[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Proposed Rules]
[Pages 59692-59709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16177]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 89 , No. 141 / Tuesday, July 23, 2024 / 
Proposed Rules  

[[Page 59692]]



DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE 2017-BT-STD-0019]
RIN 1904-AF65


Energy Conservation Program: Energy Conservation Standards for 
Consumer Water Heaters

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

ACTION: Notification of data availability and request for comment.

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

SUMMARY: On July 28, 2023, the U.S. Department of Energy (``DOE'') 
published a notice of proposed rulemaking (``NOPR''), in which DOE 
proposed amended energy conservation standards for consumer water 
heaters (``July 2023 NOPR''). In this notification of data availability 
(``NODA''), DOE is updating portions of its analysis for gas 
instantaneous water heaters. DOE requests comments, data, and 
information regarding the updated analysis.

DATES: DOE will accept comments, data, and information regarding this 
NODA no later than August 22, 2024.

ADDRESSES: Interested persons are encouraged to submit comments using 
the Federal eRulemaking Portal at www.regulations.gov under docket 
number EERE-2017-BT-STD-0019. Follow the instructions for submitting 
comments. Alternatively, interested persons may submit comments, 
identified by docket number EERE-2017-BT-STD-0019, by any of the 
following methods:
    (1) Email: [email protected]. Include the 
docket number EERE-2017-BT-STD-0019 in the subject line of the message.
    (2) 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.
    No telefacsimiles (``faxes'') will be accepted. For detailed 
instructions on submitting comments and additional information on this 
process, see section IV of this document.
    Docket: The docket for this activity, which includes Federal 
Register notices, comments, and other supporting documents/materials, 
is available for review at www.regulations.gov. All documents in the 
docket are listed in the www.regulations.gov index. However, not all 
documents listed in the index may be publicly available, such as 
information that is exempt from public disclosure.
    The docket web page can be found at www.regulations.gov/docket/EERE-2017-BT-STD-0019. The docket web page contains instructions on how 
to access all documents, including public comments, in the docket. See 
section IV of this document for information on how to submit comments 
through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: 
    Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 
1000 Independence Avenue SW, Washington, DC, 20585-0121. Email: 
[email protected].
    Mr. Uchechukwu ``Emeka'' Eze, 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. Introduction
II. Discussion
    A. Engineering Analysis
    B. Markups Analysis
    C. Energy Use Analysis
    D. Life-Cycle Cost and Payback Period Analysis
    1. Installation Cost
    2. Energy Efficiency Distribution in the No-New-Standards Case
    E. Shipments Analysis
    F. National Impact Analysis
    G. Consumer Subgroup Analysis
    H. Manufacturer Impact Analysis
    1. Manufacturer Production Costs
    2. Shipments Projections
    3. Product and Capital Conversion Costs
    4. Manufacturer Markup Scenarios
    I. Utility Impact Analysis, Emissions Analysis, and Monetizing 
Emissions Impacts
III. Analytical Results
    1. Life-Cycle Cost and Payback Period
    a. Consumer Subgroup Analysis
    b. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Direct Impacts on Employment
    3. National Impact Analysis
    a. National Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Need of the Nation To Conserve Energy
    5. Summary of Economic Impacts
IV. Public Participation
V. Approval of the Office of the Secretary

I. Introduction

    EPCA authorizes DOE to regulate the energy efficiency of a number 
of consumer products and certain industrial equipment. Title III, Part 
B of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. These products include consumer water 
heaters, the subject of this document. (42 U.S.C. 6292(a)(4))
    Generally, DOE defines a ``water heater,'' consistent with EPCA's 
definition at 42 U.S.C. 6291(27) and codified at 10 CFR 430.2, as a 
product which utilizes oil, gas, or electricity to heat potable water 
for use outside the heater upon demand. ``Gas-fired instantaneous water 
heater,'' defined at 10 CFR 430.2, means a water heater that uses gas 
as the main energy source, has a nameplate input rating less than 
200,000 Btu per hour, and contains no more than one gallon of water per 
4,000 Btu per hour of input.
    On July 28, 2023, DOE published in the Federal Register a notice of 
proposed rulemaking (``July 2023 NOPR'') and technical support document 
(``NOPR TSD'') with a 60-day comment period that proposed new and 
amended standards for consumer water heaters. 88 FR 49058 (Jul. 28, 
2023). On September 13, 2023, DOE presented the

[[Page 59693]]

proposed standards and accompanying analysis at a public meeting.
    On May 6, 2024, DOE published in the Federal Register a final rule 
that amended the energy conservation standards for certain consumer 
water heaters. 89 FR 37778 (May 6, 2024). In that final rule, DOE 
finalized standards for all consumer water heaters with the exception 
of gas-fired instantaneous water heaters (``GIWHs'') as defined in 10 
CFR 430.2. For gas-fired instantaneous water heaters, DOE indicated 
that it was not finalizing standards in the May 2024 final rule, as it 
continued to consider comments submitted in response to earlier 
rulemaking stages before finalizing a decision on amended standards. 
Id. at 89 FR 37794.
    In this document, DOE is providing a full set of analytical results 
specific to gas-fired instantaneous water heaters that include updates 
as compared to the analysis conducted for the July 2023 NOPR. DOE is 
not summarizing or responding to any gas-fired instantaneous water 
heater-specific comments in this document; DOE is continuing to 
consider all of the gas-fired instantaneous water heater-specific 
stakeholder comments received in response to the July 2023 NOPR and 
September 2023 Public Webinar and will address these comments in a 
future action. Based on consideration of all of the public comments 
received, including any additional comments received in response to 
this NODA, DOE may adopt energy efficiency levels (``ELs'') that are 
either higher or lower than the proposed standards.

II. Discussion

    In the following sections, DOE details its updated analysis for 
gas-fired instantaneous water heaters and is showing the analysis and 
results relevant to these products. A full description of the 
methodology used to conduct the analysis is available in the July 2023 
NOPR TSD.\1\ DOE is using the same methods as the NOPR. DOE seeks 
comment on any issues raised by this NODA, including those specifically 
identified below. Updates to the analysis for this NODA are then 
discussed in the subsections below.
---------------------------------------------------------------------------

    \1\ Available at: www.regulations.gov/document/EERE-2017-BT-STD-0019-0058 (Last accessed July 3, 2024).
---------------------------------------------------------------------------

A. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the efficiency and cost of gas-fired instantaneous 
water heaters. There are two elements to consider in the engineering 
analysis; the selection of efficiency levels to analyze (i.e., the 
``efficiency analysis'') and the determination of product cost at each 
efficiency level (i.e., the ``cost analysis''). DOE estimates the 
baseline cost, as well as the incremental cost for the product at 
efficiency levels above the baseline. The output of the engineering 
analysis is a set of cost-efficiency ``curves'' that are used in 
downstream analyses (i.e., the life-cycle cost and payback period 
(``LCC'' and ``PBP'') analyses, the manufacturer impact analysis 
(``MIA''), and the national impact analysis (``NIA'')).
    In this NODA, DOE has analyzed the same efficiency levels for gas-
fired instantaneous water heaters as were considered in the July 2023 
NOPR, which are shown in table II.1, expressed in terms of uniform 
energy factor (UEF). 88 FR 49058, 49093. These levels span the range 
from the ``baseline'' levels, which reflect the current energy 
conservation standard levels, to the maximum technologically feasible 
(``max-tech'') levels. As discussed in the July 2023 NOPR, a coalition 
of seven public- and private-sector organizations collectively referred 
to as the ``Joint Stakeholders'' submitted recommendations for the 
amended standard levels for various classes of consumer water heaters, 
including gas-fired instantaneous water heaters. 89 FR 37778, 37790. 
Efficiency level 2 corresponds to the levels recommended by the Joint 
Stakeholders in the Joint Stakeholder Recommendation (``JSR'').

                                Table II.1--Gas-Fired Instantaneous: Veff <2 gal,
                                            Rated Input >50,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                                UEF
                Efficiency level                 ---------------------------------------------------------------
                                                   Very small *        Low *          Medium           High
----------------------------------------------------------------------------------------------------------------
0 (Baseline--Current Federal Energy Conservation            0.80            0.81            0.81            0.81
 Standard)......................................
1...............................................   [dagger] 0.86   [dagger] 0.87            0.87            0.89
2 (JSR).........................................   [dagger] 0.89   [dagger] 0.91            0.91            0.93
3...............................................   [dagger] 0.90   [dagger] 0.92            0.92            0.95
4 (Max-Tech)....................................   [dagger] 0.91   [dagger] 0.93            0.93            0.96
----------------------------------------------------------------------------------------------------------------
* Only one brand has commercially-available products in the very small draw pattern and low draw pattern at the
  time of this analysis.
[dagger] DOE applied the differences in efficiency levels from the medium draw pattern to define the Efficiency
  Levels 1 through 4 for the very small draw pattern and the low draw pattern.

    In this NODA, DOE maintains the design options as they were 
discussed in the July 2023 NOPR (see 88 FR 49058, 49095), with the 
exception described below regarding the need for fully modulating 
burners to achieve EL 3 and EL 4. In the July 2023 NOPR, DOE 
tentatively described both EL 3 and EL 4 as efficiency levels that 
would typically require fully modulating burners to achieve. In that 
analysis, DOE had analyzed an additional efficiency level that was not 
considered at previous rulemaking stages, EL 3, which was close to the 
max-tech level, EL 4, and used generally similar design options. 88 FR 
49058, 49092-49094 (July 28, 2023). However, based on further review of 
the designs of gas-fired instantaneous water heating products currently 
on the market, DOE has found that products that meet EL 3 but not EL 4 
use step modulation rather than fully modulating burners.\2\ 
Additionally, based on a review of product literature, in the current 
market, most manufacturers use fully modulating burners in designs that 
achieve EL 4. However, a review of publicly available product 
information suggests that although some manufacturers may employ fully 
modulating burners at the max-tech efficiency today, EL 4 would still 
be technologically feasible to achieve with heat exchanger improvements 
alone, without needing to implement a fully modulating burner. This 
result is consistent with the conclusion in the NOPR. Because the

[[Page 59694]]

pathway relying on heat exchanger improvements could be more cost-
effective for manufacturers to mass-produce designs at a scale 
necessary to meet national demand, DOE expects that such designs may be 
more common if standards were to be set at EL 4 than in the current 
market. Therefore, DOE analyzes EL 4 to be achievable using either step 
modulating or fully modulating burners and the manufacturer production 
cost (``MPC'') estimated in this NODA reflects an average of these 
design pathways. Table II.2 shows the design options at each efficiency 
level considered for this NODA.
---------------------------------------------------------------------------

    \2\ The EL 3 GIWHs use step modulation. An upgrade to step 
modulation is not necessary to achieve EL 3. Rather, the design 
upgrade to achieve EL 3 is a larger condensing heat exchanger.

  Table II.2--Design Options for Gas-Fired Instantaneous: Veff <2 gal,
                        Rated Input >50,000 Btu/h
------------------------------------------------------------------------
                   EL                             Design options
------------------------------------------------------------------------
0......................................  Step modulating burner; Non-
                                          condensing tube-and-fin heat
                                          exchanger.
1......................................  Step modulating burner;
                                          Condensing tube heat
                                          exchanger.
2......................................  Step modulating burner; Larger
                                          condensing heat exchanger.
3......................................  Step modulating burner; Larger,
                                          flat plate condensing heat
                                          exchanger.
4......................................  Step modulating or fully
                                          modulating burner; Larger
                                          condensing heat exchanger.
------------------------------------------------------------------------

    The results of the engineering analysis are reported as cost-
efficiency data in the form of MPCs and shipping costs calculated for 
each efficiency level. DOE determined these MPCs using the same 
methodology as the July 2023 NOPR, by developing bills of materials 
(``BOMs'') based on a combination of physical and catalog teardowns and 
using information in the BOMs along with component and material price 
data to estimate MPCs. DOE updated the inputs to the BOMs (e.g., 
material prices, component prices) to estimate the MPCs for this NODA 
using the most recent data available. For shipping costs, DOE similarly 
maintained the methodology from the July 2023 NOPR (see 88 FR 49058, 
49095-49096) but updated the cost per trailer using the most recent 
data available. Because many gas-fired instantaneous water heaters sold 
in the United States are manufactured overseas, these shipping costs 
include the cost of shipping products from overseas to the United 
States, and then from the coast to the middle of the country. Table 
II.3 summarizes the results of the engineering analysis conducted for 
this NODA and DOE specifically seeks comment on the engineering 
analysis results presented in the NODA for gas instantaneous water 
heaters.

                                   Table II.3--Engineering Analysis Results for Gas-Fired Instantaneous: Veff <2 gal,
                                                                Rated Input >50,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               UEF
                                ----------------------------------------------------------------
               EL                                                Medium 120,000   High 199,000      MPC  (2022$)       MSP  (2022$)     Shipping (2022$)
                                   Very small          Low            Btu/h           Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
0..............................             N/A             N/A            0.81            0.81  Med: 302.00......  Med: 437.90......  Med: 4.40.
                                                                                                 High: 318.90.....  High: 462.41.....  High: 7.42.
1..............................             N/A             N/A            0.87            0.89  Med: 429.63......  Med: 622.96......  Med: 6.87.
                                                                                                 High: 448.39.....  High: 650.16.....  High: 9.23.
2..............................             N/A             N/A            0.91            0.93  Med: 433.41......  Med: 628.45......  Med: 9.90.
                                                                                                 High: 453.23.....  High: 657.19.....  High: 11.13.
3..............................             N/A             N/A            0.92            0.95  Med: 439.02......  Med: 636.58......  Med: 9.90.
                                                                                                 High: 460.25.....  High: 667.36.....  High: 11.13.
4..............................             N/A             N/A            0.93            0.96  Med: 457.04......  Med: 662.70......  Med: 9.90.
                                                                                                 High: 479.29.....  High: 694.97.....  High: 11.13.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To account for manufacturers' non-production costs and profit 
margin, DOE applies a multiplier (the manufacturer markup) to the MPC 
as was done for the NOPR. The resulting manufacturer selling price 
(``MSP'') is the price at which the manufacturer distributes a unit 
into commerce. For this NODA, DOE maintained the methodology and 
resulting manufacturer markups from the July 2023 NOPR. 88 FR 49058, 
49100.
    For further discussion of the engineering analysis, see chapter 5 
of the NOPR TSD.

B. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the MSP estimates derived in the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis. At each step in the distribution channel, companies 
mark up the price of the product to cover business costs and profit 
margin. DOE used the same distribution channels and markup values as in 
the July 2023 NOPR.
    In addition to the markups, DOE obtained State and local taxes from 
data provided by the Sales Tax Clearinghouse.\3\ These data represent 
weighted average taxes that include county and city rates. DOE derived 
shipment-weighted average tax values for each State considered in the 
analysis. These sales tax values have been updated from those in the 
July 2023 NOPR, based on the most recent available data at the time of 
conducting the analysis but the methods remain the same as the NOPR. 
Consistent with NOPR, taxes are not included the national assessment of 
benefits and costs, only with respect to LCC and PBP.
---------------------------------------------------------------------------

    \3\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates (November 10, 2023). 
Available at www.thestc.com/STrates.stm (last accessed December 1, 
2023).
---------------------------------------------------------------------------

    For further discussion of the markups analysis, see chapter 6 of 
the NOPR TSD.

C. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of gas-fired instantaneous water heaters at 
different efficiencies in representative U.S. single-family homes, 
mobile homes, multi-family residences, and commercial buildings, and to 
assess the energy savings potential of increased gas-fired 
instantaneous water heater efficiency. The energy use analysis 
estimates the range of energy use of gas-fired instantaneous water 
heaters in the field (i.e., as they are actually used by

[[Page 59695]]

consumers). The energy use analysis provides the basis for other 
analyses DOE performed, particularly assessments of the energy savings 
and the savings in consumer operating costs that could result from 
adoption of amended or new standards.
    DOE estimated the annual energy consumption of gas-fired 
instantaneous water heaters at specific energy efficiency levels across 
a range of climate zones, building characteristics, and water heating 
applications.
    To determine the field energy use of gas-fired instantaneous water 
heaters used in homes, in the July 2023 NOPR, DOE established a sample 
of households using gas-fired instantaneous water heaters from EIA's 
2015 Residential Energy Consumption Survey (``RECS 2015''), which was 
the most recent such survey that was then fully available.\4\ The RECS 
data provide information on the vintage of the home, as well as water 
heating energy use in each household. These data reflect how water 
heaters are actually used by consumers. DOE used the household samples 
not only to determine water heater annual energy consumption, but also 
as the basis for conducting the LCC and PBP analyses. DOE projected 
household weights and household characteristics in 2030, the first full 
year of compliance with any amended or new energy conservation 
standards for gas-fired instantaneous water heaters. To characterize 
future new homes, DOE used a subset of homes in RECS that were built 
after 2000.
---------------------------------------------------------------------------

    \4\ Energy Information Administration (``EIA''), 2015 
Residential Energy Consumption Survey (``RECS''). Available at 
www.eia.gov/consumption/residential/ (last accessed December 1, 
2023).
---------------------------------------------------------------------------

    For this NODA, DOE incorporated RECS 2020 as the basis of the 
building sample development and updated the analyses accordingly.\5\ 
Incorporating RECS 2020 improves the representativeness of the 
residential building sample as RECS 2020 brings a threefold increase in 
sample size compared to RECS 2015.\6\ A larger sample size generally 
results in smaller standard errors, especially for estimates of smaller 
subpopulations. In this NODA, DOE maintains the same methodology in 
residential sample development as the July 2023 NOPR, using the updated 
RECS.
---------------------------------------------------------------------------

    \5\ Energy Information Administration (``EIA''), 2020 
Residential Energy Consumption Survey (``RECS''). Available at 
www.eia.gov/consumption/residential/ (last accessed December 1, 
2023).
    \6\ According to published data and EIA website, RECS 2020 is 
based upon responses collected from in total 18,496 households which 
is three times greater than 5,686 respondents in RECS 2015.
---------------------------------------------------------------------------

    To determine the field energy use of gas-fired instantaneous water 
heaters used in commercial buildings, DOE established a sample of 
buildings using gas-fired instantaneous water heaters from EIA's 2018 
Commercial Building Energy Consumption Survey (``CBECS 2018''), which 
remains the most recent such survey that is currently fully 
available.\7\ DOE has maintained its sample development methodology 
used in July 2023 NOPR for gas-fired instantaneous water heaters used 
in commercial applications.
---------------------------------------------------------------------------

    \7\ U.S. Department of Energy: Energy Information 
Administration, Commercial Buildings Energy Consumption Survey 
(2018). Available at: www.eia.gov/consumption/commercial/data/2018/index.php?view=microdata (last accessed Dec. 1, 2023). In CBECS 
2018, there are about 800 records that indicate usage of a GIWH out 
of about 6500 total records.
---------------------------------------------------------------------------

    For further discussion of the energy use analysis, see chapter 7 of 
the NOPR TSD.

D. 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 
gas-fired instantaneous water heaters. The effect of new or amended 
energy conservation standards on individual consumers usually involves 
a reduction in operating cost and an increase in purchase cost. DOE 
used the following two metrics to measure consumer impacts:
     The LCC is the total consumer expense of an appliance or 
product over the life of that product, consisting of total installed 
cost (manufacturer selling price, distribution chain markups, sales 
tax, and installation costs) plus operating costs (expenses for energy 
use, maintenance, and repair). Future operating costs are based on the 
energy use analysis and projected energy prices. To compute the 
operating costs, DOE discounts future operating costs to the time of 
purchase and sums them over the lifetime of the product.
     The PBP is the estimated amount of time (in years) it 
takes consumers to recover these increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
at higher efficiency levels by the change in annual operating cost for 
the year that amended or new standards are assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of gas-fired instantaneous water 
heaters in the absence of a standard at the analyzed EL. In contrast, 
the PBP for a given efficiency level is measured relative to the 
baseline product.
    For each considered efficiency level, DOE calculated the LCC and 
PBP for a nationally representative set of housing units and commercial 
buildings. As stated previously, DOE developed household samples from 
the RECS 2020 and CBECS 2018 for this NODA. Equipment cost changes are 
updates to the engineering. Operating cost changes are the result of 
sample and energy price updates. The LCC results shown below in section 
III show both separately. For each sample household and commercial 
building, DOE determined the energy consumption for the gas-fired 
instantaneous water heaters and the appropriate energy price. By 
developing a representative sample of households and commercial 
buildings, the analysis captured the variability in energy consumption 
and energy prices associated with the use of gas-fired instantaneous 
water heaters.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, shipping costs, and sales taxes--and installation 
costs. Inputs to the calculation of operating expenses include annual 
energy consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability. This methodology is the same as presented 
in the NOPR and described in more detail in the NOPR TSD.
    The computer model DOE uses to calculate the LCC relies on a Monte 
Carlo simulation to incorporate uncertainty and variability into the 
analysis. The Monte Carlo simulations randomly sample input values from 
the probability distributions and gas-fired instantaneous water heater 
user samples. For this rulemaking, the Monte Carlo approach is 
implemented in MS Excel together with the Crystal Ball\TM\ add-on.\8\ 
The model calculated the LCC for products at each efficiency level for 
10,000 water heater installations in housing and commercial building 
units per simulation run. The analytical

[[Page 59696]]

results include a distribution of 10,000 data points showing the range 
of LCC savings for a given efficiency level relative to the no-new-
standards case efficiency distribution. In performing an iteration of 
the Monte Carlo simulation for a given consumer, product efficiency is 
chosen based on its probability. At the high end of the range, if the 
chosen product efficiency is greater than or equal to the efficiency of 
the standard level under consideration, the LCC calculation reveals 
that the hypothetical consumer represented by that data point is not 
impacted by the standard level because that consumer is already 
purchasing a more-efficient product. At the low end of the range, if 
the chosen product efficiency is less than the efficiency of the 
standard level under consideration, the LCC calculation reveals that 
the hypothetical consumer represented by that data point is impacted by 
the standard level. By accounting for consumers who already purchase 
more-efficient products, DOE avoids overstating the potential benefits 
from increasing product efficiency. DOE believes the efficiency 
assignment methodology better reflects purchasing behavior in the 
market today than alternative approaches that focus solely on trading 
off upfront and operating costs.
---------------------------------------------------------------------------

    \8\ Crystal Ball\TM\ is commercially-available software tool to 
facilitate the creation of these types of models by generating 
probability distributions and summarizing results within Excel, 
available at www.oracle.com/technetwork/middleware/crystalball/overview/index.html (last accessed December 1, 2023).
---------------------------------------------------------------------------

    DOE calculated the LCC and PBP for consumers of gas-fired 
instantaneous water heaters as if each were to purchase a new product 
in the first year of required compliance with new or amended standards. 
New and amended standards apply to gas-fired instantaneous water 
heaters manufactured 5 years after the date on which any new or amended 
standard is published. (42 U.S.C. 6295(m)(4)(A)(ii)) Therefore, DOE 
used 2030 as the first full year of compliance with any amended 
standards for gas-fired instantaneous water heaters. As in the NOPR, 
DOE determined for this NODA that it is highly unlikely that consumers 
will switch water heating products in response to a potential amended 
standard for gas-fired instantaneous water heaters. DOE received public 
comment regarding this determination in response to the NOPR, and seeks 
any additional data regarding expected consumer behavior and/or the 
costs of replacing non-condensing GIWH under the potential amended 
standard.
    Table II.4 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. Updates to the source or method 
as compared to the July 2023 NOPR are discussed in the following 
sections, which are limited to installation costs and the efficiency 
distribution.
    For further discussion of the life-cycle cost and payback period 
analyses, see chapter 8 of the NOPR TSD.

Table II.4--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
            Inputs                           Source/method
------------------------------------------------------------------------
Product Cost.................  Derived by multiplying MPCs by
                                manufacturer and retailer markups and
                                sales tax, as appropriate. Used
                                historical data to derive a price
                                scaling index to project product costs.
Installation Costs...........  Installation cost determined with data
                                from RSMeans and other sources.
Efficiency Distribution......  Derived based on available shipments data
                                by efficiency and data from
                                certification databases.
Annual Energy Use............  Determined based on hot water use
                                calculated from the water heating energy
                                use reported in the RECS 2020 and CBECS
                                2018.
Energy Prices................  Natural Gas: Based on EIA's Natural Gas
                                Navigator data for 2022.
                               Electricity: Based on EIA's Form 861 data
                                for 2022.
                               Propane and Fuel Oil: Based on EIA's
                                State Energy Data System (``SEDS'') for
                                2021.
                               Variability: Regional energy prices
                                determined for 50 states and District of
                                Columbia for residential and commercial
                                applications.
                               Marginal prices used for natural gas and
                                electricity prices.
Energy Price Trends..........  Based on the Annual Energy Outlook 2023
                                (AEO2023) price projections.
Repair and Maintenance Costs.  Based on RSMeans data and other sources.
                                Assumed variation in cost by efficiency.
Product Lifetime.............  Based on shipments data, multi-year RECS,
                                American Housing Survey, American Home
                                Comfort Survey data.
Discount Rates...............  Residential: approach involves
                                identifying all possible debt or asset
                                classes that might be used to purchase
                                the considered appliances, or might be
                                affected indirectly. Primary data source
                                was the Federal Reserve Board's Survey
                                of Consumer Finances.
                               Commercial: Calculated as the weighted
                                average cost of capital. Primary data
                                source was Damodaran Online.
Compliance Date..............  2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in the July 2023 NOPR if there
  are no updates.


1. Installation Cost

    The installation cost is the cost to the consumer of installing the 
gas-fired instantaneous water heater, in addition to the cost of the 
water heater itself. The cost of installation covers all labor, 
overhead, and material costs associated with the replacement of an 
existing water heater or the installation of a water heater in a new 
home, as well as delivery of the new water heater, removal of the 
existing water heater, and any applicable permit fees.

[[Page 59697]]

    DOE's analysis of installation costs estimated specific 
installation costs for each sample household based on building 
characteristics given in RECS 2020 and CBECS 2018. For this NODA, as in 
the NOPR, DOE used 2023 RSMeans data for the installation cost 
estimates, including labor costs.9 10 11 12 DOE's analysis 
of installation costs accounted for regional differences in labor costs 
by aggregating city-level labor rates from RSMeans into 50 U.S. States 
and the District of Columbia to match RECS 2020 data and CBECS 2018 
data.
---------------------------------------------------------------------------

    \9\ RSMeans Company Inc., RSMeans Mechanical Cost Data. 
Kingston, MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
    \10\ RSMeans Company Inc., RSMeans Residential Repair & 
Remodeling Cost Data. Kingston, MA (2023) (available at: 
www.rsmeans.com/products/books/2023-cost-data-books) (last accessed 
December 1, 2023).
    \11\ RSMeans Company Inc., RSMeans Plumbing Cost Data. Kingston, 
MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
    \12\ RSMeans Company Inc., RSMeans Electrical Cost Data. 
Kingston, MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
---------------------------------------------------------------------------

    For this NODA, DOE made further improvements to the methodology 
used in the July 2023 NOPR to better account for the venting costs for 
gas-fired instantaneous water heaters. First, DOE incorporated the 
usage of a concentric pipe (a pipe used for both air intake and 
venting) for some installations in the analysis, which was not included 
in the NOPR analysis. Specifically, DOE estimated that 90 percent of 
the non-condensing and 50 percent of the condensing gas-fired 
instantaneous water heaters would use concentric pipes for the benefit 
of only having to make one wall penetration. Because a single 
concentric pipe is cheaper to install than two separate pipes (one for 
air intake and one for venting), this installation scenario reduces 
overall installation costs, particularly for non-condensing gas-fired 
instantaneous water heaters. Additionally, because metal venting for 
non-condensing water heaters is more expensive per foot than plastic 
venting for condensing water heaters, updates to the analysis that 
decrease the length of total venting required for some installations 
will lower the LCC savings when replacing a non-condensing gas-fired 
instantaneous water heater with a condensing gas-fired instantaneous 
water heater for these installations.
    Second, DOE adjusted its methodology of estimating the minimum 
length of the vent run for this NODA. In the July 2023 NOPR, DOE 
calculated the minimum vent length based on housing configuration and 
installation location and estimated that the shortest route to vent a 
gas instantaneous water heater is 3 ft. DOE conducted further research 
of product literature and concluded that for many installations a 
shorter vent run could be achieved, primarily by venting through a side 
wall. Therefore, for this NODA, DOE recalibrated its methodology and 
estimated that the minimum vent length can be as low as 1 ft for a 
certain subset of installations.
    Lastly, in the July 2023 NOPR, DOE did not account for the outdoor 
installation of gas-fired tankless water heaters. For this NODA, DOE 
utilized the location information from RECS 2020 and assumed that half 
of the residential households that report their water heaters being 
installed in an ``outdoor closet, crawlspace, or outdoor'' would 
actually install the tankless water heater on the outside of a wall 
without venting. Therefore, DOE estimates that among the entire sample, 
about 12 percent of gas instantaneous water heaters are installed 
outdoors, and DOE does not apply the venting costs for those 
households. As with lowering the minimum vent length above, this update 
to the analysis reduces LCC savings when replacing a non-condensing 
gas-fired instantaneous water heater with a condensing gas-fired 
instantaneous water heater for these installations.
    The revisions to the installation cost and venting cost analysis 
discussed above are specific to the gas-fired instantaneous water 
heater market. After accounting for concentric pipes, shorter vent 
lengths, and outdoor installations, the average total installed costs 
for gas-fired instantaneous water heaters (at all ELs) are lower than 
in the July 2023 NOPR. However, the average total installed cost 
reduction as part of the NODA analysis for non-condensing gas-fired 
instantaneous water heaters is greater than for condensing gas-fired 
instantaneous water heaters. Therefore, DOE estimates higher average 
incremental costs when replacing a non-condensing gas-fired water 
heater with a condensing gas-fired water heater.
    DOE seeks public comment on the replacement cost analysis.
2. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy 
conservation standards). This approach reflects the fact that some 
consumers may purchase products with efficiencies greater than the 
baseline levels.
    To estimate the energy efficiency distribution of gas-fired 
instantaneous water heaters for 2030, DOE used available shipments data 
by efficiency including in previous AHRI submitted historical shipment 
data,\13\ ENERGY STAR unit shipments data,\14\ and data from a BRG 
Building Solutions report (a third-party market research report).\15\ 
To cover gaps in the available shipments data, DOE used DOE's public 
CCD model certification database \16\ and AHRI certification directory, 
which catalog a number of technical parameters for certified 
models.\17\ As compared to the July 2023 NOPR, the NODA analysis uses 
updated versions of the BRG Building Solutions report, DOE's CCD model 
database, and AHRI certification directory. The updated energy 
efficiency distribution of gas-fired instantaneous water heaters for 
2030 is nearly identical to the July 2023 NOPR.
---------------------------------------------------------------------------

    \13\ AHRI. Confidential Instantaneous Gas-fired Water Heater 
Shipments Data from 2004-2007 to LBNL. March 3, 2008.
    \14\ ENERGY STAR. Unit Shipments data 2010-2022. multiple 
reports (available at: www.energystar.gov/partner_resources/products_partner_resources/brand_owner_resources/unit_shipment_data) 
(last accessed May 1, 2023).
    \15\ BRG Building Solutions. The North American Heating & 
Cooling Product Markets (2023 Edition). 2023.
    \16\ U.S. Department of Energy's Compliance Certification 
Database is available at regulations.doe.gov/certification-data 
(last accessed Dec. 1, 2023).
    \17\ Air Conditioning Heating and Refrigeration Institute. 
Consumer's Directory of Certified Efficiency Ratings for Heating and 
Water Heating Equipment. May 16, 2023 (available at 
www.ahridirectory.org) (last accessed December 1, 2023).
---------------------------------------------------------------------------

    The estimated market shares for the no-new-standards case for gas-
fired instantaneous water heaters are shown in Table II.5.

[[Page 59698]]



   Table II.5--No-New-Standards Case Energy Efficiency Distributions in 2030 for Gas-Fired Instantaneous Water
                                                     Heaters
----------------------------------------------------------------------------------------------------------------
                                                                          Draw pattern *
                                                 ---------------------------------------------------------------
                                                              Medium                           High
                Efficiency level                 ---------------------------------------------------------------
                                                                   Market share                    Market share
                                                      UEF **            (%)           UEF **            (%)
----------------------------------------------------------------------------------------------------------------
0...............................................            0.81              30            0.81              30
1...............................................            0.87               8            0.89               8
2...............................................            0.91              48            0.93              47
3...............................................            0.92               6            0.95               7
4...............................................            0.93               8            0.96               8
----------------------------------------------------------------------------------------------------------------
* Very small and low draw patterns do not exist for gas-fired instantaneous water heaters.
** UEF at the representative rated capacity.

    The LCC Monte Carlo simulations draw from the efficiency 
distributions and assign an efficiency to the water heater purchased by 
each sample household in the no-new-standards case according to these 
distributions.
    As in the July 2023 NOPR, DOE used AHCS data \18\ to adjust its 
water heater efficiency distributions as follows: (1) the market share 
of higher efficiency equipment for households under 1,500 sq. ft. was 
decreased by 5 percentage points; and (2) the market share of 
condensing equipment for households above 2,500 sq. ft. was increased 
by 5 percentage points.
---------------------------------------------------------------------------

    \18\ Decision Analysts, 2022 American Home Comfort Studies 
(available at: www.decisionanalyst.com/Syndicated/HomeComfort/) 
(last accessed January 5, 2024). See the NOPR TSD section 8.4 for 
more discussion.
---------------------------------------------------------------------------

E. Shipments Analysis

    DOE uses projections of annual product shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, net present value (``NPV''), and future 
manufacturer cash flows.\19\ The shipments model takes an accounting 
approach, tracking market shares of each product class and the vintage 
of units in the stock. Stock accounting uses product shipments as 
inputs to estimate the age distribution of in-service product stocks 
for all years. The age distribution of in-service product stocks is a 
key input to calculations of both the national energy savings (``NES'') 
and NPV, because operating costs for any year depend on the age 
distribution of the stock.
---------------------------------------------------------------------------

    \19\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

    DOE developed shipment projections based on historical data and an 
analysis of key market drivers for each product. DOE estimated gas-
fired instantaneous water heater shipments by projecting shipments in 
three market segments: (1) replacement of existing gas-fired 
instantaneous water heaters; (2) new housing; and (3) new owners in 
buildings that did not previously have a gas-fired instantaneous water 
heater or existing water heater owners that are adding an additional 
gas-fired instantaneous water heater.\20\ DOE followed the same 
methodology as in the July 2023 NOPR, with the exception of using an 
updated BRG Building Solutions report.\21\
---------------------------------------------------------------------------

    \20\ The new owners primarily consist of households that add or 
switch to a different water heater option during a major remodel. 
Because DOE calculates new owners as the residual between its 
shipments model compared to historical shipments, new owners also 
include shipments that switch away from water heater product class 
to another.
    \21\ BRG Building Solutions. The North American Heating & 
Cooling Product Markets (2023 Edition). 2023.
---------------------------------------------------------------------------

    For further discussion of the shipments analysis, see chapter 9 of 
the NOPR TSD.

F. 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.\22\ 
(``Consumer'' in this context refers to consumers of the product being 
regulated.) DOE calculates the NES and NPV for the potential standard 
levels considered based on projections of annual product shipments, 
along with the annual energy consumption and total installed cost data 
from the energy use and LCC analyses. For the present analysis, DOE 
projected the energy savings, operating cost savings, product costs, 
and NPV of consumer benefits over the lifetime of gas-fired 
instantaneous water heaters sold from 2030 through 2059.
---------------------------------------------------------------------------

    \22\ The NIA accounts for impacts in the United States and U.S. 
territories.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for gas-
fired instantaneous water heaters 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 if DOE 
adopted new or amended standards at specific energy efficiency levels. 
For the standards cases, DOE considers how a given standard would 
likely affect the market shares of products with efficiencies greater 
than the standard.
    Table II.6 summarizes the inputs and methods DOE used for the NIA 
analysis for the NODA. Compared to the NOPR, the NIA for the NODA 
includes slightly updated shipments, slightly updated efficiency 
distribution, updated annual energy consumption per unit (due to the 
update to RECS 2020), and updated total installed costs per unit, all 
as discussed in the preceding sections. The annual energy cost per unit 
also changes due to the annual energy consumption update, though the 
energy prices remain the same.
    For further discussion of the national impact analysis, see chapter 
10 of the NOPR TSD.

[[Page 59699]]



    Table II.6--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
Compliance Date of Standard.......  2030.
Efficiency Trends.................  No-new-standards case: Based on
                                     historical data.
                                    Standard cases: Roll-up in the
                                     compliance year and then DOE
                                     estimated growth in shipment-
                                     weighted efficiency in all the
                                     standards cases.
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each EL.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each EL.
                                    Incorporates projection of future
                                     product prices based on historical
                                     data.
Annual Energy Cost per Unit.......  Annual weighted-average values as a
                                     function of the annual energy
                                     consumption per unit and energy
                                     prices.
Repair and Maintenance Cost per     Annual values do not change with
 Unit.                               efficiency level.
Energy Price Trends...............  AEO2023 projections (to 2050) and
                                     extrapolation thereafter.
Energy Site-to-Primary and FFC      A time-series conversion factor
 Conversion.                         based on AEO2023.
Discount Rate.....................  Three and seven percent.\1\
Present Year......................  2023.
------------------------------------------------------------------------
\1\ For assessment of climate effects, DOE uses 2% and 3%.

G. 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. DOE analyzed the impacts of 
the considered standard levels on three subgroups: (1) low-income 
households, (2) senior-only households, and (3) small businesses. The 
analysis used subsets of the RECS 2020 sample composed of households 
and CBECS 2018 sample composed of commercial buildings that meet the 
criteria for the three subgroups. DOE used the LCC and PBP spreadsheet 
model to estimate the impacts of the considered efficiency levels on 
these subgroups. DOE followed the same methodology as in the July 2023 
NOPR, with the exception of updating from RECS 2015 to RECS 2020, as 
discussed previously.
    For further discussion of the consumer subgroup analysis, see 
chapter 11 of the NOPR TSD.

H. Manufacturer Impact Analysis

    DOE uses the Government Regulatory Impact Model (``GRIM'') to 
quantify the changes in cash flow due to new or amended standards that 
result in a higher or lower industry value. The GRIM uses a standard, 
annual, discounted cash-flow analysis that incorporates manufacturer 
costs, manufacturer 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 
2023 (the base year of the analysis) and continuing 30 years after the 
analyzed 2030 compliance year. DOE calculated industry net present 
value (``INPV'') by summing the stream of annual discounted cash flows 
during the analysis period. Consistent with the July 2023 NOPR, DOE 
used a real discount rate of 9.3 percent for the gas-fired 
instantaneous water heater industry. Key inputs to the GRIM (i.e., 
MPCs, shipments projections, conversion costs, and manufacturer markup 
scenarios) are discussed in the following sections.
    For further discussion of the manufacturer impact analysis, see 
chapter 12 of the NOPR TSD.
1. Manufacturer Production Costs
    The changes in the MPCs of covered products can affect the 
revenues, gross margins, and cash flow of the industry. See section 
II.A of this document for details on the NODA engineering analysis.
2. Shipments Projections
    The GRIM estimates manufacturer revenues based on total unit 
shipment projections and the distribution of those shipments by 
efficiency level. Consistent with the July 2023 NOPR, the GRIM uses the 
NIA's annual shipment projections derived from the shipments analysis. 
88 FR 49058, 49120. See section II.E of this document for details on 
the NODA shipments analysis.
3. Product and Capital Conversion Costs
    For this NODA, DOE revised its July 2023 NOPR conversion cost 
estimates for gas-fired instantaneous water heaters for efficiency 
levels that would likely necessitate condensing technology (i.e., EL 1-
EL 4) to reflect the potential investments associated with repurposing 
a newly built domestic manufacturing facility that is currently 
optimized for production of non-condensing gas-fired instantaneous 
water heaters. DOE otherwise maintained its conversion cost estimates 
from the July 2023 NOPR. 88 FR 49058, 49127-49128. See table II.7 for 
the estimated industry conversion costs at each analyzed efficiency 
level.

[[Page 59700]]



 Table II.7--Conversion Costs for Gas-Fired Instantaneous Water Heaters
------------------------------------------------------------------------
                                              Capital         Product
                                            conversion      conversion
            Efficiency level                   costs           costs
                                             (millions       (millions
                                              2022$)          2022$)
------------------------------------------------------------------------
Baseline................................            $0.0            $0.0
EL 1....................................            13.5             2.5
EL 2....................................            16.3             3.6
EL 3....................................            53.8             4.7
EL 4....................................            53.8             4.7
------------------------------------------------------------------------

4. Manufacturer Markup Scenarios
    This NODA uses the same manufacturer markup scenarios as the July 
2023 NOPR. 88 FR 49058, 49128.

I. Utility Impact Analysis, Emissions Analysis, and Monetizing 
Emissions Impacts

    For this NODA pertaining to gas-instantaneous water heaters, DOE 
conducted the utility impact and emissions analyses using the same 
methodology as in the July 2023 NOPR. With the exception of the social 
cost of greenhouse gas (SC-GHG) estimates discussed below, DOE also 
used the same data sources that it used in the July 2023 NOPR.
    To monetize the benefits of reducing GHG emissions, the July 2023 
NOPR used the interim SC-GHG 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 Interagency Working Group on the SC-GHG (IWG). 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 represented the most 
appropriate estimate of the SC-GHG until revised estimates were 
developed reflecting the latest, peer-reviewed science. See 87 FR 
78382, 78406-78408 for discussion of the development and details of the 
IWG SC-GHG estimates. The IWG has continued working on updating the 
interim estimates, but has not published final estimates.
    Accordingly, in the regulatory analysis of its December 2023 final 
rule, ``Standards of Performance for New, Reconstructed, and Modified 
Sources and Emissions Guidelines for Existing Sources: Oil and Natural 
Gas Sector Climate Review'' (89 FR 16820, March 8, 2024), the 
Environmental Protection Agency (EPA) estimated climate benefits using 
a new, updated set of SC-GHG estimates (2023 SC-GHG estimates). EPA 
documented the methodology underlying the new estimates in the 
regulatory impact analysis (``RIA'') for the December 2023 final rule 
and in greater detail in a technical report entitled ``Report on the 
Social Cost of Greenhouse Gases: Estimates Incorporating Recent 
Scientific Advances'' that was presented as supplementary material to 
the RIA.\23\ The 2023 SC-GHG estimates ``incorporate recent research 
addressing recommendations of the Natural Academies of Science, 
Engineering, and Medicine (National Academies), responses to public 
comments on an earlier sensitivity analysis using draft SC-GHG 
estimates included in EPA's December 2022 proposal [87 FR 74702, 
December 6, 2022] in the oil and natural gas sector standards of 
performance rulemaking, and comments from a 2023 external peer review 
of the accompanying technical report.'' \24\
---------------------------------------------------------------------------

    \23\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024)
    \24\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024)
---------------------------------------------------------------------------

    On December 22, 2023, the IWG issued a memorandum directing that 
``agencies should use their professional judgment to determine which 
estimates of the SC-GHG reflect the best available evidence, are most 
appropriate for particular analytical contexts, and best facilitate 
sound decision-making'' consistent with Office of Management and Budget 
(OMB) Circular No. A-4 and applicable law.\25\
---------------------------------------------------------------------------

    \25\ https://www.whitehouse.gov/wp-content/uploads/2023/12/IWG-Memo-12.22.23.pdf (last accessed July 3, 2024).
---------------------------------------------------------------------------

    DOE has been extensively involved in the IWG process and related 
work on the SC-GHGs for over a decade. This involvement includes DOE's 
role as the federal technical monitor for the seminal 2017 report on 
the SC-GHG issued by the National Academies, which provided extensive 
recommendations on how to strengthen and update the SC-GHG 
estimates.\26\ DOE has also participated in the IWG's work since 2021. 
DOE technical experts involved in this work reviewed the 2023 SC-GHG 
methodology and report in light of the National Academies' 
recommendations and DOE's understanding of the state of the science.
---------------------------------------------------------------------------

    \26\ Valuing Climate Damages: Updating Estimation of the Social 
Cost of Carbon Dioxide  The National Academies Press 
(available at: https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of) 
(last accessed July 3, 2024).
---------------------------------------------------------------------------

    Based on this review, DOE has preliminarily determined that the 
updated 2023 SC-GHG estimates, including the approach to discounting, 
represent a significant improvement in estimating the SC-GHG through 
incorporating the most recent advancements in the scientific literature 
and by addressing recommendations on prior methodologies. In 
particular, the 2023 SC-GHG estimates implement the key recommendations 
of the National Academies, and they incorporate the extensive 
scientific findings and methodological advances that have occurred 
since the last IWG updates in 2013, 2015, and 2016.
    The 2023 SC-GHG estimates have also been peer-reviewed. As 
indicated by their statements, the peer reviewers strongly supported 
the new methodology, calling it ``a huge advance,'' ``a real step 
change,'' and ``an important improvement'' in estimating the SC-GHG, 
and noting that it addressed the National Academies' and others' 
recommendations and ``generally represents well the emerging consensus 
in the literature.''
    The most significant improvements in the 2023 SC-GHG estimates 
carry out recommendations made by the National Academies. In its 
report, the National Academies' principal recommendation was to develop 
and use ``a new framework that would strengthen the scientific basis, 
provide greater transparency, and improve characterization of the 
uncertainties of the estimates.'' \27\ The IWG's estimates

[[Page 59701]]

since 2010 have relied on averaging the values produced by three 
integrated assessment models, each of which generates a set of SC-GHG 
estimates based on the inputs and assumptions built into that 
particular model.\28\ The National Academies recommended an entirely 
new approach that would ``unbundle'' this process and instead use a 
framework in which each step of the SC-GHG calculation is developed as 
one of four separate but integrated ``modules'': the socioeconomic 
module, the climate module, the damages module, and the discounting 
module. The report provided detailed recommendations on developing and 
using these modules, including how to address discounting, 
socioeconomic projections, climate modeling, and uncertainty.
---------------------------------------------------------------------------

    \27\ Report Recommends New Framework for Estimating the Social 
Cost of Carbon [verbar] National Academies (available at: https://www.nationalacademies.org/news/2017/01/report-recommends-new-framework-for-estimating-the-social-cost-of-carbon) (last accessed 
July 3, 2023).
    \28\ See https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf, 6 (last accessed July 3, 2023).
---------------------------------------------------------------------------

    DOE preliminarily concludes that the 2023 SC-GHG estimates are 
consistent with the National Academies' (2017) recommendations and 
represent major scientific advancements over the IWG's approach. In 
addition, DOE supports the incorporation of more recent scientific 
findings and data throughout the development of each of the 2023 SC-GHG 
modules and the underlying components of those modules.
    Thus, in accordance with the IWG memo, and having reviewed the 2023 
SC-GHG methodologies and updates, DOE has preliminarily determined that 
the updated 2023 SC-GHG estimates reflect the best available scientific 
and analytical evidence and methodologies, are accordingly the most 
appropriate for DOE analyses, and best facilitate sound decision-making 
by substantially improving the transparency of the estimates and 
representations of uncertainty inherent in such estimates. DOE welcomes 
comment on this preliminary determination.\29\ In a final rulemaking, 
DOE will determine what role, if any, these estimates will play in any 
final decision adopting amended energy conservation standards for gas-
instantaneous water heaters.
---------------------------------------------------------------------------

    \29\ See EPA's SC-GHG website for all of the technical files 
related to the updated estimates, including the final SC-GHG report 
(provided as supplementary material to the Dec 2023 Oil and Gas rule 
final RIA); all replication instructions and computer code for the 
estimates; all files related to the public comment and peer review 
process; and a workbook to assist analysts in applying the 
estimates: https://www.epa.gov/environmental-economics/scghg.
---------------------------------------------------------------------------

    For this NODA, DOE used these updated 2023 SC-GHG values to 
monetize the climate benefits of the emissions reductions associated at 
each EL for gas-fired instantaneous water heaters. Using the 2023 SC-
GHG estimates provide a better informed range of potential climate 
benefits associated with amended standards. The EPA technical report 
presents SC-GHG values for emissions years through 2080; therefore, DOE 
did not monetize the climate benefits of GHG emissions reductions 
occurring after 2080. DOE expects additional climate impacts to accrue 
from GHG emissions changes post 2080, but due to a lack of readily 
available SC-GHG estimates for emissions years beyond 2080 and the 
relatively small emission effects expected from those years, DOE has 
not monetized these additional impacts in this analysis. The overall 
climate benefits are generally greater when using the higher, updated 
2023 SC-GHG estimates, compared to the climate benefits using the older 
IWG SC-GHG estimates, which were used in the July 2023 NOPR. To 
facilitate a comparison, DOE also performed a sensitivity analysis 
using the IWG's 2021 interim SC-GHG estimates. The results are shown in 
section III.4 below. The net benefits of the rule are positive, 
however, under either SC-GHG calculation methodology.
    For this NODA, DOE monetized NOX and SO2 
using the same methodology and data sources as described in chapter 14 
of the NOPR TSD.

III. Analytical Results

1. Life-Cycle Cost and Payback Period

    DOE analyzed the economic impacts on gas-fired instantaneous water 
heater consumers by looking at the effects that potential new and 
amended standards at each EL would have on the LCC and PBP.\30\ DOE 
also examined the impacts of potential standards on selected consumer 
subgroups. These analyses are discussed in the following sections.
---------------------------------------------------------------------------

    \30\ DOE has made an updated LCC spreadsheet model available in 
the docket with these results relating specifically to gas 
instantaneous water heaters.
---------------------------------------------------------------------------

    In general, higher-efficiency products affect consumers in two 
ways: (1) purchase price increases and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses product lifetime and a discount rate.
    Tables III.1 and III.2 show the LCC and PBP results. In the first 
table, the simple payback is measured relative to the baseline product. 
In the second table, the impacts are measured relative to the 
efficiency distribution in the no-new-standards case in the compliance 
year (see section II.D.2 of this document). Because some consumers 
purchase products with higher efficiency in the no-new-standards case, 
the average savings are less than the difference between the average 
LCC of the baseline product and the average LCC at each EL. The savings 
refer only to consumers who are affected by a standard at a given EL. 
Those who already purchase a product with efficiency at or above a 
given EL are not affected. Consumers for whom the LCC increases at a 
given EL experience a net cost.

                                   Table III.1--Average LCC and PBP Results for Gas-Fired Instantaneous Water Heaters
                                                        (Veff <2 gal, Rated Input >50,000 Btu/h)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2022$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                    Efficiency level                                       First year's      Lifetime                         (years)        Lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................           2,019             291           4,363           6,382  ..............            20.0
1.......................................................           2,213             274           4,153           6,365            12.1            20.0
2.......................................................           2,226             266           4,029           6,255             8.5            20.0
3.......................................................           2,241             263           3,975           6,216             7.9            20.0
4.......................................................           2,282             260           3,931           6,213             8.5            20.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each EL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


[[Page 59702]]


 Table III.2--Average LCC Savings Relative to the No-New-Standards Case
                       for Gas-Fired Instantaneous
         Water Heaters (Veff <2 gal, Rated Input >50,000 Btu/h)
------------------------------------------------------------------------
                                              Life-cycle cost savings
                                         -------------------------------
                                                            Percent of
            Efficiency level                Average LCC   consumers that
                                             savings *    experience net
                                              (2022$)          cost
------------------------------------------------------------------------
1.......................................               2            17.1
2.......................................             109            14.8
3.......................................              86            24.7
4.......................................              83            38.9
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.

a. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered ELs on low-income households, senior-only households, and 
small businesses.
    Table III.3 compares the average LCC savings and PBP at each 
efficiency level for the consumer subgroups with similar metrics for 
the entire consumer sample. In most cases, the average LCC savings and 
PBP for low-income households and senior-only households at the 
considered efficiency levels are not substantially different from the 
average for all households.

       Table III.3--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired
                      Instantaneous Water Heaters (Veff <2 gal, Rated Input >50,000 Btu/h)
----------------------------------------------------------------------------------------------------------------
                                                    Low-income      Senior-only        Small
                       EL                           households      households      businesses    All households
----------------------------------------------------------------------------------------------------------------
                                           Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1...............................................              64            (36)           (118)               2
2...............................................             183              77            (24)             109
3...............................................             123              72              18              86
4...............................................             128              63               9              83
----------------------------------------------------------------------------------------------------------------
                                          Simple Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1...............................................            10.1            12.9            10.3            12.1
2...............................................             7.1             9.1             7.2             8.5
3...............................................             6.6             8.5             6.7             7.9
4...............................................             6.9             9.2             7.0             8.5
----------------------------------------------------------------------------------------------------------------
                                           Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1...............................................             8.4            19.8            23.1            17.1
2...............................................             7.4            16.8            25.0            14.8
3...............................................            12.8            27.2            44.6            24.7
4...............................................            22.9            41.7            55.9            38.9
----------------------------------------------------------------------------------------------------------------
                                         Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1...............................................            16.9             9.1             8.9            12.9
2...............................................            25.3            21.3            16.3            23.0
3...............................................            65.2            56.7            42.7            60.2
4...............................................            63.8            49.5            38.8            52.9
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate a negative number.

b. Rebuttable Presumption Payback
    EPCA establishes a rebuttable presumption that an energy 
conservation standard is economically justified if the increased 
purchase cost for a product that meets the standard is less than three 
times the value of the first-year energy savings resulting from the 
standard. (42 U.S.C. 6295(o)(2)(B)(iii)) In calculating a rebuttable 
presumption payback period for each of the analyzed ELs, DOE used 
discrete values, and, as required by EPCA, based the energy use 
calculation on the DOE test procedures for gas-fired instantaneous 
water heaters. In contrast, the PBPs presented in section III.1 of this 
document were calculated using distributions that reflect the range of 
energy use in the field.
    Table III.4 presents the rebuttable-presumption payback periods for 
the analyzed ELs.

[[Page 59703]]



                        Table III.4--Comparison of Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
                     EL                              1                2                3                4
----------------------------------------------------------------------------------------------------------------
                                                                            (years)
                                             -------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters.......            10.2              7.4              7.0              7.5
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results
    Table III.5 presents the GRIM results for the updated gas-fired 
instantaneous water heater analysis discussed in this NODA. The 
methodology and assumptions used in the MIA did not change from the 
July 2023 NOPR except for the analytical changes described in prior 
sections (e.g., revised conversion cost estimates). Details of the MIA 
inputs and methodology are available in chapter 12 of the TSD for the 
July 2023 NOPR.\31\
---------------------------------------------------------------------------

    \31\ https://www.regulations.gov/document/EERE-2017-BT-STD-0019-0058 (last accessed July 3, 2024).

                                   Table III.5--Manufacturer Impact Analysis for Gas-Fired Instantaneous Water Heaters
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Efficiency level
                                               Units              No-new-    ---------------------------------------------------------------------------
                                                              standards case          1                  2                  3                  4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................  2022$ millions........         1,122.2         1,101.9 to         1,092.2 to         1,067.3 to         1,061.6 to
                                                                                        1,157.7            1,158.1            1,143.1            1,167.2
Change in INPV *....................  2022$ millions........  ..............     (20.3) to 35.5     (30.0) to 35.9     (54.9) to 20.9     (60.5) to 45.0
                                      %.....................  ..............       (1.8) to 3.2       (2.7) to 3.2       (4.9) to 1.9       (5.4) to 4.0
Free Cash Flow (2029)...............  2022$ millions........            88.7               81.8               80.2               62.9               62.9
Change in Free Cash Flow * (2029)...  2022$ millions........  ..............              (6.9)              (8.5)             (25.8)             (25.8)
                                      %.....................  ..............              (7.8)              (9.6)             (29.1)             (29.1)
Product Conversion Costs............  2022$ millions........  ..............                2.5                3.6                4.7                4.7
Capital Conversion Costs............  2022$ millions........  ..............               13.5               16.3               53.8               53.8
Total Investment Required...........  2022$ millions........  ..............               16.0               19.9               58.5               58.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate a negative number.

b. Direct Impacts on Employment
    For this NODA, DOE revised its direct employment analysis to 
account for a recently built domestic production facility dedicated to 
manufacturing gas-fired instantaneous water heaters. DOE estimates that 
approximately 20 percent of gas-fired instantaneous water heaters are 
currently produced in the United States. DOE derived this value by 
using its shipments analysis and public market share feedback from 
stakeholder comments to the July 2023 NOPR.\32\
---------------------------------------------------------------------------

    \32\ In 2023 (the reference year), DOE estimates that 
approximately 0.41 million out of the 1.22 million gas-fired 
instantaneous water heater unit shipments are non-condensing. Public 
information submitted in response to the July 2023 NOPR indicates 
that the domestic market share of non-condensing gas-fired 
instantaneous water heaters is 60 percent.
---------------------------------------------------------------------------

    Based on public information and DOE's shipments analysis, DOE 
projects that there would be approximately 128 domestic production 
workers of gas-instantaneous water heaters in 2030 (the analyzed 
compliance year) in the no-new-standards case. To establish a 
conservative lower bound, DOE assumes all domestic manufacturers would 
shift production to foreign countries at efficiency levels that would 
likely necessitate condensing technology. Therefore, to avoid 
underestimating the potential domestic direct employment impacts, DOE 
models a lower-bound reduction in domestic direct employment of 128 
production workers at EL 1 through EL 4 in 2030.
    The upper bound domestic direct employment estimate corresponds to 
a potential 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 products within the 
United States after compliance takes effect (i.e., 20 percent of gas-
instantaneous water heater shipments continue to be manufactured 
domestically). Results of DOE's engineering and product teardown 
analyses indicate that the labor content required to produce a 
condensing gas-fired instantaneous water heater is approximately 59 
percent more than the labor content required to produce a non-
condensing gas-fired instantaneous water heater. As such, DOE models an 
upper-bound increase in domestic direct employment of 59 percent (an 
increase of approximately 75 production workers) at EL 1 through EL 4 
in 2030. DOE tentatively expects that domestic non-production 
employment would not be significantly impacted at EL 1 through EL 4.
    DOE seeks comment on this revision to the Direct Impacts on 
Employment Analysis, including data pertaining to the potential 
implications of the upper and lower bounds of this analysis on product 
shipping costs and other markups that contribute to the total installed 
costs for gas-fired instantaneous water heaters.

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 ELs considered as potential amended standards.
a. National Energy Savings
    To estimate the energy savings attributable to potential amended 
standards for gas-fired instantaneous water heaters, DOE compared their 
energy consumption under the no-new-standards case to their anticipated 
energy consumption under each EL. The savings are measured over the 
entire lifetime of products purchased in the 30-year period that begins 
in the year of anticipated compliance with amended standards (2030-
2059). Table III.6 presents DOE's projections of the national energy 
savings for each EL considered for gas-fired instantaneous water 
heaters. The savings were calculated using the approach described in 
section II.F of this document.

[[Page 59704]]



           Table III.6--Cumulative National Energy Savings for Gas-Fired Instantaneous Water Heaters;
                                              30 Years of Shipments
                                                   [2030-2059]
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                              (quads)
----------------------------------------------------------------------------------------------------------------
                                                 Primary Energy
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters...........            0.32            0.52            0.76            0.97
----------------------------------------------------------------------------------------------------------------
                                                   FFC Energy
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters...........            0.35            0.58            0.85            1.07
----------------------------------------------------------------------------------------------------------------

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 ELs considered for gas-fired 
instantaneous water heaters. In accordance with OMB's 2003 guidelines 
on regulatory analysis,\33\ OMB finalized revisions to Circular A-4 in 
November 2023, but this rule was proposed prior to the effective date 
for proposals under the updated guidance. Hence, the 2003 Circular A-4 
will be a basis for the analyses in this NODA. DOE calculated NPV using 
both a 7-percent and a 3-percent real discount rate. Table III.7 shows 
the consumer NPV results with impacts counted over the lifetime of 
products purchased during the period 2030-2059.
---------------------------------------------------------------------------

    \33\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf 
(last accessed July 3, 2024).

  Table III.7--Cumulative Net Present Value of Consumer Benefits for Gas-Fired Instantaneous Water Heaters; 30
                                               Years of Shipments
                                                   [2030-2059]
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
----------------------------------------------------------------------------------------------------------------
                                             3 percent discount rate
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters...........            1.15            2.82            4.52            5.27
----------------------------------------------------------------------------------------------------------------
                                             7 percent discount rate
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters...........            0.21            0.78            1.30            1.41
----------------------------------------------------------------------------------------------------------------

c. Indirect Impacts on Employment
    DOE conducted the employment impact analysis using the same 
methodology as in the July 2023 NOPR. DOE estimates that amended energy 
conservation standards for gas-fired instantaneous water heaters will 
reduce energy expenditures for consumers of those products, with the 
resulting net savings being redirected to other forms of economic 
activity. These expected shifts in spending and economic activity could 
affect the demand for labor. DOE used an input/output model of the U.S. 
economy to estimate indirect employment impacts of the ELs that DOE 
considered. There are uncertainties involved in projecting employment 
impacts, especially changes in the later years of the analysis. 
Therefore, DOE generated results for near-term timeframes (2030-2035), 
where these uncertainties are reduced. Results at each EL are presented 
in Table III.8.

              Table III.8--Short-Term Change in Employment
                            [1,000s of jobs]
------------------------------------------------------------------------
         Efficiency level                  2030               2035
------------------------------------------------------------------------
EL 1..............................         0.0 to 0.5         0.1 to 0.6
EL 2..............................         0.0 to 0.6         0.2 to 0.8
EL 3..............................         0.0 to 0.7         0.3 to 1.0
EL 4..............................         0.0 to 1.1         0.4 to 1.5
------------------------------------------------------------------------


[[Page 59705]]

    The results suggest that the considered efficiency levels 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.

4. 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. Table III.9 
presents the estimated impacts on electricity-generating capacity, 
relative to the no-new-standards case, for the ELs that DOE considered 
in this NODA.

         Table III.9--Gas-Fired Instantaneous Water Heaters: Summary of Electric Utility Impact Results
----------------------------------------------------------------------------------------------------------------
                                                                                EL
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                        Installed Capacity Reduction (MW)
----------------------------------------------------------------------------------------------------------------
2030............................................          (0.81)          (0.75)          (0.70)            5.00
2035............................................          (4.98)          (4.61)          (4.25)            32.1
2040............................................          (8.57)          (7.92)          (7.26)            58.6
2045............................................          (11.6)          (10.7)          (9.76)            84.8
2050............................................          (13.9)          (12.7)          (11.5)             109
----------------------------------------------------------------------------------------------------------------
                                     Electricity Generation Reduction (GWh)
----------------------------------------------------------------------------------------------------------------
2030............................................          (2.07)          (1.92)          (1.78)            12.6
2035............................................          (12.1)          (11.2)          (10.4)            77.9
2040............................................          (21.0)          (19.4)          (17.8)             142
2045............................................          (27.9)          (25.7)          (23.5)             202
2050............................................          (32.5)          (30.0)          (27.2)             255
----------------------------------------------------------------------------------------------------------------
Note: Parentheses denote an increase in electric capacity or generation.

    Energy conservation resulting from potential energy conservation 
standards for gas-fired instantaneous water heaters is expected to 
yield environmental benefits in the form of reduced emissions of 
certain air pollutants and greenhouse gases. Table III.10 provides 
DOE's estimate of cumulative emissions reductions expected to result 
from the ELs considered in this NODA over a 30-year period of product 
shipments. National impacts, which include physical emissions, are 
estimated over 30 years of shipments extending to 2118.

   Table III.10--Cumulative Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                    Electric Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................              17              28              40              48
CH4 (thousand tons).............................             0.3             0.6             0.8             1.1
N2O (thousand tons).............................            0.03            0.06            0.08            0.11
SO2 (thousand tons).............................            0.04            0.10            0.17            0.75
NOX (thousand tons).............................              15              25              35              41
Hg (tons).......................................        (0.0004)        (0.0004)        (0.0003)          0.0035
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................               2               4               6               7
CH4 (thousand tons).............................             244             397             575             670
N2O (thousand tons).............................            0.00            0.01            0.01            0.01
SO2 (thousand tons).............................            0.01            0.02            0.03            0.04
NOX (thousand tons).............................              38              62              89             104
Hg (tons).......................................        (0.0000)        (0.0000)        (0.0000)          0.0000
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................              19              32              46              54
CH4 (thousand tons).............................             244             398             576             671
N2O (thousand tons).............................            0.04            0.06            0.09            0.12
SO2 (thousand tons).............................            0.05            0.12            0.20            0.79
NOX (thousand tons).............................              53              86             125             145
Hg (tons).......................................        (0.0004)        (0.0004)        (0.0003)          0.0035
----------------------------------------------------------------------------------------------------------------
Note: Totals may not equal sums due to rounding. Negative values refer to an increase in emissions.


[[Page 59706]]

    As described in section II.I, DOE used the updated 2023 SC-GHG 
values for estimating the climate benefits of reduced greenhouse gas 
emissions. Table III.11 presents the value of CO2 emissions 
reduction at each EL, table III.12 presents the value of the 
CH4 emissions reduction at each EL, and table III.13 
presents the value of the N2O emissions reduction at each 
EL, using the 2023 SC-GHG values. The table provides results at each of 
the three discount rates used in the 2023 SC-GHG estimates. Table 
III.10 includes emissions reductions over 30 years of shipments 
extending to 2118 while tables III.11 through III.13 estimate the 
climate benefits through 2080.

Table III.11--Present Value of CO2 Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-
                                          2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
                                                                          Near-term Ramsey discount rate
                               EL                                -----------------------------------------------
                                                                       2.5%            2.0%            1.5%
----------------------------------------------------------------------------------------------------------------
                                                                                  (billion 2022$)
                                                                 -----------------------------------------------
1...............................................................             2.0             3.6             6.4
2...............................................................             3.3             5.8            10.5
3...............................................................             4.8             8.3            15.1
4...............................................................             5.6             9.8            17.8
----------------------------------------------------------------------------------------------------------------


 Table III.12--Present Value of Methane Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in
                                       2030-2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
                                                                          Near-term Ramsey discount rate
                               EL                                -----------------------------------------------
                                                                       2.5%            2.0%            1.5%
----------------------------------------------------------------------------------------------------------------
                                                                                  (billion 2022$)
                                                                 -----------------------------------------------
1...............................................................             0.4             0.6             0.8
2...............................................................             0.7             0.9             1.3
3...............................................................             1.0             1.3             1.9
4...............................................................             1.1             1.6             2.3
----------------------------------------------------------------------------------------------------------------


   Table III.13--Present Value of Nitrous Oxide Emissions Reduction for Gas-Fired Instantaneous Water Heaters
                                  Shipped in 2030-2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
                                                                          Near-term Ramsey discount rate
                               EL                                -----------------------------------------------
                                                                       2.5%            2.0%            1.5%
----------------------------------------------------------------------------------------------------------------
                                                                                  (billion 2022$)
                                                                 -----------------------------------------------
1...............................................................          0.0012          0.0019          0.0033
2...............................................................          0.0019          0.0032          0.0054
3...............................................................          0.0028          0.0046          0.0079
4...............................................................          0.0037          0.0061          0.0105
----------------------------------------------------------------------------------------------------------------

    As part of the analysis for this rule, DOE conducted a sensitivity 
analysis using the interim 2021 IWG SC-GHG values to estimate the 
monetized climate benefits expected to result from the reduced 
emissions of GHGs that DOE estimated for each of the considered ELs for 
gas-fired instantaneous water heaters. Section II.I of this document 
discusses the estimated SC-GHG values that DOE used for this 
sensitivity analysis. Table III.14 presents the value of CO2 
emissions reduction at each EL using the range of interim IWG SC-
CO2 values. Table III.15 presents the value of the 
CH4 emissions reduction at each EL, and table III.16 
presents the value of the N2O emissions reduction at each 
EL. The table provides results at each of the four values used in the 
2021 IWG SC-GHG estimates.

[[Page 59707]]



Table III.14--Present Value of CO2 Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-
                                           2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CO2 case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       EL                               5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
                                                 ---------------------------------------------------------------
1...............................................             0.2             0.7             1.1             2.1
2...............................................             0.3             1.1             1.8             3.4
3...............................................             0.4             1.6             2.6             4.9
4...............................................             0.4             1.9             3.0             5.8
----------------------------------------------------------------------------------------------------------------


 Table III.15--Present Value of Methane Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in
                                         2030-2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
                                                                            SC-CH4 case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       EL                               5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
                                                 ---------------------------------------------------------------
1...............................................             0.1             0.3             0.4             0.8
2...............................................             0.1             0.5             0.7             1.2
3...............................................             0.2             0.7             1.0             1.8
4...............................................             0.2             0.8             1.1             2.1
----------------------------------------------------------------------------------------------------------------


   Table III.16--Present Value of Nitrous Oxide Emissions Reduction for Gas-Fired Instantaneous Water Heaters
                                   Shipped in 2030-2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
                                                                            SC-N2O case
                                                 ---------------------------------------------------------------
                                                                   Discount rate and statistics
                                                 ---------------------------------------------------------------
                       EL                               5%              3%             2.5%             3%
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2022$)
                                                 ---------------------------------------------------------------
1...............................................          0.0001          0.0005          0.0008          0.0013
2...............................................          0.0002          0.0008          0.0013          0.0022
3...............................................          0.0003          0.0012          0.0018          0.0031
4...............................................          0.0004          0.0016          0.0025          0.0042
----------------------------------------------------------------------------------------------------------------

    DOE also estimated the monetary value of the economic benefits 
associated with NOX and SO2 emissions reductions 
anticipated to result from the considered ELs for gas-fired 
instantaneous water heaters. The dollar-per-ton values that DOE used 
are the same as used in the July 2023 NOPR and discussed in the NOPR 
TSD. Table III.17 presents the present value for NOX 
emissions reduction for each EL calculated using 7-percent and 3-
percent discount rates, and table III.18 presents similar results for 
SO2 emissions reductions. Emissions reductions for 
NOX and SO2 are monetized over the entire 
analytical period in the NIA (i.e., the full lifetime of products 
shipped over 30 years, to 2118). The results in these tables reflect 
application of EPA's low dollar-per-ton values, which DOE used to be 
conservative.

  Table III.17--Present Value of NOX Emissions Reduction for Gas-Fired
            Instantaneous Water Heaters Shipped in 2030-2059
------------------------------------------------------------------------
                                            7% Discount     3% Discount
                   EL                          rate            rate
------------------------------------------------------------------------
                                                  (million 2022$)
                                         -------------------------------
1.......................................             517           1,602
2.......................................             833           2,597
3.......................................           1,177           3,719
4.......................................           1,373           4,353
------------------------------------------------------------------------


[[Page 59708]]


  Table III.18--Present Value of SO2 Emissions Reduction for Gas-Fired
            Instantaneous Water Heaters Shipped in 2030-2059
------------------------------------------------------------------------
                                            7% Discount     3% Discount
                   EL                          rate            rate
------------------------------------------------------------------------
                                                  (million 2022$)
                                         -------------------------------
1.......................................            0.04             0.2
2.......................................             0.9             2.8
3.......................................             1.8             5.7
4.......................................              12              38
------------------------------------------------------------------------

    Not all the public health and environmental benefits from the 
reduction of greenhouse gases,\34\ NOX, and SO2 
are captured in the values above, and additional unquantified benefits 
from the reductions of those pollutants as well as from the reduction 
of direct PM and other co-pollutants may be significant. DOE has not 
included monetary benefits of the reduction of Hg emissions because the 
amount of reduction is very small.
---------------------------------------------------------------------------

    \34\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024).
---------------------------------------------------------------------------

5. Summary of Economic Impacts

    Table III.19 presents the NPV values that result from adding the 
estimates of the economic benefits resulting from reduced GHG and 
NOX and SO2 emissions to the NPV of consumer 
benefits calculated for each EL considered in this NODA. The consumer 
benefits are domestic U.S. monetary savings that occur as a result of 
purchasing the covered products, and are measured for the lifetime of 
products shipped during the period 2030-2059. The climate benefits 
associated with reduced GHG emissions resulting from a standard at the 
analyzed EL are global benefits, and are also calculated based on the 
lifetime of gas-fired instantaneous water heaters shipped during the 
period 2030-2059.

         Table III.19--Consumer NPV Combined With Present Value of Climate Benefits and Health Benefits
----------------------------------------------------------------------------------------------------------------
         Category of climate benefits *                EL 1            EL 2            EL 3            EL 4
----------------------------------------------------------------------------------------------------------------
                   Using 3% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
2.0% Near-term Ramsey DR........................             6.9            12.1            17.9            21.0
----------------------------------------------------------------------------------------------------------------
                   Using 7% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
2.0% Near-term Ramsey DR........................             4.9             8.3            12.1            14.1
----------------------------------------------------------------------------------------------------------------
* Climate benefits are only calculated for emissions reductions through 2080. Monetized climate effects are
  presented under a 2 percent near-term Ramsey discount rate, consistent with the 2023 SC-GHG estimates. The
  2003 version of OMB's Circular A-4 (https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) had generally recommended 3 percent and 7 percent as default discount rates for costs
  and benefits, and as part of the IWG on the SC-GHG, OMB also recognized that climate effects should be
  discounted only at appropriate consumption-based discount rates. In November 2023, OMB finalized an update to
  Circular A-4, in which it recommended the general application of a 2.0 percent discount rate to costs and
  benefits (subject to regular updates), as well as the consideration of the shadow price of capital when costs
  or benefits are likely to accrue to capital. Because the SC-GHG estimates reflect net climate change damages
  in terms of reduced consumption (or monetary consumption equivalents), the use of the social rate of return on
  capital (7 percent and 3 percent under OMB's 2003 Circular A-4) to discount damages estimated in terms of
  reduced consumption would inappropriately underestimate the impacts of climate change for the purposes of
  estimating the SC-GHG.

IV. Public Participation

    DOE requests comment on the updated analysis for gas-fired 
instantaneous water heaters presented in the NODA. As noted in the July 
2023 NOPR, DOE may adopt energy efficiency levels that are either 
higher or lower than the proposed standards.
    DOE will accept comments, data, and information regarding this NODA 
no later than the date provided in the DATES section at the beginning 
of this document. Interested parties Approval of the Office of the 
Secretary may submit comments, data, and other information using any of 
the methods described in the ADDRESSES section at the beginning of this 
document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (``CBI'')). Comments submitted 
through www.regulations.gov cannot be claimed as CBI. Comments received 
through the website will waive any CBI claims for the information 
submitted. For information on submitting CBI, see the Confidential 
Business Information section.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or postal 
mail. Comments and documents submitted via email, hand delivery/
courier, or

[[Page 59709]]

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

V. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this 
notification of data availability and request for comment.

Signing Authority

    This document of the Department of Energy was signed on July 18, 
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 July 18, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2024-16177 Filed 7-19-24; 4:15 pm]
BILLING CODE 6450-01-P