final Rule as well as the range of efficiencies in the current 
market. (ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 1-2) 
PGE also asserted that standards for ACUACs should be substantially 
higher than standards for ACUHPs to incentivize increased adoption of 
ACUHPs by commercial consumers, particularly in dual season climates 
where the commenter claimed that ACUHPs deliver higher efficiency, 
reduce peak loads, and reduce greenhouse gas emissions. (PGE, EERE-
2019-BT-STD-0042-0009 at pp. 1-2)
    In response to PGE's assertion that standards for ACUACs should be 
substantially higher than standards for ACUHPs, DOE notes that at the 
recommended TSL, the IVEC values are marginally higher for ACUACs with 
all other types of heat than for ACUHPs, as mentioned in section 
IV.C.2.a, and are unlikely on their own to incentivize increased 
adoption of ACUHPs, as discussed in section IV.G.4. At this time, DOE 
does not have evidence or information that would justify adopting 
higher standards for ACUACs than ACUHPs by a larger margin than 
recommended by the ACUAC/HP Working Group.
    DOE also received comments in response to the May 2020 ECS RFI from 
several other stakeholders generally expressing views that DOE should 
not amend the existing energy conservation standards for ACUACs and 
ACUHPs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 3; Carrier, EERE-2019-
BT-STD-0042-0013 at pp. 8, 18-19; Lennox, EERE-2019-BT-STD-0042-0015 at 
p. 1; Trane, EERE-2019-BT-STD-0042-0016 at p. 2) More specifically, 
AHRI, Carrier, Lennox, and Trane argued that standards should not be 
amended because of the burdens manufacturers already face, including 
regulatory changes such as refrigerant regulations, new efficiency 
metrics and standards for central air conditioners and heat pumps, and 
pending test procedure and standard updates for variable refrigerant 
flow equipment. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 2; Carrier, 
EERE-2019-BT-STD-0042-0013 at pp. 18-19; Lennox, EERE-2019-BT-STD-0042-
0015 at pp. 3-4, 8; Trane, EERE-2019-BT-STD-0042-0016 at p. 2) 
Commenters also asserted that the impacts associated with the 2023 
standards could not be assessed at the time of submitting their 
comments because the standards had yet to take effect, and therefore, 
considering new standards prior to 2023 would be premature. (AHRI, 
EERE-2019-BT-STD-0042-0014 at p. 3; Carrier, EERE-2019-BT-STD-0042-0013 
at p. 8, Lennox, EERE-2019-BT-STD-0042-0015 at pp. 2-3; Trane, EERE-
2019-BT-STD-0042-0016 at p. 2) Lennox also asserted that future market 
uncertainties are compounded by the COVID19 pandemic. (Lennox, EERE-
2019-BT-STD-0042-0015 at p. 2)
    DOE acknowledges that at the time of the May 2020 ECS RFI, 
compliance was not yet required for the second tier of energy 
conservation standards adopted in the January 2016 Direct Final Rule, 
which had a compliance date of January 1, 2023. However, the ACUAC/HP 
Working Group meetings to negotiate recommended energy conservation 
standard levels and the subsequent agreement outlined in the ACUAC/HP 
Working Group ECS Term Sheet occurred after January 1, 2023. Further, 
the analyses of amended energy conservation standards conducted by DOE 
as part of the 2023 ECS Negotiations were based on the ACUAC/HP market 
after the 2023 compliance date. DOE notes that despite the concerns 
raised regarding cumulative regulatory burden and impacts to the market 
due to the COVID 19 pandemic, Carrier, Lennox, and Trane (as members of 
the ACUAC/HP Working Group) voted in favor of the recommended standard 
levels. Additionally, AHRI subsequently supported efforts for a 
negotiated rulemaking to amend standards in comments received in 
response to the May 2022 TP/ECS RFI, demonstrating AHRI's position on 
this issue changed. (AHRI, EERE-2022-BT-STD-0015-0008 at p. 1) 
Therefore, DOE surmises that those commenters' original positions on 
this topic changed since the time of the May 2020 ECS RFI.
    In response to the May 2020 ECS RFI, AHRI asserted that among 
ACUACs and ACUHPs, the only equipment category

[[Page 44066]]

for which DOE is statutorily required to review amended standards under 
the six-year-lookback rulemaking is double-duct systems, based on the 
fact that the 2023 standards adopted in the January 2016 Direct Final 
Rule had not yet come into effect. (AHRI, EERE-2019-BT-STD-0042-0014 at 
p. 3) DOE disagrees with AHRI's reading of the statute. The six-year-
lookback provision does not reference compliance dates. (See 42 U.S.C. 
6313(a)(6)(C)(1)) The plain language of EPCA requires DOE to evaluate 
amended standards for ACUACs and ACUHPs ``every 6 years'' regardless of 
compliance dates of any amended standards from previous rulemakings. 
(Id.) In this rulemaking, DOE has evaluated the potential for amended 
standards for ACUACs and ACUHPs (except for double-duct systems, as 
discussed in section III.B of this document) pursuant to its statutory 
obligations.
    In response to the May 2022 TP/ECS RFI, Lennox highlighted the 
preparations manufacturers are undergoing to implement the 2023 energy 
conservation standards, as well as the pending transition to lower 
global warming potential (``GWP'') refrigerants in 2025. (Lennox, EERE-
2022-BT-STD-0015-0009 at p. 2) Lennox recommended that DOE exercise 
caution with energy conservation standard amendments for ACUAC and 
ACUHP equipment because manufacturers need time to assess the impacts 
of an amended test procedure before DOE assesses amending energy 
conservations standards. (Id.) Specifically, Lennox recommended a 180-
day period for manufacturers to assess the test procedure before the 
DOE moves forward with energy conservation standards based on the 
provisions of 10 CFR part 430, subpart C, appendix A. (Id. at pp. 5-6)
    As discussed previously, DOE notes that at the time of the May 2022 
TP/ECS RFI, compliance was not yet required with the second tier of 
energy conservation standards adopted in the January 2016 Direct Final 
Rule. However, the ACUAC/HP Working Group meetings and subsequent 
ACUAC/HP Working Group ECS Term Sheet agreement occurred after 
compliance became required with the most recent standards (January 1, 
2023), and the analyses of amended energy conservation standards 
conducted by DOE as part of the 2023 ECS Negotiations were based on the 
ACUAC/HP market after the 2023 compliance date. DOE notes that after 
the agreement on the ACUAC/HP Working Group TP Term Sheet, industry 
members in the ACUAC/HP Working Group conducted simulations to 
approximate where many models currently on the market would fall in 
terms of the new IVEC and IVHE metrics. These simulations were shared 
with a DOE contractor and were used in the 2023 ECS Negotiations. DOE 
also notes that Lennox was a member of the ACUAC/HP Working Group and 
agreed to the ACUAC/HP Working Group ECS Term Sheet; therefore, DOE 
surmises that Lennox's original position on this topic changed since 
the time of the May 2022 TP/ECS RFI.

B. Scope of Coverage

    This direct final rule applies to ACUACs and ACUHPs with a rated 
cooling capacity greater than or equal to 65,000 Btu/h (excluding 
double-duct air conditioners and heat pumps), which is the scope of 
equipment addressed in the 2023 ECS Negotiations.
    In the May 2020 ECS RFI, DOE requested comment on several topics 
related to double-duct systems. 85 FR 27941, 27943-27953 (May 12, 
2020). DOE received comments regarding double-duct systems from 
multiple stakeholders in response to the May 2020 ECS RFI. (Carrier, 
EERE-2019-BT-STD-0042-0013, pp. 2, 8, 10; AHRI, EERE-2019-BT-STD-0042-
0014 at pp. 3-8, 11; UCA, EERE-2019-BT-STD-0042-0008, Attachment 2) 
Double-duct systems are a sub-category of ACUACs and ACUHPs with a 
separate definition (10 CFR 431.92), metrics, and efficiency 
requirements (10 CFR 431.97).
    As noted, the scope of proposed standards in the ACUAC/HP Working 
Group ECS Term Sheet was determined through the 2023 ECS Negotiations 
and excludes double-duct air conditioners and heat pumps. Therefore, 
comments regarding energy conservation standards for double-duct 
systems are outside the scope of consideration for this rulemaking. 
Topics related to energy conservation standards for double-duct systems 
will be addressed in a separate rulemaking process.
    See section IV.A.1 of this document for discussion of the equipment 
classes analyzed in this direct final rule.

C. Test Procedure and Metrics

    EPCA sets forth generally applicable criteria and procedures for 
DOE's adoption and amendment of test procedures. (42 U.S.C. 6314) 
Manufacturers of covered equipment must use these test procedures to 
certify to DOE that their equipment complies with applicable energy 
conservation standards (42 U.S.C. 6316(b)(1); 42 U.S.C. 6296) and when 
making representations about the efficiency of their equipment (42 
U.S.C. 6314(d)). Similarly, DOE uses these test procedures to determine 
whether the equipment complies with the relevant standards promulgated 
under EPCA. (42 U.S.C. 6314(d)) DOE's current energy conservation 
standards are expressed in terms of IEER for the cooling efficiency of 
ACUACs and ACUHPs, and in terms of COP for the heating efficiency of 
ACUHPs. (See 10 CFR 431.97(b))
    As previously mentioned, the ACUAC/HP Working Group met several 
times and put forth the ACUAC/HP Working Group TP Term Sheet of 
recommendations regarding ACUAC and ACUHP test procedures, including 
new metrics IVEC and IVHE. DOE recently adopted the IVEC and IVHE 
metrics in a final rule amending the test procedure for ACUACs and 
ACUHPs.\23\ The newly adopted DOE test procedure for ACUACs and ACUHPs 
appears at 10 CFR part 431, subpart F, appendix A1 (appendix A1). This 
direct final rule adopts amended energy conservation standards for 
ACUACs and ACUHPs denominated in terms of the new IVEC and IVHE 
metrics.
---------------------------------------------------------------------------

    \23\ The final rule amending the test procedure can be found at 
www.regulations.gov under docket number EERE-2023-BT-TP-0014.
---------------------------------------------------------------------------

    DOE notes that a change in metrics (i.e., from IEER to IVEC and 
from COP to IVHE) necessitates an initial DOE determination that the 
new requirement would not result in backsliding when compared to the 
current standards. (See 42 U.S.C 6313(a)(6)(B)(iii)(I)) The translation 
of the current standards to IVEC and IVHE baselines is discussed 
further in section IV.C.2 of this document.

D. 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. See generally 10 CFR 431.4; 10 CFR part 430, 
subpart C, appendix A, sections 6(b)(3)(i) and 7(b)(1) (``appendix 
A'').
    After DOE has determined that particular technology options are

[[Page 44067]]

technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
practicability to manufacture, install, and service; (2) adverse 
impacts on equipment utility or availability; (3) adverse impacts on 
health or safety and (4) unique-pathway proprietary technologies. 
Section IV.B of this document discusses the results of the screening 
analysis for ACUACs and ACUHPs, 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 technical support document (``TSD'').
2. Maximum Technologically Feasible Levels
    When DOE adopts a new or amended standard for a type or class of 
covered equipment, it determines the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such equipment. Accordingly, in the engineering analysis, 
DOE determined the maximum technologically feasible (``max-tech'') 
improvements in energy efficiency for ACUACs and ACUHPs, 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 
direct final rule and in chapter 5 of the direct final rule TSD.

E. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from application of the 
TSL to ACUACs and ACUHPs purchased in the 30-year period that begins in 
the year of compliance with the amended standards (2029-2058).\24\ The 
savings are measured over the entire lifetime of the subject equipment 
purchased in the 30-year analysis period. DOE quantified the energy 
savings attributable to each TSL as the difference in energy 
consumption between each standards case and the no-new-standards case. 
The no-new-standards case represents a projection of energy consumption 
that reflects how the market for equipment would likely evolve in the 
absence of amended energy conservation standards.
---------------------------------------------------------------------------

    \24\ Each TSL is composed of specific efficiency levels for each 
equipment class. The TSLs considered for this direct final rule are 
described in section V.A of this document. DOE also presents a 
sensitivity analysis that considers impacts for equipment shipped in 
a nine-year period.
---------------------------------------------------------------------------

    DOE used its national impact analysis (``NIA'') computer models to 
estimate national energy savings (``NES'') from potential amended 
standards for ACUACs and ACUHPs. The NIA computer model (described in 
section IV.H of this document) calculates energy savings in terms of 
site energy, which is the energy directly consumed by equipment at the 
locations where they are used. For electricity, DOE reports national 
energy savings in terms of primary energy savings, which is the savings 
in the energy that is used to generate and transmit the site 
electricity. For natural gas, the primary energy savings are considered 
to be equal to the site energy savings. DOE also calculates NES in 
terms of FFC energy savings. The FFC metric includes the energy 
consumed in extracting, processing, and transporting primary fuels 
(i.e., coal, natural gas, petroleum fuels), and, thus, presents a more 
complete picture of the impacts of energy conservation standards.\25\ 
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.
---------------------------------------------------------------------------

    \25\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (August 18, 2011), as 
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt any new or amended standards for covered equipment more 
stringent than those set forth in ASHRAE Standard 90.1 or the existing 
Federal standard (as applicable in the context of the specific 
rulemaking), DOE must have clear and convincing evidence that such 
action would result in significant additional energy savings. (See 42 
U.S.C. 6313(a)(6)(C)(i); 42 U.S.C. 6313(a)(6)(A)(ii)(II)) \26\
---------------------------------------------------------------------------

    \26\ In setting a more-stringent standard for ASHRAE equipment, 
DOE must have ``clear and convincing evidence'' that doing so 
``would result in significant additional conservation of energy'' in 
addition to being technologically feasible and economically 
justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) This language indicates 
that Congress had intended for DOE to ensure that, in addition to 
the savings from the ASHRAE standards, DOE's standards would yield 
additional energy savings that are significant. In DOE's view, this 
statutory provision shares the requirement with the statutory 
provision applicable to covered products and non-ASHRAE equipment 
that ``significant conservation of energy'' must be present (42 
U.S.C. 6295(o)(3)(B))--and supported with ``clear and convincing 
evidence''--to permit DOE to set a more-stringent requirement than 
ASHRAE.
---------------------------------------------------------------------------

    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 
this equipment on the energy infrastructure can be more pronounced than 
equipment 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 5.59 quads, the 
equivalent of the primary annual energy use of 146 million homes. Based 
on the amount of FFC savings, the corresponding reduction in emissions, 
and the need to confront the global climate crisis, DOE has determined 
(based on the methodology described in section IV of this document and 
the analytical results presented in section V.B.3.a of this document) 
that there is clear and convincing evidence that the energy savings 
from the standard levels adopted in this direct final rule are 
``significant'' within the meaning of 42 U.S.C. 6313(a)(6)(A)(ii)(II).

F. 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. 6313(a)(6)(B)(ii)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    EPCA requires DOE to consider the economic impact of a potential 
standard on manufacturers and the consumers of the equipment subject to 
the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(I) and (C)(i)) In 
determining the impacts of potential new or 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

[[Page 44068]]

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 equipment in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered equipment 
that are likely to result from a standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a piece of equipment 
(including its installation) and the operating cost (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the equipment. The LCC analysis requires a variety of inputs, such as 
equipment prices, equipment energy consumption, energy prices, 
maintenance and repair costs, equipment lifetime, and discount rates 
appropriate for consumers. To account for uncertainty and variability 
in specific inputs, such as equipment lifetime and discount rate, DOE 
uses a distribution of values, with probabilities attached to each 
value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of more-efficient equipment through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that consumers will 
purchase the covered equipment 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 additional 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. 
6313(a)(6)(B)(ii)(III)) As discussed in section IV.H of this document, 
DOE uses the NIA computer models to project national energy savings.
d. Lessening of Utility or Performance of Equipment
    In establishing equipment 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 equipment. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on data 
available to DOE, the standards adopted in this document would not 
reduce the utility or performance of the equipment under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General of the 
United States (``Attorney General''), that is likely to result from a 
standard. (42 U.S.C. 6313(a)(6)(B)(ii)(V)) To assist the Department of 
Justice (``DOJ'') in making such a determination, DOE will transmit a 
copy of this direct final rule and the accompanying TSD to the Attorney 
General for review, with a request that the DOJ provide its 
determination on this issue. DOE will consider DOJ's comments on the 
rule contained in its assessment letter in determining whether to 
proceed with the direct final rule. DOE will also publish and respond 
to the DOJ's comments in the Federal Register in a separate document.
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. 6313(a)(6)(B)(ii)(VI)) The energy 
savings from the adopted standards are likely to provide improvements 
to the security and reliability of the Nation's energy system. 
Reductions in the demand for electricity also may result in reduced 
costs for maintaining the reliability of the Nation's electricity 
system. DOE conducts a utility impact analysis to estimate how 
standards may affect the Nation's needed power generation capacity, as 
discussed in section IV.M of this document.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. The adopted standards are likely to result in 
environmental benefits in the form of reduced emissions of air 
pollutants and GHGs associated with energy production and use. As part 
of the analysis of the need for national energy and water conservation, 
DOE conducts an emissions analysis to estimate how potential standards 
may affect these emissions, as discussed in section IV.K of this 
document, and the estimated emissions impacts are reported in section 
V.B.6 of this document.\27\ DOE also estimates the economic value of 
emissions reductions resulting from the considered TSLs, as discussed 
in section IV.L of this document. DOE emphasizes that the SC-GHG 
analysis presented in this direct final rule and accompanying TSD was 
performed in support of the cost-benefit analyses required by Executive 
Order (``E.O.'') 12866, and is provided to inform the public of the 
impacts of emissions reductions resulting from this rule. However, the 
SC-GHG estimates were not factored into DOE's EPCA analysis of the need 
for national energy and water conservation. DOE would reach the same 
conclusion presented in this

[[Page 44069]]

rule in the absence of the estimated benefits from reductions in GHG 
emissions.
---------------------------------------------------------------------------

    \27\ As discussed in section IV.L of this document, for the 
purpose of complying with the requirements of E.O. 12866, DOE also 
estimates the economic value of emissions reductions resulting from 
the considered TSLs. DOE calculates this estimate using a measure of 
the social cost (``SC'') of each pollutant (e.g., SC-
CO2). Although this estimate is calculated for the 
purpose of complying with E.O. 12866, the Seventh Circuit Court of 
Appeals confirmed in 2016 that DOE's consideration of the social 
cost of carbon in energy conservation standards rulemakings is 
permissible under EPCA. Zero Zone v. United States DOE, 832 F.3d 
654, 677 (7th Cir. 2016).
---------------------------------------------------------------------------

g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) To 
the extent 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.''

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to ACUACs and ACUHPs. Separate subsections 
address each component of DOE's analyses. Comments on the methodology 
and DOE's responses are presented in each section.
    DOE used several analytical tools to estimate the impact of the 
standards considered in this document on consumers and manufacturers. 
The first tool is a spreadsheet that calculates the LCC savings and PBP 
of potential amended or new energy conservation standards. The national 
impacts analysis uses a second spreadsheet set that provides shipments 
projections and calculates national energy savings and net present 
value of total consumer costs and savings expected to result from 
potential energy conservation standards. DOE uses the third spreadsheet 
tool, the Government Regulatory Impact Model (``GRIM''), to assess 
manufacturer impacts of potential standards. These three spreadsheet 
tools are available on the DOE website for this rulemaking: 
www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=75. 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 (i.e., AEO 2023).

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the equipment 
concerned, including the purpose of the equipment, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the equipment. 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 equipment classes; (2) manufacturers and 
industry structure; (3) existing efficiency programs; (4) market and 
industry trends, and (5) technologies or design options that could 
improve the energy efficiency of ACUACs and ACUHPs. 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. Equipment Classes
    When evaluating and establishing energy conservation standards, DOE 
divides covered equipment into equipment classes by the type of energy 
used, capacity, or other performance-related feature that would justify 
a different standard. (42 U.S.C. 6313(a)(6)(B)(iii)(II))
    DOE currently defines separate energy conservation standards for 
twelve ACUAC and ACUHP equipment classes (excluding double-duct 
systems), determined according to the following performance-related 
features that provide utility to the consumer: rated cooling capacity, 
equipment subcategory (air conditioner versus heat pump), and 
supplementary heating type. Table IV.1 lists the current ACUAC and 
ACUHP equipment classes. (See also 10 CFR 431.97(b))

[[Page 44070]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.080

    In response to the May 2020 ECS RFI, DOE received multiple comments 
from stakeholders regarding the equipment classes for ACUACs and 
ACUHPs. Several stakeholders recommended that DOE evaluate the capacity 
ranges that separate the current ACUAC and ACUHP equipment classes, and 
that DOE consider splitting the existing very large equipment classes 
(i.e., 240,000 to 760,000 Btu/h) into separate equipment classes 
because of the potential for increasing stringency of standards (i.e., 
more models with efficiency significantly above the 2023 standards) for 
ACUACs and ACUHPs with capacities at the lower end of the very large 
capacity range, as compared to the capacity range of very-large 
equipment as a whole. (ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 
at pp. 2-3; CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 6; NEEA, EERE-
2019-BT-STD-0042-0024 at pp. 3-5) NEEA specifically recommended 
splitting the very large equipment class into two classes: one greater 
than or equal to 240,000 Btu/h and less than 384,000 Btu/h, and the 
other greater than or equal to 384,000 Btu/h and less than 760,000 Btu/
h. (NEEA, EERE-2019-BT-STD-0042-0024 at pp. 3-4) The CA IOUs 
specifically recommended splitting the very large equipment class into 
two classes: one greater than or equal to 240,000 Btu/h and less than 
400,000 Btu/h, and the other greater than or equal to 400,000 Btu/h and 
less than 760,000 Btu/h. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 6)
    In response, DOE notes that the stakeholders that recommended 
splitting the existing very large equipment classes (ASAP, NEEA, and CA 
IOUs) had representatives that were members of the ACUAC/HP Working 
Group and agreed to the recommendations in the ACUAC/HP Working Group 
ECS Term Sheet, which maintained the existing equipment class capacity 
boundaries based upon the capacities in the EPCA definitions of small, 
large, and very large commercial package air conditioning and heating 
equipment. Consequently, DOE concludes that the recommended energy 
conservation standards and equipment classes presented in the ACUAC/HP 
Working Group ECS Term Sheet represent those stakeholders' latest 
recommendations on equipment classes.
    Additionally, the ACUAC/HP Working Group ECS Term Sheet combines 
all ACUHPs within each capacity range into single equipment classes 
regardless of supplementary heating type, which is different from DOE's 
existing equipment class structure (which includes separate equipment 
classes in each capacity range for: (1) ACUHPs with electric resistance 
or no heating; and (2)

[[Page 44071]]

ACUHPs with all other types of heating). DOE is adopting amended energy 
conservation standards in terms of the nine equipment classes 
recommended in the ACUAC/HP Working Group ECS Term Sheet, presented in 
Table IV.2.
[GRAPHIC] [TIFF OMITTED] TR20MY24.081

2. Market Post-2023
    In the May 2020 ECS RFI, DOE sought comment on whether currently 
available models of ACUACs and ACUHPs (excluding double-duct systems) 
with efficiency ratings that meet or exceed the 2023 standard levels 
are representative of the designs and characteristics of models that 
would be expected to be on the market after the 2023 compliance date. 
85 FR 27941, 27948 (May 12, 2020).
    AHRI, Carrier, and Trane asserted that the ACUAC and ACUHP markets 
at the time of the May 2020 ECS RFI are not representative of the 
models that would be expected to be on the market after the 2023 
standards take effect. (AHRI, EERE-2019-BT-STD-0042-0014 at pp. 3, 5-6; 
Carrier, EERE-2019-BT-STD-0042-0013 at p. 7; Trane, EERE-2019-BT-STD-
0042-0016 at p. 6) More specifically, AHRI commented that it is 
impossible to forecast the market impact of the 2023 standards on 
ACUACs and ACUHPs, and also asserted that State refrigerant regulations 
that drive the industry to use A2L refrigerants will require components 
such as compressors to be redesigned to accommodate new refrigerants. 
(AHRI, EERE-2019-BT-STD-0042-0014 at pp. 3, 5-6) Goodman also stated 
that alternative refrigerants would impact future product design and 
characteristics (e.g., requiring factory-installed refrigerant 
detection sensors depending on the charge amounts of an alternate 
refrigerant). (Goodman, EERE-2019-BT-STD-0042-0017 at p. 3) Carrier 
stated the then-current models available on the market that meet the 
2023 standards will not be the same products that are offered in 2023 
because manufacturers will be working to optimize efficiencies, lower 
cost, and implement new entry level products. Carrier added that the 
upcoming 2023 standards will also create a need to further optimize 
higher-efficiency equipment. Carrier asserted that most products being 
sold are currently at the minimum efficiency levels, which leads to an 
inability to properly evaluate the economic impact of moving the 
markets from the current standards to 2023 standards. (Carrier, EERE-
2019-BT-STD-0042-0013 at p. 7) Trane stated that it would be 
redesigning all of its ACUAC and ACUHP model lines in response to the 
2023 standards. (Trane, EERE-2019-BT-STD-0042-0016 at p. 6)
    Lennox commented that the market impacts of the 2023 standards are 
unknown because of uncertainties in assessing the evolving market, 
including uncertainties in future shipments, the economic impact on 
manufacturers and consumers, and the total projected energy savings. 
(Lennox, EERE-2019-BT-STD-0042-0015 at pp. 2-3) However, Lennox also 
commented that the ACUAC and ACUHP models on the market are 
representative of designs and characteristics of models that would be 
expected to be on the market after the 2023 compliance date. (Id. at p. 
5) Lennox additionally mentioned that the 2023 standards would cause a 
phase out of single-speed technology and constant airflow fans. (Id.)
    DOE notes that at the time these comments were received, compliance 
was not yet required with the current standards. Compliance was 
required with the current standards beginning January 1, 2023. DOE 
analyzed the market after January 1, 2023 for its analyses for the 2023 
ECS Negotiations and for this direct final rule such that the comments 
received in 2020 on this matter are now moot. DOE's analysis of the 
market efficiency distribution to develop IEER efficiency levels is 
discussed in section of this direct final rule.
3. Technology Options
    As part of the market and technology assessment, DOE identifies 
technologies that manufacturers could use to improve ACUAC and ACUHP 
energy efficiency. Chapter 3 of the direct final rule TSD includes the 
detailed list and descriptions of all technology options identified for 
this equipment.
    In the May 2020 ECS RFI, DOE listed 19 technology options 
determined to improve the efficiency of ACUACs and ACUHPs, as measured 
by the DOE test procedure, that were presented in the

[[Page 44072]]

January 2016 Direct Final Rule. 85 FR 27941, 27946 (May 12, 2020). DOE 
requested comment on the technology options considered in the 
development of the January 2016 Direct Final Rule, their applicability 
to the current market, and the range of performance characteristics for 
each technology option. Id. DOE also sought feedback on other 
technology options that it should consider for inclusion in its 
analysis. Id.
    DOE also sought comment on any changes in market adoption, costs, 
and concerns with incorporating the technologies identified into 
equipment that may have occurred since the January 2016 Direct Final 
Rule. Id. DOE also requested feedback on how manufacturers would 
incorporate the technology options from the January 2016 Direct Final 
Rule to increase energy efficiency in ACUACs and ACUHPs beyond the 
current levels. Id. at 85 FR 27949. This request included information 
on the order in which manufacturers would incorporate the different 
technologies to incrementally improve the efficiencies of equipment. 
Id. DOE also requested feedback on whether the increased energy 
efficiency would lead to other design changes that would not occur 
otherwise. Id. DOE was also interested in information regarding any 
potential impact of design options on a manufacturer's ability to 
incorporate additional functions or attributes in response to consumer 
demand. Id.
    DOE also requested comment on whether certain design options may 
not be applicable to (or incompatible with) specific equipment classes. 
Id.
    Several stakeholders stated that, in general, the technology 
options listed in the May 2020 ECS RFI are appropriate and have not 
seen any significant changes since the analysis was conducted for the 
January 2016 Direct Final Rule. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 
4; Lennox, EERE-2019-BT-STD-0042-0015 at p. 5; Trane, EERE-2019-BT-STD-
0042-0016 at p. 3)
    Carrier stated that high-efficiency, multi-stage, and variable-
speed compressors, the size of heat exchangers, and more-efficient 
condenser fan blades and motors can increase efficiency. Carrier also 
stated that microchannel heat exchangers and expansion valves do not 
affect efficiency, and that electro-hydrodynamic enhancement has a very 
minor effect on efficiency.\28\ (Carrier, EERE-2019-BT-STD-0042-0013 at 
p. 4) Carrier stated that it anticipates that the identified technology 
options would impact practicability to manufacture, install, and 
service, with potential impacts including larger/heavier chassis, roof 
curb changes, and modified electrical service to accommodate high-
efficiency components. (Carrier, EERE-2019-BT-STD-0042-0013 at pp. 5-6) 
AHRI stated that there may be limited availability of electro-
hydrodynamic enhancements (without elaborating on why) and that direct-
drive fan systems at some voltages may not be available. (AHRI, EERE-
2019-BT-STD-0042-0014 at p. 4)
---------------------------------------------------------------------------

    \28\ Carrier used the term electro-hydromatic enhancement, but 
DOE assumes Carrier was referring to electro-hydrodynamic 
enhancement.
---------------------------------------------------------------------------

    NEEA recommended that DOE consider the presence of economizers, fan 
speed control, multi-stage compressors, electronically-commutated 
motors (``ECMs''), and fan efficiency. (NEEA, EERE-2019-BT-STD-0042-
0024 at p. 7)
    Trane stated that achieving the 2023 standard levels will take a 
combination of compressor technology and advanced heat exchanger 
design. Trane also stated that secondarily, indoor and outdoor fan 
technologies would be employed to reach the 2023 standard levels. 
(Trane, EERE-2019-BT-STD-0042-0016 at p. 8) Carrier stated that the 
technology options identified are currently being used to reach max-
tech efficiency and that more of the advanced features would be used to 
meet the 2023 standards. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 11) 
Carrier also asserted that additional features or advancements at the 
time of their comments would create undue burden in terms of cost and 
increased equipment size, resulting in a lack of marketability for 
ACUACs and ACUHPs. (Id.)
    AHRI suggested that DOE contact manufacturers directly to solicit 
feedback on: (1) how manufacturers would incorporate the identified 
technology options to increase energy efficiency of ACUACs and ACUHPs 
and (2) whether certain design options may not be applicable to 
specific equipment classes. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 7)
    In response to the May 2020 ECS RFI, the CA IOUs and ASAP, ACEEE, 
et al. suggested that DOE consider additional alternative refrigerants 
as a technology option. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 5; 
ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 3-4) ASAP, 
ACEEE, et al. stated that alternative refrigerants, including R-452B, 
R-454B, and R-32, can improve efficiency by at least 5 percent relative 
to the current refrigerant R-410A, citing testing conducted by Oak 
Ridge National Laboratory (``ORNL'') in partnership with Trane.\29\ 
(ASAP, ACEEE, et al., EERE-2019-BT-STD-0042-0023 at pp. 1, 3-4) In 
response to the May 2022 TP/ECS RFI, ASAP and ACEEE again recommended 
DOE consider low-GWP refrigerants as a design option. (ASAP and ACEEE, 
EERE-2022-BT-STD-0015-0011 at p. 3)
---------------------------------------------------------------------------

    \29\ Available at: www.energy.gov/sites/prod/files/2017/04/f34/10_32226f_Shen_031417-1430.pdf.
---------------------------------------------------------------------------

    AHRI commented that considering alternative refrigerants as a 
technology option is not appropriate and would be unduly burdensome for 
manufacturers, recommending screening out alternative refrigerants on 
the bases of technological feasibility and practicability to 
manufacture, install, and service. (AHRI, EERE-2019-BT-STD-0042-0014 at 
pp. 4-5) Carrier suggested that alternate refrigerants should not be 
the basis of an energy efficiency increase. (Carrier, EERE-2019-BT-STD-
0042-0013 at p. 7)
    As discussed in section IV.C.1 of this document, DOE conducted its 
engineering analysis by selecting and analyzing currently-available 
models using their rated efficiency in terms of IEER to characterize 
the energy use and manufacturing production costs at each efficiency 
level. As a result, DOE analyzed equipment designs, including expansion 
devices, indoor and outdoor coils, and fans/motors, consistent with 
currently available models and the design of the equipment as whole. 
Therefore, DOE has concluded that the technology options in this direct 
final rule accurately reflect the efficiency improvement and 
incremental manufacturing costs associated with these designs.
    Comments received in response to the May 2020 ECS RFI were received 
three years prior to the compliance date of the current standards and 
the 2023 ECS Negotiations. Since that time, the market has updated to 
comply with the new standards, and DOE conducted interviews with 
manufacturers to solicit feedback on all aspects of its engineering 
analysis, including technology options used to increase efficiency of 
ACUACs and ACUHPs. Certain technology options were also discussed among 
the ACUAC/HP Working Group during the 2023 ECS Negotiations. (EERE-
2022-BT-STD-0015-0088 at pp. 60-64; EERE-2022-BT-STD-0015-0089 at pp. 
17-24) Therefore, DOE surmises that the positions of commenters on 
certain technology options may have changed since the time of the 
drafting of some of the comments received.

[[Page 44073]]

    Regarding economizers, while the IVEC metric accounts for the 
benefit of economizer cooling and the energy consumed during 
economizing via calculations, the metric does not include testing with 
economizer operation due to test burden and repeatability concerns. As 
such, the IVEC metric does not allow for differentiation in terms of 
IVEC efficiency between: (1) systems installed with economizers versus 
not installed with economizers, and (2) different types of economizers 
offered. Therefore, DOE did not consider economizers as a technology 
option for this rulemaking.
    There are no models currently on the market that include low-GWP 
refrigerants. Therefore, at this time, DOE does not have sufficient 
information to consider low-GWP refrigerants as a technology option for 
improving efficiency. As such, DOE did not consider low-GWP 
refrigerants as a technology option in its analysis. Section IV.C.4 of 
this document includes discussion of the impact of low-GWP refrigerants 
on efficiency and cost of ACUACs and ACUHPs.
    Regarding electro-hydrodynamic enhancement, DOE did not identify 
any prototypes or models currently on the market that incorporate this 
technology to improve efficiency.
    After consideration of the comments received, assessment of 
technology options used to improve efficiency in models currently on 
the market, and additional information provided during manufacturer 
interviews, DOE considered the technology options presented in Table 
IV.3 as part of this rulemaking.
[GRAPHIC] [TIFF OMITTED] TR20MY24.082

    A detailed discussion of each technology option identified is 
contained in chapter 3 of the direct final rule TSD.

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 equipment 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 equipment 
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) Adverse impacts on equipment utility or availability. If a 
technology is determined to have a significant adverse impact on the 
utility of the equipment to subgroups of consumers, or result in the 
unavailability of any covered equipment type with performance 
characteristics (including reliability), features, sizes, capacities, 
and volumes that are substantially the same as equipment generally 
available in the United States at the time, it will not be considered 
further.
    (4) Adverse impact on health or 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 431.4; 10 CFR part 430, subpart C, appendix A, sections 
6(c)(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 comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    In the January 2016 Direct Final Rule, DOE screened-out three 
technology

[[Page 44074]]

options: electro-hydrodynamic enhanced heat transfer (due to 
technological feasibility and practicability to manufacture/install/
service), alternative refrigerants (due to technological feasibility), 
and sub-coolers (due to technological feasibility). 81 FR 2420, 2449 
(Jan. 15, 2016).
    In the May 2020 ECS RFI, DOE presented the three technology options 
that were screened out in the January 2016 Direct Final Rule and the 
criteria for screening them out. DOE sought feedback on whether the 
technology options that were screened out in the January 2016 Direct 
Final Rule should continue to be screened out. DOE also sought comment 
on what impact the screening criteria would have on consideration of 
the technology options that were considered (i.e., not screened out) in 
the January 2016 Direct Final Rule. 85 FR 27941, 27947 (May 12, 2020).
    Trane agreed with the screening analysis conducted for the January 
2016 Direct Final Rule. (Trane, EERE-2019-BT-STD-0042-0016 at p. 5)
    Carrier also agreed with continuing to screen out the technology 
options that were screened out in the January 2016 Direct Final Rule. 
(Carrier, EERE-2019-BT-STD-0042-0013 at p. 6) Carrier further 
recommended that an additional screening criterion be added to address 
cost of a technology option. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 
6)
    As discussed in section IV.A.3 of this document, DOE is not 
considering alternative refrigerants and electro-hydrodynamic enhanced 
heat transfer as technology options, and, thus, the need to screen them 
in or out is not relevant. With respect to the third previously-
screened out technology option, DOE is aware of at least one model line 
on the market that uses sub-coolers for increased efficiency. DOE does 
not find that the third previously-screened out technology meets any of 
the criteria for being screened out.
    In response to Carrier's comment recommending an additional 
screening criterion be added to address cost of a technology option, 
the added cost of a technology option is considered in the cost-
efficiency analysis and the downstream economic analyses that evaluate 
the impacts to consumers and the Nation as a whole. Additionally, the 
product and capital conversion costs manufacturers must bear in order 
to implement certain technologies are considered in the manufacturer 
impact analysis, discussed further in section IV.J of this document.
    DOE did not find that any of the other technology options it 
identified met the criteria to be screened-out in this rulemaking.
2. Remaining Technologies
    Through a review of each technology, DOE concludes that all of the 
identified technologies listed in section IV.A.3 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 
any technology options for this rulemaking.
    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been used in 
commercially-available equipment 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; do 
not result in adverse impacts on consumer utility, equipment 
availability, health, or safety; and do not involve a proprietary 
technology that is a unique pathway to meeting a given efficiency 
level). 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 ACUACs and ACUHPs. 
There are two elements to consider in the engineering analysis: (1) the 
selection of efficiency levels to analyze (i.e., the ``efficiency 
analysis'') and (2) the determination of equipment cost at each 
efficiency level (i.e., the ``cost analysis''). In determining the 
performance of higher-efficiency equipment, DOE considers technologies 
and design option combinations not eliminated by the screening 
analysis. For each equipment class, DOE estimates the baseline cost, as 
well as the incremental cost for the 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 Levels in Terms of Existing Metrics
    DOE typically uses one of two approaches to develop energy 
efficiency levels for the engineering analysis: (1) relying on observed 
efficiency levels in the market (i.e., the efficiency-level approach), 
or (2) determining the incremental efficiency improvements associated 
with incorporating specific design options to a baseline model (i.e., 
the design-option approach). Using the efficiency-level approach, the 
efficiency levels established for the analysis are determined based on 
the market distribution of existing equipment (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 equipment 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).
    In this rulemaking, DOE applied an efficiency-level approach, 
analyzing three specific capacities--90,000 Btu/h (7.5-tons), 180,000 
Btu/h (15-tons), and 360,000 Btu/h (30-tons)--that served as 
representative units for the three equipment capacity ranges--``small'' 
(>=65,000 to <135,000 Btu/h), ``large'' (>=135,000 to <240,000 Btu/h), 
and ``very large'' (>=240,000 to <760,000 Btu/h). DOE selected these 
representative capacities consistent with the analysis conducted for 
the January 2016 Direct Final Rule after concluding based on assessment 
of the current market (and receiving no contrary feedback during the 
2023 ECS Negotiation meetings) that these capacities continue to be 
representative of models on the market in their respective capacity 
ranges. To develop cost-efficiency curves, DOE used the current cooling 
efficiency metric (IEER) and later translated each efficiency level to 
the new cooling efficiency metric (IVEC) because there were no 
publicly-available data for existing models on the market in terms of 
the new metric; therefore, the cost to produce these models could not 
be linked directly to efficiency in terms of IVEC. Selection of the 
efficiency levels in terms of the current efficiency metrics is 
discussed in sections IV.C.1.a and IV.C.1.b of this document. Further 
discussion on the translation from IEER to IVEC can be found in section 
IV.C.2.a of this document. The selection of heating efficiency levels 
in terms of the new heating efficiency metric (IVHE) is discussed in 
section IV.C.2.b of this document.

[[Page 44075]]

    Based on DOE's review of equipment available on the market and 
feedback received during manufacturer interviews, DOE understands that 
the majority of ACUAC models with electric resistance heating or no 
heating are designed on the same basic platform and cabinet size as the 
equivalent ACUAC models with all other types of heating and comparable 
ACUHP models. Because these models typically have similar designs, DOE 
estimated that implementing the same efficiency-improving design 
options would result in the same or similar energy savings for 
comparable equipment classes. As discussed further in section IV.C.2.a 
of this document, ACUACs with all other types of heating typically are 
paired with furnaces that impose additional pressure drop that must be 
overcome by the indoor fan, thus increasing measured indoor fan power, 
so for otherwise comparable models, efficiencies in terms of IEER are 
lower for ACUACs with all other types of heating than ACUACs with 
electric resistance heating or no heating. Therefore, in order to 
develop equivalently stringent efficiency levels for all ACUACs, DOE 
first developed higher efficiency levels specifically for ACUACs with 
electric resistance heating or no heating. As discussed, these 
efficiency levels were developed in terms of IEER, and were 
subsequently translated to the new IVEC metric. DOE then translated 
these IVEC efficiency levels for ACUACs with electric resistance 
heating or no heating into IVEC efficiency levels for ACUACs with all 
other types of heating by using furnace pressure drops from product 
literature to calculate additional indoor fan power consumed and 
ultimately IVEC decrements to represent the reduction in IVEC as a 
result of furnace pressure drop. The calculated decrements closely 
aligned with the decrements proposed in the ACUAC/HP Working Group ECS 
Term Sheet. As further discussed in section IV.C.2 of this document, 
DOE did not analyze lower IVEC efficiency levels for ACUHPs as compared 
to ACUACs.
a. Baseline Efficiency
    For each equipment 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 equipment class represents the characteristics 
of 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.
    In the May 2020 ECS RFI, DOE requested feedback on whether the 2023 
energy conservation standards for ACUACs and ACUHPs are appropriate 
baseline efficiency levels for DOE to apply each equipment class in 
evaluating whether to amend energy conservation standards for this 
equipment. 85 FR 27941, 27948 (May 12, 2020). AHRI, Lennox, and Goodman 
stated that the 2023 standards would be the correct baseline efficiency 
to be used in a future DOE analysis. (AHRI, EERE-2019-BT-STD-0042-0014 
at p. 6; Lennox, EERE-2019-BT-STD-0042-0015 at p. 6; Goodman, EERE-
2019-BT-STD-0042-0017 at p. 3)
    Consistent with stakeholder feedback, DOE used the current energy 
conservation standards as the baseline efficiency level in terms of 
IEER and COP for each equipment class. The baseline efficiency levels 
in terms of IEER and COP considered in this direct final rule are 
presented in Table IV.4. As discussed further in section IV.A.1 of this 
document, consistent with the ACUAC/HP Working Group ECS Term Sheet, 
DOE is combining ACUHPs with all types of heating into a single 
equipment class for each capacity range. Therefore, for the baseline 
for ACUHP equipment classes, DOE used the current IEER standard for 
ACUHPs with all other types of heating.
[GRAPHIC] [TIFF OMITTED] TR20MY24.083


[[Page 44076]]


b. Higher Efficiency Levels
    For each equipment class, DOE analyzes several efficiency levels 
above baseline. The maximum available efficiency level is the highest 
efficiency model currently available on the market. DOE also defines a 
``max-tech'' efficiency level to represent the maximum possible 
efficiency for a given equipment class.
    In the May 2020 ECS RFI, DOE requested comment on what efficiency 
levels should be considered as max-tech levels for ACUACs and ACUHPs 
for the evaluation of whether amended standards are warranted. 85 FR 
27941, 27949 (May 12, 2020).
    The CA IOUs and ASAP, ACEEE, et al. suggested DOE should analyze 
max-tech efficiency levels higher than what were analyzed in the 
January 2016 Direct Final Rule and consider max-tech efficiency levels 
that reflect incorporation of all possible technology options. (CA 
IOUs, EERE-2019-BT-STD-0042-0020 at pp. 6-7; ASAP, ACEEE, et al., EERE-
2019-BT-STD-0042-0023 at pp. 1-2, 4) The CA IOUs recommended DOE 
consider the technology development timeline of emerging technologies 
in determining max-tech levels, specifically technology options 
currently in the lab-scale prototype stage. (CA IOUs, EERE-2019-BT-STD-
0042-0020 at pp. 6-7)
    AHRI, Goodman, and Lennox recommended DOE only consider 
commercially-available technologies in determining max-tech efficiency 
levels, specifically those that are used in equipment certified to 
DOE's Compliance Certification Database (``CCD''). (AHRI, EERE-2019-BT-
STD-0042-0014 at p. 6; Goodman, EERE-2019-BT-STD-0042-0017 at p. 3; 
Lennox, EERE-2019-BT-STD-0042-0015 at p. 6) Lennox additionally 
commented that the max-tech levels for ACUACs and ACUHPs have increased 
by up to eight percent since the January 2016 Direct Final Rule, driven 
by manufacturers having optimized designs for the part-load IEER 
metric, which is more representative of consumer use than the prior EER 
full-load metric, not the advancement of technologies that are employed 
by this equipment. (Lennox, EERE-2019-BT-STD-0042-0015 at p. 6)
    Trane stated that the analysis for the January 2016 Direct Final 
Rule is still relevant and that it supported the process used then for 
considering max-tech efficiency levels (including manufacturer 
interviews). (Trane, EERE-2019-BT-STD-0042-0016 at p. 7)
    Carrier specified what it argued are the max-tech levels for ACUACs 
and ACUHPs should be in terms of IEER and COP based on certifications 
to the AHRI Directory at the time of its comment submission. (Carrier, 
EERE-2019-BT-STD-0042-0013 at pp. 9-10)
    Consistent with feedback from stakeholders, DOE identified 
incremental efficiency levels based on a review of currently available 
models on the market, taking into consideration the efficiency levels 
analyzed for the January 2016 Direct Final Rule. DOE relied on 
certified IEER data from DOE's CCD and the AHRI Directory, focusing on 
models that had sufficient information in public product literature to 
develop costs. Review of the market showed that many of the model lines 
analyzed for the January 2016 Direct Final Rule are still on the market 
today; therefore, DOE concluded that many of the efficiency levels 
analyzed for the January 2016 Direct Final Rule were still appropriate 
to consider for this rulemaking. DOE started with the efficiency levels 
used for the January 2016 Direct Final Rule analysis that were above 
the current IEER standards (i.e., standards with compliance date of 
January 1, 2023), adjusting IEER values of some efficiency levels as 
appropriate based on current market efficiency distributions. DOE also 
added efficiency levels, as needed, to better represent the range of 
certified IEER ratings for ACUAC models with electric resistance 
heating or no heating currently available on the market. This included 
adjusted max-tech levels for some classes that have models on the 
market with higher rated IEER than the max-tech levels analyzed for the 
January 2016 Direct Final Rule, consistent with suggestions by 
stakeholders.
    Regarding the CA IOU's comment that DOE consider emerging 
technologies in determining max-tech levels, as discussed, DOE 
developed max-tech levels for the engineering analysis based on model 
designs currently on the market. DOE concluded that it lacked 
sufficient cost and efficiency information to analyze higher efficiency 
levels than currently on the market. DOE notes that the max-tech levels 
presented in this DFR reflect those presented in the 2023 ECS 
Negotiations, and the CA IOUs were a member of the ACUAC/HP Working 
Group and did not object to the analyzed max-tech levels in the 2023 
ECS Negotiations.
    In response to the May 2020 ECS RFI, Carrier also recommended that 
DOE analyze max-tech efficiency separately for equipment that uses 
alternate refrigerants once available on the market, as it believes 
that safety code compliance will require additional components and 
testing that may restrict the use of certain design options. (Carrier, 
EERE-2019-BT-STD-0042-0013 at p. 10)
    In response, DOE did not analyze max-tech levels for equipment with 
alternative refrigerants separately for this rulemaking because DOE is 
not aware of any models on the market at this time that include 
refrigerants with GWP below the limit of 700 GWP adopted by the 
Environmental Protection Agency (``EPA'').\30\ Section IV.C.4 of this 
direct final rule includes further discussion on consideration of 
lower-GWP refrigerants in the engineering analysis.
---------------------------------------------------------------------------

    \30\ On October 24, 2023, the EPA published a final rule in the 
Federal Register restricting the use of certain higher-GWP 
hydrofluorocarbons (``HFCs'') in aerosols, foams, and refrigeration, 
air conditioning, and heat pump products and equipment (``October 
2023 EPA Final Rule''). This final rule restricts refrigerants with 
a GWP higher than 700 in residential and light commercial air 
conditioning and heat pump systems installed on and after January 1, 
2025. 88 FR 73098. On December 26, 2023, EPA published an interim 
final rule and request for comment in the Federal Register amending 
a provision of the October 2023 EPA Final Rule allowing one 
additional year, until January 1, 2026, for the installation of new 
residential and light commercial air conditioning and heat pump 
systems using components manufactured or imported prior to January 
1, 2025. 88 FR 88825.
---------------------------------------------------------------------------

    The higher efficiency levels for ACUACs with electric resistance 
heating or no heating in terms of IEER considered in this direct final 
rule are presented in Table IV.5.

[[Page 44077]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.084

2. Efficiency Levels in Terms of New Metrics
a. IVEC
    DOE considered the efficiency levels in terms of IVEC presented in 
Table IV.6 for this direct final rule. The development of these 
efficiency levels for each equipment class is discussed in the 
following subsections.
[GRAPHIC] [TIFF OMITTED] TR20MY24.085

ACUACs with Electric Resistance Heating or No Heating
    As discussed in section II.B.3 of this document, the ACUAC/HP 
Working Group recommended the current cooling performance energy 
efficiency descriptor, IEER, be replaced with the newly-developed IVEC 
metric. While the cost-efficiency curves were developed in terms of the 
existing cooling efficiency metric (IEER), DOE translated the IEER 
values at each

[[Page 44078]]

efficiency level to IVEC values for use in the other analyses in this 
direct final rule, and to allow consideration of potential amended 
energy conservation standard levels in terms of the IVEC metric.
    With this change in cooling efficiency metric, DOE must ensure that 
a new IVEC-based standard would not result in backsliding of energy 
efficiency levels when compared to the current IEER standards. (42 
U.S.C 6313(a)(6)(B)(iii)(I)) To this end, DOE translated the identified 
IEER baseline levels (as discussed in section IV.C.1.a of this 
document) to IVEC baseline levels.
    During the course of the 2023 ECS Negotiations, industry members in 
the ACUAC/HP Working Group provided a DOE contractor with a 
confidential, anonymized dataset that included simulated IEER and IVEC 
values for more than 100 models currently available on the market. In 
this dataset, for each equipment class, there is a range of IVEC values 
near the IEER baseline. DOE calculated a weighted-average IVEC baseline 
based on the values in this industry-provided dataset to use as the 
IVEC baseline for analysis for each equipment class for ACUACs with 
electric resistance heating or no heating. Further discussion of DOE's 
analysis of baseline IVEC levels is included in chapter 5 of the direct 
final rule TSD.
    DOE also translated the higher efficiency levels in terms of IEER 
to IVEC based on the performance correlations it developed (discussed 
further in section IV.C.3 of this document) (i.e., DOE used the 
performance correlations to calculate an IVEC value for each IEER 
efficiency level). Further discussion of DOE's analysis of higher IVEC 
levels is included in chapter 5 of the direct final rule TSD.
ACUACs with All Other Types of Heating
    ACUACs with all other types of heating typically are paired with 
furnaces that impose additional pressure drop that must be overcome by 
the indoor fan, thus increasing measured indoor fan power. Therefore, 
the current IEER standards have lower minimum efficiency for ACUACs 
with all other types of heating as compared to ACUACs with electric 
resistance heating or no heating, and DOE considered a similar furnace 
decrement for IVEC efficiency levels (i.e., difference in IVEC levels 
between comparable classes to reflect presence of a furnace). The 
recommended standard levels in the ACUAC/HP Working Group ECS Term 
Sheet include a furnace decrement of 0.5 for IVEC levels for small and 
large ACUACs and a furnace decrement of 0.7 for IVEC levels for very 
large ACUACs. DOE conducted an analysis of furnace pressure drops based 
on public literature for ACUAC models and used estimates of furnace 
pressure drop to calculate a furnace IVEC decrement for small, large, 
and very large ACUACs. DOE's calculated furnace IVEC decrements are 
similar to the decrements of 0.5, 0.5, and 0.7 included in the ACUAC/HP 
Working Group ECS Term Sheet for small, large, and very large ACUACs, 
respectively. Therefore, with these decrements confirmed, DOE used the 
furnace IVEC decrements from the ACUAC/HP Working Group ECS Term Sheet 
more broadly to develop IVEC efficiency levels for ACUACs with all 
other types of heating across all considered efficiency levels for the 
subject equipment. In other words, for each IVEC efficiency level for 
ACUACs with electric resistance heating or no heating, DOE subtracted 
the corresponding furnace IVEC decrement from the ACUAC/HP Working 
Group ECS Term Sheet to determine the corresponding IVEC efficiency 
level for ACUACs with all other types of heating. Further discussion of 
DOE's analysis of furnace IVEC decrements is included in chapter 5 of 
the direct final rule TSD.
ACUHPs
    For the IVEC values of ACUHPs, DOE conducted an analysis to 
understand the potential decrement in IVEC efficiency ratings between 
ACUACs and ACUHPs. Using the January 2016 Direct Final Rule IEER 
decrements between ACUACs and ACUHPs (81 FR 2420, 2456 (Jan. 15, 
2016)), DOE determined IEER values at each efficiency level for ACUHPs. 
The performance correlations developed for each efficiency level of 
ACUACs were then adjusted to decrease IEER to reflect the lower ACUHP 
IEER values. Changes made to the performance correlations reflect the 
design and operating differences between otherwise identical ACUACs and 
ACUHPs. For example, compressor performance may be lower in a heat pump 
than an air conditioner due to the reversing valve imposing pressure 
drop on the suction line (i.e., heat pumps may have reduced capacity at 
a similar power input). Compressor performance may also be lower in a 
heat pump than an air conditioner due to circuiting not being fully 
optimized for cooling operation (i.e., heat pumps may have reduced 
capacity with a higher power input in this case). Additionally, a heat 
pump is more likely to require a tube and fin condenser coil instead of 
a microchannel heat exchanger, which could increase high-side pressure 
(resulting in a capacity reduction at increased power input) or 
increase condenser fan power. DOE then calculated IVEC values based on 
these adjusted correlations for ACUHPs at each efficiency level, and 
the Department found no significant difference in IVEC between ACUACs 
and ACUHPs with the same supplemental heating type at each efficiency 
level using its performance correlations, in contrast to the decrement 
used when analyzing IEER efficiency levels for the January 2016 Direct 
Final Rule.
    DOE understands the lack of decrement found in IVEC between ACUACs 
and ACUHPs to be for two reasons: (1) the design differences in ACUHPs 
that reduce IEER affect vapor compression system performance, and IVEC 
weights this performance less than IEER for several reasons (e.g., 
because IVEC also includes economizer-only cooling operation, higher 
external static pressure requirements, and crankcase heater energy 
consumption; and (2) the reduction in vapor compression system 
performance for an ACUHP mentioned previously is counterbalanced by an 
increase in IVEC due to the metric including fewer hours of off-mode 
operation (i.e., crankcase heater energy consumption) for ACUHPs than 
are included in IVEC for ACUACs.\31\ Further discussion of DOE's 
analysis of ACUHP IVEC decrements is included in chapter 5 of the 
direct final rule TSD.
---------------------------------------------------------------------------

    \31\ The IVEC metric includes all annual crankcase heater 
operation, which includes ventilation mode and unoccupied no-load 
hours for ACUACs and ACUHPs. For ACUACs, the IVEC metric also 
includes crankcase heater operation during the heating season, 
because ACUAC compressors do not provide mechanical heating, whereas 
ACUHP compressors do provide mechanical heating. Specifically, for 
ACUACs, IVEC includes 4,202 hours of crankcase heater operation 
during ventilation mode, unoccupied no-load hours, and heating 
season hours. For ACUHPs, IVEC includes 338 hours of crankcase 
heater operation during ventilation mode and unoccupied no-load 
hours.
---------------------------------------------------------------------------

    Given the finding of no IVEC decrement between ACUACs and ACUHPs of 
the same supplementary heating type, for all efficiency levels except 
for the levels recommended in the ACUAC/HP Working Group ECS Term Sheet 
(discussed later in this sub-section), DOE did not analyze lower IVEC 
efficiency levels for ACUHPs as compared to ACUACs. Because the 
standard levels recommended in the ACUAC/HP Working Group ECS Term 
Sheet combine ACUHPs into equipment classes that depend only on cooling 
capacity, regardless of supplemental heating type, DOE analyzed ACUHPs 
without separate classes for different

[[Page 44079]]

supplementary heating types at all efficiency levels. Therefore, for 
all efficiency levels (including the baseline) except for the levels 
recommended in the ACUAC/HP Working Group ECS Term Sheet (discussed 
later in this sub-section), the IVEC efficiency levels for ACUHPs are 
the same as the efficiency levels for ACUACs with all other types of 
heating.
    Despite the finding of no IVEC decrement for ACUHPs as compared to 
ACUACs, the ACUAC/HP Working Group ECS Term Sheet includes marginally 
lower recommended standards for ACUHPs than ACUACs with all other types 
of heat. Therefore, at the recommended efficiency level for each ACUHP 
equipment class, DOE analyzed the IVEC value recommended by the ACUAC/
HP Working Group for that class, instead of using the corresponding 
IVEC level for ACUACs with all other types of heating.
    As previously discussed, the additional pressure drop of a furnace 
and indoor fan energy required to overcome that pressure drop results 
in lower IVEC for otherwise identical models with furnaces. This 
pressure drop is the reason that DOE's current standards apply a 
decrement such that ACUHPs with all other types of heating and have 
lower IEER standards than ACUHPs with electric resistance heating or no 
heating. Based on review of models currently on the market and feedback 
from manufacturer interviews, DOE understands that most manufacturers 
offer ACUHPs with and without furnaces (i.e., considered in either the 
``all other types of heating'' class or the ``electric resistance 
heating or no heating'' class), and ACUHP models with furnaces are 
typically otherwise identical to ACUHP models without the furnace. 
Therefore, DOE understands that manufacturers do not design separate 
baseline ACUHP models to precisely meet the IEER standards for both 
``electric resistance heating or no heating'' and ``all other types of 
heating''; rather, they design a single ACUHP model such that it meets 
the applicable standard with or without a furnace present. If the 
presence of a furnace for an ACUHP model impacts the IEER rating for a 
model by an amount that differs from the decrement present in the IEER 
standards, using a single ACUHP design to meet both standards 
inherently means that one model will have an IEER value above the 
applicable standard, but DOE understands that manufacturers do not 
undertake the product development effort to design separate slightly 
less efficient ACUHP models to take advantage of this small IEER gap. 
Based on feedback from manufacturer interviews, DOE expects this to 
continue in the future, even in the context of more-stringent 
standards.
    Therefore, considering ACUHP equipment classes including models of 
all supplementary heating types (which is the equipment class structure 
recommended in the ACUAC/HP Working Group ECS Term Sheet), DOE assumed 
that manufacturers would design ACUHPs to meet the applicable IVEC 
efficiency level with a furnace present; by removing the furnace, the 
otherwise identical ACUHP models with electric resistance or no heating 
would naturally achieve a higher IVEC. Therefore, in the analyses 
following the engineering analysis, DOE assumed that all ACUHP IVEC 
efficiency levels would be met by ACUHPs with furnaces, and that ACUHPs 
without furnaces (but otherwise identical to the models with furnaces) 
would have higher IVEC values. Therefore, to determine the IVEC values 
achieved by ACUHPs without furnaces, DOE added the previously discussed 
furnace decrements to the ACUHP efficiency levels (which nominally 
apply to all ACUHPs regardless of supplementary heating type). As a 
result, DOE concluded that combining ACUHP equipment classes for all 
types of heating into single equipment classes for each capacity range 
would generally result in the same market dynamics and energy savings 
as having ACUHP equipment classes separated by supplementary heating 
type (i.e., with the IVEC standard levels for ACUHPs with electric 
resistance or no heating being higher than the IVEC standard levels for 
ACUHPs with all other types of heating, with the difference being equal 
to the previously discussed furnace IVEC decrements). In other words, 
when comparing IVEC efficiency levels between ACUACs and ACUHPs, DOE's 
analysis for this direct final rule considers the ACUHP levels to be 
comparable to the levels for ACUACs with all other types of heating 
(because the ACUHP levels would need to be met by ACUHP models with 
furnaces), rather than the ACUHP levels being comparable to the levels 
for ACUACs with electric resistance or no heating.
b. IVHE
    The ACUAC/HP Working Group also recommended the current heating 
performance energy efficiency descriptor, COP, be replaced with the 
newly-developed IVHE metric. With this change in heating efficiency 
metric, DOE must ensure that a new IVHE-based standard would not result 
in backsliding of energy efficiency levels when compared to the current 
COP standards. (42 U.S.C 6313(a)(6)(B)(iii)(I)) To this end, DOE first 
established a baseline at the current energy conservation standard in 
terms of COP for each of the ACUHP equipment classes, and then 
translated the COP baseline for each class to an IVHE baseline. As 
discussed previously, DOE used the current COP energy conservations 
standards as the COP baseline for all ACUHP equipment classes.
    During the 2023 ECS Negotiations and in confidential interviews 
conducted with manufacturers, two industry members in the ACUAC/HP 
Working Group provided a DOE contractor with simulated COP and IVHE 
values. DOE used this data set, as well as DOE's own test data, to 
determine an IVHE baseline for each ACUHP equipment class. 
Specifically, DOE identified an IVHE baseline representative of models 
with simulated COP at or near the current applicable COP standard level 
for each ACUHP equipment class.
    Although, as mentioned, two industry members in the ACUAC/HP 
Working Group provided DOE contractors with simulated COP and IVHE 
values, this dataset was significantly smaller than the previously 
discussed IVEC dataset. Therefore, DOE has concluded that it lacks 
sufficient IVHE data to identify IVHE efficiency levels more stringent 
than the levels recommended in the ACUAC/HP Working Group ECS Term 
Sheet. In particular, many ACUHP models currently on the market with 
multiple stages of mechanical cooling offer only one stage of 
mechanical heating. DOE recognizes that the IVHE metric (which includes 
part-load operation) will incentivize development of multiple stages of 
mechanical heating in ACUHPs. However, at this time, there are limited 
IVHE data available for ACUHP models with multiple stages of mechanical 
heating; therefore, it is unclear which IVHE levels above the 
recommended IVHE levels are attainable across the range of capacities. 
Consequently, for all efficiency levels above the recommended 
efficiency levels, DOE assigned the recommended IVHE levels--i.e., for 
all IVEC levels above the recommended IVEC levels for ACUHPs, DOE did 
not analyze an increase in IVHE levels above the recommended IVHE 
levels.
    For efficiency levels between the IVHE baseline and the recommended 
IVHE levels, DOE used its own test data and confidential data provided 
by certain industry members to identify incremental IVHE levels 
corresponding to the incremental IVEC levels.
    Commercial buildings where ACUHPs are currently installed tend to 
be

[[Page 44080]]

dominated by cooling hours as compared to heating hours (e.g., there 
are 4,220 hours with a cooling demand in the IVEC metric and only 1,745 
hours with a heating demand in the IVHE metric). Further, as discussed, 
at this time, there are limited IVHE data available to quantify IVHE 
improvements from design options that impact only heating efficiency. 
Therefore, the evaluation of amended energy conservation standards for 
ACUHPs is focused on the analysis of higher cooling efficiency. While 
many design options employed to achieve higher cooling efficiency 
levels could inherently result in higher heating efficiency, DOE did 
not analyze design options that improve only heating efficiency.
    DOE considered the efficiency levels in terms of IVHE presented in 
Table IV.7 for this direct final rule.
[GRAPHIC] [TIFF OMITTED] TR20MY24.086

3. Energy Modeling
    As done for the January 2016 Direct Final Rule (see 81 FR 2420, 
2458-2459 (Jan. 15, 2016)), DOE developed component wattage profiles 
and performance correlations for each efficiency level in this 
rulemaking (discussed further in section IV.E of this document). This 
served two purposes. First, and as discussed in section IV.E of this 
document, these component wattage profiles and performance correlations 
developed for this direct final rule were used in the energy use 
analysis, along with hourly building cooling loads and generalized 
building samples, to estimate the energy savings associated with each 
efficiency level. Second, as discussed in section IV.C.2.a of this 
document, the developed performance correlations, along with industry 
data, were used to develop IVEC values that translated the IEER 
efficiency levels to the IVEC metric.
    As previously mentioned in section IV.C.1.b of this document, many 
of the efficiency levels analyzed for the January 2016 Direct Final 
Rule were still appropriate to consider for this rulemaking. For this 
rulemaking, DOE repurposed component wattage profiles and performance 
correlations from the January 2016 Direct Final Rule analysis for some 
of those efficiency levels also included in the January 2016 Direct 
Final Rule. Some IEER efficiency levels for this direct final rule have 
an IEER value that is close to but not exactly the same as an IEER 
efficiency level analyzed in the January 2016 Direct Final Rule. In 
those cases, DOE adjusted the calculations used to develop the 
component wattage profiles and performance correlations for that 
efficiency level from the January 2016 Direct Final Rule analysis so 
that the resulting IEER would match the IEER value of the new target 
IEER efficiency level.
    For new efficiency levels added in the analysis for this direct 
final rule that are not close to an IEER efficiency level from the 
January 2016 Direct Final Rule, DOE selected currently-available models 
with rated IEER close to the IEER efficiency level to use as the basis 
for new component wattage profiles and performance correlations. DOE 
used publicly-available product literature for the selected models to 
collect relevant compressor, evaporator fan, condenser fan, and 
capacity data. This information was used to create component wattage 
profiles and performance correlations as a function of temperature for 
the new efficiency levels.
    These component wattage profiles and performance correlations were 
then used to calculate an IVEC value for each efficiency level. As 
discussed in section IV.C.2.a of this document, the IVEC values 
resulting from these component wattage profiles and performance 
correlations were used to develop the incremental IVEC efficiency 
levels corresponding to each incremental IEER efficiency level. More 
details regarding the methodology for creating the component wattage 
profiles and performance correlations for each efficiency level and 
equipment class are presented in chapter 5 of the direct final rule 
TSD.
    DOE did not conduct similar energy modeling for ACUHP 
representative units since ACUHP shipments represent a very small 
portion of industry shipments compared to ACUACs shipments (10 percent 
versus 90 percent). Further, as discussed, in section IV.C.2.a of this 
document, DOE found no IVEC decrement between ACUACs and ACUHPs of the 
same supplementary heating type, and, therefore, DOE did not analyze 
lower IVEC efficiency levels for ACUHPs as compared to ACUACs for all 
efficiency levels, except for the levels recommended in the ACUAC/HP 
Working Group ECS Term Sheet. In addition, because ACUHPs represent a 
small portion of shipments, DOE noted, based on equipment teardowns and 
an extensive review of equipment literature, that manufacturers 
generally use the same basic design/platform for equivalent ACUAC and 
ACUHP models. DOE also considered the same design changes for the ACUHP 
equipment classes that were considered for the ACUAC equipment classes 
within a given capacity range. For these reasons, DOE focused energy 
modeling on ACUAC equipment. Although not considered in the LCC and PBP 
analyses, DOE did analyze ACUHP equipment in the NIA. From this 
analysis, DOE believes the energy modeling conducted for ACUAC 
equipment provides a good estimate of ACUHP cooling performance and 
provides the necessary information to estimate the magnitude of the 
national energy savings from increases in ACUHP equipment efficiency.

[[Page 44081]]

4. Impact of Low-GWP Refrigerants
    On October 24, 2023, EPA published in the Federal Register 
regulations to restrict the use of HFC refrigerants in specific sectors 
or subsectors (``October 2023 EPA Final Rule''). 88 FR 73098. This 
includes establishing a GWP limit of 700 for refrigerants used in light 
commercial air conditioning and heat pump systems (which includes 
ACUACs and ACUHPs) installed January 1, 2025 or later. Id. at 88 FR 
73206, 73208. On December 26, 2023, EPA published an interim final rule 
and request for comment in the Federal Register amending a provision of 
the October 2023 EPA Final Rule allowing one additional year, until 
January 1, 2026, for the installation of new residential and light 
commercial air conditioning and heat pump systems using components 
manufactured or imported prior to January 1, 2025. 88 FR 88825. ACUACs 
and ACUHPs available on the market today use R-410A, which has a GWP 
that exceeds this 700 GWP limit. This will require manufacturers to 
shift away from the use of R-410A to low-GWP refrigerants.
    In response to the May 2020 ECS RFI, multiple stakeholders 
commented regarding the transition to low-GWP refrigerants and their 
impacts on ACUACs and ACUHPs, which was well before EPA took final 
regulatory action.
    On this topic, the CA IOUs recommended that DOE work closely with 
the California Air Resources Board, ASHRAE Standing Standard Project 
Committee 15--Safety Standard for Refrigeration Systems, and AHRI's 
Low-GWP Alternative Refrigeration Evaluation Program to ensure that 
equipment meeting low-GWP requirements can meet any new efficiency 
standard. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 5)
    NEEA recommended that DOE consider the impact of alternate 
refrigerants on ACUAC efficiency, including the technical feasibility 
and economic implications of meeting new and amended standard levels 
with alternate refrigerants. (NEEA, EERE-2019-BT-STD-0042-0024 at p. 9)
    AHRI stated that changes to the engineering analysis would be 
needed if conducting an analysis at present due to the transition to 
alternative refrigerants. AHRI stated that the combined costs to add 
sensors, controls, and other components for new refrigerants, including 
the cost of these refrigerants, will increase the overall cost of the 
subject equipment by 10-15 percent over minimum designs of 2018. (AHRI, 
EERE-2019-BT-STD-0042-0014 at p. 7)
    Trane stated that systems that use A2L refrigerants will need more 
controls and sensors for safety reasons, which it predicted will impact 
the adoption of the new technologies negatively. (Trane, EERE-2019-BT-
STD-0042-0016 at pp. 4-5) Trane also recommended that DOE consider in 
its analysis the effect of new low-GWP refrigerants on cost, design, 
and size of units. (Trane, EERE-2019-BT-STD-0042-0016 at p. 7) AHRI, 
Carrier, and Trane also collectively mentioned the Federal authority to 
regulate refrigerants and the timing of adoption of State building and 
safety codes to support mildly flammable (A2L) refrigerants. (AHRI, 
EERE-2019-BT-STD-0042-0014 at p. 5; Carrier, EERE-2019-BT-STD-0042-0013 
at p. 7; Trane, EERE-2019-BT-STD-0042-0016 at p. 4)
    In the May 2022 TP/ECS RFI, DOE requested data on the impact of 
low-GWP refrigerants as replacements for R-410A on: (1) the cooling and 
heating capacities and compressor power of ACUACs and ACUHPs at various 
temperature conditions, including, but not limited to, the temperatures 
currently included in the IEER metric; and (2) the size and design of 
heat exchangers and compressors used in ACUACs and ACUHPs. 87 FR 31743, 
31753 (May 25, 2022). DOE also sought feedback and any additional data 
on the cost of implementing low-GWP refrigerants in ACUACs and ACUHPs 
beyond the comments received in response to the May 2020 ECS RFI. Id.
    In response to DOE's request for data on the impact of low-GWP 
refrigerants on capacities, compressor power, and design of heat 
exchangers and compressors in the May 2022 TP/ECS RFI, Carrier stated 
that replacement refrigerants require optimization and compressor 
displacement changes which could also impact performance results, if 
not properly compensated for. Carrier provided data for a pure cycle 
analysis where equal compressor isentropic efficiency, heat exchanger 
efficiency, and system operating conditions were assumed. The analysis 
presented by Carrier indicates that new low-GWP refrigerant 
alternatives R-32 and R-454B do not result in a significant impact on 
measured EER, IEER, and COP at 47 [deg]F and 17 [deg]F. (Carrier, EERE-
2022-BT-STD-0015-0010 Attachment 1 at p. 17) Carrier further commented 
that the required displacement changes with the alternative 
refrigerants it analyzed, so compressor optimization is required. 
Carrier also stated the mass flow rates changed with the alternative 
refrigerants it analyzed, so coil redesign may be required. (Id.)
    Lennox stated that implementing low-GWP refrigerants will require 
extensive product redesign from both a performance and safety standard 
perspective for ACUACs and ACUHPs. (Lennox, EERE-2022-BT-STD-0015-0009 
at pp. 5-6)
    With respect to the cost of implementing low-GWP refrigerants in 
ACUACs and ACUHPs, AHRI stated that refrigerant charge generally 
increases with increasing efficiency. AHRI added that transporting 
factory-charged systems with A2L refrigerants would be more expensive 
than shipping existing systems charged with non-flammable refrigerants. 
AHRI further commented that the Department of Transportation has not 
approved special permits allowing systems with larger charge amounts to 
ship in the same manner as those containing non-flammable refrigerants. 
AHRI indicated that without special permits, the expectation is that 
systems over the charge size threshold of 12 kilograms would need to be 
shipped as HAZMAT, which would be more costly. (AHRI, EERE-2022-BT-STD-
0015-0008 at p. 6)
    Carrier stated that the likely replacement for R-410A will be A2L 
refrigerants with low-flame spread per ASHRAE Standard 34, 
``Designation and Safety Classification of Refrigerants.'' (Carrier, 
EERE-2022-BT-STD-0015-0010 Attachment 1 at p. 17) Carrier further 
stated that per UL 60335-2-40 4th edition, ``Household and Similar 
Electrical Appliances--Safety--Part 2-40: Particular Requirements for 
Electrical Heat Pumps, Air-Conditioners, and Dehumidifiers,'' and 
ASHRAE 15-2022, ``Safety Standard for Refrigeration Systems,'' 
additional changes would be required for A2L mitigation, including 
addition of a refrigerant sensor, additional labeling, testing, and 
certification. (Id.) Carrier commented that it is currently conducting 
design work and system optimization for the anticipated 2025 
implementation date, but that it has not determined final details on 
cost impacts. (Id.) Carrier also stated that there is variability in 
refrigerant prices due to supply chain issues and it anticipates that 
the start of the American Innovation and Manufacturing (``AIM'') Act 
regulations would increase those prices. (Id.)
    NEEA recommended that the analysis consider the effects on 
efficiency of the likely and approved refrigerant options for ACUACs 
available domestically and internationally. NEEA specifically 
recommended that DOE address the technical feasibility and economic 
implications of meeting amended standard levels with equipment that

[[Page 44082]]

uses different refrigerants, similar to the analysis DOE conducted for 
the 2016 beverage vending machine energy conservation standards 
rulemaking (81 FR 1028 (Jan. 8, 2016)). (NEEA, EERE-2022-BT-STD-0015-
0013 at p. 8)
    More generally in response to the May 2022 TP/ECS RFI, NYSERDA 
recommended that in evaluating amended energy conservation standards, 
DOE should be mindful of the transition to low-GWP refrigerants that 
will be more common, even if not required, by 2029. (NYSERDA, EERE-
2022-BT-STD-0015-0007 at p. 3)
    In response, DOE notes that these comments were received prior to 
the 2023 ECS Negotiations, and in particular, comments received in 
response to the May 2020 ECS RFI were received three years prior to the 
2023 ECS Negotiations. Therefore, manufacturers' understanding of the 
impacts of low-GWP refrigerants may have changed since the time of the 
drafting of some of the comments received. DOE conducted multiple 
rounds of manufacturer interviews to support the analyses for this 
direct final rule. In the first round of manufacturer interviews, DOE 
sought feedback on its engineering analysis, and the Department 
particularly sought input on the potential impacts of low-GWP 
refrigerants. DOE understands that manufacturers are currently still in 
the process of developing models that use low-GWP refrigerants and 
consequently there are currently no market efficiency data available 
for models using low-GWP refrigerants. However, based on feedback 
received to this point during the course of the rulemaking (including 
manufacturer interviews and Carrier's comment providing preliminary 
testing data), DOE has concluded that implementation of low-GWP 
refrigerants such as R-32 and R-454B is unlikely to result in a 
significant impact on measured efficiency of ACUACs and ACUHPs. 
Therefore, DOE conducted its engineering analysis for this direct final 
rule using efficiency data for models currently on the market that use 
R-410A.
    With respect to suggestions that DOE consider the impact of cost of 
equipment using A2L refrigerants, DOE acknowledges that design changes 
to implement A2L refrigerants could impact the cost of equipment and 
that models using A2L refrigerants may require additional controls or 
sensors to detect leaks and additional labeling. However, DOE's 
research and feedback from manufacturer interviews suggests that based 
on information available at this time, these cost differences are not 
likely to have a significant impact on the marginal cost to improve 
efficiency (i.e., the costs to implement these changes will likely be 
similar at each efficiency level). DOE concludes that the switch to A2L 
refrigerants will not make a significant difference to the incremental 
costs of higher efficiency levels as compared to R-410A. Similarly, to 
the extent that shipping costs may increase in some cases for equipment 
shipped with A2L refrigerants, DOE does not expect these shipping costs 
are likely to have a significant impact on the marginal costs to 
consumers. Therefore, DOE conducted its cost analysis, including 
shipping costs, considering models currently on the market that use R-
410A.
5. Cost Analysis
a. MPC Estimates
    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 
equipment, and the availability and timeliness of purchasing the 
equipment on the market. The cost approaches are summarized as follows:
     Physical teardowns: Under this approach, DOE physically 
dismantles commercially-available equipment, component-by-component, to 
develop a detailed bill of materials for the equipment.
     Catalog teardowns: In lieu of physically deconstructing 
equipment, 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 equipment.
     Price surveys: If neither a physical nor catalog teardown 
is feasible (e.g., for tightly integrated products such as fluorescent 
lamps, which are infeasible to disassemble and for which parts diagrams 
are unavailable), cost-prohibitive, or 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 May 2020 ECS RFI, DOE sought input on the increase in 
manufacturer production cost (``MPC'') associated with incorporating 
particular design options and/or with reaching efficiency levels above 
the baseline. 85 FR 27941, 27949 (May 12. 2020). Specifically, DOE was 
interested in whether and how the costs estimated in the January 2016 
Direct Final Rule have changed since the time of that analysis. Id. DOE 
also requested information on the investments necessary to incorporate 
specific design options, including, but not limited to, costs related 
to new or modified tooling (if any), materials, engineering and 
development efforts to implement each design option, and manufacturing/
production impacts. Id.
    Regarding feedback on MPC associated with each design option and 
how costs estimated in the January 2016 Direct Final Rule have changed, 
AHRI commented that the work done to quantify MPCs was generally 
accurate at the time of the analysis. Regarding the list of design 
options to improve efficiency, AHRI asserted that ACUAC progression to 
larger heat exchangers was not properly characterized in the January 
2016 Direct Final Rule and that increases to outdoor and indoor fan 
efficiency were missing. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 7)
    DOE notes that AHRI's comment was received three years ago and 
prior to the 2023 ECS Negotiations. As discussed, as part of the 
analyses supporting the 2023 ECS Negotiations, DOE contractors 
conducted engineering interviews with manufacturers (all of which are 
AHRI members) and analyzed the market after the January 1, 2023 
compliance date. During these discussions, DOE contractors received 
feedback on design options used in higher efficiency equipment 
(including heat exchangers, indoor fans, and outdoor fans), and the 
MPCs developed for this direct final rule analysis reflect the feedback 
received in those confidential interviews. Additionally, the cost-
efficiency curves were developed based on ACUAC and ACUHP models 
available on the market at the time of the 2023 ECS Negotiations. To 
the extent that available models included larger heat exchangers and 
increases to outdoor and indoor fan efficiency, the improvement in 
efficiency and corresponding cost for these design options are 
reflected in the cost-efficiency curves presented in this direct final 
rule. Further, the cost-efficiency curves were presented during 
multiple meetings during the 2023 ECS Negotiations \32\ and ACUAC/HP 
Working Group members had ample opportunity to provide feedback.
---------------------------------------------------------------------------

    \32\ See www.regulations.gov/document/EERE-2022-BT-STD-0015-0077 
and www.regulations.gov/document/EERE-2022-BT-STD-0015-0080 for 
presentations during the 2023 ECS Negotiations with cost efficiency 
curves.
---------------------------------------------------------------------------

    In the present case, DOE conducted the cost analysis using a 
combination of physical teardowns and catalog

[[Page 44083]]

teardowns of models to assess how manufacturing costs change with 
increased equipment efficiency. The resulting bill of materials 
(``BOM'') provides the basis for the MPC estimates. For each equipment 
class, DOE initially estimated the MPCs for models using physical and 
catalog teardowns for each manufacturer that included sufficient 
information in their equipment literature to conduct the cost 
estimation analysis. As discussed in section IV.C.1 of this document, 
DOE specifically focused its analysis on 7.5-ton, 15-ton, and 30-ton 
ACUAC models with electric resistance heating or no heating.
    To collect additional information regarding design options and 
costs associated with equipment at different efficiency levels, DOE 
provided design details and cost estimates, broken out by production 
factors (materials, labor, depreciation, and overhead) and also by 
major subassemblies (e.g., indoor/outdoor heat exchangers and fan 
assemblies, controls, sealed system) and components (e.g., compressors, 
fan motors), for each model analyzed in its physical and catalog 
teardowns to the manufacturers of the models. DOE refined its analysis 
based on all data and feedback provided by manufacturers in 
confidential manufacturer interviews.
    As previously discussed, DOE did not consider any design changes 
specific to improving heating efficiency, and the cost-efficiency 
analysis was focused on cooling mode operation. Further, as discussed, 
because market efficiency data in terms of the new IVEC metric are not 
available beyond the limited dataset provided to DOE contractors during 
the Negotiations, the cost-efficiency analysis was conducted based on 
IEER, and then IVEC values were developed to translate the IEER 
efficiency levels to IVEC.
    DOE analyzed costs (using physical teardowns and catalog teardowns) 
across the full range of manufacturers and equipment offerings for 
which DOE identified sufficient data to conduct the manufacturing cost 
estimation analysis. Therefore, DOE's cost estimates reflect the 
various design pathways that each manufacturer uses to increase 
efficiency in their current model offerings. The following paragraphs 
provide additional detail on DOE's methodology for developing MPC 
estimates, and further detail is included in chapter 5 of the direct 
final rule TSD. Generally, the methodology used for this direct final 
rule is consistent with the methodology used in the January 2016 Direct 
Final Rule analysis. 81 FR 2420, 2464 (Jan. 15, 2016).
    For small and large equipment classes (represented by 7.5-ton and 
15-ton capacities, respectively), DOE developed cost-efficiency curves 
(i.e., relationship between rated IEER and MPC estimate) for each 
manufacturer individually, and then aggregated the manufacturer-
specific cost curves into an industry-average cost-efficiency curve. 
For efficiency levels for which there were no analyzed models from a 
given manufacturer with rated IEER values that exactly match the 
efficiency level, DOE's primary method to determine the MPCs for those 
efficiency levels for that manufacturer was to interpolate or 
extrapolate results. For example, to determine the MPC at 7.5-ton 
Efficiency Level 1 (15.4 IEER) for one manufacturer, DOE interpolated 
between the results for models rated at 14.8 IEER and 15.6 IEER. For 
cases in which a manufacturer does not offer a model near a given 
efficiency level at the representative capacity but offers models at 
that efficiency level at a similar capacity, DOE estimated the costs of 
similar capacity models at the target efficiency level and then scaled 
those costs up or down to reflect the capacity difference and estimate 
what the cost would be for that model to achieve that efficiency level 
at the representative capacity. For example, to determine the MPC at 
7.5-ton Efficiency Level 5 (19.9 IEER) for one manufacturer, DOE scaled 
down the cost of an 8.5-ton model with a rated IEER of 19.9 to reflect 
DOE's estimate of the cost of a 7.5-ton model with comparable 
efficiency, by developing a cost per efficiency times capacity 
relationship for that specific model line. There were certain 
efficiency levels for which some manufacturers did not offer models at 
or near the target efficiency level, even including capacities slightly 
different than the representative capacity. For these levels (for 
example, the 15-ton Efficiency Level 4 (20.1 IEER)), DOE calculated the 
relative percentage increase in cost relative to baseline for a 
manufacturer with a commercially-available model at that level, and 
then applied that percentage increase to the baseline cost for the 
other manufacturers to estimate MPCs at that level for each 
manufacturer.
    For the very large equipment class represented by 30-ton 
representative units, DOE identified fewer manufacturers offering 
equipment in this capacity range. After collecting information for all 
models with sufficient data available to develop cost estimates, DOE 
concluded that there are insufficient models available to develop 
separate cost curves for each manufacturer and then combine into an 
industry-average cost-efficiency curve as was done for the small and 
large equipment classes. Therefore, DOE developed a single industry-
wide cost curve for very large equipment including models from all 
identified manufacturers. Additionally, DOE's review of equipment 
available on the market showed that there are two platform types of 
equipment for 30-ton models (and the very large equipment class more 
broadly): (1) models with smaller cabinets for light commercial 
applications, and (2) models with larger cabinets for industrial-type 
applications. DOE concluded that there are insufficient models with the 
larger cabinet size spanning the range of efficiency levels being 
considered (both at the low and high ends of the efficiency range) to 
develop cost estimates based on the larger cabinet size. Therefore, DOE 
developed incremental MPCs based on the smaller cabinet platform.
    As discussed, DOE's cost analysis focused on ACUAC models with 
electric resistance heating or no heating. In the economic analyses for 
this rulemaking, the MPCs developed for ACUACs with electric resistance 
heating or no heating were applied for all ACUACs, including ACUACs 
with all other types of heating. As previously discussed, DOE has found 
that ACUACs with electric resistance heating or no heating model lines 
and ACUACs with all other types of heating model lines generally differ 
only in the type of supplemental heating and are otherwise identical; 
therefore, the incremental MPCs for ACUACs with electric resistance 
heating or no heating and ACUACs with all other types of heating would 
be the same. In other words, the cost to achieve higher efficiencies 
would not be impacted by the presence of a furnace. DOE also developed 
a baseline cost differential between a baseline ACUAC model with 
electric resistance heating or no heating as compared to a baseline 
ACUHP model, reflecting the cost differentials of heat pump technology. 
Consistent with the analysis from the January 2016 Direct Final Rule 
and feedback received during manufacturer interviews, DOE applied the 
incremental MPC adders determined for ACUACs with electric resistance 
or no heating to develop cost curves for ACUHPs. In other words, while 
there is an absolute cost differential associated with heat pump 
technology, DOE assumed that this cost differential remained constant 
across all efficiency levels (e.g., the cost to achieve higher 
efficiencies would not be impacted by the presence of a reversing

[[Page 44084]]

valve). The one exception to this approach was developing costs for the 
recommended efficiency levels for ACUHPs, because as discussed in 
section IV.C.2.a of this document, the IVEC values at those efficiency 
levels for ACUHP equipment classes were slightly different than the 
IVECs for the comparable efficiency levels for the ACUACs with all 
other types of heating., For these recommended ACUHP IVEC levels, DOE 
used interpolation to adjust the MPC estimates for the corresponding 
ACUAC levels to reflect the slight difference in IVEC levels between 
ACUACS and ACUHPS. As discussed in section IV.C.2 of this document, DOE 
translated the cost-efficiency relationships based on IEER to IVEC and 
IVHE. Further discussion of DOE's methodology for developing MPC 
estimates is included in chapter 5 of the direct final rule TSD.
b. MSP Estimates, Manufacturer Markup, and Shipping Costs
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a multiplier (the manufacturer markup) to the MPC. 
The resulting manufacturer selling price (``MSP'') is the price at 
which the manufacturer distributes a unit into commerce. DOE developed 
an average manufacturer markup by examining the annual Securities and 
Exchange Commission (``SEC'') 10-K reports \33\ filed by publicly-
traded manufacturers primarily engaged in commercial package air 
conditioning and heating equipment manufacturing and whose combined 
product range includes ACUACs and ACUHPs.
---------------------------------------------------------------------------

    \33\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (available at: www.sec.gov/edgar/searchedgar/companysearch.html) (last accessed Oct. 3, 2023).
---------------------------------------------------------------------------

    In the May 2020 ECS RFI, DOE requested feedback on whether 
manufacturer mark-ups determined in the January 2016 Direct Final Rule 
are still appropriate for ACUACs and ACUHPs. 85 FR 27941, 27950 (May 
12, 2020). In response, AHRI stated that its members found that the 
manufacturer markups from the January 2016 Direct Final Rule are still 
appropriate for ACUACs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 8) AHRI 
stated that manufacturer markups for ACUHPs are up to 10 percent higher 
than those determined in the January 2016 Direct Final Rule. (Id.)
    DOE incorporated AHRI's feedback into its current analysis, 
estimating manufacturer markups of 1.30 for small ACUACs, 1.32 for 
small ACUHPs, 1.34 for large ACUACs, 1.36 for large ACUHPs, 1.41 for 
very large ACUACs, and 1.43 for very large ACUHPs. These markups were 
applied to MPC estimates to develop MSP estimates. See section IV.J.2.d 
of this document and chapter 12 of the direct final rule TSD for 
additional discussion on manufacturer markups.
    Because the design options associated with certain incremental 
efficiency level involved increases in cabinet sizes, DOE also 
estimated the incremental shipping cost at each efficiency level 
separate from the MSP. More specifically, DOE estimated the per-unit 
shipping costs based on the cabinet dimensions at each efficiency 
level, assuming the use of a typical 53-foot flatbed trailer. For 
shipping of HVAC equipment, the size threshold of a trailer is 
typically met before the weight threshold. DOE used the same approach 
used for estimating the cost-efficiency relationship, evaluating 
shipping costs for each manufacturer individually then averaging the 
results for the small and large equipment classes, and (for the reasons 
described for MPC estimates in section IV.C.5.a of this document) a 
single industry-wide shipping cost relationship for the very large 
equipment class including models from all identified manufacturers. 
Further discussion of DOE's methodology for developing shipping cost 
estimates is included in chapter 5 of the direct final rule TSD.
6. Cost-Efficiency Results
    The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of IVEC versus MSP plus 
shipping cost (in dollars), which form the basis for subsequent 
analyses. As previously mentioned, DOE's cost analysis focused on 
ACUACs with electric resistance heating or no heating, which were also 
used to represent the MPCs of ACUACs with all other types of heating. 
The incremental MPC estimates for these classes were applied to ACUHPs. 
The total MPC, shipping cost, and MSP plus shipping cost for each 
efficiency level for the ACUAC equipment classes are listed in Table 
IV.8 through Table IV.10. The total MPC, shipping cost, and MSP plus 
shipping cost for each efficiency level for the ACUHP equipment classes 
(which, as discussed, are based on the same incremental MPC estimates 
as for ACUAC equipment classes) can be found in chapter 5 of the direct 
final rule TSD.
[GRAPHIC] [TIFF OMITTED] TR20MY24.087


[[Page 44085]]


[GRAPHIC] [TIFF OMITTED] TR20MY24.088

[GRAPHIC] [TIFF OMITTED] TR20MY24.089

    See chapter 5 of the direct final rule TSD for additional detail on 
the engineering analysis.

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., 
manufacturer markups, retailer markups, distributor markups, contractor 
markups) in the distribution chain and sales taxes to convert the MPC/
MSP estimates derived in the engineering analysis to consumer prices, 
which are then used in the LCC and PBP analysis. The markups are 
multiplicative factors applied to MPCs and MSPs. At each step in the 
distribution channel, companies mark up the price of the equipment to 
cover business costs and profit margin. Before developing markups, DOE 
defines key market participants and identifies distribution channels.
    In response to the May 2020 ECS RFI, AHRI commented that it is 
researching distribution channels; however, it had no feedback at the 
time the comment was written. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 
8) Carrier commented that it has not observed large shifts in the 
distribution channels, as the industry for the subject equipment 
remains mature in the U.S. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 
12)
    However, AHRI disagreed with DOE's use of incremental markups, 
citing an analysis by Everett Shorey from 2014, and recommended that 
DOE revert to using the baseline markup for both baseline and 
incremental costs. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 8)
    DOE responded thoroughly to the Shorey report in the previous 
direct final rule. See 81 FR 2420, 2468 (Jan. 15, 2016). In summary, 
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, is unlikely to be viable over time in reasonably 
competitive markets. 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 sales prices after an amendment to 
energy conservation standards. However, DOE believes that retail 
pricing is likely to adjust over time as those actors are forces to 
readjust their markups to reach a medium-term equilibrium in which per-
unit profit is relatively unchanged before and after standards are 
implemented.
    DOE acknowledges that markup practices in response to amended 
standards are complex and vary across business conditions. However, 
DOE's analysis necessarily only considers changes in appliance 
offerings that occur in response to amended standards. DOE continues to 
maintain that its assumption that standards do not facilitate a 
sustainable increase in profitability is reasonable.
    PGE commented that ACUACs are purchased in larger volume by 
distributors, with larger discounts from manufacturers, and thereby 
resulting in lower prices to contractors. PGE stated that raising the 
minimum efficiency ratings for ACUACs will have a lesser negative 
wholesale pricing impact due to this volume. (PGE, EERE-2019-BT-STD-
0042-0009 at p. 2)
    DOE reviewed the distribution channels and overall markups from the 
January 2016 Direct Final Rule at the February 9, 2023 public meeting 
webinar for this rulemaking (see presentation slides, EERE-2022-BT-STD-
0015-0073 at pp. 20-23), with updated overall markups presented at the 
March 21-22, 2023 ACUAC/HP Working Group meeting (see presentation 
slides, EERE-2022-BT-STD-0015-0080 at pp. 30-33). There was no 
stakeholder discussion regarding the distribution channels or markups 
at these meetings. For this reason, DOE continues to use the 
distribution channels from the January 2016 Direct Final Rule, as well 
as the same overall methodology, but with updated inputs.
1. Distribution Channels
    For ACUACs and ACUHPs, the main parties in the distribution channel 
are: (1) manufacturers; (2) wholesalers; (3) small or large mechanical 
contractors, and (4) consumers. See chapter 6 and appendix 6A of the 
direct final rule TSD for a more detailed discussion about parties in 
the distribution chain.
    For the direct final rule, DOE characterized three distribution

[[Page 44086]]

channels to describe how the ACUAC and ACUHP equipment passes from the 
manufacturer to the commercial consumer. The first of these channels, 
the replacement distribution channel, estimated to represent 66.0 
percent of shipments, was characterized as follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical 
Contractor [rarr] Consumer

    The second channel, the new construction distribution channel, 
estimated to represent 16.5 percent of shipments, was characterized as 
follows:

Manufacturer [rarr] Wholesaler [rarr] Small or Large Mechanical 
Contractor [rarr] General Contractor [rarr] Consumer

    In the third distribution channel, which applies to both the 
replacement and new construction markets, estimated to represent 17.5 
percent of shipments, the manufacturer sells the equipment directly to 
the customer through a national account:

Manufacturer [rarr] Consumer (National Account)
2. Markups and Sales Tax
    DOE developed baseline and incremental markups for each actor in 
the distribution channels. Baseline markups are applied to the price of 
equipment 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.\34\
---------------------------------------------------------------------------

    \34\ Because the projected price of standards-compliant 
equipment is typically higher than the price of baseline equipment, 
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.
---------------------------------------------------------------------------

    Following the same approach applied in the January 2016 Direct 
Final Rule, DOE relied on several sources to estimate average baseline 
and incremental markups, including: (1) the 2017 Annual Wholesale Trade 
Survey for ``Hardware and Plumbing and Heating Equipment and Supplies 
Merchant Wholesaler'' \35\ to develop wholesaler markups, and (2) U.S. 
Census Bureau's 2017 Economic Census data \36\ for the commercial and 
institutional building construction industry to develop mechanical and 
general contractor markups. In addition, DOE used the 2005 Air 
Conditioning Contractors of America's (``ACCA'') financial analysis for 
the heating, ventilation, air conditioning, and refrigeration 
(``HVACR'') contracting industry \37\ to disaggregate the mechanical 
contractor markups into small and large, replacement and new 
construction markets.
---------------------------------------------------------------------------

    \35\ U.S. Census Bureau, 2017 Annual Wholesale Trade Survey 
(available at: www.census.gov/data/tables/2017/econ/awts/annual-reports.html) (last accessed Feb. 7, 2023).
    \36\ U.S. Census Bureau, 2017 Economic Census Data (2017) 
(available at: www.census.gov/econ/) (last accessed Feb. 7, 2023).
    \37\ Air Conditioning Contractors of America (ACCA), Financial 
Analysis for the HVACR Contracting Industry: 2005 (available at: 
www.acca.org/store/) (last accessed Feb. 7, 2023).
---------------------------------------------------------------------------

    In addition to the markups, DOE derived State and local taxes from 
data provided by the Sales Tax Clearinghouse.\38\ These data represent 
weighted-average taxes that include county and city rates. DOE derived 
population-weighted average tax values for each of the regions from the 
Energy Information Administration's 2018 Commercial Building Energy 
Consumption Survey (``CBECS 2018'') \39\ considered in the analysis.
---------------------------------------------------------------------------

    \38\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates, 2023 (available at: 
thestc.com/STrates.stm) (last accessed Sept. 11, 2023).
    \39\ Energy Information Administration (EIA), 2018 Commercial 
Building Energy Consumption Survey (available at: www.eia.gov/consumption/commercial/) (last accessed August 19, 2023).
---------------------------------------------------------------------------

    Chapter 6 of the direct final rule TSD provides details on DOE's 
development of markups for ACUACs and ACUHPs.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of ACUACs at different efficiencies for a 
representative sample of U.S. commercial buildings, and to assess the 
energy savings potential of increased equipment efficiency. DOE did not 
analyze ACUHP energy use because, for the reasons explained in section 
IV.C.3 of this document, the energy modeling in the engineering 
analysis was performed only for ACUAC equipment.
    The energy use analysis estimates the range of energy use of ACUACs 
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.
    Chapter 7 of the direct final rule TSDs provides details on DOE's 
energy use analysis for ACUACs. DOE developed engineering correlation 
data and energy consumption estimates only for the ACUAC equipment 
classes that have electric resistance heating or no heating. For 
equipment classes with all other types of heating, DOE assumed that the 
incremental change in efficiency, and hence, energy savings and energy 
cost savings, would be similar to the values calculated for the 
equipment classes with electric resistance heating or no heating.
1. System-level Calculations
    DOE based the energy use estimates for all equipment classes on 
three sets of input data:
    (1) The engineering analysis provided data that were used to 
calculate the equipment net capacity, compressor, and condenser power 
consumption as a function of outdoor air temperature (``OAT''), the 
indoor fan power as a function of external static pressure (``ESP''), 
and controls power (constant), for each equipment stage at each 
efficiency level. The compressor, condenser, indoor fan, and controls 
are referred to as the ``system components'' in the discussion that 
follows. The ``net capacity'' is defined as the maximum-stage system 
capacity minus the heat generated by the indoor fan. DOE assumed that 
the ESPs appropriate to each equipment class were those agreed upon in 
the ACUAC/HP Working Group TP Term Sheet, plus an increment of 0.1 to 
account for the economizer pressure drop (also included in the ACUAC/HP 
Working Group TP Term Sheet).
    (2) Hourly A/C system data were generated using Energy Plus for 11 
commercial building prototypes, 4 building vintages, and 16 climate 
zones; as each building prototype includes multiple systems serving 
multiple zones, the total number of simulated systems in the 11 
commercial building prototypes is 48. Given 4 vintages and 16 climates, 
this leads to a total of 3,072 individual systems. DOE used TMY3 
weather data as simulation input, with the cities used to represent 
each climate zone the same as those used in the ACUAC/ACUHP Test 
Procedure. The simulation data account for economizer use. The hourly 
data extracted from the simulations for each system included the total 
system load (heat removed from the space), the fan fraction (fraction 
of the hour that the fan is on), and cooling and heating coil rates. 
The coil cooling/heating rates were used only to determine the system 
operating mode.
    (3) Data from the Commercial Building Energy Consumption Survey 
(``CBECS'') 2018 were used to estimate,

[[Page 44087]]

for those buildings using packaged cooling systems, the relative share 
of floor space by Census Division and building type. In the 2015 
analysis, this description of the relevant features of the building 
stock with associated weights was referred to as the Generalized 
Building Sample (``GBS'').
    DOE prepared the engineering data for input to the energy use 
analysis as follows: For each EL and equipment stage, the engineering 
correlations were used to calculate the net capacity and component 
power consumption for a set of integer temperatures spanning the range 
30 [deg]F to 110 [deg]F (which exceeds the maximum temperature in the 
TMY3 data). The capacity and power consumption data were then scaled by 
the system nominal capacity; the power consumption is, therefore, 
defined on a per-unit-of-capacity basis. The system nominal capacity 
was defined as the maximum stage capacity at 95 [deg]F.
    DOE processed the building simulation data for input to the energy 
use calculation as follows: First, the data were scaled to the nominal 
system capacity. For this analysis, consistent with assumption used in 
the development of the ACUAC/ACUHP Test Procedure, DOE assumed that the 
system capacity was equal to 1.15 times the peak hourly load. Next, DOE 
assigned one of four operating modes to each hour: (1) off (zero fan 
energy use); (2) fan only (fan energy >0 and coil rates = 0); (3) 
cooling (cooling coil rate >0), and (4) heating (heating coil rate >0). 
For multizone variable air volume (``VAV'') systems, there were a few 
hours where both cooling and heating rates are positive; as these hours 
were dominated by the cooling load, they were assigned to cooling mode.
    DOE combined the building simulation data with the engineering data 
to determine the energy use in each hour, and summed this energy use 
over all hours to determine the annual summer and winter energy use per 
unit of capacity. The summer season was defined as May through 
September, and the winter season as all other months in the year. In 
each hour, the energy use calculations are adjusted based on the system 
operating mode:
     Fan-only mode: the engineering analysis provided a 
specific value for fan power during fan-only operation; during these 
hours the energy use is equal to the fan power multiplied by the fan 
fraction (to account for the fact that the system may be off during 
part of the hour) plus the controls power.
     Heating mode: as discussed with the ACUAC/HP Working 
Group, DOE assumed that the fan would operate at maximum stage during 
heating hours; during these hours the energy use is equal to the fan 
power multiplied by the fan fraction (to account for the fact that the 
system may be off during part of the hour) plus the controls power at 
maximum stage.
     Cooling mode: all equipment designs include multi-stage 
compressors, so the calculation must first determine which stages are 
operating during the hour. DOE calculated the total heat removed, and 
compared this to the net capacity at each stage; the highest stage that 
is less than the total load is the lower stage, and the next stage up 
is the upper stage. The fraction of load allocated to each stage 
determines the fraction of the hour that the system operates in each 
stage (equations describing these calculations are provided in chapter 
7 of the direct final rule TSD). DOE used the values of component power 
for the OAT in the hour to calculate the energy use for the upper and 
lower stages. The total energy use is equal to the weighted sum of the 
values for the lower and upper stages. If the lower stage was off, DOE 
adjusted for cyclic performance using the degradation coefficient and 
load factor as calculated according to section 6.2, Part-Load Rating, 
of AHRI 340/360-2007, ``2007 Standard for Performance Rating of 
Commercial and Industrial Unitary Air-Conditioning and Heat Pump 
Equipment.''
     Off mode: the energy use is equal to the controls power 
for the fan-only mode.
    DOE converted the system-level energy use data to building-level 
energy use data by averaging the energy use over all systems in a 
building. To calculate this average, DOE weighted each system based on 
the system nominal capacity. DOE also accounted for the possibility 
that installation of new equipment would require a conversion curb. DOE 
estimated that the presence of a conversion curb would add 0.2 to the 
ESP, with a resulting adjustment to fan power and system net capacity. 
DOE calculated the energy use two times for each system--once with no 
assumed conversion curb, and once with the assumed conversion curb. DOE 
then averaged these results to get a single value for each system. The 
percent of installations with and without conversion curbs, for each 
equipment class and efficiency level, was estimated based on data 
collected for the January 2016 Direct Final Rule. These data were 
adjusted to account for the current equipment baseline, and the cross-
walk between IEER and IVEC, as discussed during the 2023 ECS 
Negotiations. DOE converted the per-unit energy use to a value 
appropriate to each representative unit by multiplying the energy use 
by the representative unit capacity.
2. Generalized Building Sample
    The calculations described in the previous section result in summer 
and winter energy use values for each building prototype, vintage, and 
climate. To use these data in the LCC, sample weights must be defined 
that reflect the relative frequency of each of these attributes in the 
building stock. In addition to building prototype, vintage, and 
climate, DOE included Census Division (``CD'') and building type as 
attributes in the building sample. Census Division is included because 
energy prices depend on these regions. Building type is included as 
this is the categorization used in CBECS and in the AEO.
    DOE used CBECS 2018 to determine the total floor space cooled by 
packaged equipment distributed by Census Division and building type as 
encoded by Principal Building Activity (``PBA'') in CBECS. DOE mapped 
the CBECS PBA definitions to the building type definition used in the 
AEO commercial demand module, and the Department used the AEO building 
type definitions as categories in the LCC sample. In general, the 
mapping of building prototype to building type is straightforward (for 
example, office, retail, assembly). For the food sales and educational 
building types, there are two building prototypes (i.e., full-service 
and quick-service, and primary and secondary schools respectively). 
Additional data available in CBECS were used to calculate the 
percentage of building type floor space to allocate to each building 
prototype.
    DOE used four vintage categories: pre-1980, 1980-2003, 2004-2018 
and 2019-2029. DOE used CBECS2018 to apportion floor space by vintage 
and building type for the first three vintage categories. For the 
fourth category, DOE used AEO 2023 commercial floor space projections 
to adjust the floor space to the compliance year 2029. DOE used the AEO 
to estimate, for the period 2019-2029, the floor space added and 
demolished relative to existing floor space in 2018, for each building 
type. DOE used these percentages to calculate the existing floor space 
by vintage and building type in 2029, then converted the absolute 
numbers to percentages.
    DOE combined the climate zones (``CZ'') and Census Divisions into a 
set of 28 distinct sub-regions, using population data to estimate the 
weight for each region. These weights were used to distribute the floor 
space by CD

[[Page 44088]]

into floor space by CD-CZ combined sub-regions.
    DOE used the building simulation data to estimate the total cooling 
capacity per square foot of cooled floor space for each climate zone, 
building type and vintage. DOE used the capacity per square foot 
numbers to convert total cooled floor space to total installed 
capacity. DOE assigned a weight to each combination of attributes in 
the building sample based on the percentage of installed capacity.
    DOE tailored the sample weights for the small, large, and very 
large equipment classes using a filter based on system nominal 
capacity. If the system nominal capacity was less than 0.8 times the 
representative unit capacity, the system was excluded from the sample 
(and from the calculation of building-level energy use).
3. Energy Use Adjustment Factors
    Building simulations reflect idealized conditions and may over-
represent or under-represent heating and cooling loads relative to 
real-world conditions. In the January 2016 Direct Final Rule, DOE's 
analysis relied on building simulation data that had been calibrated to 
CBECS 1995. In the current analysis, DOE's building simulations were 
not calibrated, so DOE accounted for any deviations from real-world 
conditions by calculating energy use adjustment factors.
    DOE calculated these factors as follows:
     DOE used CBECS 2018 estimates of cooling and ventilation 
energy use to estimate the average equipment energy use per square foot 
of cooled floor space as a function of building type.
     DOE used data published with the AEO NEMS model 
(commercial demand module) to estimate the ratio of the stock average 
efficiency of packaged cooling equipment in 2018 to the efficiency of 
the current standard. DOE applied this ratio to convert the CBECS 
stock-average energy use calculation to a value that represents what 
the energy use would be if the equipment efficiencies were all equal to 
the current standard.
     DOE took the calculated energy use per unit of capacity 
for the EL0 engineering data, combined with the capacity per square 
foot estimate from the building simulation data, to calculate the 
equipment energy use per square foot at EL0. As this value varies 
slightly by equipment class, DOE used shipments weight to calculate an 
average across all installed stock.
     DOE compared, for each building type, the CBECS 2018 
estimate of energy use per square foot at the current standard to the 
value calculated for the EL0 engineering data. DOE used the ratio of 
these two values to define an energy use adjustment factor for each 
building type. In most cases, the factor is larger than 1, reflecting 
an under-estimate of energy use by the simulation data. However, for 
education and healthcare buildings, the calculated factor is less than 
1, corresponding to an over-estimate of energy use in the simulated 
data.
     DOE applied the energy use adjustment factors to the 
energy use values input to the LCC.
    DOE considered two other trends that can impact cooling energy use 
by space-conditioning equipment: (1) changes to building shell 
characteristics and internal loads, and (2) increases in cooling-degree 
days (driven by population shifts and estimated weather trends). Both 
these trends are modeled in the AEO commercial demand module. The first 
is captured in the AEO cooling factor, which tends to decrease loads 
over time. The second is captured in AEO estimates of Cooling Degree 
Days (``CDD'') over the projection period. DOE estimated the combined 
impact of the two trends, and calculated that the average impact of the 
combined trends over a 30-year period results in a 2.8-percent increase 
in equipment energy use. DOE decided to not include the impact of these 
trends in the energy use analysis and LCC, as these issues were not 
discussed during the ASRAC negotiations, and so would present a 
deviation from the agreed-upon methodology. As the small increase would 
apply to all ELs, DOE determined that there is no impact to the 
decision criteria.
4. Comments
    In response to the May 2020 ECS RFI, the CA IOUs commented that DOE 
should update the weather data used in the energy use analysis to 
reflect the temperatures recorded in the U.S. in recent years. The CA 
IOUs recommend that DOE consider the methodology used by the California 
Energy Commission to update weather files to analyze the Title 24-2022 
Building Energy Code. (CA IOUs, EERE-2019-BT-STD-0042-0020 at p. 5) 
AHRI and Trane stated that the methodology used in the January 2016 
Direct Final Rule is out of date. (AHRI, EERE-2019-BT-STD-0042-0014 at 
p. 8; Trane, EERE-2019-BT-STD-0042-0016 at p. 9) AHRI and Carrier both 
recommended using the ASHRAE prototype buildings and the ASHRAE 205, 
``Standard Representation of Performance Simulation Data for HVAC&R and 
Other Facility Equipment,'' standardized equipment modeling approach, 
along with the Dodge data base, for weighting factors. AHRI and Carrier 
further suggested that the energy modeling should include real world 
static pressures for well-designed duct work, economizers, fan speed 
control, stages of capacity, energy recovery, supply air reset, and 
static pressure reset. (AHRI, EERE-2019-BT-STD-0042-0014 at pp. 8-9; 
Carrier, EERE-2019-BT-STD-0042-0013 at pp. 13-14) Carrier added that 
both heating and cooling should be modeled, as well as occupied and 
unoccupied operation. (Id.)
    NEEA recommended that DOE account for part-load operation, staged 
systems, and varying percentages of outside air. (NEEA, EERE-2019-BT-
STD-0042-0024 at p. 9)
    In response, DOE reviewed its energy use analysis in light of these 
comments. To evaluate the adequacy of the TMY3 weather data, DOE 
downloaded hourly historical dry-bulb temperature data for the period 
1998-2020, for the sixteen climate locations used in the TP and ECS 
analyses, from the National Renewable Energy Laboratory (``NREL'') 
Physical Solar Model (``PSM'') database, Version 3 (link https://developer.nrel.gov/docs/solar/nsrdb/). DOE constructed histograms of 
the historical data (binned temperature distributions) and compared 
these to distributions created from the TMY3 weather data. As the focus 
of the ACUAC/HP Working Group was on cooling, DOE looked primarily at 
distributions of temperatures greater than or equal to 70 deg F. The 
data did not show any large discrepancies. Both the maximum 
temperatures and the percent of annual hours in the high temperature 
bins were comparable across all sites. DOE also calculated annual 65-
degree based heating and cooling degree days (HDD and CDD) for the two 
datasets; CDD values calculated were 1680 for the TMY3 data and 1672 
for the NREL-PSM data; HDD values calculated were 4635 for the TMY3 
data and 4634 for the NREL-PSM data. DOE determined that the 
distribution of hourly temperatures in the TMY3 data are entirely 
consistent with the actual historical data for the last 20 years. In 
particular, CDD and HDD metrics, which are most highly correlated with 
cooling and heating loads, are almost identical between the two data 
sets. DOE presented these findings to the stakeholders, and did not 
make any adjustments to the energy use analysis on this basis.
    In addition to the review of historical weather data requested by 
the stakeholders, as noted in section IV.E of this document, DOE also 
analyzed the

[[Page 44089]]

projections of CDD trends and commercial sector cooling load trends 
published in AEO 2023. While this review was not requested by 
stakeholders, for completeness DOE evaluated any potential impacts 
these trends might have on energy use over the analysis period. DOE 
found that the combined effect of these two trends would be to increase 
lifetime energy consumption at the baseline by 2.8%; the same increase 
would occur at all higher ELs, hence, the impact on energy savings 
would also be 2.8%. A small increase in energy savings across all ELs 
cannot change the relative cost-effectiveness of the analyzed TSLs; and 
these issues were not actively discussed during the 2023 ECS 
Negotiations. Therefore, DOE decided not to make this adjustment in the 
DFR.
    DOE used four building vintages, including the ASHRAE 90.1-2019 
building prototypes, to account for variability in building stock 
characteristics in the population of buildings using ACUACs/ACUHPs. DOE 
reviewed and discussed methodologies for weighting the building 
simulation data with stakeholders during the 2023 ECS Negotiations (see 
EERE-2022-BT-STD-0015-0055 at pp. 26-30). The sales data (Dodge data) 
presented by stakeholders was from 2006 and may not represent the 
current market. Instead, DOE presented an alternative approach, based 
on 2018 CBECS data, 2019 Census data, and supplementary data from AEO 
2023, which was accepted by stakeholders. More detail on DOE's 
weighting approach is provided in section IV.E.2 of this document.
    During the ACUAC/HP Working Group TP negotiations, static pressures 
were extensively discussed, and stakeholders adopted new test procedure 
values more appropriate to real-world conditions. DOE used these 
values, with a 0.1 increment to account for economizer pressure drop, 
in this ECS analysis. DOE's engineering data and the methods DOE used 
to calculate energy use accounted for occupied and unoccupied hours, 
part-load operation, staged systems, economizer operation, fan speed 
control, and variable rates of outdoor air flow. As previously 
discussed, DOE did not conduct an energy use analysis specific to 
heating.
    Furthermore, DOE reviewed its proposed methodology for the energy 
use analysis in the February 9, 2023 webinar (EERE-2022-BT-STD-0015-
0073 at pp. 18-19), the February 22-23, 2023 meeting (EERE-2022-BT-STD-
0015-0078 at p. 36), and the March 21-22, 2023 meeting (EERE-2022-BT-
STD-0015-0080 at pp. 21-29). In general, this methodology is consistent 
with that used to develop the weights in the IVEC metric as part of the 
test procedure negotiations, with scalars developed to match energy use 
to CBECS 2018. There were no objections to the energy use methodology 
as presented in ACUAC/HP Working Group meetings.
    DOE also reviewed updates to its energy use analysis to account for 
conversion curbs in the April 24, 2023 slide deck (EERE-2022-BT-STD-
0015-0086 at p. 4) and based on discussion regarding installation costs 
related to conversion curbs at the March 22, 2023 meeting (EERE-2022-
BT-STD-0015-0091 at pp. 40-41, 47).
    Chapter 7 of the direct final rule TSD provides further details on 
DOE's energy use analysis for ACUACs and ACUHPs.

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 
ACUACs. 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:
     Life-cycle Cost (``LCC'') is the total consumer expense of 
an appliance or equipment over the life of that equipment, 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 equipment.
     Payback Period (``PBP'') is the estimated amount of time 
(in years) it takes consumers to recover the increased purchase cost 
(including installation) of more-efficient equipment through lower 
operating costs. DOE calculates the PBP by dividing the change in 
purchase cost 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 ACUACs 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 equipment.
    For each considered efficiency level in each equipment class, DOE 
calculated the LCC and PBP for a nationally representative set of 
commercial buildings. As stated previously, DOE developed building 
samples from the 2018 CBECS. For each sample building, DOE determined 
the energy consumption for the ACUACs and the appropriate energy price. 
By developing a representative sample of buildings, the analysis 
captured the variability in energy consumption and energy prices 
associated with the use of ACUACs.
    Inputs to the LCC calculation include the installed cost to the 
commercial consumer, operating expenses, the lifetime of the equipment, 
and a discount rate. Inputs to the calculation of total installed cost 
include the cost of the equipment--which includes MPCs, manufacturer 
markups, retailer and distributor markups, and sales taxes (where 
appropriate)--and installation costs. Inputs to the calculation of 
operating expenses include annual energy consumption, energy prices and 
price projections, repair and maintenance costs, equipment lifetimes, 
and discount rates. Inputs to the payback period calculation include 
the installed cost to the consumer and first year operating expenses. 
DOE created distributions of values for equipment lifetime, and 
discount rates, with probabilities attached to each value, to account 
for their uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP relies on 
a Monte Carlo simulation to incorporate uncertainty and variability 
into the analysis. The Monte Carlo simulations randomly sample input 
values from the probability distributions and ACUAC user samples. For 
this rulemaking, the Monte Carlo approach is implemented in the Python 
programming language. The model calculated the LCC for equipment at 
each efficiency level for 10,000 buildings per simulation run. The 
analytical results include a distribution of 10,000 data points showing 
the range of LCC savings for a given efficiency level relative to the 
no-new-standards case efficiency distribution. In performing an 
iteration of the Monte Carlo simulation for a given commercial 
consumer, equipment efficiency is chosen based on its probability. If 
the chosen equipment efficiency is greater than or equal to the 
efficiency of the standard level under consideration, the LCC 
calculation reveals that a consumer is not impacted by the standard 
level. By accounting for consumers who already purchase more-efficient 
equipment, DOE avoids

[[Page 44090]]

overstating the potential benefits from increasing equipment 
efficiency. DOE calculated the LCC for consumers of ACUACs as if each 
were to purchase new equipment in the first year of required compliance 
with new or amended standards. Amended standards apply to ACUACs 
manufactured after a date that is the later of the date that is three 
years after publication of any final rule establishing an amended 
standard or the date that is six years after the effective date of the 
current standard. (42 U.S.C. 6313(a)(6)(C)(iv)) In this case, the 
latter date prevails; therefore, DOE used 2029 as the first year of 
compliance with any amended standards for ACUACs.
    Table IV.11 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 computer 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.
BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TR20MY24.090

BILLING CODE 6450-01-C
    DOE reviewed the various LCC inputs at the February 9, 2023 webinar 
(EERE-2022-BT-STD-0015-0073 at pp. 25-35) and the March 21-22, 2023 
meeting (EERE-2022-BT-STD-0015-0080 at pp. 35-47). The only significant 
stakeholder discussion involved lifetimes and installation, repair, and 
maintenance costs. These comments are discussed in more detail in their 
respective following sections.
1. Equipment Cost
    To calculate equipment 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 equipment 
and higher-efficiency equipment, because DOE applies an incremental 
markup to the increase in MSP associated with higher-efficiency 
equipment. For ACUACs, DOE reviewed historical producer price index 
(``PPI'') data for ``unitary air-conditioners, except heat pumps'' 
spanning 1978 to 2022, but did not find a discernable long-term trend. 
As a result, DOE applied constant price trends to project the equipment 
cost to the year of compliance.
2. Installation Cost
    The installation cost is the expense to the commercial consumer of 
installing the ACUAC, in addition to the price of the unit itself. 
Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the equipment. DOE used data from 
the January 2016 Direct Final Rule to estimate the baseline 
installation costs for ACUACs, and scaled these values to the current 
year based on data from the Bureau of Labor Statistics (``BLS'') \40\ 
for materials and labor costs, at yearly rates of 1.95 percent and 2.62 
percent, respectively. DOE assumed installation costs are proportional 
to the equipment weight, as associated with each efficiency level.
---------------------------------------------------------------------------

    \40\ Bureau of Labor Statistics data (available at: www.bls.gov/data/) (last accessed Sept. 9, 2023).
---------------------------------------------------------------------------

    DOE reviewed updates to its installation cost analysis to account 
for conversion curbs that may be required in some cases to accommodate 
equipment designs with large footprints in the April 24, 2023 slide 
deck (EERE-2022-BT-STD-0015-0086 at p. 4), based on discussion at the 
March 22, 2023 meeting (EERE-2022-BT-STD-0015-0091 at pp. 20-21, 40-41, 
47). The approach to determining the

[[Page 44091]]

applicability of conversion curbs in each installation is consistent 
with that in the January 2016 Direct Final Rule. It generally results 
in an increased likelihood of consumers encountering conversion curb 
costs as efficiency levels increase relative to the baseline equipment.
    DOE did not account for any electric panel upgrades in this rule, 
because DOE did not model product switching from ACUAC-furnace to ACUHP 
installations in this rulemaking, as discussed in section IV.G.4.
3. Annual Energy Consumption
    For each sampled building, DOE determined the energy consumption 
for an ACUAC at different efficiency levels using the approach 
described previously in section IV.E of this document.
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 equipment 
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 commercial sector, DOE calculated 
electricity prices using the methodology described in Coughlin and 
Beraki (2019).\41\
---------------------------------------------------------------------------

    \41\ Coughlin, K. and B. Beraki (2019), Non-residential 
Electricity Prices: A Review of Data Sources and Estimation Methods. 
Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL-
2001203. (available at: ees.lbl.gov/publications/non-residential-electricity-prices).
---------------------------------------------------------------------------

    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. For ACUACs, 
DOE developed annual unit energy consumption values (UECs) by Census 
Division for each equipment class and efficiency level for the summer 
(May to September) and winter (October to April) seasons.
    The average summer and winter electricity prices were used to 
measure the baseline energy cost. The summer and winter marginal 
prices, using a marginal load factor of 0.4, were used to measure the 
operating cost savings from higher-efficiency ACUACs.
    EEI non-residential electricity prices are separated into three 
rate categories based on annual peak demand: (1) small commercial; (2) 
large commercial, and (3) industrial. The demand limits for small 
commercial, large commercial, and industrial are up to 100 kW, 100-1000 
kW, and larger than 1000 kW, respectively. CBECS billing data, which 
includes monthly demand information, were used to calculate the total 
square footage assigned to each category based on annual peak demand, 
as a function of building type. For each building in the CBECS billing 
data, DOE mapped the building to a rate category based on the annual 
peak demand, and to a building type based on the CBECS Principal 
Building Activity. DOE calculated the total floor space associated with 
each building type and rate category, and used this to define, for each 
building type, a relative weight for each rate category. DOE then 
calculated a weighted-average (across rate categories) value of the 
average and marginal electricity price. DOE calculated the weighted-
average for all Census Divisions, assuming the rate category weights do 
not depend on Census Division.
    See chapter 8 of the direct final rule TSD for further details.
    To estimate energy prices in future years, DOE multiplied the 2022 
energy prices by the projection of annual average price changes for 
each of the nine Census Divisions from the Reference case in AEO 2023, 
which has an end year of 2050.\42\ To estimate price trends after 2050, 
DOE kept the energy price constant at the 2050 value.
---------------------------------------------------------------------------

    \42\ EIA, Annual Energy Outlook 2023 (available at: www.eia.gov/outlooks/aeo/) (last accessed Oct. 1, 2023).
---------------------------------------------------------------------------

5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing equipment 
components that have failed in an appliance; maintenance costs are 
associated with maintaining the operation of the equipment. Typically, 
small incremental increases in equipment efficiency entail no, or only 
minor, changes in maintenance costs compared to baseline efficiency 
equipment. Therefore, DOE assumed no change in maintenance cost with 
efficiency level.
    For repair costs, DOE used data from the January 2016 Direct Final 
Rule to estimate the baseline repair costs for ACUACs, and scaled these 
values to the current year based on data from the BLS for materials and 
labor costs, at yearly rates of 1.95 percent and 2.62 percent, 
respectively. DOE assumed repair costs are proportional to the 
equipment's manufacturer selling price, as associated with each 
efficiency level. The approach to determining the frequency of 
equipment repair is consistent with that in the January 2016 Direct 
Final Rule, and it includes non-compressor repairs conducted in the 
seventh year, for all consumers.
    In response to the May 2020 ECS RFI, AHRI stated that the costs 
used in previous analyses do not reflect actual repair and maintenance 
costs and that typical maintenance costs are double the values in RS 
Means. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 10) In contrast, Trane 
stated that the methodology used in the January 2016 Direct Final Rule 
is adequate, although an update to a more recent version of RS Means is 
appropriate. (Trane, EERE-2019-BT-STD-0042-0016 at p. 10) Trane and 
Goodman stated that repair and maintenance costs will rise for products 
using low-GWP refrigerants. (Trane, EERE-2019-BT-STD-0042-0016 at p. 
10; Goodman, EERE-2019-BT-STD-0042-0017 at p. 4)
    As stated previously, DOE reviewed the various LCC inputs at the 
February 9, 2023 webinar (EERE-2022-BT-STD-0015-0073 at pp. 25-35) and 
the March 21-22, 2023 meeting (EERE-2022-BT-STD-0015-0080 at pp. 35-
47). At the March 22, 2023 ACUAC/HP Working Group meeting, AHRI and 
Daikin stated that the maintenance costs were too low. (EERE-2022-BT-
STD-0015-0091 at pp. 21, 38-39) In the April 24, 2023 slide deck, DOE 
confirmed that the maintenance and repair cost numbers were based on 
negotiated inputs from the previous rulemaking, adjusted for inflation. 
(EERE-2022-BT-STD-0015-0086 at p. 3)
    In response to AHRI, DOE notes that because maintenance costs do 
not change with efficiency level, they have no impact on the LCC 
results. In response to Trane, DOE notes that it did not update to a 
more recent version of RS Means due to additional adjustments made to 
repair and maintenance costs during the 2016 rulemaking, but it did 
update the 2016 costs by using the BLS scalars previously discussed. In 
response to Trane and Goodman, DOE has no data with respect to the 
impact of low-GWP refrigerants on repair and maintenance costs. This 
issue was not discussed during the 2023 ECS

[[Page 44092]]

Negotiations. Furthermore, low-GWP refrigerants would be used at all 
efficiency levels in the analysis including the no-new-standards case, 
so any impacts would be independent of the amended standards.
    Consequently, DOE continues to use the repair and maintenance costs 
as discussed during the ACUAC/HP Working Group meetings.
6. Equipment Lifetime
    Equipment lifetime is the age at which a unit of covered equipment 
is retired from service. For the LCC and PBP analysis, DOE develops a 
distribution of lifetimes to reflect variability in equipment lifetimes 
in the field.
    For small and large ACUAC equipment, DOE used the same lifetime as 
in the January 2016 Direct Final Rule, which had been developed based 
on a Weibull distribution. DOE assumed a mean lifetime of 21 years for 
small equipment classes, and a mean lifetime of 23 years for large 
equipment classes. For very large equipment classes, DOE created a new 
distribution with an assumed mean lifetime of 30 years, based on 
stakeholders' feedback during the 2023 ECS Negotiations. The maximum 
lifetimes were assumed to be 40 years for the small and large equipment 
classes and 60 years for the very large equipment classes.
    In response to the May 2020 ECS RFI, AHRI disagreed with the 
Weibull approach to lifetimes and stated that service lifetimes are in 
the range of 12 to 15 years. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 
10) In contrast, Trane stated that the Weibull approach is appropriate 
and that equipment lifetime should be the same as in the January 2016 
Direct Final Rule. (Trane, EERE-2019-BT-STD-0042-0016 at p. 10) Carrier 
stated that the lifetimes determined by the proposed approach seem 
reasonable. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 14) AHRI and 
Carrier both stated that location is an important determinant of 
lifetime (e.g., reduced lifetimes for units with more runtime hours or 
for units in coastal areas due to interactions with salt air). (AHRI, 
EERE-2019-BT-STD-0042-0014 at p.10; Carrier, EERE-2019-BT-STD-0042-0013 
at p. 14)
    At the March 22, 2023 ACUAC/HP Working Group meeting, there was 
discussion regarding whether the proposed lifetime as presented was 
really consistent with the previous rulemaking, as well as a suggestion 
that the average life of a 30-ton unit would be much shorter than 34 
years. (EERE-2022-BT-STD-0015-0091 at pp. 18, 20, 36-38) In the April 
24, 2023 slide deck, DOE confirmed that the lifetimes were consistent 
with those negotiated in the previous rulemaking. (EERE-2022-BT-STD-
0015-0086 at p. 3) DOE noted that shipments modeling indicates that a 
much shorter lifetime, such as a 20-year lifetime, would result in 
approximately 50% more shipments than demonstrated in the AHRI data. 
Given that the CUAC market is saturated (i.e., market penetrations are 
not increasing), about 95% of shipments are for the replacement market. 
On an average basis, the number of replacements that ship each year is 
equal to the total installed stock divided by the average lifetime. The 
total installed stock is an independently observed variable (for 
example, through CBECS surveys) and therefore cannot change when 
assumptions about the inputs to the shipments model are varied. This 
means that, if the equipment lifetime is decreased by a factor of \2/
3\, then the total shipments must increase by a factor of \3/2\ (i.e., 
by 50%), to ensure that the installed stock remains constant. 
Similarly, if AHRI shipments are (for example) underestimated by 10%, 
then a roughly 10% reduction in mean lifetime would be needed to ensure 
the model results alight with the observed installed stock. Given the 
possibility of some uncertainty in AHRI shipments, and in response to 
ACUAC/HP Working Group discussions, DOE reduced the lifetime for very 
large equipment by approximately 10%, from 34 to 30 years. To provide 
further information on the importance of the assumed lifetimes for the 
LCC analysis, DOE also conducted a sensitivity analysis based on a 20-
year lifetime. (Id.) The sensitivity analysis showed that consumers 
were only marginally but not significantly worse off under a 20-year 
timeline, as relatively heavy discounting in the later years of a 
unit's lifetime limits any impact. For example, for the very large 
equipment class at EL 1, under the 20-year scenario, the percent of 
consumers with net cost increased from 20 to 21% and the LCC savings 
decreased from $2053 to $1671. (Id at p. 14)
    In this DFR, DOE continues to use lifetimes with a mean of 21, 23, 
and 30 years for the small, large, and very large equipment classes, 
respectively, as discussed in the April 24, 2023 slide deck. DOE is not 
including additional results for the 20-year-lifetime sensitivity in 
this direct final rule, but such results can be found in chapter 8 of 
the direct final rule TSD. In response to AHRI and Carrier, DOE does 
not assign lifetime based on location, but the distribution includes 
variability that addresses this issue.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to commercial buildings to estimate the present value of future 
operating cost savings. The discount rate used in the LCC analysis 
represents the rate from an individual consumer's perspective. DOE 
estimated a distribution of discount rates for ACUACs based on 
commercial consumer financing costs and the cost of capital for 
commercial applications.
    For developing discount rates by commercial building type, DOE used 
the cost of capital to estimate the present value of cash flows to be 
derived from a typical company project or investment. Most companies 
use both debt and equity capital to fund investments, so the cost of 
capital is the weighted-average cost to the firm of equity and debt 
financing. This corporate finance approach is referred to as the 
weighted-average cost of capital. DOE used currently available economic 
data in developing commercial discount rates, with Damodaran Online 
being the primary data source.\43\ The average discount rate across the 
commercial building types is 6.04 percent.
---------------------------------------------------------------------------

    \43\ Damodaran, A. Data Page: Historical Returns on Stocks, 
Bonds and Bills-United States. 2021. pages.stern.nyu.edu/~adamodar/ 
(last accessed April 26, 2022).
---------------------------------------------------------------------------

    See chapter 8 of the final rule TSD for further details on the 
development of discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of equipment efficiencies under the no-
new-standards case (i.e., the case without amended or new energy 
conservation standards).
    In response to the May 2020 ECS RFI, AHRI, Carrier, and Trane all 
commented that they expect the majority of shipments to remain close to 
the Federal minimum standard level after 2023. (AHRI, EERE-2019-BT-STD-
0042-0014 at p. 11; Carrier, EERE-2019-BT-STD-0042-0013 at p. 15; 
Trane, EERE-2019-BT-STD-0042-0016 at p. 11) PGE stated that ACUACs 
purchased by customers are often chosen with the minimum required 
efficiency ratings. (PGE, EERE-2019-BT-STD-0042-0009 at p. 2)
    In a presentation at an ACUAC/HP Working Group meeting, industry 
noted that approximately 65 percent of shipments are at baseline 
efficiency.

[[Page 44093]]

(EERE-2022-BT-STD-0015-0081 at p. 5) AHRI subsequently provided 
confidential data to a DOE contractor regarding shipments of ACUACs and 
ACUHPs by IEER. The data submitted by AHRI were gathered for 2018-2022; 
in these data, the market share of equipment with IEER above the 2023 
standard is around 10-20 percent. This estimate is approximate, as the 
IEER bin boundaries in the provided data do not align exactly with 
either the 2018 or 2023 energy conservation standard levels. Under the 
2023 standard, it is expected that a significant fraction of shipments 
will roll-up to the 2023 minimum, but possibly not the full 80-90% 
shown in the data; some fraction of shipments may shift to levels above 
the minimum.
    To estimate the energy efficiency distribution of ACUACs for 2029, 
DOE also reviewed information from the 2015 ASRAC Working Group, 
combined with information presented during the negotiations on the 
relationship between the existing metric, IEER, and the new metric, 
IVEC. The 2015 ASRAC Working Group analysis used data submitted by AHRI 
to develop separate base-case efficiency distributions for the Small, 
Large, and Very Large equipment classes. That analysis separated 
equipment types into constant air volume (``CAV'') and VAV 
installations, with lower efficiency levels corresponding to CAV (fixed 
fan speed) designs. In the analysis presented here, DOE's engineering 
analysis considered only staged or variable-speed designs because its 
review of models available on the market after the January 1, 2023 
compliance date of current standards and confidential discussions with 
manufacturers indicated that almost all models on the market today 
offer staged or variable-speed indoor fan designs and very few models, 
if any, offer single-speed indoor fan designs, even at EL0, implying 
that going forward, all installations will use some type of VAV 
equipment. The 2015 ASRAC Working Group base-case efficiency 
distribution for VAV equipment indicated approximately 15-percent 
market share for IEER values above the 2023 standard. This estimate is 
consistent with the confidential data provided by AHRI for the years 
2018-2022.
    To map the IEER levels to the new IVEC metric, DOE considered 
information presented during the 2023 ECS Negotiation meetings, 
specifically scatterplots of IEER vs. IVEC. These scatter plots show a 
fairly broad range of IVEC for a given band of IEER. For example, for 
Small ACUACs, for IEER approximately equal to 14.8 (the current 
standard), the range of plotted IVEC is 10-14. Hence, it seems 
reasonable to assume that when the market transitions to the new IVEC 
metric, designs that cluster near a single value of IEER would cover a 
range of IVEC, and some would, therefore, fall into higher efficiency 
levels as defined by the IVEC metric. For this reason, DOE assumed 70 
percent of equipment at baseline and distributed 30 percent of 
equipment to higher IVEC-based ELs. For ELs in this direct final rule 
analysis that did not exist in the 2015 ASRAC analysis, DOE assumed 
zero market share in the base case.
    The estimated market shares for the no-new-standards case for are 
shown in Table IV.12. See chapter 8 of the direct final rule TSD for 
further information on the derivation of the efficiency distributions.
[GRAPHIC] [TIFF OMITTED] TR20MY24.091

    DOE notes that the market shares in Table IV.12 are based on 
shipments data, as described in the preceding paragraphs. DOE also 
reviewed model counts in the industry-provided dataset and observed 
models at ELs shown in this table as having zero shipments. It is 
common for there to be significantly more models (as a percentage of 
the total) than shipments at higher efficiency levels; there tend to be 
more shipments per model at lower efficiency levels. However, DOE 
acknowledges that there are likely to be non-zero shipments at higher 
ELs where there are models available. Therefore, DOE has performed a 
sensitivity analysis for small CUACs that distributes the 30% market 
share above baseline to the first four ELs (7.5% each) rather than 10% 
each at the first three ELs, as shown in the table. The results of this 
sensitivity can be found in Chapter 10 of the TSD.
    The LCC Monte Carlo simulations draw from the efficiency 
distributions and randomly assign an efficiency to the ACUACs purchased 
by each sample building in the no-new-standards case. The resulting 
percentage shares within the sample match the market shares in the 
efficiency distributions.
    While DOE expects economic factors to play a role when consumers, 
commercial building owners, or builders decide on what type of ACUAC to 
install, assignment of equipment efficiency for a given installation 
based solely on economic measures such as life-cycle cost or simple 
payback period, would not accurately reflect most real-world 
installations. There are a number of market failures discussed in the 
economics literature that illustrate how purchasing decisions with 
respect to

[[Page 44094]]

energy efficiency are unlikely to be perfectly correlated with energy 
use, as described subsequently. DOE finds that the method of 
assignment, which is in part random, simulates behavior in the ACUAC 
market, where market failures result in purchasing decisions not being 
perfectly aligned with economic interests. DOE further emphasizes that 
its approach does not assume that all purchasers of ACUACs make 
economically irrational decisions (i.e., the lack of a correlation is 
not the same as a negative correlation). As part of the random 
assignment, some buildings with large cooling loads will be assigned 
higher-efficiency ACUACs, and some buildings with particularly low 
cooling loads will be assigned baseline ACUACs, which aligns with the 
available data.
    The following discussion provides more detail about the various 
market failures that affect ACUAC purchases. First, a recognized 
problem in commercial settings is the split incentive problem, where 
the building owner (or building developer) selects the equipment, and 
the tenant (or subsequent building owner) pays for energy 
costs.44 45 There are other similarly misaligned incentives 
embedded in the organizational structure within a given firm or 
business that can impact the choice of an ACUAC. For example, if one 
department or individual within an organization is responsible for 
capital expenditures (and therefore equipment selection) while a 
separate department or individual is responsible for paying the energy 
bills, a market failure similar to the split-incentive problem can 
result.\46\ Additionally, managers may have other responsibilities and 
often have other incentives besides operating cost minimization, such 
as satisfying shareholder expectations, which can sometimes be focused 
on short-term returns.\47\ Decision-making related to commercial 
buildings is highly complex and involves gathering information from and 
for a variety of different market actors. It is common to see 
conflicting goals across various actors within the same organization, 
as well as information asymmetries between market actors in the energy 
efficiency context in commercial building construction.\48\
---------------------------------------------------------------------------

    \44\ Vernon, D., and Meier, A. (2012). ``Identification and 
quantification of principal-agent problems affecting energy 
efficiency investments and use decisions in the trucking industry,'' 
Energy Policy, 49, 266-273.
    \45\ Blum, H. and Sathaye, J. (2010). ``Quantitative Analysis of 
the Principal-Agent Problem in Commercial Buildings in the U.S.: 
Focus on Central Space Heating and Cooling,'' Lawrence Berkeley 
National Laboratory, LBNL-3557E (available at: escholarship.org/uc/item/6p1525mg) (last accessed March 14, 2024).
    \46\ Prindle, B., Sathaye, J., Murtishaw, S., Crossley, D., 
Watt, G., Hughes, J., and de Visser, E. (2007). ``Quantifying the 
effects of market failures in the end-use of energy,'' Final Draft 
Report Prepared for International Energy Agency (available from 
International Energy Agency, Head of Publications Service, 9 rue de 
la Federation, 75739 Paris, Cedex 15 France).
    \47\ Bushee, B.J. (1998). ``The influence of institutional 
investors on myopic R&D investment behavior,'' Accounting Review, 
305-333. DeCanio, S.J. (1993). ``Barriers Within Firms to Energy 
Efficient Investments,'' Energy Policy, 21(9), 906-914 (explaining 
the connection between short-termism and underinvestment in energy 
efficiency).
    \48\ International Energy Agency (IEA) (2007). Mind the Gap: 
Quantifying Principal-Agent Problems in Energy Efficiency. OECD Pub. 
(available at www.iea.org/reports/mind-the-gap) (last accessed March 
14, 2024).
---------------------------------------------------------------------------

    The arguments for the existence of market failures in the 
commercial and industrial sectors are corroborated by empirical 
evidence. One study in particular showed evidence of substantial gains 
in energy efficiency that could have been achieved without negative 
repercussions on profitability, but the investments had not been 
undertaken by firms.\49\ The study found that multiple organizational 
and institutional factors caused firms to require shorter payback 
periods and higher returns than the cost of capital for alternative 
investments of similar risk. Another study demonstrated similar results 
with firms requiring very short payback periods of 1-2 years in order 
to adopt energy-saving projects, implying hurdle rates of 50 to 100 
percent, despite the potential economic benefits.\50\
---------------------------------------------------------------------------

    \49\ DeCanio, S.J. (1998). ``The Efficiency Paradox: 
Bureaucratic and Organizational Barriers to Profitable Energy-Saving 
Investments,'' Energy Policy, 26(5), 441-454.
    \50\ Andersen, S.T., and Newell, R.G. (2004). ``Information 
programs for technology adoption: the case of energy-efficiency 
audits,'' Resource and Energy Economics, 26, 27-50.
---------------------------------------------------------------------------

    If DOE developed an efficiency distribution that assigned ACUAC 
efficiency in the no-new-standards case solely according to energy use 
or economic considerations such as life-cycle cost or payback period, 
the resulting distribution of efficiencies within the consumer sample 
would not reflect any of the market failures above. Thus, DOE concludes 
such a distribution would not be representative of the ACUAC market.
    The use of random assignment is not an assertion of economic 
irrationality, but instead, it is a methodological approximation of 
complex consumer behavior. The analysis is neither biased toward high 
or low energy savings. The methodology does not preferentially assign 
lower-efficiency ACUACs to buildings in the no-new-standards case where 
savings from the rule would be greatest, nor does it preferentially 
assign lower-efficiency ACUACs to buildings in the no-new-standards 
case where savings from the rule would be smallest. Some consumers were 
assigned the ACUACs that they would have chosen if they had engaged in 
perfect economic considerations when purchasing the products. Others 
were assigned less-efficient ACUACs even where a more-efficient product 
would eventually result in life-cycle savings, simulating scenarios 
where, for example, various market failures prevent consumers from 
realizing those savings. Still others were assigned ACUACs that were 
more efficient than one would expect simply from life-cycle costs 
analysis, reflecting, say, ``green'' behavior, whereby consumers 
ascribe independent value to minimizing harm to the environment.
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 equipment, compared to baseline equipment, through energy 
cost savings. Payback periods that exceed the life of the equipment 
mean that the increased total installed cost is not recovered in 
reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the equipment 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, 
except that discount rates are not needed.

G. Shipments Analysis

    DOE uses projections of annual equipment shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, NPV, and future manufacturer cash flows.\51\ 
The shipments model takes an accounting approach, tracking market 
shares of each equipment class and the vintage of units in the stock. 
Stock accounting uses equipment shipments as inputs to estimate the age 
distribution of in-service equipment stocks for all years. The age 
distribution of in-service equipment stocks is a key input to 
calculations of both the NES and NPV,

[[Page 44095]]

because operating costs for any year depend on the age distribution of 
the stock.
---------------------------------------------------------------------------

    \51\ 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.
---------------------------------------------------------------------------

    For the current analysis, DOE assumed that any new energy 
conservation standards for ACUAC and ACUHP would require compliance in 
2029. Thus, all units purchased starting in 2029 are affected by the 
standard level. DOE's analysis considered shipments over a 30-year 
period, in this case from 2029 through 2058.
    To project annual shipments over the analysis period, DOE used key 
drivers, including floor space forecasts, saturations, and product 
lifetimes, to project shipments of small, large, and very large air-
cooled ACUAC and ACUHP in each market segment, which are then 
aggregated to estimate total shipments. DOE considered two market 
segments: (1) shipments to new construction, (2) shipments to existing 
buildings for replacement.
1. New Shipments
    Shipments to new buildings are driven by market saturations (number 
of units per square foot) and new floor space constructed in each year. 
DOE assumed that the market saturations for each equipment type of 
ACUAC and ACUHP stay constant over the analysis period. Table IV.13 
shows the saturation for each equipment class:
[GRAPHIC] [TIFF OMITTED] TR20MY24.092

    DOE obtained the new floor space projections from the Annual Energy 
Outlook 2023 (AEO 2023) \52\ reference case for the commercial sector.
---------------------------------------------------------------------------

    \52\ EIA, Annual Energy Outlook 2023 (available at: www.eia.gov/outlooks/aeo/) (last accessed Oct. 1, 2023).
---------------------------------------------------------------------------

2. Replacement Shipments
    Shipments to existing buildings for replacement are calculated 
using an accounting framework involving initial shipments and a 
retirement function. The shipments model is initialized in the present 
year (2023) with a distribution by vintage for ages up to the maximum 
lifetime, in this case 60 years. The vintage distribution is obtained 
from the 2015 rulemaking which is calibrated by the AHRI shipments in 
2013. Specifically, the shipments total in 2013 is set equal to the 
AHRI total in the same year. While AHRI data were available up to 2022, 
market conditions have led to an irregular shipments pattern. In order 
to smooth the projection, DOE calibrated to 2013 and used model 
projections for the period up to 2022. Numerically, the quantity that 
impacts the NES and NPV calculation is cumulative shipments; DOE 
confirmed that the difference between cumulative shipments for the 
model projection vs. AHRI historic data is 1 percent or less. The 
retirement function is based on a failure probability distribution 
consistent with LCC calculations described in section IV.F.6 of this 
document.
3. Stock Calculation
    The number units in the existing stock in each year is equal to the 
sum of total units shipped the same year and the stock in the previous 
year, with the retired units of the same year removed. The number of 0-
year-old units is equal to the number of total units purchased in the 
same year. As the year is incremented from y - 1 to y, a fraction of 
the stock is removed; that fraction is determined by survival 
probability, which uses shipments lifetimes, as discussed in previous 
section.
4. Comments
    In response to the May 2020 ECS RFI, AHRI, Carrier, Goodman, and 
Trane all commented that historical shipments would not accurately 
portray the market for ACUACs and ACUHPs, as the impacts of COVID-19 on 
the HVAC industry are not yet known. (AHRI, EERE-2019-BT-STD-0042-0014 
at p. 11; Carrier, EERE-2019-BT-STD-0042-0013 at p. 16; Goodman, EERE-
2019-BT-STD-0042-0017 at p. 4; Trane, EERE-2019-BT-STD-0042-0016 at p. 
11) AHRI also commented that computer room air conditioner shipments 
were likely included as ACUAC and ACUHP shipments in the previous 
rulemaking and that those shipments should be removed in any future 
shipments analysis for ACUAC and ACUHP. (AHRI, EERE-2019-BT-STD-0042-
0014 at p. 11)
    Carrier commented that the higher cost of higher-efficiency 
equipment will lead more customers to repair rather than replace, 
although the company does not anticipate a change in failure rates or 
equipment lifetimes. (Carrier, EERE-2019-BT-STD-0042-0013 at p. 15)
    PGE stated that the current marketplace split between ACUACs and 
ACUHPs is estimated at 85 percent to 15 percent. (PGE, EERE-2019-BT-
STD-0042-0009 at p. 2) In response to the May 2022 TP/ECS RFI, the CA 
IOUs stated that while CUHPs are still a small fraction of the market, 
they expected that CUHPs will play an important role in non-residential 
space heating electrification efforts in the coming decades. The CA 
IOUs added that the Consortium for Energy Efficiency's 2019 overview of 
CUAC/HP programs indicate that States in ASHRAE climate zones two to 
five are incentivizing electric-only CUHPs. (CA IOUs, EERE-2022-BT-STD-
0015-0012 at pp. 4-5) In a presentation at an ACUAC/HP Working Group 
meeting, industry noted that approximately 10 percent of shipments are 
heat pumps. (EERE-2022-BT-STD-0015-0081 at p. 6)
    DOE reviewed its shipments methodology presented at the February 9, 
2023 webinar (EERE-2022-BT-STD-0015-0073 at pp. 37-43), the February 
22-23, 2023 ACUAC/HP Working Group meeting ((EERE-2022-BT-STD-0015-0078 
at p. 38-40), and the March 21-22, 2023 ACUAC/HP Working Group meeting 
(EERE-2022-BT-STD-0015-0080 at pp. 49-54). While DOE acknowledges that 
the impact of COVID-19 on the HVAC industry were unknown at the time 
that stakeholders submitted comments on the May 2020 ECS RFI, it is DOE 
practice to use projections of economic and demographic data from the 
AEO as inputs to the DOE shipments and NIA models. These projections 
account, to the extent possible, for near-term economic impacts and 
long-term expectations. By the time of publication of this direct final 
rule, COVID-19-related supply chain issues have largely resolved, so 
DOE expects that AEO 2023 continues to provide the best available

[[Page 44096]]

source to gauge future shipments of ACUACs and ACUHPs.
    In addition, DOE reviewed publicly-available data from the AHRI 
website and notes that, while the market share of heat pumps aggregated 
across all size classes is increasing, this increase is dominated by 
the residential size classes (below 60,000 Btu/hr). DOE recommended 
that the ACUAC/HP Working Group base its analysis on an assumption that 
10-percent of Small unitary product shipments are heat pumps rather 
than air conditioning only products, and 5-percent of Large and Very 
Large product shipments are heat pumps, to which the ACUAC/HP Working 
Group did not disagree. DOE examined AEO 2023 projections of the market 
share split between air conditioners and heat pumps and noted that, 
while there is a significant trend of increasing market share for 
residential heat pumps, the trend in the commercial sector is much 
weaker, with less than a 2-percent shift from rooftop AC to HP over 30 
years. Furthermore, DOE does not expect that the marginal differences 
in standard level between ACUACs with all other types of heat and 
ACUHPs, as discussed in sections III.A and IV.C.2.a, are large enough 
to cause any significant difference in commercial consumer purchasing 
decisions. Hence, DOE held the ACUHP market shares constant over the 
analysis period and did not model any shift from ACUAC-furnace 
installations to ACUHP installations in either the base case or the 
standards cases.
    Regarding AHRI's comment that computer room air conditioner 
shipments may have been included historically, DOE notes that this is 
not clear as computer room air conditioners were added to the scope of 
ASHRAE Standard 90.1 rather than being carved out of existing ACUAC 
equipment classes. If any computer room air conditioner shipments were 
included, DOE expects it would represent a small fraction of total 
shipments and have limited effects on the analysis. In addition, this 
concern was not brought up in the context of any ASHRAE Working Group 
discussions regarding shipments, suggesting that it is not likely a 
significant issue. For these reasons, DOE has not adjusted total 
shipments to account for computer room air conditioners.
    With regard to the repair vs. replace decision, DOE noted during 
the 2023 ECS Negotiations that, while this issue had been discussed 
extensively in the 2015 ASRAC negotiations, the impact of this model 
feature on the policy decision is minimal. Quantitatively, the impact 
of repairing rather than replacing some fraction of the stock is just 
to delay the time at which the equipment is replaced; as the lifetime 
energy use of the equipment is counted in the NES, a delay in the time 
of replacement has a limited impact on the NES metric. It is also 
important to note that DOE used the equipment economic lifetime in its 
analyses (i.e., the time to replacement). It is possible, and even 
likely, that this observed economic lifetime includes the effect of 
life-extending equipment repairs in the no-new-standards case. In 
modeling terms, the question is: which consumers who would have 
replaced the unit in the no-new-standards case would instead repair it 
in the standards case? This decision is driven by the difference 
between the cost of repairing an existing unit, and the incremental 
cost of a new, more efficient unit. DOE estimated the cost of repair, 
as discussed in section IV.F.5 of this document, and compared this to 
the increase in total installed cost (``TIC'') at higher standard 
levels. Based on this comparison, the increase in units being repaired 
vs. replaced would be negligible except at max-tech levels, and in this 
direct final rule, DOE is not adopting max-tech levels.

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 equipment 
being regulated.) DOE calculates the NES and NPV for the potential 
standard levels considered based on projections of annual equipment 
shipments, along with the annual energy consumption and total installed 
cost data from the energy use and LCC analyses.\54\ For the present 
analysis, DOE projected the energy savings, operating cost savings, 
equipment costs, and NPV of consumer benefits over the lifetime of 
ACUACs and ACUHPs sold from 2029 through 2058.
---------------------------------------------------------------------------

    \53\ The NIA accounts for impacts in the 50 states and U.S. 
territories.
    \54\ For the NIA, DOE adjusts the installed cost data from the 
LCC analysis to exclude sales tax, which is a transfer.
---------------------------------------------------------------------------

    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 
equipment class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each equipment 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 equipment with efficiencies greater than the standard.
    DOE uses a computer 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 computer model uses typical values (as opposed 
to probability distributions) as inputs.
    Table IV.14 summarizes the inputs and methods DOE used for the NIA 
analysis for the direct final rule. Discussion of these inputs and 
methods follows the table. See chapter 10 of the direct final rule TSD 
for further details.
BILLING CODE 6450-01-P

[[Page 44097]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.093

BILLING CODE 6450-01-C
    DOE discussed its NIA methodology at the February 9, 2023 webinar 
(EERE-2022-BT-STD-0015-0073 at pp. 44-48) and the March 21-22, 2023 
ACUAC/HP Working Group meeting (EERE-2022-BT-STD-0015-0080 at pp. 55-
62). There was not any discussion on the NIA methodology during these 
meetings.
    As discussed in section IV.C.3 of this document, DOE did not 
conduct an LCC analysis for ACUHPs. The energy use analysis calculated 
the cooling and ventilation energy use for ACUACs and is also 
representative of the cooling and ventilation energy use for ACUHPs, 
but the energy use analysis did not calculate the energy use for the 
heating end-use for ACUHPs. Instead, the data that are output from the 
LCC for input to the NIA were adjusted to include the heating energy 
use, operating cost, and related savings for ACUHPs. The NIA also 
accounted for slightly higher MSPs for ACUHPs, as described in section 
IV.C, Engineering Analysis, of this document. DOE used the higher MSP 
for ACUHPs provided by the engineering analysis, but the Department 
assumed the same installation costs when estimating the total installed 
cost for ACUHPs.
    When considering ACUHPs, DOE made two adjustments to the EL0 LCC 
sample-averaged output:
     DOE defined a heating energy adder for ACUHPs, based on 
CBECS 2018. The CBECS includes estimates of cooling, ventilation, and 
heating energy use for packaged heat pumps. For those buildings using 
heat pumps for heating, DOE calculated the ratio of energy use for 
heating, cooling, and ventilation to the energy use for cooling and 
ventilation only. This ratio is 1.22, which means that for every kwh of 
cooling and ventilation energy use, on average, ACUHPs would use an 
additional 0.22 kwh for heating. DOE assumed that this ratio is 
constant across equipment classes, and added the heating energy use to 
the sample-average energy use output by the LCC to define total annual 
energy use.
     DOE calculated a sample-average energy price for each 
equipment class as the ratio of sample-average annual operating cost to 
the sample-average annual energy consumption for cooling and 
ventilation. DOE applied this average price to the heating energy use 
to estimate the total annual operating cost for ACUHPs.
    At higher ELs, DOE estimated the heating energy use as the EL0 
value multiplied by the ratio of IVHE at the considered EL (IVHE 
increases with higher efficiency). DOE added this modified heating 
energy use to the cooling and ventilation energy use output by the LCC 
to get the total energy use for ACUHPs at each EL. DOE applied the LCC 
sample-average energy price to calculate the total operating cost for 
ACUHPs at each EL.
    These summary data, accounting for all energy use and costs for 
both ACUACs and ACUHPs, were then input to the NIA calculation.
    In response to the May 2020 ECS RFI, PGE stated that ACUHPs have 
significant advantages for customers over ACUACs, as they provide both 
heating and cooling and, therefore, provide for: (1) lower operating 
and maintenance costs; (2) decreases in greenhouse gas and localized 
air pollution; and (3) longer life spans for the equipment. (PGE, EERE-
2019-BT-STD-0042-0009 at p. 2) PGE stated that ACUHPs, on average, are 
sold at higher efficiency ratings compared to ACUACs. Customers 
choosing heat pump technology use it for both heating and cooling 
needs, thereby driving greater efficiency gains during both peak 
seasons. Additionally, in Northern climates, the run time for equipment 
is

[[Page 44098]]

substantially higher, so there is a natural tendency to buy more 
efficient, less expensive units to operate. (Id.)
    As stated, DOE has incorporated ACUHPs into its NIA analysis. DOE 
has not identified a different efficiency distribution or different 
lifetimes for this equipment. However, the NIA does account for heating 
energy use.
1. Equipment 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 equipment classes for the year of anticipated compliance 
with an amended or new standard (2029). To project the trend in 
efficiency absent amended standards for ACUACs and ACUHPs over the 
entire shipments projection period, DOE held the efficiency 
distribution constant, as historical data based on IEER may not be 
indicative of potential trends in IVEC.
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective (2029). In this scenario, the market 
shares of equipment in the no-new-standards case that do not meet the 
standard under consideration would ``roll up'' to meet the new standard 
level, and the market share of equipment above the standard would 
remain unchanged.
    To develop standards-case efficiency trends after 2029, DOE also 
held the efficiency distribution constant at the rolled-up levels, for 
similar reasons as in the no-new-standards case.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered equipment between each 
potential standards case (``TSL'') and the case with no new or amended 
energy conservation standards. DOE calculated the national energy 
consumption by multiplying the number of units (stock) of each 
equipment (by vintage or age) by the unit energy consumption (also by 
vintage). DOE calculated annual NES based on the difference in national 
energy consumption for the no-new-standards case and for each higher-
efficiency standard case. DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy (i.e., the energy consumed by power plants to 
generate site electricity) using annual conversion factors derived from 
AEO 2023. Cumulative energy savings are the sum of the NES for each 
year over the timeframe of the analysis.
    Use of higher-efficiency equipment is sometimes associated with a 
direct rebound effect, which refers to an increase in utilization of 
the equipment due to the increase in efficiency. DOE did not consider a 
direct rebound effect for ACUACs and ACUHPs. An important reason for 
this decision is that in contrast to residential heating and cooling, 
HVAC operation adjustment in commercial buildings is driven primarily 
by building managers or owners. The comfort conditions are already 
established in order to satisfy the occupants, and they are unlikely to 
change due to installation of higher-efficiency equipment. While it is 
possible that a small degree of rebound could occur for higher-
efficiency ACUACs and ACUHPs, there is no basis to select a specific 
value. Because the available information suggests that any rebound 
would be small to negligible, DOE did not include a rebound effect for 
the direct final rule.
    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 (August 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in which DOE explained its determination 
that EIA's National Energy Modeling System (``NEMS'') is the most 
appropriate tool for its FFC analysis and its intention to use NEMS for 
that purpose. 77 FR 49701 (August 17, 2012). NEMS is a public domain, 
multi-sector, partial equilibrium model of the U.S. energy sector \55\ 
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.
---------------------------------------------------------------------------

    \55\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581(2023), May 2023 
(available at: www.eia.gov/outlooks/aeo/nems/overview/pdf/0581(2023).pdf) (last accessed Oct. 23, 2023).
---------------------------------------------------------------------------

3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are: (1) total annual installed cost; (2) 
total annual operating costs (energy costs and repair and maintenance 
costs), and (3) a discount factor to calculate the present value of 
costs and savings. DOE calculates net savings each year as the 
difference between the no-new-standards case and each standards case in 
terms of total savings in operating costs versus total increases in 
installed costs. DOE calculates operating cost savings over the 
lifetime of each equipment shipped during the projection period.
    As discussed in section IV.F.1 of this document, DOE developed 
ACUACs and ACUHPs price trends based on historical PPI data. DOE 
applied the same trends to project prices for each equipment class at 
each considered efficiency level. For ACUACs and ACUHPs, DOE has used a 
constant default price trend. DOE's projection of equipment prices is 
described in appendix 10C of the direct final rule TSD.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of different equipment price 
projections on the consumer NPV for the considered TSLs for ACUACs and 
ACUHPs. In addition to the default price trend, DOE considered two 
equipment price sensitivity cases: (1) an increasing trend based on the 
same PPI data but only the years 2000 to 2022 and (2) a decreasing 
trend based on the same PPI data but only the years 1978 to 2000. The 
derivation of these price trends and the results of these sensitivity 
cases are described in appendix 10C of the direct final rule TSD.
    The operating cost savings are energy cost savings, which are 
calculated using the estimated energy savings in each year and the 
projected price of the appropriate form of energy. To estimate energy 
prices in future years, DOE multiplied the average regional energy 
prices by the projection of annual national-average residential energy 
price changes in the Reference case from AEO 2023, which has an end 
year of 2050. Price trends onwards are held constant at 2050 level. As 
part of the NIA, DOE also analyzed scenarios that used inputs from 
variants of the AEO 2023 Reference case that have lower and higher 
economic growth. Those cases have lower and higher energy price

[[Page 44099]]

trends compared to the Reference case. NIA results based on these cases 
are presented in appendix 10C of the direct final rule TSD.
    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.\56\ 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.
---------------------------------------------------------------------------

    \56\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (available at: www.whitehouse.gov/omb/information-for-agencies/circulars/) (last accessed Dec. 11, 2023). 
DOE used the prior version of Circular A-4 (2003) as a result of the 
March 1, 2024, effective date of the new version.
---------------------------------------------------------------------------

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 one 
subgroup: small businesses. The analysis used subsets of the LCC sample 
composed of buildings that meet the criteria for the considered 
subgroup. Additionally, electricity prices and discount rates were 
updated to be representative of small businesses. DOE used the LCC and 
PBP computer model to estimate the impacts of the considered efficiency 
levels on this subgroup. 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 ACUACs and ACUHPs and 
to estimate the potential impacts of such standards on domestic 
employment, manufacturing capacity, and cumulative regulatory burden 
for those manufacturers. The MIA has both quantitative and qualitative 
aspects. The quantitative part of the MIA includes analyses of 
projected industry cash flows, the INPV, additional investments in 
research and development (``R&D'') and manufacturing capital necessary 
to comply with amended standards, and potential impacts on domestic 
manufacturing employment. Additionally, the MIA seeks to qualitatively 
determine how amended energy conservation standards might affect 
manufacturing capacity and competition, as well as how standards 
contribute to manufacturers' 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,\57\ 
an industry cash-flow model with inputs specific to this rulemaking. 
The key GRIM inputs include data on the industry cost structure, unit 
production costs, equipment shipments, manufacturer markups, and 
investments in R&D and manufacturing capital required to produce 
compliant equipment. The key GRIM outputs are the INPV, which is the 
sum of industry annual cash flows over the analysis period, discounted 
using the industry-weighted average cost of capital, and the impact on 
domestic manufacturing employment. The model uses standard accounting 
principles to estimate the impacts of more-stringent energy 
conservation standards on the ACUAC and ACUHP manufacturing industry by 
comparing changes in INPV and domestic manufacturing employment between 
the 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.
---------------------------------------------------------------------------

    \57\ A copy of the GRIM spreadsheet tool is available on the DOE 
website for this rulemaking at www.regulations.gov/docket/EERE-2022-BT-STD-0015/document.
---------------------------------------------------------------------------

    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 regulatory burden 
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 ACUAC and ACUHP 
manufacturing industry based on the market and technology assessment, 
preliminary manufacturer interviews, and publicly-available 
information. This included a top-down analysis of ACUAC and ACUHP 
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''); R&D 
expenses; and tax rates). DOE also used public sources of information 
to further calibrate its initial characterization of the ACUAC and 
ACUHP manufacturing industry, including company filings of form 10-K 
from the SEC,\58\ corporate annual reports, the U.S. Census Bureau's 
Annual Survey of Manufactures,\59\ and reports from Dun & 
Bradstreet.\60\
---------------------------------------------------------------------------

    \58\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (available at: www.sec.gov/edgar/searchedgar/companysearch.html) (last accessed Oct. 3, 2023).
    \59\ U.S. Census Bureau, Annual Survey of Manufactures: General 
Statistics: Statistics for Industry Groups and Industries (2021) 
(available at: www.census.gov/programs-surveys/asm/data/tables.html) 
(last accessed Dec. 5, 2023).
    \60\ Dun & Bradstreet Company Profiles, Various Companies 
(available at: app.dnbhoovers.com) (last accessed Oct. 3, 2023).
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared a framework industry cash-flow 
analysis to quantify the potential impacts of amended energy 
conservation standards. The GRIM uses several factors to determine a 
series of annual cash flows starting with the announcement of the 
standard and extending over a 30-year period following the compliance 
date of the standard. These factors include annual expected revenues, 
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. 
In general, energy conservation standards can affect manufacturer cash 
flow in three distinct ways: (1) creating a need for increased 
investment; (2) raising production costs per unit, and (3) altering 
revenue due to higher per-unit prices and changes in sales volumes.
    In addition, during Phase 2, DOE developed interview guides to 
distribute

[[Page 44100]]

to manufacturers of ACUACs and ACUHPs in order to develop other key 
GRIM inputs, including equipment and capital conversion costs, and to 
gather additional information on the anticipated effects of amended 
energy conservation standards on revenues, direct employment, capital 
assets, industry competitiveness, and manufacturer subgroup impacts.
    In Phase 3 of the MIA, DOE's contractor conducted structured, 
detailed interviews with representative ACUAC and ACUHP manufacturers. 
During these interviews, DOE's contractor discussed efficiency levels, 
design options, and conversion costs to validate assumptions used in 
the GRIM. 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, all of 
whom could be disproportionately affected by amended energy 
conservation standards. DOE identified one subgroup for a separate 
impact analysis: 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 over time 
due to new or amended energy conservation standards that result in a 
higher or lower INPV. 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 reference year of the analysis) and 
continuing to 2058 (the terminal year of the analysis). DOE calculated 
INPVs by summing the stream of annual discounted cash flows during this 
period. For manufacturers of ACUACs and ACUHPs, DOE used a real 
discount rate of 5.9 percent, which was derived from industry 
financials (i.e., corporate annual reports and public filings to the 
Securities and Exchange Commission (SEC 10-Ks)).
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between the no-new-standards case and each 
standards case. The difference in INPV between the no-new-standards 
case and a standards case represents the financial impact of the new or 
amended energy conservation standard on manufacturers. As discussed 
previously, DOE developed critical GRIM inputs using a number of 
sources, including publicly-available data, results of the engineering 
analysis, and information gathered from industry stakeholders during 
the course of manufacturer interviews and subsequent ACUAC/HP Working 
Group meetings. 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 equipment is typically more expensive 
than manufacturing baseline equipment due to the use of more complex 
components, which are typically more costly than baseline components. 
The changes in the MPCs of covered equipment can affect the shipments, 
revenues, gross margins, and cash flow of the industry. In this 
rulemaking, DOE relies on an efficiency-level approach for small, 
large, and very large ACUACs/HPs. 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 and equipment class. 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). In the shipments 
analysis (see section IV.G of this document), DOE estimates the 
distribution of efficiencies in the no-new-standards case and standards 
cases for all equipment classes.
    For the standards cases in the NIA, DOE used a ``roll-up'' scenario 
to establish the shipment-weighted efficiency for the year that 
standards are assumed to become effective (2029). In this scenario, the 
market shares of equipment in the no-new-standards case that do not 
meet the standard under consideration would ``roll up'' to meet the new 
standard level, and the market share of equipment above the standard 
would remain unchanged. For a complete description of the shipments 
analysis, see section IV.G of this document and chapter 9 of the direct 
final rule TSD.
c. Capital and Product Conversion Costs
    Amended energy conservation standards could cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and equipment designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each equipment class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
capital conversion costs; and (2) product conversion costs. Capital 
conversion costs are one-time investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new, compliant equipment designs can be fabricated and 
assembled. Product conversion costs are one-time investments in 
research, development, testing, marketing, and other non-capitalized 
costs necessary to make equipment designs comply with amended energy 
conservation standards.
    DOE relied on manufacturer feedback to evaluate the level of 
capital and product conversion costs manufacturers would likely incur 
at the various TSLs. DOE contractors conducted interviews with six 
manufacturers of small, large, and very large ACUACs and ACUHPs. The 
interviewed manufacturers account for approximately 90 percent of unit 
sales in the industry.
    During confidential interviews, DOE's contractor asked 
manufacturers to estimate the capital conversion costs (e.g., changes 
in production processes, equipment, and tooling) to meet the various 
efficiency levels. The capital conversion cost feedback from these 
interviews was then scaled using market share estimates to estimate 
total industry capital conversion costs. Manufacturers were also asked 
to estimate the redesign effort and engineering resources required at 
various efficiency levels to quantify the product conversion costs. DOE 
also relied on data submitted throughout the 2023 ECS Negotiations to 
estimate product conversion costs. Specifically, manufacturers 
submitted data simulating IVEC ratings for existing models currently 
rated under IEER as part of the 2023 ECS Negotiations. DOE reviewed the 
product conversion cost

[[Page 44101]]

feedback from interviews at each efficiency level and then compared the 
IVEC simulation data provided during the 2023 ECS Negotiations to IEER 
data from the CCD in order to extrapolate the number of models industry 
would need to redesign under amended standards. Based on manufacturer 
feedback, DOE estimated some industry conversion costs associated with 
the transition in energy efficiency metrics from IEER to IVEC. To 
estimate total industry product conversion costs, DOE multiplied the 
development redesign estimate at each efficiency level for each 
equipment class by the estimated number of industry basic models in CCD 
that would require redesign. Manufacturer data were aggregated to 
better reflect the industry as a whole and to protect confidential 
information.
    Industry conversion costs for the adopted standard (i.e., TSL 3, 
the Recommended TSL) total $288.0 million. It consists of $70.8 million 
in capital conversion costs and $217.2 million in product conversion 
costs.
    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 capital 
and product 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 non-production cost manufacturer 
markups to the MPCs estimated in the engineering analysis for each 
equipment 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. The industry cash-flow analysis results in section V.B.2.a of 
this document present the impacts of the upper and lower bound 
manufacturer markup scenarios on INPV. The preservation of gross margin 
percentage scenario represents the upper bound scenario, and the 
preservation of operating profit scenario represents the lower bound 
scenario for INPV impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' across all 
efficiency levels, which assumes that following amended standards, 
manufacturers would be able to maintain the same amount of profit as a 
percentage of revenues at all efficiency levels within an equipment 
class. As manufacturer production costs increase with efficiency, this 
scenario implies that the per-unit dollar profit will increase. Based 
on publicly-available financial information for ACUAC and ACUHP 
manufacturers, as well as comments from manufacturer interviews, DOE 
estimated average gross margin percentages of 23 percent for small 
ACUACs, 24 percent for small ACUHPs, 25 percent for large ACUACs, 26 
percent for large ACUHPs, 29 percent for very large ACUACs, and 30 
percent for very large ACUHPs.\61\ 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 to industry profitability under new or amended energy 
conservation standard, because manufacturers can fully pass on 
incremental increases in production costs due to standards to 
consumers.
---------------------------------------------------------------------------

    \61\ The gross margin percentage of 23 percent for small ACUACs 
is based on a manufacturer markup of 1.30. The gross margin 
percentage of 24 percent for small ACUHPs is based on a manufacturer 
markup of 1.32. The gross margin percentage of 25 percent for large 
ACUACs is based on a manufacturer markup of 1.34. The gross margin 
percentage of 26 percent for large ACUHPs is based on a manufacturer 
markup of 1.36. The gross margin percentage of 29 percent for very 
large ACUACs is based on a manufacturer markup of 1.41. The gross 
margin percentage of 30 percent for very large ACUHPs is based on a 
manufacturer markup of 1.43.
---------------------------------------------------------------------------

    Under the preservation of operating profit scenario, DOE modeled a 
situation in which manufacturers are not able to increase per-unit 
operating profit in proportion to increases in manufacturer production 
costs. 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 (i.e., margins) to a 
level that maintains base-case operating profit, which allows them to 
maintain a cost-competitive offering in the market. 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 compliance date of the amended standards. In this scenario, 
manufacturers maintain their total operating profit in absolute dollars 
in the standards case, despite higher equipment costs and investment. 
Therefore, gross margin (as a percentage) shrinks in the standards case 
for minimally-compliant equipment. The implicit assumption behind this 
scenario is that the industry can only maintain its operating profit in 
absolute dollars after the standard. This manufacturer markup scenario 
represents the lower bound to industry profitability under new or 
amended energy conservation standards.
    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
    In response to the May 2020 ECS RFI, Lennox asserted that the 
commercial package air conditioner and commercial warm air furnace 
manufacturers are facing significant cumulative regulatory burden. 
(Lennox, EERE-2019-BT-STD-0042-0015 at pp. 7-8)
    In response to the May 2020 ECS RFI, Carrier likewise commented 
that commercial package air conditioner and heat pump manufacturers 
face a significant regulatory burden, citing regulatory changes to 
ASHRAE Standard 90.1, the International Energy Conservation Code 
(``IECC''), California Air Resource Board, and State-level action, 
stressing the potential overlap between these regulatory actions and 
the lack of coordination between their governing bodies. Carrier 
requested DOE to review its approach to multiple regulations and work 
closely with industry organizations to minimize regulatory burden. 
(Carrier, EERE-2019-BT-STD-0042-0013 at pp. 18-19)
    In response to the May 2020 ECS RFI, Trane commented that multiple 
regulations affecting the same manufacturer can strain profits and lead 
companies to abandon product lines or markets. Trane asserted that 
commercial package air conditioner and commercial warm air furnace 
manufacturers will experience significant cumulative regulatory burden 
due to DOE energy conservation standards rulemakings.

[[Page 44102]]

(Trane, EERE-2019-BT-STD-0042-0016 at pp. 12-13)
    In response to the May 2020 ECS RFI, the Air-Conditioning, Heating, 
and Refrigeration Institute commented that the industry faces 
regulatory burden from a variety of sources, including the sunsetting 
of the UL Standard 1995, State-level GWP limits, and the transition to 
new efficiency metrics, suggesting that the combined effects of these 
changes would consume almost all available research and development 
resources and laboratory time. (AHRI, EERE-2019-BT-STD-0042-0014 at p. 
2)
    In response to the May 2022 TP/ECS RFI, Lennox asserted that 
commercial package air conditioner and heat pump manufacturers are 
facing unprecedented regulatory change regarding the equipment they 
manufacture, stressing technical and laboratory resources in the 
industry. (Lennox, EERE-2022-BT-STD-0015-0009 at p. 6) Lennox also 
recommended that DOE consider the cumulative impact of the refrigerant 
transition as part of the rulemaking process for amended energy 
conservation standards. (Id. at pp. 5-6)
    In response, DOE notes that it analyzes cumulative regulatory 
burden pursuant to section 13(g) of 10 CFR part 430, subpart C, 
appendix A (which applies to this equipment per 10 CFR 431.4). As such, 
the Department will recognize and consider the overlapping effects on 
manufacturers of new or revised DOE standards and other Federal 
regulatory actions affecting the same products or equipment that take 
effect approximately three years before or after the 2029 compliance 
date (i.e., 2026 to 2032). DOE details the rulemakings and expected 
conversion expenses of Federal energy conservation standards that could 
impact ACUAC and ACUHP original equipment manufacturers (``OEMs'') that 
take effect approximately three years before or after the 2029 
compliance date, as discussed in section V.B.2.e of this document. 
Regarding potential refrigerant regulations, DOE accounts for the 
potential costs associated with transitioning covered equipment to low-
GWP refrigerants in order to comply with Federal and State regulations 
limiting the use of high-GWP refrigerants in its GRIM. See section 
V.B.2.e of this document for addition information on the estimated 
refrigerant transition costs.
    In response to the May 2020 ECS RFI, AHRI's comment encouraged DOE 
to reach out to four manufacturers of ACUACs/ACUHPs and CWAFs 
identified by AHRI as small businesses. (AHRI, EERE-2019-BT-STD-0042-
0014 at p. 12) In response to the May 2020 ECS RFI, UCA commented that 
DOE should be cognizant of the disproportionate impact that regulations 
may have on small businesses, which, among other issues, may have more 
limited resources to follow and comply with regulations, and face 
greater difficulties competing with larger corporations. (UCA, EERE-
2019-BT-STD-0042-0006, pp. 1-7 \62\)
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    \62\ The UCA comment included two supplemental attachments: 
Attachment 1, US DOE LETTER 6.10.2020, and Attachment 2, DOE RFI 
Double Duct Information 6.10.2020. DOE references as ``Attachment 
1'' and ``Attachment 2'' throughout this document. Both attachments 
are available on the docket.
---------------------------------------------------------------------------

    In response, DOE reviewed the individual company websites of the 
four small businesses identified by AHRI and confirmed that none of 
them currently produce equipment covered by this rulemaking. Further, 
DOE conducted an assessment of the ACUAC/HP market and did not identify 
any small, domestic OEMs that manufacture ACUAC/HP equipment for the 
U.S. market. See chapter 3 of the direct final rule TSD for a list of 
OEMs of ACUACs and/or ACUHPs.

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 AEO 2023. Power sector 
emissions of CH4 and N2O from fuel combustion are 
estimated using Emission Factors for Greenhouse Gas Inventories 
published by the EPA.\63\
---------------------------------------------------------------------------

    \63\ Available at www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf (last accessed July 12, 
2021).
---------------------------------------------------------------------------

    FFC upstream emissions, which include emissions from fuel 
combustion during extraction, processing, and transportation of fuels, 
and ``fugitive'' emissions (direct leakage to the atmosphere) of 
CH4 and CO2, are estimated based on the 
methodology described in chapter 15 of the 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. AEO 2023 reflects, to the extent 
possible, laws and regulations adopted through mid-November 2022, 
including the emissions control programs discussed in the following 
paragraphs the emissions control programs discussed in the following 
paragraphs, and the Inflation Reduction Act.\64\
---------------------------------------------------------------------------

    \64\ For further information, see the Assumptions to AEO 2023 
report that sets forth the major assumptions used to generate the 
projections in the Annual Energy Outlook (available at: www.eia.gov/outlooks/aeo/assumptions/) (last accessed Oct. 1, 2023).
---------------------------------------------------------------------------

    SO2 emissions from affected electric generating units 
(``EGUs'') are subject to nationwide and regional emissions cap-and-
trade programs. Title IV of the Clean Air Act sets an annual emissions 
cap on SO2 for affected EGUs in the 48 contiguous States and 
the District of Columbia (``DC''). (42 U.S.C. 7651 et seq.) 
SO2 emissions from numerous States in the eastern half of 
the United States are also limited under the Cross-State Air Pollution 
Rule (``CSAPR''). 76 FR 48208 (August 8, 2011). CSAPR requires these 
States to reduce certain emissions, including annual SO2 
emissions, and went into effect as of January 1, 2015.\65\ AEO 2023

[[Page 44103]]

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.
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    \65\ CSAPR requires States to address annual emissions of 
SO2 and NOX, precursors to the formation of 
fine particulate matter (``PM2.5'') pollution, in order 
to address the interstate transport of pollution with respect to the 
1997 and 2006 PM2.5 National Ambient Air Quality 
Standards (``NAAQS''). CSAPR also requires certain States to address 
the ozone season (May-September) emissions of NOX, a 
precursor to the formation of ozone pollution, in order to address 
the interstate transport of ozone pollution with respect to the 1997 
ozone NAAQS. 76 FR 48208 (August 8, 2011). EPA subsequently 
published a supplemental rule in the Federal Register that included 
an additional five States in the CSAPR ozone season program. 76 FR 
80760 (Dec. 27, 2011) (Supplemental Rule). EPA also published in the 
Federal Register 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.\66\ 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 AEO 2023.
---------------------------------------------------------------------------

    \66\ 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. Energy 
conservation standards would be expected to reduce NOX 
emissions in the States not covered by CSAPR. DOE used AEO 2023 data to 
derive NOX emissions factors for the group of States not 
covered by CSAPR.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would be expected to slightly reduce Hg emissions. DOE 
estimated mercury emissions reduction using emissions factors based on 
AEO 2023, which incorporates the MATS.

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 net 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 equipment 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'').\67\
---------------------------------------------------------------------------

    \67\ See www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf 
(last accessed August 1, 2023).
---------------------------------------------------------------------------

1. Monetization of Greenhouse Gas Emissions
    DOE estimates the monetized benefits of the reductions in emissions 
of CO2, CH4, and N2O by using a 
measure of the social cost (``SC'') of each pollutant (e.g., SC-
CO2). These estimates represent the monetary value of the 
net harm to society associated with a marginal increase in emissions of 
these pollutants in a given year, or the benefit of avoiding that 
increase. These estimates are intended to include (but are not limited 
to) climate-change-related changes in net agricultural productivity, 
human health, property damages from increased flood risk, disruption of 
energy systems, risk of conflict, environmental migration, and the 
value of ecosystem services.
    DOE exercises its own judgment in presenting monetized climate 
benefits as recommended by applicable Executive orders, and DOE would 
reach the same conclusion presented in this direct final rule in the 
absence of the social cost of greenhouse gases. That is, the social 
costs of greenhouse gases, whether measured using the February 2021 
interim estimates presented by the IWG on the Social Cost of Greenhouse 
Gases or by another means, did not affect the rule ultimately adopted 
by DOE.
    DOE estimated the global social benefits of CO2, 
CH4, and N2O reductions (i.e., SC-GHGs) 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 are 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

[[Page 44104]]

lower.\68\ 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 TSD, the IWG has recommended that, taken 
together, the limitations suggest that the interim SC-GHG estimates 
used in this direct final rule likely underestimate the damages from 
GHG emissions. DOE concurs with this assessment.
---------------------------------------------------------------------------

    \68\ Interagency Working Group on Social Cost of Greenhouse 
Gases (IWG) (2021) Technical Support Document: Social Cost of 
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive 
Order 13990. February. United States Government (available at: 
www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-science-evidence-based-estimates-of-the-benefits-of-reducing-climate-pollution/) (last accessed Nov. 1, 2023).
---------------------------------------------------------------------------

    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.\69\ As DOE had used the IWG interim values in proposing this rule 
and is currently reviewing the updated 2023 SC-GHG values, for this 
direct final rule, 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 ACUACs and ACUHPs (see 
section IV.L.1.c of this notice). 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.
---------------------------------------------------------------------------

    \69\ See www.epa.gov/environmental-economics/scghg.
---------------------------------------------------------------------------

    DOE's derivations of the SC-GHG (i.e., SC-CO2, SC-
N2O, and SC-CH4) values used for this direct 
final rule 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 of this document.
a. Social Cost of Carbon Dioxide
    The SC-CO2 values used for this direct final rule were 
based on the values developed for the IWG's February 2021 TSD, which 
are shown in Table IV.15 in five-year increments from 2020 to 2050. DOE 
notes that it has exercised its discretion in adopting the IWG's 
estimates, and as previously stated, DOE finds that the interim SC-GHG 
estimates represent the most appropriate estimate of the SC-GHG until 
revised estimates have been developed reflecting the latest, peer-
reviewed science.
    The set of annual values that DOE used, which was adapted from 
estimates published by EPA,\70\ 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 equipment 
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.
---------------------------------------------------------------------------

    \70\ 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 Feb. 21, 2023).
[GRAPHIC] [TIFF OMITTED] TR20MY24.094

    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. See chapter 13 of the direct final 
rule TSD for the annual emissions reductions and see

[[Page 44105]]

also appendix 14A of the direct final rule TSD for the annual SC-
CO2 values.
    Regarding the May 2020 ECS RFI, DOE received comments from Policy 
Integrity regarding the social cost of carbon used in the emissions 
monetization analysis. Policy Integrity commented that DOE should 
account for the benefits of greenhouse gas emissions reductions from 
the use of higher-efficiency equipment using the global estimate of the 
social cost of greenhouse gases, and that the values developed by the 
IWG are the best available. (Policy Integrity, EERE-2019-BT-STD-0042-
007 at pp. 2-3, 5)
    In response, DOE agrees that the global estimate of the SC-GHG is 
appropriate to use in its analysis. The SC-GHG values used in this 
analysis are based on the best available science and economics. 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.
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 TSD. DOE notes that it has exercised its discretion in adopting 
the IWG's estimates, and as previously stated, DOE finds that the 
interim SC-GHG estimates represent the most appropriate estimate of the 
SC-GHG until revised estimates have been developed reflecting the 
latest, peer-reviewed science. Table IV.16 shows the updated sets of 
SC-CH4 and SC-N2O estimates from the latest 
interagency update in five-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 described previously for the SC-CO2.
[GRAPHIC] [TIFF OMITTED] TR20MY24.095

    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. See 
chapter 13 of the direct final rule TSD for the annual emissions 
reduction, and see also appendix 14A of the direct final rule TSD for 
the annual SC-CH4 and SC-N2O values.
c. Sensitivity Analysis Using EPA's New SC-GHG Estimates
    In December 2023, EPA issued an updated set of SC-GHG estimates 
(2023 SC-GHG) in connection with a final rulemaking under the Clean Air 
Act. 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 ACUACs and ACUHPs. 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.
    The overall climate benefits are greater when using the higher, 
updated 2023 SC-GHG 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 
EPA's Benefits Mapping and Analysis Program.\71\ DOE used EPA's values 
for PM2.5-related benefits associated with NOX 
and SO2 and for ozone-related benefits associated with 
NOX for 2025, 2030, and 2040, calculated with discount rates 
of 3 percent and 7 percent. DOE used linear interpolation to define 
values for the years not given in the 2025 to 2040 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 AEO 2023 to define weighted-
average national values for NOX and SO2 (see 
appendix 14B of the direct final rule TSD).
---------------------------------------------------------------------------

    \71\ 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 Nov. 1, 2023).

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

[[Page 44106]]

M. Utility Impact Analysis

    The utility impact analysis estimates the changes in installed 
electrical capacity and generation projected to result for each 
considered TSL. The analysis is based on published output from the NEMS 
associated with AEO 2023. NEMS produces the AEO Reference case, as well 
as a number of side cases, that estimate the economy-wide impacts of 
changes to energy supply and demand. For the current analysis, impacts 
are quantified by comparing the levels of electricity sector 
generation, installed capacity, fuel consumption and emissions in the 
AEO 2023 Reference case and various side cases. Details of the 
methodology are provided in the appendices to chapters 13 and 15 of the 
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 equipment subject to standards, their suppliers, 
and related service firms. The MIA addresses those impacts. Indirect 
employment impacts are changes in national employment that occur due to 
the shift in expenditures and capital investment caused by the purchase 
and operation of more-efficient 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 equipment to which the new standards 
apply and other goods and services, and (4) the effects of those three 
factors throughout the economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's 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.\72\ 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.
---------------------------------------------------------------------------

    \72\ See U.S. Department of Commerce-Bureau of Economic 
Analysis. Regional Multipliers: A User Handbook for the Regional 
Input-Output Modeling System (``RIMS II'') (1997) U.S. Government 
Printing Office: Washington, DC (available at: www.bea.gov/resources/methodologies/RIMSII-user-guide) (last accessed August 1, 
2023).
---------------------------------------------------------------------------

    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'').\73\ 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.
---------------------------------------------------------------------------

    \73\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W. 
Schultz, ImSET 4.0: Impact of Sector Energy Technologies Model 
Description and User's Guide (2015) Pacific Northwest National 
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run for this rule. Therefore, DOE used ImSET only 
to generate results for near-term timeframes (2034), where these 
uncertainties are reduced. For more details on the employment impact 
analysis, see chapter 16 of the direct final rule TSD.

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for ACUACs 
and ACUHPs. It addresses the TSLs examined by DOE, the projected 
impacts of each of these levels if adopted as energy conservation 
standards for ACUACs and ACUHPs, and the standard 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 at the equipment class level and 
by grouping individual efficiency levels for each class into TSLs. Use 
of TSLs allows DOE to identify and consider industry-level manufacturer 
cost interactions between the equipment classes, to the extent that 
there are such interactions, and national-level 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 four TSLs for ACUACs and ACUHPs. DOE 
developed TSLs that combine efficiency levels for each analyzed 
equipment class. 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.
    Table V.1 presents the TSLs and the corresponding efficiency levels 
that DOE has identified for potential amended energy conservation 
standards for ACUACs and ACUHPs. TSL 4 represents the maximum 
technologically feasible (``max-tech'') energy efficiency for all 
equipment classes. TSL 3 represents the efficiency levels recommended 
by the ACUAC/HP Working Group. TSL 2 and TSL 1 represent intermediate 
efficiency levels between baseline and TSL 3 for the small and large 
equipment classes, but

[[Page 44107]]

correspond to the same efficiency level for very large equipment 
classes as TSL 3.
[GRAPHIC] [TIFF OMITTED] TR20MY24.096

    While representative ELs were included in the TSLs, DOE considered 
all efficiency levels as part of its analysis.\74\
---------------------------------------------------------------------------

    \74\ Efficiency levels that were analyzed for this direct final 
rule are discussed in sections IV.C.1 and IV.C.2 of this document. 
Results by efficiency level are presented in chapters 8, 10, and 12 
of the direct final rule TSD.
---------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on ACUACs and ACUHPs 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 equipment 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., equipment price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses equipment lifetime and a discount rate. Chapter 8 of the direct 
final rule TSD provides detailed information on the LCC and PBP 
analyses.
    Table V.2 through Table V.7 show the LCC and PBP results for the 
TSLs considered for each ACUAC equipment class. As discussed 
previously, in section IV.C.3 of this document, separate LCC and PBP 
results were not run for ACUHPs, but values related to ACUHP shipments 
are considered in the NIA. In the first of each pair of tables, the 
simple payback is measured relative to the baseline equipment. In the 
second table, the impacts are measured relative to the efficiency 
distribution in the no-new-standards case in the compliance year (see 
section IV.F.8 of this document). Because some consumers purchase 
equipment with higher efficiency in the no-new-standards case, the 
average savings are less than the difference between the average LCC of 
the baseline equipment and the average LCC at each TSL. The savings 
refer only to consumers who are affected by a standard at a given TSL. 
Those who already purchase equipment with efficiency at or above a 
given TSL are not affected. Consumers for whom the LCC increases at a 
given TSL experience a net cost.
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[[Page 44108]]


[GRAPHIC] [TIFF OMITTED] TR20MY24.098

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[GRAPHIC] [TIFF OMITTED] TR20MY24.100

[GRAPHIC] [TIFF OMITTED] TR20MY24.101


[[Page 44109]]


[GRAPHIC] [TIFF OMITTED] TR20MY24.102

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on small businesses. Table V.8 through Table V.10 
compare the average LCC savings and PBP at each efficiency level for 
the consumer subgroup, along with similar metrics for the entire 
consumer sample for ACUACs (once again, ACUHPs, are considered only in 
the NIA). In most cases, the average LCC savings and PBP for small 
businesses at the considered efficiency levels are not substantially 
different from the average for all commercial consumers. Chapter 11 of 
the direct final rule TSD presents the complete LCC and PBP results for 
the subgroup.
[GRAPHIC] [TIFF OMITTED] TR20MY24.103

[GRAPHIC] [TIFF OMITTED] TR20MY24.104

[GRAPHIC] [TIFF OMITTED] TR20MY24.105


[[Page 44110]]


2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on manufacturers of ACUACs and ACUHPs. 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. 
Table V.12 and Table V.13 summarize the estimated financial impacts 
(represented by changes in INPV) of potential amended energy 
conservation standards on manufacturers of ACUACs and ACUHPs, as well 
as the conversion costs that DOE estimates manufacturers of ACUACs and 
ACUHPs would incur at each TSL.
    As discussed in section IV.J.2.d of this document, to evaluate the 
range of cash-flow impacts on the ACUAC/ACUHP industry, DOE modeled two 
manufacturer markup scenarios that correspond to the range of 
anticipated market responses to amended standards. DOE modeled: (1) the 
preservation of gross margin percentage scenario and (2) the 
preservation of operating profit scenario. Under the preservation of 
gross margin percentage scenario, DOE applied a single uniform ``gross 
margin percentage'' across all efficiency levels. As MPCs increase with 
efficiency, this scenario implies that the absolute dollar markup will 
increase. DOE assumed a manufacturer ``gross margin percentage'' of 23 
percent for small ACUACs, 24 percent for small ACUHPs, 25 percent for 
large ACUACs, 26 percent for large ACUHPs, 29 percent for very large 
ACUACs, and 30 percent for very large ACUHPs. This manufacturer markup 
is the same as the one DOE assumed in the engineering analysis and the 
no-new-standards case of the GRIM. Because this scenario assumes that a 
manufacturer's absolute dollar markup would increase as MPCs increase 
in the standards cases, it represents the upper (less severe) bound to 
industry profitability under potential amended energy conservation 
standards. Specifically, the industry will be able to maintain its 
average no-new-standards case gross margin (as a percentage of revenue) 
despite the higher production costs in the standards cases. In general, 
the larger the MPC increases, the less likely manufacturers are to 
achieve the cash flow from operations calculated in this scenario 
because it is less likely that manufacturers will be able to fully 
markup these larger production cost increases.
    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. It represents the lower (more severe) bound to 
industry profitability under potential amended energy conservation 
standards because no additional operating profit is earned on the 
higher MPCs, thereby eroding profit margins as a percentage of total 
revenue.
    Each of the modeled manufacturer markup scenarios results in a 
unique set of cash-flows and corresponding INPVs at each TSL. In the 
following discussion, the INPV results refer to the difference in 
industry value between the no-new-standards case and each standards 
case resulting from the sum of discounted cash-flows from the reference 
year (2024) through the end of the analysis period (2058). To provide 
perspective on the short-run cash-flow impact, DOE includes in the 
discussion of results a comparison of free cash flow between the no-
new-standards case and the standards case at each TSL in the year 
before compliance with new standards is required. This figure 
represents the size of the required conversion costs relative to the 
cash flow generated by the ACUAC/ACUHP industry in the absence of 
amended energy conservation standards.
[GRAPHIC] [TIFF OMITTED] TR20MY24.106


[[Page 44111]]


[GRAPHIC] [TIFF OMITTED] TR20MY24.107

    At TSL 1, DOE estimates that impacts on INPV range from -$92.9 
million to -$44.2 million, or a change in INPV of -3.5 percent to -1.7 
percent. At TSL 1, industry free cash-flow (operating cash flow minus 
capital expenditures and capital conversion costs) is $67.5 million, 
which is a decrease of $44.4 million, or a drop of 39.7 percent, 
compared to the no-new-standards case value of $111.9 million in 2028, 
the year before the compliance date of amended energy conservation 
standards. Industry conversion costs total $163.2 million.
    TSL 1 would set the energy conservation standard for small ACUACs/
HPs at EL 2, large ACUACs/HPs at EL 1, and very large ACUACs/HPs at EL 
1. At TSL 1, DOE estimates that manufacturers would incur approximately 
$124.9 million in product conversion costs, as some small ACUACs/HPs, 
large ACUACs/HPs, and very large ACUACs/HPs would need to be redesigned 
to comply with the standard. DOE also estimates that manufacturers 
would incur approximately $38.4 million in capital conversion costs.
    At TSL 1, DOE estimates that approximately 52 percent of small 
ACUAC/HP models currently available for purchase, 64 percent of large 
ACUAC/HP models, and 64 percent of very large ACUAC/HP models would 
have the capability of meeting the efficiency levels required at TSL 1, 
necessitating a significant amount of product redesign. DOE estimates 
that seven of the nine manufacturers of small ACUACs/HPs offer small 
ACUACs/HPs that would meet the efficiency level required at TSL 1. DOE 
estimates that seven of the eight manufacturers of large ACUACs/HPs 
offer large ACUACs/HPs that meet the efficiency level required at TSL 
1. DOE estimates that six of the eight manufacturers of very large 
ACUACs/HPs offer very large ACUACs/HPs that meet the efficiency level 
required at TSL 1.
    At TSL 1, the shipment-weighted average MPC for all ACUACs/HPs 
increases by 2.6 percent relative to the no-new-standards case 
shipment-weighted-average MPC for all ACUACs/HPs in 2029. The 
incremental increases in MPC lead to different profitability and cash-
flows under the two manufacturer markup scenarios. However, the 
conversion costs are the key driver on impacts to the industry, with 
the $163.2 million in conversion costs, being the major contributor to 
changes of -3.5 percent and -1.7 percent of INPV at TSL 1 under the 
preservation of operating profit scenario and the preservation of gross 
margin scenario, respectively.
    At TSL 2, DOE estimates that impacts on INPV range from -$141.7 
million to -$76.0 million, or a change in INPV of -5.3 percent to -2.9 
percent. At TSL 2, industry free cash-flow is $43.4 million, which is a 
decrease of $68.5 million, or a drop of 61.2 percent, compared to the 
no-new-standards case value of $111.9 million in 2028, the year before 
the compliance date of amended energy conservation standards. Industry 
conversion costs total $228.0 million.
    TSL 2 would set the energy conservation standard for small ACUACs/
HPs at EL 3, large ACUACs/HPs at EL 1, and very large ACUACs/HPs at EL 
1. At TSL 2, DOE estimates that manufacturers would incur approximately 
$171.1 million in product conversion costs, as some small ACUACs/HPs, 
large ACUACs/HPs, and very large ACUACs/HPs would need to be redesigned 
to comply with the standard. DOE also estimates that manufacturers 
would incur approximately $56.9 million in capital conversion costs.
    At TSL 2, DOE estimates that approximately 43 percent of small 
ACUAC/HP models currently available for purchase, 64 percent of large 
ACUAC/HP models, and 64 percent of very large ACUAC/HP models would 
have the capability of meeting the efficiency levels required at TSL 2, 
necessitating a significant amount of product redesign. DOE estimates 
that six of the nine manufacturers of small ACUACs/HPs offer small 
ACUACs/HPs that would meet the efficiency level required at TSL 2. DOE 
estimates that seven of the eight manufacturers of large ACUACs/HPs 
offer large ACUACs/HPs that meet the efficiency level required at TSL 
2. DOE estimates that six of the eight manufacturers of very large 
ACUACs/HPs offer very large ACUACs/HPs that meet the efficiency level 
required at TSL 2.
    At TSL 2, the shipment-weighted average MPC for all ACUACs/HPs 
increases by 3.6 percent relative to the no-new-standards case 
shipment-weighted-average MPC for all ACUACs/HPs in 2029. The 
incremental increases in MPC lead to different profitability and cash-
flows under the two

[[Page 44112]]

manufacturer markup scenarios. However, the conversion costs are the 
key driver on impacts to the industry, with the $228.0 million in 
conversion costs, being the major contributor to changes of -5.3 
percent and -2.9 percent of INPV at TSL 2 under the preservation of 
operating profit scenario and the preservation of gross margin 
scenario, respectively.
    At TSL 3 (i.e., the ACUAC/HP Working Group recommended levels), DOE 
estimates that impacts on INPV would range from -$193.9 million to -
$79.5 million, or a change in INPV of -7.3 percent to -3.0 percent. At 
TSL 3, industry free cash-flow is $21.5 million, which is a decrease of 
$90.4 million, or a drop of 80.8 percent, compared to the no-new-
standards case value of $111.9 million in 2028, the year before the 
compliance date of amended energy conservation standards. Industry 
conversion costs total $288.0 million.
    TSL 3 would set the energy conservation standard for small ACUACs/
HPs at EL 4, large ACUACs/HPs at EL 2, and very large ACUACs/HPs at EL 
1. At TSL 3, DOE estimates that manufacturers would incur approximately 
$217.2 million in product conversion costs, as some small ACUACs/HPs, 
large ACUACs/HPs, and very large ACUACs/HPs would need to be redesigned 
to comply with the standard. DOE also estimates that manufacturers 
would incur approximately $70.8 million in capital conversion costs.
    At TSL 3, DOE estimates that approximately 37 percent of small 
ACUAC/HP models available for purchase, 50 percent of large ACUAC/HP 
models, and 64 percent of very large ACUAC/HP models have the 
capability of meeting the efficiency levels required at TSL 3, 
necessitating a significant amount of product redesign. DOE estimates 
that five of the nine manufacturers of small ACUACs/HPs offer small 
ACUACs/HPs that would meet the efficiency level required at TSL 3. DOE 
estimates that six of the eight manufacturers of large ACUACs/HPs offer 
large ACUACs/HPs that meet the efficiency level required at TSL 3. DOE 
estimates that six of the eight manufacturers of very large ACUACs/HPs 
offer very large ACUACs/HPs that meet the efficiency level required at 
TSL 3.
    At TSL 3, the shipment-weighted average MPC for all ACUACs/HPs 
increases by 6.3 percent relative to the no-new-standards case 
shipment-weighted-average MPC for all ACUACs/HPs in 2029. The 
incremental increases in MPC lead to different profitability and cash-
flows under the two manufacturer markup scenarios. However, the 
conversion costs are the key driver on impacts to the industry, with 
the $288.0 million in conversion costs, being the major contributor to 
changes of -7.3 percent and -3.0 percent of INPV at TSL 3 under the 
preservation of operating profit scenario and the preservation of gross 
margin scenario, respectively.
    At TSL 4 (max-tech), DOE estimates that impacts on INPV range from 
-$1,550.6 million to -$830.1 million, or a change in INPV of -58.4 
percent to -31.3 percent. At TSL 4, industry free cash-flow is -$677.1 
million, which is a decrease of $789.0 million, or a drop of 705.2 
percent, compared to the no-new-standards case value of $111.9 million 
in 2028, the year before the compliance date of amended energy 
conservation standards. The negative free-cash-flow calculation 
indicates manufacturers may need to access cash reserves or outside 
capital to finance conversion efforts. Industry conversion costs total 
$1,891.0 million.
    TSL 4 would set the energy conservation standard for small ACUACs/
HPs at EL 7, large ACUACs/HPs at EL 4, and very large ACUACs/HPs at EL 
3. At TSL 4, DOE estimates that manufacturers would incur approximately 
$1,443.2 million in product conversion costs, as the majority of small 
ACUACs/HPs, large ACUACs/HPs, and very large ACUACs/HPs would need to 
be redesigned to comply with the standard. DOE also estimates that 
manufacturers would incur approximately $447.8 million in capital 
conversion costs.
    At TSL 4, DOE estimates that approximately 2 percent of small 
ACUAC/HP models available for purchase, 10 percent of large ACUAC/HP 
models, and 1 percent of very large ACUAC/HP models would have the 
capability of meeting the efficiency levels required at TSL 4, 
necessitating a significant amount of product redesign. DOE estimates 
that only three of the nine manufacturers of small ACUACs/HPs offer 
small ACUACs/HPs that would meet the efficiency level required at TSL 
4. DOE estimates that only two of the eight manufacturers of large 
ACUACs/HPs offer large ACUACs/HPs that meet the efficiency level 
required at TSL 4. DOE estimates that only one of the eight 
manufacturers of very large ACUACs/HPs offer very large ACUACs/HPs that 
meet the efficiency level required at TSL 4.
    At max-tech, DOE expects that manufacturers would have to contend 
with significant engineering uncertainty (considering that very few 
manufacturers produce models that would meet the efficiency level 
required at TSL 4) and would need to invest heavily in product redesign 
at all capacities. At TSL 4, the shipment-weighted average MPC for all 
ACUACs/HPs increases by 30.3 percent relative to the no-new-standards 
case shipment-weighted-average MPC for all ACUACs/HPs in 2029. The 
incremental increases in MPC lead to different profitability and cash-
flows under the two manufacturer markup scenarios. However, the 
conversion costs continue to be the key driver on impacts to the 
industry, with the $1,891.0 million in conversion costs, being the 
major contributor to changes of -58.4 percent and -31.3 percent of INPV 
at TSL 4 under the preservation of operating profit scenario and the 
preservation of gross margin scenario, respectively.
b. Direct Impacts on Employment
    To quantitatively assess the potential impacts of amended energy 
conservation standards on direct employment in the ACUACs and ACUHPs 
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. DOE calculated these 
values using the most up-to-date statistical data from the 2021 
ASM,\75\ BLS employee compensation data,\76\ and the results of the 
engineering analysis.
---------------------------------------------------------------------------

    \75\ 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/tables.html) (last accessed Dec. 5, 2023).
    \76\ U.S. Bureau of Labor Statistics, Employer Costs for 
Employee Compensation (June 2023) (Sept. 12, 2023) (available at: 
www.bls.gov/news.release/pdf/ecec.pdf) (last accessed Dec. 5, 2023).
---------------------------------------------------------------------------

    Labor expenditures related to equipment manufacturing depend on the 
labor intensity of the equipment, 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

[[Page 44113]]

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 production capacity for 
the covered equipment. This value is derived from manufacturer 
interviews, product database analysis, and publicly-available 
information. Based on information obtained during manufacturer 
interviews, DOE estimates that 50 percent of ACUACs/HPs are produced 
domestically.
    The domestic production employees estimate covers production line 
workers, including line supervisors, who are directly involved in 
fabricating, processing, or assembling equipment 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.\77\ DOE's estimates 
only account for production workers who manufacture the specific 
equipment covered by this rulemaking.
---------------------------------------------------------------------------

    \77\ The comprehensive description of production and non-
production workers is available online at: www2.census.gov/programs-surveys/asm/technical-documentation/questionnaire/2021/instructions/MA_10000_Instructions.pdf, ``Definitions and Instructions for the 
Annual Survey of Manufacturers, MA-10000'' (pp. 13-14) (last 
accessed June 1, 2023).
---------------------------------------------------------------------------

    Non-production employees 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. 
Using the amount of domestic production workers previously calculated, 
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.
    Direct employment is the sum of domestic production employees and 
non-production employees. Using the GRIM, DOE estimates in the absence 
of amended energy conservation standards, there would be 3,429 domestic 
production and non-production employees for ACUACs/HPs in 2029. Table 
V.14 shows the range of the impacts of amended energy conservation 
standards on U.S. manufacturing employment in the ACUAC/HP industry. 
The following discussion provides a qualitative evaluation of the range 
of potential impacts presented in Table V.14.
[GRAPHIC] [TIFF OMITTED] TR20MY24.108

    The direct employment impacts shown in Table V.14 represent the 
potential domestic employment changes that could result following the 
compliance date of the amended standards for ACUACs and ACUHPs. 
Employment could increase or decrease due to the labor content of the 
various equipment being manufactured domestically. The upper bound 
estimate corresponds to an increase in the number of domestic workers 
that would result from amended energy conservation standards if 
manufacturers continue to produce the same scope of covered equipment 
within the United States after compliance takes effect and would 
require additional labor to produce more-efficient equipment. To 
establish a conservative lower bound, DOE assumes all manufacturers 
would shift production to foreign countries with lower labor costs. At 
lower TSLs, DOE believes the likelihood of changes in production 
location due to amended standards are low due to feedback from industry 
that they would not expect major changes to their production lines and 
processes, with the majority of conversion costs driven by equipment 
redesign (i.e., investments in research, development, testing, 
marketing, and other non-capitalized costs). However, as amended 
standards increase in stringency and both the complexity and cost of 
production facility updates increases, manufacturers are more likely to 
revisit their production location decisions.
    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
    Based on manufacturer feedback, DOE expects there would be 
relatively low capital conversion costs at TSLs below the max-tech 
level (including TSL 3, the Recommended TSL), which indicates that 
major updates to manufacturing lines will likely not be required to 
meet amended standards. At max-tech (i.e., TSL 4), it is unclear if 
most manufacturers would have the engineering capacity to complete the 
necessary redesigns within the compliance period. However, because the 
Recommended TSL would not require max-tech efficiencies, DOE does not 
expect manufacturers would face long-term capacity constraints due to 
the standard levels detailed in this direct final rule. Furthermore, 
accepting that manufacturers fully considered the investment and 
capacity implications prior to voluntarily entering into the ACUAC/HP 
Working Group ECS Term Sheet, DOE infers that manufacturers would not 
have agreed to standard levels that they could not reasonably meet 
within the compliance period.

[[Page 44114]]

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 used the 
results of the industry characterization to group manufacturers 
exhibiting similar characteristics. Specifically, DOE investigated 
small businesses as a manufacturer subgroup that could be 
disproportionally impacted by energy conservation standards and could 
merit additional analysis in the MIA. DOE did not identify any other 
adversely impacted manufacturer subgroups for this rulemaking based on 
the results of the industry characterization.
    DOE analyzes the impacts on small businesses in a separate analysis 
for the amended energy conservation 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 1,250 employees or less for North American 
Industry Classification System (``NAICS'') code 333415, ``Air 
Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing.'' Based on this 
classification, DOE did not identify any domestic OEMs that qualify as 
a small business. For a discussion of the small business manufacturer 
subgroup, see chapter 12 of the direct final rule TSD.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves examining at 
the cumulative impact of multiple DOE standards and the regulatory 
actions of other Federal agencies, States, and localities that affect 
the manufacturers of a covered product or equipment. While any one 
regulation may not impose a significant burden on manufacturers, the 
combined effects of several existing or impending regulations may have 
serious consequences for some manufacturers, groups of manufacturers, 
or an entire industry. Assessing the impact of a single regulation may 
overlook this cumulative regulatory burden. In addition to energy 
conservation standards, multiple regulations affecting the same 
manufacturer can strain profits and lead companies to abandon equipment 
lines or markets with lower expected future returns than competing 
equipment. For these reasons, DOE conducts an analysis of cumulative 
regulatory burden as part of its rulemakings pertaining to appliance 
efficiency.
    For this cumulative regulatory burden analysis, DOE examined 
Federal, equipment-specific regulations that could affect ACUAC and 
ACUHP manufacturers that take effect approximately three years before 
or after the 2029 compliance date. Table V.15 presents the DOE energy 
conservation standards that would impact manufacturers of ACUAC and 
ACUHP equipment in the 2026 to 2032 timeframe.

[[Page 44115]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.109

Refrigerant Regulations
    DOE evaluated the potential impacts of State and Federal 
refrigerant regulations, such as the California Air Resources Board 
(``CARB'') rulemaking prohibiting the use of refrigerants with a GWP of 
750 or greater starting January 1, 2025 for ``Other Air-conditioning 
Equipment,'' which includes covered equipment under this 
rulemaking,\78\ and

[[Page 44116]]

the October 2023 EPA Final Rule which establishes a GWP limit of 700 
for refrigerants used in light commercial air conditioning and heat 
pump systems (which includes ACUACs and ACUHPs) manufactured January 1, 
2025, or later. 88 FR 73098, 73206, 73208. Based on market research and 
information from manufacturer interviews, DOE expects that ACUAC/HP 
manufacturers will transition to flammable refrigerants (e.g., R-32) in 
response to these refrigerant GWP restrictions. See section IV.C.4 of 
this document for additional information. DOE understands that 
switching from non-flammable to flammable refrigerants requires time 
and investment to redesign ACUAC/HP units and to upgrade production 
facilities to accommodate the additional structural and safety 
precautions required. DOE expects manufacturers will need to transition 
to an A2L \79\ refrigerant to comply with upcoming refrigerant 
regulations, prior to the expected 2029 compliance date of the amended 
energy conservation standards.
---------------------------------------------------------------------------

    \78\ State of California Air Resource Board, ``Prohibitions on 
Use of Certain Hydrofluorocarbons in Stationary Refrigeration, 
Stationary Air-conditioning, and Other End-Uses Regulation,'' 
Amendments effective January 1, 2022 (available at: ww2.arb.ca.gov/sites/default/files/barcu/regact/2020/hfc2020/frorevised.pdf) (last 
accessed Oct. 18, 2023).
    \79\ A2L is a refrigerant classification from the American 
Society of Heating, Refrigeration, and Air-Conditioning Engineers 
(``ASHRAE'') Standard 34: ``Designation and Safety Classification of 
Refrigerants.'' The A2L class defines refrigerants that are 
nontoxic, but mildly flammable. See section IV.C.4 of this document 
for additional discussion on low-GWP refrigerants.
---------------------------------------------------------------------------

    Investments required to transition to flammable refrigerants in 
response to Federal or State regulations, including EPA's final rule, 
necessitate a level of resource allocation beyond typical annual R&D 
and capital expenditures. DOE considers the cost associated with the 
refrigerant transition in its GRIM to be independent of DOE actions 
related to any amended energy conservation standards. DOE accounted for 
the costs associated with redesigning ACUAC/HPs to make use of 
flammable refrigerants in the GRIM in the no-new-standards case and 
standards cases to reflect the cumulative regulatory burden from 
Federal and State refrigerant regulation. DOE relied on manufacturer 
feedback in confidential interviews and a report prepared by CARB,\80\ 
to estimate the industry refrigerant transition costs. To avoid 
underestimating the potential costs, DOE used the more conservative 
costs reported in the report prepared by CARB. Based on feedback, DOE 
assumed that the transition to low-GWP refrigerants would require 
industry to invest approximately $210 million in equipment redesign.
---------------------------------------------------------------------------

    \80\ Report prepared by the state of California's Air Resources 
Board, ``Proposed Amendments to the Prohibitions on Use of Certain 
Hydrofluorocarbons in Stationary Refrigeration, Chillers, Aerosols, 
Propellants, and Foam End-Uses Regulation'' (2020) (available at: 
ww2.arb.ca.gov/sites/default/files/barcu/regact/2020/hfc2020/appb.pdf?_ga=2.199664686.188689668.1697147618-702155270.1695067053) 
(last accessed Oct. 18, 2023).
---------------------------------------------------------------------------

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 ACUACs and ACUHPs, DOE compared their energy consumption 
under the no-new-standards case to their anticipated energy consumption 
under each TSL. The savings are measured over the entire lifetime of 
equipment purchased in the 30-year period that begins in the year of 
anticipated compliance with amended standards (2029-2058). Table V.16 
presents DOE's projections of the national energy savings for each TSL 
considered for ACUACs and ACUHPs. The savings were calculated using the 
approach described in section IV.H.2 of this document.

[[Page 44117]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.110

    OMB Circular A-4 \81\ 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 nine years, rather than 30 
years, of equipment shipments. The choice of a nine-year period is a 
proxy for the timeline in EPCA for the review of certain energy 
conservation standards and potential revision of and compliance with 
such revised standards.\82\ The review timeframe established in EPCA is 
generally not synchronized with the equipment lifetime, equipment 
manufacturing cycles, or other factors specific to ACUACs and ACUHPs. 
Thus, such results are presented for informational purposes only and 
are not indicative of any change in DOE's analytical methodology. The 
NES sensitivity analysis results based on a nine-year analytical period 
are presented in Table V.17. The impacts are counted over the lifetime 
of ACUACs and ACUHPs purchased in 2029-2037.
---------------------------------------------------------------------------

    \81\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Sept. 17, 2003) (available at: 
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (last accessed Oct. 23, 2023).
    \82\ For ASHRAE equipment, EPCA requires DOE to review its 
standards every six years, and requires, for certain products, a 
three-year period after any new standard is promulgated before 
compliance is required, except that in no case may any new standards 
be required within six years of the compliance date of the previous 
standards. (42 U.S.C. 6313(a)(6)(C)) If DOE makes a determination 
that amended standards are not needed, it must conduct a subsequent 
review within three years following such a determination. (Id.) As 
DOE is evaluating the need to amend the standards, the sensitivity 
analysis is based on the review timeframe associated with amended 
standards. While adding a six-year review to the three-year 
compliance period adds up to nine years, DOE notes that it may 
undertake reviews at any time within the six-year period and that 
the three-year compliance date may yield to the six-year backstop. A 
nine-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 six years 
rather than three years.

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

[[Page 44118]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.111

BILLING CODE 6450-01-C
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 ACUACs and 
ACUHPs. In accordance with OMB's guidelines on regulatory analysis,\83\ 
DOE calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V.18 shows the consumer NPV results with impacts counted 
over the lifetime of equipment purchased in 2029-2058.
---------------------------------------------------------------------------

    \83\ U.S. Office of Management and Budget, Circular A-4: 
Regulatory Analysis (Sept. 17, 2003) (available at: 
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (last accessed Oct. 23, 2023).

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

[[Page 44119]]

[GRAPHIC] [TIFF OMITTED] TR20MY24.112

    The NPV results based on the aforementioned nine-year analytical 
period are presented in Table V.19. The impacts are counted over the 
lifetime of equipment 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] TR20MY24.113


[[Page 44120]]


    The previous results reflect the use of a default (constant) trend 
to estimate the change in price for ACUACs and ACUHPs over the analysis 
period (see section IV.H of this document). DOE also conducted a 
sensitivity analysis that considered one scenario with a declining 
price trend in combination with AEO High-Economic-Growth (high benefit) 
and one scenario with an increasing price trend in combination with AEO 
Low-Economic-Growth (low benefit). For 30-year shipments at the amended 
TSL, in the high benefit scenario, NPV of consumer benefits results at 
3 percent and 7 percent discount rates, respectively, are $17.3 billion 
and $5.2 billion USD. In the low benefit scenario, NPV of consumer 
benefits results at 3 percent and 7 percent discount rates, 
respectively, are $14.0 billion and $3.9 billion USD. In the reference 
scenario, the NPV of consumer benefits results at 3 percent and 7 
percent discount rates, respectively, are $15.3 billion and $4.4 
billion USD. The full results of these alternative cases are presented 
in appendix 10C of the direct final rule TSD.
c. Indirect Impacts on Employment
    DOE estimates that amended energy conservation standards for ACUACs 
and ACUHPs will reduce energy expenditures for consumers of that 
equipment, with the resulting net savings being redirected to other 
forms of economic activity. These expected shifts in spending and 
economic activity could affect the demand for labor. As described in 
section IV.N of this document, DOE used an input/output model of the 
U.S. economy to estimate indirect employment impacts of the TSLs that 
DOE considered. 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 
(2029-2034), 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 Equipment
    As discussed in section III.F.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 ACUACs and ACUHPs under 
consideration in this rulemaking. Manufacturers of this equipment 
currently offer units that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
    DOE considered any lessening of competition that would be likely to 
result from new or amended standards. As discussed in section III.F.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 has provided DOJ with copies of the 
direct final rule, the related NOPR, and the accompanying TSD for 
review. DOE will consider DOJ's comments on the DFR in determining how 
to proceed with this rulemaking. DOE will also publish and respond to 
the DOJ's comments in the Federal Register in a separate document. DOE 
invites comment from the public regarding any competitive impacts that 
are likely to result from this direct final rule. In addition, 
stakeholders may also provide comments separately to DOJ regarding 
these potential impacts. See the ADDRESSES section of the NOPR 
published elsewhere in this issue of the Federal Register for 
information to send comments to DOJ.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. 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 ACUACs and ACUHPs is expected to yield environmental 
benefits in the form of reduced emissions of certain air pollutants and 
greenhouse gases. Table V.20 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.
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    As part of the analysis for this rulemaking, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
that DOE estimated for each of the considered TSLs for ACUACs and 
ACUHPs. Section IV.L of this document discusses the SC-CO2 
values that DOE used. Table V.21 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.
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    As discussed in section IV.L.2 of this document, DOE estimated the 
monetized climate benefits likely to result from the reduced emissions 
of CH4 and N2O that DOE estimated for each of the 
considered TSLs for ACUACs and ACUHPs. Table V.22 presents the value of 
the CH4 emissions reduction at each TSL, and Table V.23 
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.
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    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. Thus, any value 
placed on reduced GHG emissions in this rulemaking is subject to 
change. That said, because of omitted damages, DOE agrees with the IWG 
that these estimates most likely underestimate the climate benefits of 
greenhouse gas reductions. 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 are 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 ACUACs and ACUHPs. 
The dollar-per-ton values that DOE used are discussed in section IV.L 
of this document. Table V.24 presents the present value for 
NOX emissions reduction for each TSL calculated using 7-
percent and 3-percent discount rates, and Table V.25 presents similar 
results for SO2 emissions reductions. The results in these 
tables reflect application of EPA's low dollar-per-ton values, which 
reflects DOE's primary estimate. The time-series of annual values is 
presented for the selected TSL in chapter 14 of the direct final rule 
TSD.

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    The benefits of reduced CO2, CH4, and 
N2O emissions are collectively referred to as ``climate 
benefits.'' The effects of SO2 and NOX emissions 
reductions are collectively referred to as ``health benefits.'' 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 for this direct 
final rule because the amount of reduction is expected the be 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. 6313(a)(6)(B)(ii)(VII)) No 
other factors were considered in this analysis.
8. Summary of Economic Impacts
    Table V.26 presents the NPV values that result from adding the 
monetized estimates of the potential economic, climate, and health 
benefits resulting from reduced GHG, NOX, and SO2 
emissions to the NPV of consumer benefits calculated for each TSL 
considered in this rulemaking. The consumer benefits are domestic U.S. 
monetary savings that occur as a result of purchasing the covered 
ACUACs and ACUHPs, and are measured for the lifetime of equipment 
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 ACUACs and ACUHPs shipped 
in 2029-2058. The climate benefits associated with four SC-GHG 
estimates are shown in Table V.26. DOE does not have a single, central 
SC-GHG point estimate, and it emphasizes the value of considering the 
benefits calculated using all four SC-GHG estimates.
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C. Conclusion

    As noted previously, EPCA specifies that, for any commercial and 
industrial equipment addressed under 42 U.S.C. 6313(a)(6)(A)(i), DOE 
may prescribe an energy conservation standard more stringent than the 
level for such equipment in ASHRAE Standard 90.1, as amended,\84\ only 
if ``clear and convincing evidence'' shows that a more-stringent 
standard would result in significant additional conservation of energy 
and is technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)(II)) For this direct final rule, DOE considered the 
impacts of amended standards for ACUACs and ACUHPs 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 additional amount of energy.
---------------------------------------------------------------------------

    \84\ As discussed in section II.B.2, ASHRAE 90.1-2019 updated 
the minimum efficiency levels for ACUACs and ACUHPs to align with 
those adopted by DOE in the January 2016 Direct Final Rule--i.e., 
ASHRAE 90.1-2019 includes minimum efficiency levels that are aligned 
with the current Federal energy conservation standards. ASHRAE 90.1-
2022 includes the same minimum efficiency levels for ACUACs and 
ACUHPs as ASHRAE 90.1-2019.
---------------------------------------------------------------------------

    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard and impacts on 
employment.
1. Benefits and Burdens of TSLs Considered for ACUACs and ACUHPs 
Standards
    Table V.27 and Table V.28 summarize the quantitative impacts 
estimated for each TSL for ACUACs and ACUHPs. The national impacts are 
measured over the lifetime of ACUACs and ACUHPs 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 social cost of greenhouse gases, including the Interim 
Estimates presented by the IWG. The efficiency levels contained in each 
TSL are described in section V.A of this document.
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    DOE first considered TSL 4, which represents the max-tech 
efficiency levels. The max-tech efficiency levels for all equipment 
classes would require complete redesigns of almost all models currently 
available on the market to be optimized around the new test procedure 
and energy efficiency metrics to provide better field performance. TSL 
4 could necessitate using a combination of numerous design options, 
including the most efficient compressors, fans and motor designs, more-
efficient heat exchangers, and/or advanced controls. TSL 4 would save 
an estimated 14.8 quads of energy, an amount DOE considers significant. 
Under TSL 4, the NPV of consumer net benefit would be $1.5 billion 
using a discount rate of 7 percent, and $21.7 billion using a discount 
rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 291.4 Mt of 
CO2, 67.7 thousand tons of SO2, 496.0 thousand 
tons of NOX, 0.45 tons of Hg, 2,268.2 thousand tons of 
CH4, and 2.2 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 4 is $12.6 billion. The estimated monetary value of the health 
benefits from reduced SO2 and NOX emissions at 
TSL 4 is $7.8 billion using a 7-percent discount rate and $23.2 billion 
using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 4 is $21.9 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 4 is $57.5 billion. The estimated total 
NPV is provided for additional information; however, DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
potential standard level is economically justified.
    At TSL 4, the average LCC impact is a savings of $242 for small 
ACUACs, $3,880 for large ACUACs, and $12,766 for very large ACUACs. The 
simple payback period is 10 years for small ACUACs and seven years for 
large and very large ACUACs. The fraction of consumers experiencing a 
net LCC cost is 60 percent for small ACUACs, 31 percent for large 
ACUACs, and 24 percent for very large ACUACs. On a shipment-weighted 
average basis, the average LCC impact is a savings of $2,379, the 
simple payback period is 9 years, and the fraction of consumers 
experiencing a net LCC cost is 49 percent.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$1,550.6 million to a decrease of $830.1 million, which corresponds to 
decreases of 58.4 percent to 31.3 percent, respectively. DOE estimates 
that industry would need to invest $1,891 million to comply with 
standards set at TSL 4. DOE estimates that approximately 2 percent of 
small ACUAC/HP models, 10 percent of large ACUAC/HP models, and 1 
percent of very large ACUAC/HP models currently available for purchase 
meet the efficiency levels that would be required at TSL 4 after 
testing using the amended test procedure and when represented in the 
new metric. Very few manufacturers produce equipment at TSL 4 
efficiency levels at this time. DOE estimates that only three of the 
nine manufacturers of small ACUACs/HPs currently offer models that meet 
the efficiency levels that would be required for small ACUACs/HPs at 
TSL 4. DOE estimates that only two of the eight manufacturers of large 
ACUACs/HPs currently offer models that meet the efficiency levels that 
would be required for large ACUACs/HPs at TSL 4. DOE estimates

[[Page 44127]]

that only one of the eight manufacturers of very large ACUACs/HPs 
currently offers models that meet the efficiency level that would be 
required for very large ACUACs/HPs at TSL 4.
    At TSL 4, DOE understands that all of the manufacturers would need 
to utilize significant engineering resources to redesign their current 
offerings to bring them into compliance with TSL 4 efficiencies. All 
manufacturers would have to invest heavily in their production 
facilities and source more-efficient components for incorporation into 
their designs. One of the challenges that certain members of the ACUAC/
HP Working Group expressed was ensuring the footprint of the large and 
very large ACUACs and ACUHPs did not grow to a level that was not 
sustainable for existing retrofits. While there was some uncertainty 
surrounding what those footprints might look like, most manufacturers 
were generally concerned that TSL 4 could require such increases 
especially for very large models. DOE understands that to meet max-tech 
IVEC levels, a high fraction of models would need larger cabinet 
footprints to accommodate the increased size of efficiency-improving 
design options, which would require substantial investment in retooling 
as well as redesign engineering efforts.
    DOE estimates that at TSL 4, most manufacturers would be required 
to redesign every ACUAC/HP model offering covered by this rulemaking. 
Some manufacturers may not have the engineering capacity to complete 
the necessary redesigns within the compliance period. If manufacturers 
were unable to redesign all their covered ACUAC/HP models within the 
compliance period, they would likely prioritize redesigns based on 
model sales volume. In such case, model offerings of large and very 
large ACUACs/HPs might decrease given that there are many capacities 
offered for large and very large ACUACs/HPs and comparatively fewer 
shipments across which to distribute conversion costs. Furthermore, DOE 
recognizes that a standard set at max-tech could greatly limit 
equipment differentiation in the ACUAC/ACUHP market.
    Based upon the previous considerations, the Secretary concludes 
that at TSL 4 for ACUACs and ACUHPs, the benefits of energy savings, 
positive NPV of consumer benefits, emission reductions, and the 
estimated monetary value of the emissions reductions would be 
outweighed by the impacts on manufacturers, including the large 
conversion costs, profit margin impacts that could result in a large 
reduction in INPV, and the scale and magnitude of the redesign efforts 
needed for manufacturers to bring their current equipment offerings 
into compliance at this TSL. DOE is concerned that manufacturers may 
narrow their equipment offerings and focus on high-volume models to 
meet the standard within the compliance window. DOE is also concerned 
with the potential footprint implications especially for very large 
ACUAC/HP models as manufacturer optimize around the new test procedure 
and metric for the largest of ACUAC/HP models. Consequently, DOE has 
concluded that it is unable to make a determination, supported by clear 
and convincing evidence, that TSL 4 is economically justified.
    DOE then considered TSL 3 (the Recommended TSL), which represents 
efficiency levels 4, 2, and 1 for small, large, and very large ACUACs 
and ACUHPs, respectively. At TSL 3 efficiency levels, DOE understands 
that manufacturers would likely need to implement fewer design options 
than needed for TSL 4. These design options could include increasing 
outdoor and/or indoor coil size, modifying compressor staging, and 
improving fan and/or fan motor efficiency in order to meet these 
levels. These technologies and design paths are familiar to 
manufacturers as they produce equipment today that can meet TSL 3 
efficiency levels, but they are not optimized around the new test 
procedure and metrics, which are more representative of field 
performance. The Recommended TSL would save an estimated 5.5 quads of 
energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer net benefit would be $4.4 billion using a discount rate of 7 
percent, and $15.3 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at the Recommended TSL are 
108.7 Mt of CO2, 25.3 thousand tons of SO2, 185.1 
thousand tons of NOX, 0.2 tons of Hg, 845.6 thousand tons of 
CH4, and 0.8 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 $4.86 billion. The estimated monetary value of 
the health benefits from reduced SO2 and NOX 
emissions at the Recommended TSL is $3.0 billion using a 7-percent 
discount rate and $8.8 billion using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 3 is $12.3 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 3 is $29.0 billion. The estimated total 
NPV is provided for additional information; however, DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
potential standard level is economically justified.
    At the Recommended TSL, the average LCC impact is a savings of 
$1,380 for small ACUACs, $2,488 for large ACUACs, and $6,431 for very 
large ACUACs. The simple payback period is six years for small ACUACs, 
3.5 years for large ACUACs, and 1 year for very large ACUACs. The 
fraction of consumers experiencing a net LCC cost is 26 percent for 
small ACUACs, 4 percent for large ACUACs, and 1 percent for very large 
ACUACs. On a shipment-weighted average basis, the average LCC impact is 
a savings of $2,154, the simple payback period is 4.8 years, and the 
fraction of consumers experiencing a net LCC cost is 18 percent.
    At the Recommended TSL, TSL 3, the projected change in INPV ranges 
from a decrease of $193.9 million to a decrease $79.5 million, which 
correspond to decreases of 7.3 percent and 3.0 percent, respectively. 
DOE estimates that industry must invest $288 million to comply with 
standards set at the Recommended TSL. The ACUAC/HP Working Group 
manufacturers were more comfortable with TSL 3 efficiency levels 
because the technologies anticipated to be used are the same as 
technologies employed in the commercially available products today. In 
some cases, manufacturers believed existing cabinets could be 
maintained, while in other cases, investments would be needed to modify 
production equipment for new cabinet designs to optimize fan design and 
accommodate other changes. DOE estimates that at TSL 3 efficiency 
levels manufacturers might likely utilize staging of the compressor 
instead of moving the entire market to variable-speed compressors. 
However, DOE understands that both of these are options that 
manufacturers may choose to improve efficiency for those models needing 
redesign. While DOE estimates that there are currently few shipments at 
the Recommended TSL, particularly for small ACUACs/HPs (as discussed in 
section IV.F.8 of this document), DOE estimates that approximately 37 
percent of small ACUAC/HP models, 50 percent of large ACUAC/HP models, 
and 64 percent of very large ACUAC/HP models currently available would 
have the capability of meeting the efficiency levels required at

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TSL 3 without being redesigned. This indicates that there is already a 
significant number of models available on the market that would meet 
the Recommended TSL when represented in the new metric, and that the 
technology to meet these standards is readily available. Manufacturers 
understand the design pathways and have significant experience with the 
existing technologies needed to bring the remaining models into 
compliance within the timeframe given. DOE estimates that five of the 
nine manufacturers of small ACUACs/HPs offer small ACUACs/HPs that 
would meet the efficiency level required at TSL 3. DOE estimates that 
six of the eight manufacturers of large ACUACs/HPs offer large ACUACs/
HPs that meet the efficiency level required at TSL 3. DOE estimates 
that six of the eight manufacturers of very large ACUACs/HPs offer very 
large ACUACs/HPs that meet the efficiency level required at TSL 3. 
Given the support expressed by the ACUAC/HP Working Group for TSL 3 
(the Recommended TSL), DOE believes that all manufacturers of ACUACs/
HPs will be able to redesign their model offerings in the compliance 
timeframe.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has concluded that the Recommended TSL (TSL 3) 
for ACUACs and ACUHPs is in accordance with 42 U.S.C. 6313(a)(6)(B), 
which contains provisions for adopting a uniform national standard more 
stringent than the amended ASHRAE Standard 90.1 \85\ for the equipment 
considered in this document. Specifically, the Secretary has 
determined, supported by clear and convincing evidence as described in 
this direct final rule and accompanying TSD, that such adoption would 
result in significant additional 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. At this TSL, the average LCC savings for consumers 
of ACUACs is positive. An estimated 18 percent of ACUAC consumers 
experience a net cost. 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. Notably, the benefits to consumers vastly 
outweigh the cost to manufacturers. At the Recommended TSL, the NPV of 
consumer benefits, even measured at the more conservative discount rate 
of 7 percent, is over 47 times higher than the maximum estimated 
manufacturers' loss in INPV. The economic justification for standard 
levels at the Recommended TSL is clear and convincing even without 
weighing the estimated monetary value of emissions reductions. When 
those emissions reductions are included--representing $4.9 billion in 
climate benefits (associated with the average SC-GHG at a 3-percent 
discount rate), and $9.0 billion (using a 3-percent discount rate) or 
$3.0 billion (using a 7-percent discount rate) in health benefits--the 
rationale becomes stronger still.
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    \85\ As discussed in section II.B.2 of this document, ASHRAE 
Standard 90.1-2019 updated the minimum efficiency levels for ACUACs 
and ACUHPs to align with those adopted by DOE in the January 2016 
Direct Final Rule (i.e., ASHRAE Standard 90.1-2019 includes minimum 
efficiency levels that are aligned with the current Federal energy 
conservation standards). ASHRAE Standard 90.1-2022 includes the same 
minimum efficiency levels for ACUACs and ACUHPs as ASHRAE Standard 
90.1-2019.
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    Accordingly, the Secretary has concluded that the Recommended TSL 
(TSL 3) would offer the maximum improvement in efficiency that is 
technologically feasible and economically justified and would result in 
the significant additional conservation of energy. The Secretary has 
also concluded, by clear and convincing evidence, that the adoption of 
the recommended standards would result in the significant conservation 
of energy and is technologically feasible and economically justified. 
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 (Dec. 13, 2021). Although DOE has not conducted a comparative 
analysis to select the amended energy conservation standards, DOE notes 
that compared to TSL 4, the Recommended TSL results in shorter payback 
periods and fewer consumers with net cost and results in a lower 
maximum decrease in INPV and lower manufacturer conversion costs.
    Although DOE considered amended standard levels for ACUACs and 
ACUHPs by grouping the efficiency levels for each equipment class into 
TSLs, DOE evaluates all analyzed efficiency levels in its analysis. 
Although there are ELs for each equipment class above those of TSL 3, 
the previously discussed uncertainty around the economic justification 
to support amended standards at TSL 4 applies for all efficiency levels 
higher than those of the Recommended TSL. As discussed, there is 
substantial uncertainty as to which combinations of design options 
manufacturers may employ to achieve high IVEC levels (i.e., those above 
the Recommended TSL), which may result in very high product conversion 
costs. In addition, manufacturers' capacity to redesign all models that 
do not meet the amended standard levels is constrained by resources 
devoted to the low-GWP refrigerant transition and becomes increasingly 
difficult as minimum efficiency levels increases above the Recommended 
TSL. Also, similar to TSL 4, many more cabinets would need to be 
redesigned at efficiency levels above those at TSL 3, which would 
require substantial investment in design and retooling. For small 
ACUACs and ACUHPs, adopting an efficiency level above that at TSL 3 
would result in nearly 50 percent of purchasers experiencing a net 
cost. For large and very large ACUACs and ACUHPs, higher ELs could 
potentially result in reduced configuration and model availability due 
to large jumps in failing model counts, high cost of redesign, high 
conversion costs, and lower shipment volumes (as compared to small 
ACUACs and ACUHPs) across which to distribute conversion costs. 
Therefore, DOE has concluded that it is unable to make a determination, 
supported by clear and convincing evidence, that efficiency levels 
above TSL 3 are economically justified.
    However, at the Recommended TSL, there are substantially more model 
offerings currently available on the market, and significantly less 
redesign would be required than for higher efficiency levels. 
Additionally, the efficiency levels at TSL 3 result in positive LCC 
savings for all equipment classes and with far fewer consumers 
experiencing a net LCC cost, and mitigate the impacts on 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.
    Under the authority provided by 42 U.S.C. 6295(p)(4) and 
6316(b)(1), DOE is issuing this direct final rule that adopts amended 
energy conservation standards for ACUACs and ACUHPs at the Recommended 
TSL (TSL 3). The amended energy conservation standards for ACUACs and 
ACUHPs, which are expressed as minimum efficiency values

[[Page 44129]]

in terms of IVEC and IVHE, are shown in Table V.29.
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2. Annualized Benefits and Costs of the 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$) of the 
benefits from operating equipment that meet the adopted standards 
(consisting primarily of operating cost savings from using less 
energy), minus increases in equipment purchase costs, and (2) the 
annualized monetary value of the climate and health benefits from 
emissions reductions.
    Table V.30 shows the annualized values for ACUACs and ACUHPs under 
the Recommended TSL (TSL 3), expressed in 2022$. The results under the 
primary estimate are as follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced NOx and SO2 emissions, and the 
3-percent discount rate case for climate benefits from reduced GHG 
emissions, the estimated cost of the standards for ACUACs and ACUHPs 
adopted in this rule is $481.3 million per year in increased equipment 
costs, while the estimated annual benefits are $944.7 million in 
reduced equipment operating costs, $279.2 million in climate benefits, 
and $317.1 million in health benefits. In this case, the net benefit 
would amount to $1.1 billion per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the standards for ACUACs and ACUHPs is $493.2 million 
per year in increased equipment costs, while the estimated annual 
benefits are $1371.6 billion in reduced operating costs, $279.2 million 
in climate benefits, and $507.9 million in health benefits. In this 
case, the net benefit amounts to $1.7 billion per year.
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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,'' 58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by 
E.O. 13563, ``Improving Regulation and Regulatory Review,'' 76 FR 3821 
(Jan. 21, 2011), 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

[[Page 44132]]

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, as amended by E.O. 14094. Accordingly, pursuant to 
section 6(a)(3)(C) of E.O. 12866, DOE has provided to OIRA an 
assessment, including the underlying analysis, of benefits and costs 
anticipated from the 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, ``Proper Consideration of Small Entities in Agency 
Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published procedures 
and policies in the Federal Register 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 ACUAC/HP Working Group ECS Term Sheet meets 
the necessary requirements under EPCA to issue this direct final rule 
for energy conservation standards for ACUACs and ACUHPs under the 
procedures in 42 U.S.C. 6295(p)(4). DOE notes that the NOPR for energy 
conservation standards for ACUACs and ACUHPs published elsewhere in 
this issue of the Federal Register contains a regulatory flexibility 
analysis.

C. Review Under the Paperwork Reduction Act of 1995

    Under the procedures established by the Paperwork Reduction Act of 
1995 (``PRA''), a person is not required to respond to a collection of 
information by a Federal agency unless that collection of information 
displays a currently valid OMB Control Number. OMB Control Number 1910-
1400, Compliance Statement Energy/Water Conservation Standards for 
Appliances, is currently valid and assigned to the certification 
reporting requirements applicable to covered products and equipment, 
including ACUACs and ACUHPs.
    DOE's certification and compliance activities ensure accurate and 
comprehensive information about the energy and water use 
characteristics of covered products and covered equipment sold in the 
United States. Manufacturers of all covered products and covered 
equipment must submit a certification report before a basic model is 
distributed in commerce, annually thereafter, and if the basic model is 
redesigned in such a manner to increase the consumption or decrease the 
efficiency of the basic model such that the certified rating is no 
longer supported by the test data. Additionally, manufacturers must 
report when production of a basic model has ceased and is no longer 
offered for sale as part of the next annual certification report 
following such cessation. DOE requires the manufacturer of any covered 
product or covered equipment to establish, maintain, and retain the 
records of certification reports, of the underlying test data for all 
certification testing, and of any other testing conducted to satisfy 
the requirements of part 429, part 430, and/or part 431. Certification 
reports provide DOE and consumers with comprehensive, up-to date 
efficiency information and support effective enforcement.
    DOE is not amending the existing certification or reporting 
requirements or establishing new DOE reporting requirements for ACUACs 
and ACUHPs in this direct final rule. Instead, if determined to be 
necessary, DOE may consider proposals to establish associated 
certification requirements and reporting for ACUACs and ACUHPs under a 
separate, future rulemaking regarding appliance and equipment 
certification. DOE will address changes to OMB Control Number 1910-1400 
at that time, as necessary. Therefore, DOE has concluded that the 
amended energy conservation standards for ACUACs and ACUHPs will not 
impose additional costs for manufacturers related to reporting and 
certification.
    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 direct final 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 B, 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 otherwise meets the requirements 
for application of a categorical exclusion. See 10 CFR 1021.410. 
Therefore, DOE has determined that promulgation of this 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.

[[Page 44133]]

E. Review Under Executive Order 13132

    E.O. 13132, ``Federalism,'' 64 FR 43255 (August 10, 1999), imposes 
certain requirements on Federal agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and to carefully assess 
the necessity for such actions. The Executive order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined this rule and has determined 
that it would not have a substantial direct effect on the States, on 
the relationship between the National Government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government. EPCA governs and prescribes Federal preemption of State 
regulations as to energy conservation for the equipment that is the 
subject of this 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. 6316(a) and (b); 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,'' 61 FR 4729 (Feb. 7, 1996), 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. 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 ``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 ACUAC and ACUHP 
manufacturers in the years between the direct final rule and the 
compliance date for the amended standards and (2) incremental 
additional expenditures by consumers to purchase higher-efficiency 
ACUACs and ACUHPs, 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. The 
SUPPLEMENTARY INFORMATION section of this document 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. 
6313(a)(6)(C)(i), this direct final rule establishes amended energy 
conservation standards for ACUACs and ACUHPs that DOE has determined to 
be both technologically feasible and economically justified, and save a 
significant additional amount of energy, as required by 42 U.S.C. 
6313(a)(6)(A)(ii)(II) and (a)(6)(B)(ii). 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 rule that may affect family well-being. 
This rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

    Pursuant to 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

[[Page 44134]]

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 ACUACs and ACUHPs, 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.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (``OSTP''), issued its Final Information 
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan. 
14, 2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the Bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' 70 FR 2664, 2667 (Jan. 14, 2005).
    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.\86\ 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 December 2021 NAS report.\87\
---------------------------------------------------------------------------

    \86\ The 2007 ``Energy Conservation Standards Rulemaking Peer 
Review Report'' is available at the following website: 
www.energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0 (last accessed Sept. 26, 
2023).
    \87\ The December 2021 NAS report is available at 
www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards (last accessed Dec. 5, 
2023).
---------------------------------------------------------------------------

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of this rule prior to its effective date. The report will 
state that 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 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Reporting and recordkeeping 
requirements.

Signing Authority

    This document of the Department of Energy was signed on April 12, 
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 17, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

    For the reasons set forth in the preamble, DOE amends part 431 of 
chapter II, subchapter D, of title 10 of the Code of Federal 
Regulations, as set forth below:

PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND 
INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 431 continues to read as follows:

    Authority: 42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.

0
2. Revise Sec.  431.97 to read as follows:


Sec.  431.97  Energy efficiency standards and their compliance dates.

    (a) All basic models of commercial package air conditioning and 
heating equipment must be tested for performance using the applicable 
DOE test procedure in Sec.  431.96, be compliant with the applicable 
standards set forth

[[Page 44135]]

in paragraphs (b) through (i) of this section, and be certified to the 
Department under 10 CFR part 429.
    (b) Each air-cooled commercial package air conditioning and heating 
equipment (excluding air-cooled equipment with cooling capacity less 
than 65,000 Btu/h and double-duct air conditioners or heat pumps) 
manufactured on or after January 1, 2023, and before January 1, 2029, 
must meet the applicable minimum energy efficiency standard level(s) 
set forth in table 1 to this paragraph (b). Each air-cooled commercial 
package air conditioning and heating equipment (excluding air-cooled 
equipment with cooling capacity less than 65,000 Btu/h and double-duct 
air conditioners or heat pumps) manufactured on or after January 1, 
2029, must meet the applicable minimum energy efficiency standard 
level(s) set forth in table 2 to this paragraph (b). Each water-cooled 
commercial package air conditioning and heating equipment manufactured 
on or after the compliance date listed in table 3 to this paragraph (b) 
must meet the applicable minimum energy efficiency standard level(s) 
set forth in table 3. Each evaporatively-cooled commercial air 
conditioning and heating equipment manufactured on or after the 
compliance date listed in table 4 to this paragraph (b) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
table 4. Each double-duct air conditioner or heat pump manufactured on 
or after January 1, 2010, must meet the applicable minimum energy 
efficiency standard level(s) set forth in table 5 to this paragraph 
(b).

  Table 1 to Paragraph (b)--Minimum Efficiency Standards for Air-Cooled Commercial Package Air Conditioning and
   Heating Equipment With a Cooling Capacity Greater Than or Equal to 65,000 Btu/h (Excluding Double-Duct Air-
                                          Conditioners and Heat Pumps)
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                    Supplementary     Minimum efficiency         equipment
       Cooling capacity            Subcategory      heating type             \1\           manufactured starting
                                                                                                  on . . .
----------------------------------------------------------------------------------------------------------------
  Air-Cooled Commercial Package Air Conditioning and Heating Equipment With a Cooling Capacity Greater Than or
                  Equal to 65,000 Btu/h (Excluding Double-Duct Air Conditioners and Heat Pumps)
----------------------------------------------------------------------------------------------------------------
>=65,000 Btu/h and <135,000     AC..............  Electric          IEER = 14.8..........  January 1, 2023.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=65,000 Btu/h and <135,000     AC..............  All Other Types   IEER = 14.6..........  January 1, 2023.
 Btu/h.                                            of Heating.
>=65,000 Btu/h and <135,000     HP..............  Electric          IEER = 14.1..........  January 1, 2023.
 Btu/h.                                            Resistance       COP = 3.4............
                                                   Heating or No
                                                   Heating.
>=65,000 Btu/h and <135,000     HP..............  All Other Types   IEER = 13.9..........  January 1, 2023.
 Btu/h.                                            of Heating.      COP = 3.4............
>=135,000 Btu/h and <240,000    AC..............  Electric          IEER = 14.2..........  January 1, 2023.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=135,000 Btu/h and <240,000    AC..............  All Other Types   IEER = 14.0..........  January 1, 2023.
 Btu/h.                                            of Heating.
>=135,000 Btu/h and <240,000    HP..............  Electric          IEER = 13.5..........  January 1, 2023.
 Btu/h.                                            Resistance       COP = 3.3............
                                                   Heating or No
                                                   Heating.
>=135,000 Btu/h and <240,000    HP..............  All Other Types   IEER = 13.3..........  January 1, 2023.
 Btu/h.                                            of Heating.      COP = 3.3............
>=240,000 Btu/h and <760,000    AC..............  Electric          IEER = 13.2..........  January 1, 2023.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=240,000 Btu/h and <760,000    AC..............  All Other Types   IEER = 13.0..........  January 1, 2023.
 Btu/h.                                            of Heating.
>=240,000 Btu/h and <760,000    HP..............  Electric          IEER = 12.5..........  January 1, 2023.
 Btu/h.                                            Resistance       COP = 3.2............
                                                   Heating or No
                                                   Heating.
>=240,000 Btu/h and <760,000    HP..............  All Other Types   IEER = 12.3..........  January 1, 2023.
 Btu/h.                                            of Heating.      COP = 3.2............
----------------------------------------------------------------------------------------------------------------
\1\ See section 3 of appendix A to this subpart for the test conditions upon which the COP standards are based.


      Table 2 to Paragraph (b)--Updated Minimum Efficiency Standards for Air-Cooled Commercial Package Air
   Conditioning and Heating Equipment With a Cooling Capacity Greater Than or Equal to 65,000 Btu/h (Excluding
                                  Double-Duct Air Conditioners and Heat Pumps)
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                    Supplementary                                equipment
       Cooling capacity            Subcategory      heating type      Minimum efficiency   manufactured starting
                                                                                                  on . . .
----------------------------------------------------------------------------------------------------------------
  Air-Cooled Commercial Package Air Conditioning and Heating Equipment With a Cooling Capacity Greater Than or
                  Equal to 65,000 Btu/h (Excluding Double-Duct Air Conditioners and Heat Pumps)
----------------------------------------------------------------------------------------------------------------
>=65,000 Btu/h and <135,000     AC..............  Electric          IVEC = 14.3..........  January 1, 2029.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=65,000 Btu/h and <135,000     AC..............  All Other Types   IVEC = 13.8..........  January 1, 2029.
 Btu/h.                                            of Heating.
>=65,000 Btu/h and <135,000     HP..............  All Types of      IVEC = 13.4..........  January 1, 2029.
 Btu/h.                                            Heating.         IVHE = 6.2...........
>=135,000 Btu/h and <240,000    AC..............  Electric          IVEC = 13.8..........  January 1, 2029.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=135,000 Btu/h and <240,000    AC..............  All Other Types   IVEC = 13.3..........  January 1, 2029.
 Btu/h.                                            of Heating.
>=135,000 Btu/h and <240,000    HP..............  All Types of      IVEC = 13.1..........  January 1, 2029.
 Btu/h.                                            Heating.         IVHE = 6.0...........
>=240,000 Btu/h and <760,000    AC..............  Electric          IVEC = 12.9..........  January 1, 2029.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=240,000 Btu/h and <760,000    AC..............  All Other Types   IVEC = 12.2..........  January 1, 2029.
 Btu/h.                                            of Heating.
>=240,000 Btu/h and <760,000    HP..............  All Types of      IVEC = 12.1..........  January 1, 2029.
 Btu/h.                                            Heating.         IVHE = 5.8...........
----------------------------------------------------------------------------------------------------------------


[[Page 44136]]


     Table 3 to Paragraph (b)--Minimum Cooling Efficiency Standards for Water-Cooled Commercial Package Air
                                             Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
           Cooling capacity             Supplementary heating      Minimum efficiency     equipment manufactured
                                                 type                                       starting on . . .
----------------------------------------------------------------------------------------------------------------
                           Water-Cooled Commercial Package Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
<65,000 Btu/h........................  All....................  EER = 12.1.............  October 29, 2003.
>=65,000 Btu/h and <135,000 Btu/h....  No Heating or Electric   EER = 12.1.............  June 1, 2013.
                                        Resistance Heating.
>=65,000 Btu/h and <135,000 Btu/h....  All Other Types of       EER = 11.9.............  June 1, 2013.
                                        Heating.
>=135,000 Btu/h and <240,000 Btu/h...  No Heating or Electric   EER = 12.5.............  June 1, 2014.
                                        Resistance Heating.
>=135,000 Btu/h and <240,000 Btu/h...  All Other Types of       EER = 12.3.............  June 1, 2014.
                                        Heating.
>=240,000 Btu/h and <760,000 Btu/h...  No Heating or Electric   EER = 12.4.............  June 1, 2014.
                                        Resistance Heating.
>=240,000 Btu/h and <760,000 Btu/h...  All Other Types of       EER = 12.2.............  June 1, 2014.
                                        Heating.
----------------------------------------------------------------------------------------------------------------


 Table 4 to Paragraph (b)--Minimum Cooling Efficiency Standards for Evaporatively-Cooled Commercial Package Air
                                             Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
                                                                                             Compliance date:
           Cooling capacity             Supplementary heating      Minimum efficiency     equipment manufactured
                                                 type                                       starting on . . .
----------------------------------------------------------------------------------------------------------------
                       Evaporatively-Cooled Commercial Package Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
<65,000 Btu/h........................  All....................  EER = 12.1.............  October 29, 2003.
>=65,000 Btu/h and <135,000 Btu/h....  No Heating or Electric   EER = 12.1.............  June 1, 2013.
                                        Resistance Heating.
>=65,000 Btu/h and <135,000 Btu/h....  All Other Types of       EER = 11.9.............  June 1, 2013.
                                        Heating.
>=135,000 Btu/h and <240,000 Btu/h...  No Heating or Electric   EER = 12.0.............  June 1, 2014.
                                        Resistance Heating.
>=135,000 Btu/h and <240,000 Btu/h...  All Other Types of       EER = 11.8.............  June 1, 2014.
                                        Heating.
>=240,000 Btu/h and <760,000 Btu/h...  No Heating or Electric   EER = 11.9.............  June 1, 2014.
                                        Resistance Heating.
>=240,000 Btu/h and <760,000 Btu/h...  All Other Types of       EER = 11.7.............  June 1, 2014.
                                        Heating.
----------------------------------------------------------------------------------------------------------------


      Table 5 to Paragraph (b)--Minimum Efficiency Standards for Double-Duct Air Conditioners or Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                    Supplementary     Minimum efficiency         equipment
       Cooling capacity            Subcategory      heating type             \1\           manufactured starting
                                                                                                  on . . .
----------------------------------------------------------------------------------------------------------------
                                   Double-Duct Air Conditioners or Heat Pumps
----------------------------------------------------------------------------------------------------------------
>=65,000 Btu/h and <135,000     AC..............  Electric          EER = 11.2...........  January 1, 2010.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=65,000 Btu/h and <135,000     AC..............  All Other Types   EER = 11.0...........  January 1, 2010.
 Btu/h.                                            of Heating.
>=65,000 Btu/h and <135,000     HP..............  Electric          EER = 11.0...........  January 1, 2010.
 Btu/h.                                            Resistance       COP = 3.3............
                                                   Heating or No
                                                   Heating.
>=65,000 Btu/h and <135,000     HP..............  All Other Types   EER = 10.8...........  January 1, 2010.
 Btu/h.                                            of Heating.      COP = 3.3............
>=135,000 Btu/h and <240,000    AC..............  Electric          EER = 11.0...........  January 1, 2010.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=135,000 Btu/h and <240,000    AC..............  All Other Types   EER = 10.8...........  January 1, 2010.
 Btu/h.                                            of Heating.
>=135,000 Btu/h and <240,000    HP..............  Electric          EER = 10.6...........  January 1, 2010.
 Btu/h.                                            Resistance       COP = 3.2............
                                                   Heating or No
                                                   Heating.
>=135,000 Btu/h and <240,000    HP..............  All Other Types   EER = 10.4...........  January 1, 2010.
 Btu/h.                                            of Heating.      COP = 3.2............
>=240,000 Btu/h and <300,000    AC..............  Electric          EER = 10.0...........  January 1, 2010.
 Btu/h.                                            Resistance
                                                   Heating or No
                                                   Heating.
>=240,000 Btu/h and <300,000    AC..............  All Other Types   EER = 9.8............  January 1, 2010.
 Btu/h.                                            of Heating.
>=240,000 Btu/h and <300,000    HP..............  Electric          EER = 9.5............  January 1, 2010.
 Btu/h.                                            Resistance       COP = 3.2............
                                                   Heating or No
                                                   Heating.
>=240,000 Btu/h and <300,000    HP..............  All Other Types   EER = 9.3............  January 1, 2010.
 Btu/h.                                            of Heating.      COP = 3.2............
----------------------------------------------------------------------------------------------------------------
\1\ See section 3 of appendix A to this subpart for the test conditions upon which the COP standards are based.

    (c) Each water-source heat pump manufactured starting on the 
compliance date listed in table 6 to this paragraph (c) must meet the 
applicable minimum energy efficiency standard level(s) set forth in 
this paragraph (c).

[[Page 44137]]



 Table 6 to Paragraph (c)--Minimum Efficiency Standards for Water-Source
                  Heat Pumps (Water-to-Air, Water-Loop)
------------------------------------------------------------------------
                                                       Compliance date:
                                                           equipment
        Cooling capacity          Minimum efficiency     manufactured
                                                       starting on . . .
------------------------------------------------------------------------
           Water-Source Heat Pumps (Water-to-Air, Water-Loop)
------------------------------------------------------------------------
<17,000 Btu/h...................  EER = 12.2........  October 9, 2015.
                                  COP = 4.3.........
>=17,000 Btu/h and <65,000 Btu/h  EER = 13.0........  October 9, 2015.
                                  COP = 4.3.........
>=65,000 Btu/h and <135,000 Btu/  EER = 13.0........  October 9, 2015.
 h.                               COP = 4.3.........
------------------------------------------------------------------------

    (d) Each non-standard size packaged terminal air conditioner (PTAC) 
and packaged terminal heat pump (PTHP) manufactured on or after October 
7, 2010, must meet the applicable minimum energy efficiency standard 
level(s) set forth in table 7 to this paragraph (d). Each standard size 
PTAC manufactured on or after October 8, 2012, and before January 1, 
2017, must meet the applicable minimum energy efficiency standard 
level(s) set forth in table 7. Each standard size PTHP manufactured on 
or after October 8, 2012, must meet the applicable minimum energy 
efficiency standard level(s) set forth in table 7. Each standard size 
PTAC manufactured on or after January 1, 2017, must meet the applicable 
minimum energy efficiency standard level(s) set forth in table 8 to 
this paragraph (d).

                    Table 7 to Paragraph (d)--Minimum Efficiency Standards for PTAC and PTHP
----------------------------------------------------------------------------------------------------------------
                                                                                      Compliance date: products
        Equipment type             Category      Cooling capacity       Minimum      manufactured on and after .
                                                                      efficiency                 . .
----------------------------------------------------------------------------------------------------------------
PTAC.........................  Standard Size...  <7,000 Btu/h....  EER = 11.7......  October 8, 2012.\2\
                                                 >=7,000 Btu/h     EER = 13.8-(0.3   October 8, 2012.\2\
                                                  and <=15,000      x Cap \1\).
                                                  Btu/h.
                                                 >15,000 Btu/h...  EER = 9.3.......  October 8, 2012.\2\
                               Non-Standard      <7,000 Btu/h....  EER = 9.4.......  October 7, 2010.
                                Size.
                                                 >=7,000 Btu/h     EER = 10.9-       October 7, 2010.
                                                  and <=15,000      (0.213 x Cap
                                                  Btu/h.            \1\).
                                                 >15,000 Btu/h...  EER = 7.7.......  October 7, 2010.
PTHP.........................  Standard Size...  <7,000 Btu/h....  EER = 11.9......  October 8, 2012.
                                                                   COP = 3.3.......
                                                 >=7,000 Btu/h     EER = 14.0-(0.3   October 8, 2012.
                                                  and <=15,000      x Cap \1\).
                                                  Btu/h.           COP = 3.7-(0.052
                                                                    x Cap \1\).
                                                 >15,000 Btu/h...  EER = 9.5.......  October 8, 2012.
                                                                   COP = 2.9.......
                               Non-Standard      <7,000 Btu/h....  EER = 9.3.......  October 7, 2010.
                                Size.                              COP = 2.7.......
                                                 >=7,000 Btu/h     EER = 10.8-       October 7, 2010.
                                                  and <=15,000      (0.213 x Cap
                                                  Btu/h.            \1\).
                                                                   COP = 2.9-(0.026
                                                                    x Cap \1\).
                                                 >15,000 Btu/h...  EER = 7.6.......  October 7, 2010.
                                                                   COP = 2.5.......
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95 [deg]F outdoor dry-bulb temperature.
\2\ And manufactured before January 1, 2017. See table 8 to this paragraph (d) for updated efficiency standards
  that apply to this category of equipment manufactured on and after January 1, 2017.


                     Table 8 to Paragraph (d)--Updated Minimum Efficiency Standards for PTAC
----------------------------------------------------------------------------------------------------------------
                                                                                      Compliance date: products
        Equipment type             Category      Cooling capacity       Minimum       manufactured on  and after
                                                                      efficiency                . . .
----------------------------------------------------------------------------------------------------------------
PTAC.........................  Standard Size...  <7,000 Btu/h....  EER = 11.9......  January 1, 2017.
                                                 >=7,000 Btu/h     EER = 14.0-(0.3   January 1, 2017.
                                                  and <=15,000      x Cap \1\).
                                                  Btu/h.
                                                 >15,000 Btu/h...  EER = 9.5.......  January 1, 2017.
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95 [deg]F outdoor dry-bulb temperature.

    (e)(1) Each single package vertical air conditioner and single 
package vertical heat pump manufactured on or after January 1, 2010, 
but before October 9, 2015 (for models >=65,000 Btu/h and <135,000 Btu/
h), or October 9, 2016 (for models >=135,000 Btu/h and <240,000 Btu/h), 
must meet the applicable

[[Page 44138]]

minimum energy conservation standard level(s) set forth in this 
paragraph (e)(1).

   Table 9 to Paragraph (e)(1)--Minimum Efficiency Standards for Single Package Vertical Air Conditioners and
                                       Single Package Vertical Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                                                   products
          Equipment type             Cooling capacity    Sub- category    Efficiency level   manufactured on and
                                                                                                 after . . .
----------------------------------------------------------------------------------------------------------------
Single package vertical air        <65,000 Btu/h......  AC              EER = 9.0..........  January 1, 2010.
 conditioners and single package                        HP              EER = 9.0..........  January 1, 2010.
 vertical heat pumps, single-                                           COP = 3.0..........
 phase and three-phase.
Single package vertical air        >=65,000 Btu/h and   AC              EER = 8.9..........  January 1, 2010.
 conditioners and single package    <135,000 Btu/h.     HP              EER = 8.9..........  January 1, 2010.
 vertical heat pumps.                                                   COP = 3.0..........
Single package vertical air        >=135,000 Btu/h and  AC              EER = 8.6..........  January 1, 2010.
 conditioners and single package    <240,000 Btu/h.     HP              EER = 8.6..........  January 1, 2010.
 vertical heat pumps.                                                   COP = 2.9..........
----------------------------------------------------------------------------------------------------------------

    (2) Each single package vertical air conditioner and single package 
vertical heat pump manufactured on and after October 9, 2015 (for 
models >=65,000 Btu/h and <135,000 Btu/h), or October 9, 2016 (for 
models >=135,000 Btu/h and <240,000 Btu/h), but before September 23, 
2019, must meet the applicable minimum energy conservation standard 
level(s) set forth in this paragraph (e)(2).

   Table 10 to Paragraph (e)(2)--Minimum Efficiency Standards for Single Package Vertical Air Conditioners and
                                       Single Package Vertical Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                                                   products
          Equipment type             Cooling capacity    Sub- category    Efficiency level   manufactured on and
                                                                                                 after . . .
----------------------------------------------------------------------------------------------------------------
Single package vertical air        <65,000 Btu/h......  AC              EER = 9.0..........  January 1, 2010.
 conditioners and single package                        HP              EER = 9.0..........  January 1, 2010.
 vertical heat pumps, single-                                           COP = 3.0..........
 phase and three-phase.
Single package vertical air        >=65,000 Btu/h and   AC              EER = 10.0.........  October 9, 2015.
 conditioners and single package    <135,000 Btu/h.     HP              EER = 10.0.........  October 9, 2015.
 vertical heat pumps.                                                   COP = 3.0..........
Single package vertical air        >=135,000 Btu/h and  AC              EER = 10.0.........  October 9, 2016.
 conditioners and single package    <240,000 Btu/h.     HP              EER = 10.0.........  October 9, 2016.
 vertical heat pumps.                                                   COP = 3.0..........
----------------------------------------------------------------------------------------------------------------

    (3) Each single package vertical air conditioner and single package 
vertical heat pump manufactured on and after September 23, 2019, must 
meet the applicable minimum energy conservation standard level(s) set 
forth in this paragraph (e)(3).

 Table 11 to Paragraph (e)(3)--Updated Minimum Efficiency Standards for Single Package Vertical Air Conditioners
                                     and Single Package Vertical Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                               Compliance date:
                                                                                                   products
          Equipment type             Cooling capacity    Sub- category    Efficiency level   manufactured on and
                                                                                                 after . . .
----------------------------------------------------------------------------------------------------------------
Single package vertical air        <65,000 Btu/h......  AC              EER = 11.0.........  September 23, 2019.
 conditioners and single package                        HP              EER = 11.0.........  September 23, 2019.
 vertical heat pumps, single-                                           COP = 3.3..........
 phase and three-phase.
Single package vertical air        >=65,000 Btu/h and   AC              EER = 10.0.........  October 9, 2015.
 conditioners and single package    <135,000 Btu/h.     HP              EER = 10.0.........  October 9, 2015.
 vertical heat pumps.                                                   COP = 3.0..........
Single package vertical air        >=135,000 Btu/h and  AC              EER = 10.0.........  October 9, 2016.
 conditioners and single package    <240,000 Btu/h.     HP              EER = 10.0.........  October 9, 2016.
 vertical heat pumps.                                                   COP = 3.0..........
----------------------------------------------------------------------------------------------------------------

    (f)(1) Each computer room air conditioner with a net sensible 
cooling capacity less than 65,000 Btu/h manufactured on or after 
October 29, 2012, and before May 28, 2024 and each computer room air 
conditioner with a net sensible cooling capacity greater than or equal 
to 65,000 Btu/h and less than 760,000 Btu/h manufactured on or after 
October 29, 2013, and before May 28, 2024 must meet the applicable 
minimum energy efficiency standard level(s) set forth in this paragraph 
(f)(1).

          Table 12 to Paragraph (f)(1)--Minimum Efficiency Standards for Computer Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
                                                                                      Minimum SCOP efficiency
               Equipment type                   Net sensible cooling capacity    -------------------------------
                                                                                     Downflow         Upflow
----------------------------------------------------------------------------------------------------------------
Air-Cooled.................................  <65,000 Btu/h......................            2.20            2.09
                                             >=65,000 Btu/h and <240,000 Btu/h..            2.10            1.99

[[Page 44139]]

 
                                             >=240,000 Btu/h and <760,000 Btu/h.            1.90            1.79
Water-Cooled...............................  <65,000 Btu/h......................            2.60            2.49
                                             >=65,000 Btu/h and <240,000 Btu/h..            2.50            2.39
                                             >=240,000 Btu/h and <760,000 Btu/h.            2.40            2.29
Water-Cooled with Fluid Economizer.........  <65,000 Btu/h......................            2.55            2.44
                                             >=65,000 Btu/h and <240,000 Btu/h..            2.45            2.34
                                             >=240,000 Btu/h and <760,000 Btu/h.            2.35            2.24
Glycol-Cooled..............................  <65,000 Btu/h......................            2.50            2.39
                                             >=65,000 Btu/h and <240,000 Btu/h..            2.15            2.04
                                             >=240,000 Btu/h and <760,000 Btu/h.            2.10            1.99
Glycol-Cooled with Fluid Economizer........  <65,000 Btu/h......................            2.45            2.34
                                             >=65,000 Btu/h and <240,000 Btu/h..            2.10            1.99
                                             >=240,000 Btu/h and <760,000 Btu/h.            2.05            1.94
----------------------------------------------------------------------------------------------------------------

    (2) Each computer room air conditioner manufactured on or after May 
28, 2024, must meet the applicable minimum energy efficiency standard 
level(s) set forth in this paragraph (f)(2).

                   Table 13 to Paragraph (f)(2)--Updated Minimum Efficiency Standards for Floor-Mounted Computer Room Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Downflow and upflow ducted                         Upflow non-ducted and horizontal flow
                                       -----------------------------------------------------------------------------------------------------------------
                                                                            Minimum NSenCOP                                          Minimum NSenCOP
            Equipment type                                                    efficiency                                               efficiency
                                        Net sensible cooling capacity -------------------------- Net sensible cooling capacity -------------------------
                                                                                       Upflow                                   Upflow  non-  Horizontal
                                                                         Downflow      ducted                                      ducted        flow
--------------------------------------------------------------------------------------------------------------------------------------------------------
Air-Cooled............................  <80,000 Btu/h................         2.70         2.67  <65,000 Btu/h................         2.16         2.65
                                        >=80,000 Btu/h and <295,000           2.58         2.55  >=65,000 Btu/h and <240,000           2.04         2.55
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.36         2.33  >=240,000 Btu/h and <760,000          1.89         2.47
                                         Btu/h.                                                   Btu/h.
Air-Cooled with Fluid Economizer......  <80,000 Btu/h................         2.70         2.67  <65,000 Btu/h................         2.09         2.65
                                        >=80,000 Btu/h and <295,000           2.58         2.55  >=65,000 Btu/h and <240,000           1.99         2.55
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.36         2.33  >=240,000 Btu/h and <760,000          1.81         2.47
                                         Btu/h.                                                   Btu/h.
Water-Cooled..........................  <80,000 Btu/h................         2.82         2.79  <65,000 Btu/h................         2.43         2.79
                                        >=80,000 Btu/h and <295,000           2.73         2.70  >=65,000 Btu/h and <240,000           2.32         2.68
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.67         2.64  >=240,000 Btu/h and <760,000          2.20         2.60
                                         Btu/h.                                                   Btu/h.
Water-Cooled with Fluid Economizer....  <80,000 Btu/h................         2.77         2.74  <65,000 Btu/h................         2.35         2.71
                                        >=80,000 Btu/h and <295,000           2.68         2.65  >=65,000 Btu/h and <240,000           2.24         2.60
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.61         2.58  >=240,000 Btu/h and <760,000          2.12         2.54
                                         Btu/h.                                                   Btu/h.
Glycol-Cooled.........................  <80,000 Btu/h................         2.56         2.53  <65,000 Btu/h................         2.08         2.48
                                        >=80,000 Btu/h and <295,000           2.24         2.21  >=65,000 Btu/h and <240,000           1.90         2.18
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.21         2.18  >=240,000 Btu/h and <760,000          1.81         2.18
                                         Btu/h.                                                   Btu/h.
Glycol-Cooled with Fluid Economizer...  <80,000 Btu/h................         2.51         2.48  <65,000 Btu/h................         2.00         2.44
                                        >=80,000 Btu/h and <295,000           2.19         2.16  >=65,000 Btu/h and <240,000           1.82         2.10
                                         Btu/h.                                                   Btu/h.
                                        >=295,000 Btu/h and <930,000          2.15         2.12  >=240,000 Btu/h and <760,000          1.73         2.10
                                         Btu/h.                                                   Btu/h.
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 14 to Paragraph (f)(2)--Minimum Efficiency Standards for Ceiling-
                 Mounted Computer Room Air Conditioners
------------------------------------------------------------------------
                                                     Minimum NSenCOP
                                 Net sensible          efficiency
        Equipment type             cooling     -------------------------
                                   capacity        Ducted     Non-ducted
------------------------------------------------------------------------
Air-Cooled with Free Air       <29,000 Btu/h..         2.05         2.08
 Discharge Condenser.
                               >=29,000 Btu/h          2.02         2.05
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.92         1.94
                                and <760,000
                                Btu/h.
Air-Cooled with Free Air       <29,000 Btu/h..         2.01         2.04
 Discharge Condenser and
 Fluid Economizer.
                               >=29,000 Btu/h          1.97            2
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.87         1.89
                                and <760,000
                                Btu/h.
Air-Cooled with Ducted         <29,000 Btu/h..         1.86         1.89
 Condenser.
                               >=29,000 Btu/h          1.83         1.86
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.73         1.75
                                and <760,000
                                Btu/h.
Air-Cooled with Fluid          <29,000 Btu/h..         1.82         1.85
 Economizer and Ducted
 Condenser.
                               >=29,000 Btu/h          1.78         1.81
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.68          1.7
                                and <760,000
                                Btu/h.
Water-Cooled.................  <29,000 Btu/h..         2.38         2.41
                               >=29,000 Btu/h          2.28         2.31
                                and <65,000
                                Btu/h.

[[Page 44140]]

 
                               >=65,000 Btu/h          2.18          2.2
                                and <760,000
                                Btu/h.
Water-Cooled with Fluid        <29,000 Btu/h..         2.33         2.36
 Economizer.
                               >=29,000 Btu/h          2.23         2.26
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          2.13         2.16
                                and <760,000
                                Btu/h.
Glycol-Cooled................  <29,000 Btu/h..         1.97            2
                               >=29,000 Btu/h          1.93         1.98
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.78         1.81
                                and <760,000
                                Btu/h.
Glycol-Cooled with Fluid       <29,000 Btu/h..         1.92         1.95
 Economizer.
                               >=29,000 Btu/h          1.88         1.93
                                and <65,000
                                Btu/h.
                               >=65,000 Btu/h          1.73         1.76
                                and <760,000
                                Btu/h.
------------------------------------------------------------------------

    (g)(1) Each variable refrigerant flow air conditioner or heat pump 
manufactured on or after the compliance date listed in table 15 to this 
paragraph (g)(1) and prior to January 1, 2024, must meet the applicable 
minimum energy efficiency standard level(s) set forth in this paragraph 
(g)(1).

    Table 15 to Paragraph (g)(1)--Minimum Efficiency Standards for Variable Refrigerant Flow Multi-Split Air
                                           Conditioners and Heat Pumps
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                    Cooling                                                       equipment
        Equipment type             capacity      Heating type \1\      Efficiency level     manufactured  on and
                                                                                                 after . . .
----------------------------------------------------------------------------------------------------------------
VRF Multi-Split Air            >=65,000 Btu/h    No Heating or     11.2 EER...............  January 1, 2010.
 Conditioners (Air-Cooled).     and <135,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   11.0 EER...............  January 1, 2010.
                                                  of Heating.
                               >=135,000 Btu/h   No Heating or     11.0 EER...............  January 1, 2010.
                                and <240,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   10.8 EER...............  January 1, 2010.
                                                  of Heating.
                               >=240,000 Btu/h   No Heating or     10.0 EER...............  January 1, 2010.
                                and <760,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   9.8 EER................  January 1, 2010.
                                                  of Heating.
VRF Multi-Split Heat Pumps     >=65,000 Btu/h    No Heating or     11.0 EER, 3.3 COP......  January 1, 2010.
 (Air-Cooled).                  and <135,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   10.8 EER, 3.3 COP......  January 1, 2010.
                                                  of Heating.
                               >=135,000 Btu/h   No Heating or     10.6 EER, 3.2 COP......  January 1, 2010.
                                and <240,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   10.4 EER, 3.2 COP......  January 1, 2010.
                                                  of Heating.
                               >=240,000 Btu/h   No Heating or     9.5 EER, 3.2 COP.......  January 1, 2010.
                                and <760,000      Electric
                                Btu/h.            Resistance
                                                  Heating.
                                                 All Other Types   9.3 EER, 3.2 COP.......  January 1, 2010.
                                                  of Heating.
VRF Multi-Split Heat Pumps     <17,000 Btu/h...  Without Heat      12.0 EER,..............  October 29, 2012.
 (Water-Source).                                  Recovery.        4.2 COP................  October 29, 2003.
                                                 With Heat         11.8 EER...............  October 29, 2012.
                                                  Recovery.        4.2 COP................  October 29, 2003.
                               >=17,000 Btu/h    All.............  12.0 EER, 4.2 COP......  October 29, 2003.
                                and <65,000 Btu/
                                h.
                               >=65,000 Btu/h    All.............  12.0 EER, 4.2 COP......  October 29, 2003.
                                and <135,000
                                Btu/h.
                               >=135,000 Btu/h   Without Heat      10.0 EER, 3.9 COP......  October 29, 2013.
                                and <760,000      Recovery.
                                Btu/h.
                                                 With Heat         9.8 EER, 3.9 COP.......  October 29, 2013.
                                                  Recovery.
----------------------------------------------------------------------------------------------------------------
\1\ VRF multi-split heat pumps (air-cooled) with heat recovery fall under the category of ``All Other Types of
  Heating'' unless they also have electric resistance heating, in which case it falls under the category for
  ``No Heating or Electric Resistance Heating.''

    (2) Each variable refrigerant flow air conditioner or heat pump 
(except air-cooled systems with cooling capacity less than 65,000 Btu/
h) manufactured on or after January 1, 2024, must meet the applicable 
minimum energy efficiency standard level(s) set forth in this paragraph 
(g)(2).

[[Page 44141]]



Table 16 to Paragraph (g)(2)--Updated Minimum Efficiency Standards for Variable Refrigerant Flow Multi-Split Air
                                           Conditioners and Heat Pumps
----------------------------------------------------------------------------------------------------------------
          Equipment type                Size category          Heating type             Minimum efficiency
----------------------------------------------------------------------------------------------------------------
VRF Multi-Split Air Conditioners    >=65,000 and <135,000  All.................  15.5 IEER.
 (Air-Cooled).                       Btu/h.
                                    >=135,000 and          All.................  14.9 IEER.
                                     <240,000 Btu/h.
                                    >=240,000 Btu/h and    All.................  13.9 IEER.
                                     <760,000 Btu/h.
VRF Multi-Split Heat Pumps (Air-    >=65,000 and <135,000  Heat Pump without     14.6 IEER, 3.3 COP.
 Cooled).                            Btu/h.                 Heat Recovery.
                                                           Heat Pump with Heat   14.4 IEER, 3.3 COP.
                                                            Recovery.
                                    >=135,000 and          Heat Pump without     13.9 IEER, 3.2 COP.
                                     <240,000 Btu/h.        Heat Recovery.       13.7 IEER, 3.2 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
                                    >=240,000 Btu/h and    Heat Pump without     12.7 IEER, 3.2 COP.
                                     <760,000 Btu/h.        Heat Recovery.       12.5 IEER, 3.2 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
VRF Multi-Split Heat Pumps (Water-  <65,000 Btu/h........  Heat Pump without     16.0 IEER, 4.3 COP.
 Source).                                                   Heat Recovery.       15.8 IEER, 4.3 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
                                    >=65,000 and <135,000  Heat Pump without     16.0 IEER, 4.3 COP.
                                     Btu/h.                 Heat Recovery.       15.8 IEER, 4.3 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
                                    >=135,000 and          Heat Pump without     14.0 IEER, 4.0 COP.
                                     <240,000 Btu/h.        Heat Recovery.       13.8 IEER, 4.0 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
                                    >=240,000 Btu/h and    Heat Pump without     12.0 IEER, 3.9 COP.
                                     <760,000 Btu/h.        Heat Recovery.       11.8 IEER, 3.9 COP.
                                                           Heat Pump with Heat
                                                            Recovery.
----------------------------------------------------------------------------------------------------------------

    (h) Each direct expansion-dedicated outdoor air system manufactured 
on or after the compliance date listed in table 17 to this paragraph 
(h) must meet the applicable minimum energy efficiency standard 
level(s) set forth in this paragraph (h).

   Table 17 to Paragraph (h)--Minimum Efficiency Standards for Direct Expansion-Dedicated Outdoor Air Systems
----------------------------------------------------------------------------------------------------------------
                                                                                            Compliance date:
        Equipment  category                 Subcategory            Efficiency level      equipment manufactured
                                                                                           starting on . . .
----------------------------------------------------------------------------------------------------------------
Direct expansion-dedicated outdoor  (AC)--Air-cooled without    ISMRE2 = 3.8.........  May 1, 2024.
 air systems.                        ventilation energy
                                     recovery systems.
                                    (AC w/VERS)--Air-cooled     ISMRE2 = 5.0.........  May 1, 2024.
                                     with ventilation energy
                                     recovery systems.
                                    (ASHP)--Air-source heat     ISMRE2 = 3.8.........  May 1, 2024.
                                     pumps without ventilation  ISCOP2 = 2.05........
                                     energy recovery systems.
                                    (ASHP w/VERS)--Air-source   ISMRE2 = 5.0.........  May 1, 2024.
                                     heat pumps with            ISCOP2 = 3.20........
                                     ventilation energy
                                     recovery systems.
                                    (WC)--Water-cooled without  ISMRE2 = 4.7.........  May 1, 2024.
                                     ventilation energy
                                     recovery systems.
                                    (WC w/VERS)--Water-cooled   ISMRE2 = 5.1.........  May 1, 2024.
                                     with ventilation energy
                                     recovery systems.
                                    (WSHP)--Water-source heat   ISMRE2 = 3.8.........  May 1, 2024.
                                     pumps without ventilation  ISCOP2 = 2.13........
                                     energy recovery systems.
                                    (WSHP w/VERS)--Water-       ISMRE2 = 4.6.........  May 1, 2024.
                                     source heat pumps with     ISCOP2 = 4.04........
                                     ventilation energy
                                     recovery systems.
----------------------------------------------------------------------------------------------------------------

    (i) Air-cooled, three-phase, commercial package air conditioning 
and heating equipment with a cooling capacity of less than 65,000 Btu/h 
and air-cooled, three-phase variable refrigerant flow multi-split air 
conditioning and heating equipment with a cooling capacity of less than 
65,000 Btu/h manufactured on or after the compliance date listed in 
tables 18 and 19 to this paragraph (i) must meet the applicable minimum 
energy efficiency standard level(s) set forth in this paragraph (i).

   Table 18 to Paragraph (i)--Minimum Efficiency Standards for Air-Cooled, Three-Phase, Commercial Package Air
   Conditioning and Heating Equipment With a Cooling Capacity of Less Than 65,000 Btu/h and Air-Cooled, Three-
    Phase, Small Variable Refrigerant Flow Multi-Split Air Conditioning and Heating Equipment With a Cooling
                                       Capacity of Less Than 65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                                                                 equipment
        Equipment type          Cooling capacity     Subcategory      Minimum efficiency   manufactured starting
                                                                                                  on . . .
----------------------------------------------------------------------------------------------------------------
Commercial Package Air          <65,000 Btu/h...  Split-System....  13.0 SEER............  June 16, 2008.\1\
 Conditioning Equipment.
Commercial Package Air          <65,000 Btu/h...  Single-Package..  14.0 SEER............  January 1, 2017.\1\
 Conditioning Equipment.
Commercial Package Air          <65,000 Btu/h...  Split-System....  14.0 SEER............  January 1, 2017.\1\
 Conditioning and Heating                                           8.2 HSPF.............
 Equipment.
Commercial Package Air          <65,000 Btu/h...  Single-Package..  14.0 SEER............  January 1, 2017.\1\
 Conditioning and Heating                                           8.0 HSPF.............
 Equipment.
VRF Air Conditioners..........  <65,000 Btu/h...  ................  13.0 SEER............  June 16, 2008.\1\

[[Page 44142]]

 
VRF Heat Pumps................  <65,000 Btu/h...  ................  13.0 SEER............  June 16, 2008.\1\
                                                                    7.7 HSPF.............
----------------------------------------------------------------------------------------------------------------
\1\ And manufactured before January 1, 2025. For equipment manufactured on or after January 1, 2025, see table
  19 to this paragraph (i) for updated efficiency standards.


 Table 19 to Paragraph (i)--Updated Minimum Efficiency Standards for Air-Cooled, Three-Phase, Commercial Package
 Air Conditioning and Heating Equipment With a Cooling Capacity of Less Than 65,000 Btu/h and Air-Cooled, Three-
    Phase, Small Variable Refrigerant Flow Multi-Split Air Conditioning and Heating Equipment With a Cooling
                                       Capacity of Less Than 65,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                                              Compliance date:
                                                                                                 equipment
        Equipment type          Cooling capacity     Subcategory      Minimum efficiency   manufactured starting
                                                                                                  on . . .
----------------------------------------------------------------------------------------------------------------
Commercial Package Air          <65,000 Btu/h...  Split-System....  13.4 SEER2...........  January 1, 2025.
 Conditioning Equipment.
Commercial Package Air          <65,000 Btu/h...  Single-Package..  13.4 SEER2...........  January 1, 2025.
 Conditioning Equipment.
Commercial Package Air          <65,000 Btu/h...  Split-System....  14.3 SEER2...........  January 1, 2025.
 Conditioning and Heating                                           7.5 HSPF2............
 Equipment.
Commercial Package Air          <65,000 Btu/h...  Single-Package..  13.4 SEER2...........  January 1, 2025.
 Conditioning and Heating                                           6.7 HSPF2............
 Equipment.
Space-Constrained Commercial    <=30,000 Btu/h..  Split-System....  12.7 SEER2...........  January 1, 2025.
 Package Air Conditioning
 Equipment.
Space-Constrained Commercial    <=30,000 Btu/h..  Single-Package..  13.9 SEER2...........  January 1, 2025.
 Package Air Conditioning
 Equipment.
Space-Constrained Commercial    <=30,000 Btu/h..  Split-System....  13.9 SEER2...........  January 1, 2025.
 Package Air Conditioning and                                       7.0 HSPF2............
 Heating Equipment.
Space-Constrained Commercial    <=30,000 Btu/h..  Single-Package..  13.9 SEER2...........  January 1, 2025.
 Package Air Conditioning and                                       6.7 HSPF2............
 Heating Equipment.
Small-Duct, High-Velocity       <65,000 Btu/h...  Split-System....  13.0 SEER2...........  January 1, 2025.
 Commercial Package Air
 Conditioning.
Small-Duct, High-Velocity       <65,000 Btu/h...  Split-System....  14.0 SEER2...........  January 1, 2025.
 Commercial Package Air                                             6.9 HSPF2............
 Conditioning and Heating
 Equipment.
VRF Air Conditioners..........  <65,000 Btu/h...  ................  13.4 SEER2...........  January 1, 2025.
VRF Heat Pumps................  <65,000 Btu/h...  ................  13.4 SEER2...........  January 1, 2025.
                                                                    7.5 HSPF2............
----------------------------------------------------------------------------------------------------------------


[FR Doc. 2024-08546 Filed 5-17-24; 8:45 am]
BILLING CODE 6450-01-P