[Federal Register Volume 88, Number 102 (Friday, May 26, 2023)]
[Rules and Regulations]
[Pages 34298-34364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10287]
[[Page 34297]]
Vol. 88
Friday,
No. 102
May 26, 2023
Part III
Department of Energy
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10 CFR Parts 429 and 430
Energy Conservation Program: Energy Conservation Standards for Room Air
Conditioners; Final Rule
Federal Register / Vol. 88 , No. 102 / Friday, May 26, 2023 / Rules
and Regulations
[[Page 34298]]
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DEPARTMENT OF ENERGY
10 CFR Parts 429 and 430
[EERE-2014-BT-STD-0059]
RIN 1904-AD97
Energy Conservation Program: Energy Conservation Standards for
Room Air Conditioners
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''),
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including room air
conditioners. EPCA also requires the U.S. Department of Energy
(``DOE'') to periodically determine whether more-stringent, standards
would be technologically feasible and economically justified, and would
result in significant energy savings. In this final rule, DOE is
adopting amended energy conservation standards for room air
conditioners. It has determined that the amended energy conservation
standards for these products would result in significant conservation
of energy, and are technologically feasible and economically justified.
DATES: The effective date of this rule is July 25, 2023. Compliance
with the amended standards established for room air conditioners in
this final rule is required on and after May 26, 2026.
ADDRESSES: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
comments, and other supporting documents/materials, is available for
review at www.regulations.gov. All documents in the docket are listed
in the www.regulations.gov index. However, not all documents listed in
the index may be publicly available, such as information that is exempt
from public disclosure.
The docket web page can be found at www.regulations.gov/docket??D=EERE-2014-BT-STD-0059. The docket web page contains
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact the
Appliance and Equipment Standards Program staff at (202) 287-1445 or by
email: [email protected].
FOR FURTHER INFORMATION CONTACT: Mr. Lucas Adin, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Building
Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC
20585-0121. Telephone: (202) 287-5904. Email: [email protected].
Ms. Sarah Butler, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-1777. Email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for Room Air Conditioners
III. General Discussion
A. Product Classes and Scope of Coverage
B. Test Procedure
C. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Scope of Coverage and Product Classes
2. Technology Options
a. Alternative Refrigerants
b. Product Weight
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Efficiency Analysis
a. Baseline Efficiency/Energy Use
b. Higher Efficiency Levels
2. Cost Analysis
3. Cost-Efficiency Relationship
4. Consumer Utility
D. Markups Analysis
E. Energy Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
a. Rebound Effect
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Manufacturer Markup Scenarios
3. Discussion of MIA Comments
K. Emissions Analysis
1. Air Quality Regulations Incorporated in DOE's Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous Oxide
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Direct Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Room Air
Conditioner Standards
2. Annualized Benefits and Costs of the Adopted Standards
VI. Cooling Capacity Verification
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
[[Page 34299]]
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Information Quality
M. Congressional Notification
VIII. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
The Energy Policy and Conservation Act, Public Law 94-163, as
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency
of a number of consumer products and certain industrial equipment. (42
U.S.C. 6291-6317) Title III, Part B of EPCA \2\ established the Energy
Conservation Program for Consumer Products Other Than Automobiles. (42
U.S.C. 6291-6309) These products include room air conditioners, the
subject of this final rule.
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\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law. 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\2\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
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Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in significant conservation of energy.
(42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6
years after issuance of any final rule establishing or amending a
standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a notice of
proposed rulemaking including new proposed energy conservation
standards (proceeding to a final rule, as appropriate). (42 U.S.C.
6295(m))
In accordance with these and other statutory provisions discussed
in this document, DOE is adopting amended energy conservation standards
for room air conditioners. The adopted standards, which are expressed
in the amount of cooling provided per amount of energy consumed,
measured in British thermal units per watt-hour (``Btu/Wh'') are shown
in Table I.1. These standards apply to all room air conditioners listed
in Table I.1 and manufactured in, or imported into, the United States
starting on May 26, 2026.
Table I.1--Energy Conservation Standards for Room Air Conditioners
[Compliance starting May 26, 2026]
------------------------------------------------------------------------
Combined energy
Equipment class efficiency ratio
(CEER) (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and 13.1
less than 6,000 British thermal units per hour
(``Btu/h'').........................................
2. Without reverse cycle, with louvered sides and 13.7
6,000 to 7,900 Btu/h................................
3. Without reverse cycle, with louvered sides and 16.0
8,000 to 13,900 Btu/h...............................
4. Without reverse cycle, with louvered sides and 16.0
14,000 to 19,900 Btu/h..............................
5a. Without reverse cycle, with louvered sides and 13.8
20,000 to 27,900 Btu/h..............................
5b. Without reverse cycle, with louvered sides and 13.2
28,000 Btu/h or more................................
6. Without reverse cycle, without louvered sides, and 12.8
less than 6,000 Btu/h...............................
7. Without reverse cycle, without louvered sides and 12.8
6,000 to 7,900 Btu/h................................
8a. Without reverse cycle, without louvered sides and 14.1
8,000 to 10,900 Btu/h...............................
8b. Without reverse cycle, without louvered sides and 13.9
11,000 to 13,900 Btu/h..............................
9. Without reverse cycle, without louvered sides and 13.7
14,000 to 19,900 Btu/h..............................
10. Without reverse cycle, without louvered sides and 13.8
20,000 Btu/h or more................................
11. With reverse cycle, with louvered sides, and less 14.4
than 20,000 Btu/h...................................
12. With reverse cycle, without louvered sides, and 13.7
less than 14,000 Btu/h..............................
13. With reverse cycle, with louvered sides, and 13.7
20,000 Btu/h or more................................
14. With reverse cycle, without louvered sides, and 12.8
14,000 Btu/h or more................................
15. Casement-Only.................................... 13.9
16. Casement-Slider.................................. 15.3
------------------------------------------------------------------------
A. Benefits and Costs to Consumers
Table I.2 summarizes DOE's evaluation of the economic impacts of
the adopted standards on consumers of room air conditioners, as
measured by the average life-cycle cost (``LCC'') savings and the
simple payback period (``PBP'').\3\ The average LCC savings are
positive for all product classes, and the PBP is less than the average
lifetime of room air conditioners, which is estimated to be 9.3 years
(see section IV.F of this document).
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\3\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the efficiency
distribution in the no-new-standards case, which depicts the market
in the compliance year in the absence of new or amended standards
(see section IV.F.9 of this document). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline product (see section IV.C of this document).
Table I.2--Impacts of Adopted Energy Conservation Standards on Consumers of Room Air Conditioners
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Average LCC Simple payback
Room air conditioner product class savings (2021$) period (years)
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1. Without reverse cycle, with louvered sides, and less than 6,000 Btu/h.. 65 0.8
2. Without reverse cycle, with louvered sides and 6,000 to 7,900 Btu/h.... 72 1.5
3. Without reverse cycle, with louvered sides and 8,000 to 13,900 Btu/h... 100 2.9
[[Page 34300]]
4. Without reverse cycle, with louvered sides and 14,000 to 19,900 Btu/h.. 92 3.0
5a. Without reverse cycle, with louvered sides and 20,000 Btu/h to 27,900 148 2.5
Btu/h....................................................................
5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more... 284 2.3
8a. Without reverse cycle, without louvered sides and 8,000 to 10,900 Btu/ 84 3.2
h........................................................................
8b. Without reverse cycle, without louvered sides and 11,000 to 13,900 Btu/ 119 2.4
h........................................................................
9. Without reverse cycle, without louvered sides and 14,000 to 19,900 Btu/ 165 2.9
h........................................................................
11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h... 134 3.2
12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h 124 2.6
16. Casement-Slider....................................................... 84 4.0
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DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document.
B. Impact on Manufacturers
The industry net present value (``INPV'') is the sum of the
discounted cash flows to the industry from the announcement of the
standard through the end of the analysis period (2023-2055). Using a
real discount rate of 7.2 percent, DOE estimates that the INPV for
manufacturers of room air conditioners in the case without amended
standards is $1.20 billion.\4\ Under the adopted standards, DOE
estimates the change in INPV to range from -4.8 percent to 7.1 percent,
which is approximately -$57.7 million to $85.6 million. In order to
bring products into compliance with amended standards, it is estimated
that industry will incur total conversion costs of $24.8 million.
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\4\ All monetary values in this document are expressed in 2021
dollars.
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DOE's analysis of the impacts of the adopted standards on
manufacturers is described in sections IV.J and V.B.2 of this document.
C. National Benefits and Costs
DOE's analyses indicate that the adopted energy conservation
standards for room air conditioners would save a significant amount of
energy. Relative to the case without amended standards, the lifetime
energy savings for room air conditioners purchased in the 30-year
period that begins in the anticipated year of compliance with the
amended standards (2026-2055), amount to 1.41 quadrillion British
thermal units (``Btu''), or quads.\5\ This represents a savings of 12
percent relative to the energy use of these products in the case
without amended standards (referred to as the ``no-new-standards
case'').
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\5\ The quantity refers to full-fuel-cycle (FFC) energy savings.
FFC energy savings includes the energy consumed in extracting,
processing, and transporting primary fuels (i.e., coal, natural gas,
petroleum fuels), and, thus, presents a more complete picture of the
impacts of energy efficiency standards. For more information on the
FFC metric, see section IV.H.1 of this document.
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The cumulative net present value (``NPV'') of total consumer
benefits of the standards for room air conditioners ranges from $5.39
billion (at a 7-percent discount rate) to $11.46 billion (at a 3-
percent discount rate). This NPV expresses the estimated total value of
future operating-cost savings minus the estimated increased product
costs for room air conditioners purchased in 2026-2055.
In addition, the adopted standards for room air conditioners are
projected to yield significant environmental benefits. DOE estimates
that the standards will result in cumulative emission reductions (over
the same period as for energy savings) of 48.5 million metric tons
(``Mt'') \6\ of carbon dioxide (``CO2''), 20.1 thousand tons
of sulfur dioxide (``SO2''), 74.2 thousand tons of nitrogen
oxides (``NOX''), 325.6 thousand tons of methane
(``CH4''), 0.5 thousand tons of nitrous oxide
(``N2O''), and 0.1 tons of mercury (``Hg'').\7\ The
estimated cumulative reduction in CO2 emissions through 2030
amounts to 4.4 Mt, which is equivalent to the emissions resulting from
the annual electricity use of more than 856,000 homes.
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\6\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons.
\7\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2022 (``AEO2022''). AEO2022 represents current Federal and
state legislation and final implementation of regulations as of the
time of its preparation. See section IV.K of this document for
further discussion of AEO2022 assumptions that effect air pollutant
emissions.
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DOE estimates the value of climate benefits from a reduction in
greenhouse gases (GHG) using four different estimates of the social
cost of CO2 (``SC-CO2''), the social cost of
methane (``SC-CH4''), and the social cost of nitrous oxide
(``SC-N2O''). Together these represent the social cost of
GHG (SC-GHG).\8\ DOE used interim SC-GHG values developed by an
Interagency Working Group on the Social Cost of Greenhouse Gases
(IWG).\9\ The derivation of these values is discussed in section IV.L.1
of this document. For presentational purposes, the climate benefits
associated with the average SC-GHG at a 3-percent discount rate are
estimated to be $2.51 billion. DOE does not have a single central SC-
GHG point estimate and it emphasizes the importance and value of
considering the benefits calculated using all four sets of SC-GHG
estimates.
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\8\ On March 16, 2022, the Fifth Circuit Court of Appeals (No.
22-30087) granted the Federal Government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a
result of the Fifth Circuit's order, the preliminary injunction is
no longer in effect, pending resolution of the Federal Government's
appeal of that injunction or a further court order. Among other
things, the preliminary injunction enjoined the defendants in that
case from ``adopting, employing, treating as binding, or relying
upon'' the interim estimates of the social cost of greenhouse
gases--which were issued by the Interagency Working Group on the
Social Cost of Greenhouse Gases on February 26, 2021--to monetize
the benefits of reducing greenhouse gas emissions. As reflected in
this rule, DOE has reverted to its approach prior to the injunction
and presents monetized greenhouse gas abatement benefits where
appropriate and permissible under law.
\9\ See Interagency Working Group on Social Cost of Greenhouse
Gases, Technical Support Document: Social Cost of Carbon, Methane,
and Nitrous Oxide. Interim Estimates Under Executive Order 13990,
Washington, DC, February 2021 (``February 2021 SC-GHG TSD'').
www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf.
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DOE estimated the monetary health benefits of SO2 and
NOX emissions reductions, using benefit per ton estimates
from the scientific literature, as discussed in section IV.L of this
document. DOE estimated the present value of the health benefits would
be $2.02 billion using a 7-percent discount rate, and $4.39 billion
using a 3-percent
[[Page 34301]]
discount rate.\10\ DOE is currently only monetizing (for SO2
and NOX) fine particulate matter (``PM2.5'')
precursor health benefits and (for NOX) ozone precursor
health benefits, but will continue to assess the ability to monetize
other effects such as health benefits from reductions in direct
PM2.5 emissions.
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\10\ DOE estimates the economic value of these emissions
reductions resulting from the considered TSLs for the purpose of
complying with the requirements of Executive Order 12866.
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Table I.3 summarizes the economic benefits and costs expected to
result from the adopted standards for room air conditioners. There are
other important unquantified effects, including certain unquantified
climate benefits, unquantified public health benefits from the
reduction of toxic air pollutants and other emissions, unquantified
energy security benefits, and distributional effects, among others.
Table I.3--Summary of Economic Benefits and Costs of Adopted Energy
Conservation Standards for Room Air Conditioners
------------------------------------------------------------------------
Billion $2021
------------------------------------------------------------------------
3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings..................... 14.63
Climate Benefits *.................................. 2.51
Health Benefits **.................................. 4.39
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Total Benefits [dagger]......................... 21.54
Consumer Incremental Product Costs [Dagger]......... 3.17
-------------------
Net Benefits.................................... 18.37
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7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings..................... 7.46
Climate Benefits * (3% discount rate)............... 2.51
Health Benefits **.................................. 2.02
-------------------
Total Benefits [dagger]......................... 12.00
Consumer Incremental Product Costs [Dagger]......... 2.08
-------------------
Net Benefits.................................... 9.92
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Note: This table presents the costs and benefits associated with room
air conditioners shipped in 2026-2055. These results include benefits
to consumers which accrue after 2055 from the products shipped in 2026-
2055.
* Climate benefits are calculated using four different estimates of the
social cost of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide
(SC-N2O) (model average at 2.5 percent, 3 percent, and 5 percent
discount rates; 95th percentile at 3 percent discount rate) (see
section IV.L of this document). Together these represent the global SC-
GHG. For presentational purposes of this table, the climate benefits
associated with the average SC-GHG at a 3 percent discount rate are
shown, but DOE does not have a single central SC-GHG point estimate.
On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087)
granted the Federal Government's emergency motion for stay pending
appeal of the February 11, 2022, preliminary injunction issued in
Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of
the Fifth Circuit's order, the preliminary injunction is no longer in
effect, pending resolution of the Federal Government's appeal of that
injunction or a further court order. Among other things, the
preliminary injunction enjoined the defendants in that case from
``adopting, employing, treating as binding, or relying upon'' the
interim estimates of the social cost of greenhouse gases--which were
issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of
reducing greenhouse gas emissions. As reflected in this rule, DOE has
reverted to its approach prior to the injunction and presents
monetized greenhouse gas abatement benefits where appropriate and
permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
precursor health benefits and (for NOX) ozone precursor health
benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct PM2.5
emissions. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
health benefits that can be quantified and monetized. For presentation
purposes, total and net benefits for both the 3-percent and 7-percent
cases are presented using the average SC-GHG with 3-percent discount
rate, but DOE does not have a single central SC-GHG point estimate.
DOE emphasizes the importance and value of considering the benefits
calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
installation costs.
The benefits and costs of the standards can also be expressed in
terms of annualized values. The monetary values for the total
annualized net benefits are (1) the reduced consumer operating costs,
minus (2) the increase in product purchase prices and installation
costs, plus (3) the value of climate and health benefits of emission
reductions, all annualized.\11\
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\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2022, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2020 or 2030), and then discounted the present value from
each year to 2022. Using the present value, DOE then calculated the
fixed annual payment over a 30-year period, starting in the
compliance year, that yields the same present value.
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The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products and are measured for the lifetime of room air
conditioners shipped in 2026-2055. The benefits associated with reduced
emissions achieved as a result of the adopted standards are also
calculated based on the lifetime of room air conditioners shipped in
2026-2055. Total benefits for both the 3-percent and 7-percent cases
are presented using the average GHG social costs with 3-percent
discount rate. Estimates of SC-GHG values are presented for all four
discount rates in section V.B.6 of this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the standard, expressed in terms of
[[Page 34302]]
annualized values. The results under the primary estimate are as
follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NOX and SO2 emissions, and the
3-percent discount rate case for climate benefits from reduced GHG
emissions, the estimated cost of the standards adopted in this rule is
$205.2 million per year in increased equipment costs, while the
estimated annual benefits are $736.9 million in reduced equipment
operating costs, $140.1 million in climate benefits, and $199.9 million
in health benefits. In this case, the net benefit would amount to
$871.7 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the standards is $176.8 million per year in increased
equipment costs, while the estimated annual benefits are $815.8 million
in reduced operating costs, $140.1 million in climate benefits, and
$244.8 million in health benefits. In this case, the net benefit would
amount to $1,023.9 million per year.
Table I.4--Annualized Benefits and Costs of Adopted Standards for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
Million 2021$/year
-----------------------------------------------
Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 815.8 784.9 851.9
Climate Benefits *.............................................. 140.1 137.6 142.5
Health Benefits **.............................................. 244.8 240.6 248.9
-----------------------------------------------
Total Benefits [dagger]..................................... 1,200.6 1,163.2 1,243.3
Consumer Incremental Product Costs [Dagger]..................... 176.8 199.0 152.2
-----------------------------------------------
Net Benefits................................................ 1,023.9 964.1 1,091.1
----------------------------------------------------------------------------------------------------------------
7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 736.9 712.3 765.4
Climate Benefits * (3% discount rate)........................... 140.1 137.6 142.5
Health Benefits **.............................................. 199.9 196.8 203.0
-----------------------------------------------
Total Benefits [dagger]..................................... 1,076.9 1,046.7 1,111.0
Consumer Incremental Product Costs [Dagger]..................... 205.2 227.0 181.0
-----------------------------------------------
Net Benefits................................................ 871.7 819.7 930.0
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
These results include benefits to consumers which accrue after 2057 from the products shipped in 2028-2057.
The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the
Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
at a 3 percent discount rate are shown, but the Department does not have a single central SC-GHG point
estimate, and it emphasizes the importance and value of considering the benefits calculated using all four
sets of SC-GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted the
Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's order, the
preliminary injunction is no longer in effect, pending resolution of the Federal Government's appeal of that
injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in
that case from ``adopting, employing, treating as binding, or relying upon'' the interim estimates of the
social cost of greenhouse gases--which were issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas emissions. As
reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized
greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as installation costs.
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
DOE concludes that the standards adopted in this final rule
represent the maximum improvement in energy efficiency that is
technologically feasible and economically justified, and would result
in the significant conservation of energy. Specifically, with regards
to technological feasibility products achieving these standard levels
are already commercially available for all product classes covered by
this rule. As for economic justification, DOE's analysis shows that the
benefits of the standards exceed, to a great extent, the burdens of the
standards.
Using a 7-percent discount rate for consumer benefits and costs and
NOX and SO2 reduction benefits, and a 3-percent
discount rate case for GHG social costs, the estimated cost of the
standards for room air conditioners is
[[Page 34303]]
$205.2 million per year in increased product costs, while the estimated
annual benefits are $736.9 million in reduced product operating costs,
$140.1 million in climate benefits, and $199.9 million in health
benefits. The net benefit amounts to $871.7 million per year.
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\12\ For
example, some covered products and equipment have most of their energy
consumption occur during periods of peak energy demand. The impacts of
these products on the energy infrastructure can be more pronounced than
products with relatively constant demand. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis.
---------------------------------------------------------------------------
\12\ Procedures, Interpretations, and Policies for Consideration
in New or Revised Energy Conservation Standards and Test Procedures
for Consumer Products and Commercial/Industrial Equipment, 86 FR
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------
As previously mentioned, the standards are projected to result in
estimated national energy savings of 1.41 quad FFC, the equivalent of
the primary annual energy use of 15 million homes. In addition, they
are projected to reduce CO2 emissions by 48.5 Mt. Based on
these findings, DOE has determined the energy savings from the standard
levels adopted in this final rule are ``significant'' within the
meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the
basis for these conclusions is contained in the remainder of this
document and the accompanying TSD.
II. Introduction
The following section briefly discusses the statutory authority
underlying this final rule, as well as some of the relevant historical
background related to the establishment of standards for room air
conditioners.
A. Authority
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include room air
conditioners, the subject of this document. (42 U.S.C. 6292(a)(2)) EPCA
prescribed energy conservation standards for these products (42 U.S.C.
6295(c)(1)), and directs DOE to conduct future rulemakings to determine
whether to amend these standards. (42 U.S.C. 6295(c)(2)) EPCA further
provides that, not later than 6 years after the issuance of any final
rule establishing or amending a standard, DOE must publish either a
notice of determination that standards for the product do not need to
be amended, or a NOPR including new proposed energy conservation
standards (proceeding to a final rule, as appropriate). (42 U.S.C.
6295(m)(1))
The energy conservation program under EPCA, consists essentially of
four parts: (1) testing, (2) labeling, (3) the establishment of Federal
energy conservation standards, and (4) certification and enforcement
procedures. Relevant provisions of EPCA specifically include
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293),
labeling provisions (42 U.S.C. 6294), energy conservation standards (42
U.S.C. 6295), and the authority to require information and reports from
manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal
preemption in limited instances for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under EPCA. (See 42 U.S.C. 6297(d))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products
must use the prescribed DOE test procedure as the basis for certifying
to DOE that their products comply with the applicable energy
conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use
these test procedures to determine whether the products comply with
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test
procedures for room air conditioners appear at title 10 of the Code of
Federal Regulations (``CFR''), part 430, subpart B, appendix F.
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including room air
conditioners. Any new or amended standard for a covered product must be
designed to achieve the maximum improvement in energy efficiency that
the Secretary of Energy determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A) and (o)(3)(B))
Furthermore, DOE may not adopt any standard that would not result in
the significant conservation of energy. (42 U.S.C. 6295(o)(3))
Moreover, DOE may not prescribe a standard (1) for certain products,
including room air conditioners, if no test procedure has been
established for the product, or (2) if DOE determines by rule that the
standard is not technologically feasible or economically justified. (42
U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is
economically justified, DOE must determine whether the benefits of the
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make
this determination after receiving comments on the proposed standard,
and by considering, to the greatest extent practicable, the following
seven statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated
average life of the covered products in the type (or class) compared
to any increase in the price, initial charges, or maintenance
expenses for the covered products that are likely to result from the
standard;
(3) The total projected amount of energy (or as applicable,
water) savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the
covered products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (``Secretary'')
considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified if the Secretary finds that
the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard
[[Page 34304]]
that either increases the maximum allowable energy use or decreases the
minimum required energy efficiency of a covered product. (42 U.S.C.
6295(o)(1)) Also, the Secretary may not prescribe an amended or new
standard if interested persons have established by a preponderance of
the evidence that the standard is likely to result in the
unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of products that has the same function or intended use if DOE
determines that products within such group (A) consume a different kind
of energy from that consumed by other covered products within such type
(or class); or (B) have a capacity or other performance-related feature
which other products within such type (or class) do not have and such
feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In
determining whether a performance-related feature justifies a different
standard for a group of products, DOE must consider such factors as the
utility to the consumer of such a feature and other factors DOE deems
appropriate. Id. Any rule prescribing such a standard must include an
explanation of the basis on which such higher or lower level was
established. (42 U.S.C. 6295(q)(2))
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140,
any final rule for new or amended energy conservation standards
promulgated after July 1, 2010, is required to address standby mode and
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE
adopts a standard for a covered product after that date, it must, if
justified by the criteria for adoption of standards under EPCA (42
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into
a single standard, or, if that is not feasible, adopt a separate
standard for such energy use for that product. (42 U.S.C.
6295(gg)(3)(A)-(B)) DOE's current test procedures and standards for
room air conditioners address standby mode and off mode energy use, as
do the amended standards adopted in this final rule.
B. Background
1. Current Standards
DOE prescribed the current energy conservation standards in a
direct final rule published on April 21, 2011 (``April 2011 Direct
Final Rule''), which apply to room air conditioners manufactured on and
after April 21, 2014. 76 FR 22454. These standards are set forth in
DOE's regulations at 10 CFR 430.32(b) and are repeated in Table II.1.
Table II.1--Federal Energy Efficiency Standards for Room Air
Conditioners
------------------------------------------------------------------------
Minimum CEER
Room air conditioner product class (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and less 11.0
than 6,000 Btu/h.......................................
2. Without reverse cycle, with louvered sides and 6,000 11.0
to 7,999 Btu/h.........................................
3. Without reverse cycle, with louvered sides and 8,000 10.9
to 13,999 Btu/h........................................
4. Without reverse cycle, with louvered sides and 14,000 10.7
to 19,999 Btu/h........................................
5a. Without reverse cycle, with louvered sides and 9.4
20,000 Btu/h to 27,999 Btu/h...........................
5b. Without reverse cycle, with louvered sides and 9.0
28,000 Btu/h or more...................................
6. Without reverse cycle, without louvered sides, and 10.0
less than 6,000 Btu/h..................................
7. Without reverse cycle, without louvered sides and 10.0
6,000 to 7,999 Btu/h...................................
8a. Without reverse cycle, without louvered sides and 9.6
8,000 to 10,999 Btu/h..................................
8b. Without reverse cycle, without louvered sides and 9.5
11,000 to 13,999 Btu/h.................................
9. Without reverse cycle, without louvered sides and 9.3
14,000 to 19,999 Btu/h.................................
10. Without reverse cycle, without louvered sides and 9.4
20,000 Btu/h or more...................................
11. With reverse cycle, with louvered sides, and less 9.8
than 20,000 Btu/h......................................
12. With reverse cycle, without louvered sides, and less 9.3
than 14,000 Btu/h......................................
13. With reverse cycle, with louvered sides, and 20,000 9.3
Btu/h or more..........................................
14. With reverse cycle, without louvered sides, and 8.7
14,000 Btu/h or more...................................
15. Casement-Only....................................... 9.5
16. Casement-Slider..................................... 10.4
------------------------------------------------------------------------
2. History of Standards Rulemaking for Room Air Conditioners
EPCA prescribed initial energy conservation standards for room air
conditioners and further directed DOE to conduct two cycles of
rulemakings to determine whether to amend these standards. (42 U.S.C.
6295(c)(1)-(2)) DOE completed the first of these rulemaking cycles on
September 24, 1997, by adopting amended performance standards for room
air conditioners manufactured on or after October 1, 2000. 62 FR 50122.
Additionally, DOE completed a second rulemaking cycle to amend the
standards for room air conditioners by issuing the April 2011 Direct
Final Rule, in which DOE prescribed the current energy conservation
standards for room air conditioners manufactured on or after April 21,
2014. 76 FR 22454 (April 21, 2011). DOE subsequently published a final
rule amending the compliance date for the current room air conditioner
standards to June 1, 2014. 76 FR 52852 (Aug. 24, 2011). In a separate
document, also published on August 24, 2011, DOE confirmed the adoption
of these energy conservation standards in a notice of effective date
and compliance dates for the April 2011 Direct Final Rule. 76 FR 52854.
As part of the current analysis, on June 18, 2015, DOE prepared a
Request for Information (``June 2015 RFI''), which solicited
information from the public to help DOE determine whether amended
standards for room air conditioners would result in a significant
amount of additional energy savings and whether those standards would
be technologically feasible and economically justified.\13\ 80 FR
34843.
---------------------------------------------------------------------------
\13\ Pursuant to amendments to appendix A to 10 CFR part 430,
subpart C (``appendix A''), DOE generally will issue an early
assessment request for information announcing that DOE is
considering initiating a rulemaking proceeding. Section 6(a)(1) of
appendix A; see also 85 FR 8626, 8637 (Feb. 14, 2020) and 86 FR
70892 (Dec. 13, 2021). Section 6(a)(2) of appendix A provides that
if the DOE determines it is appropriate to proceed with a
rulemaking, the preliminary stages of a rulemaking to issue or amend
an energy conservation standard that DOE will undertake will be a
Framework Document and Preliminary Analysis, or an advance notice of
proposed rulemaking. Because this rulemaking was already in progress
at the time the relevant amendments to appendix A were published,
DOE did not reinitiate the entire rulemaking process. Additionally,
the June 2015 RFI presented the issues, analyses, and processes
relevant to consideration of amended standards for room air
conditioners.
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[[Page 34305]]
DOE published a notice of public meeting and availability of the
preliminary technical support document (``TSD'') on June 17, 2020
(``June 2020 Preliminary Analysis''). 85 FR 36512.
Comments received following the publication of the June 2020
Preliminary Analysis helped DOE identify and resolve issues related to
the subsequent NOPR analysis.\14\ DOE published a notice of proposed
rulemaking on April 7, 2022 (``April 2022 NOPR''). 87 FR 20608. DOE
subsequently held a public meeting on May 3, 2022, to discuss and
receive comments on the NOPR. The NOPR TSD that presented the
methodology and results of the NOPR analysis is available at:
www.regulations.gov/document/EERE-2014-BT-STD-0059-0030.
---------------------------------------------------------------------------
\14\ Comments are available at www.regulations.gov/document/EERE-2014-BT-STD-0059-0031/comment.
---------------------------------------------------------------------------
DOE received 17 written comments in response to the April 2022 NOPR
from the interested parties listed in Table II.2.
Table II.2--April 2022 NOPR Written Comments
----------------------------------------------------------------------------------------------------------------
Comment No. in
Commenter(s) Abbreviation the docket Commenter type
----------------------------------------------------------------------------------------------------------------
A. Krishna \1\..................... Krishna.............. 32 Individual.
Anonymous Individual............... University of 34 Individual.
Massachusetts
Amherst Student.
L. Adelman......................... University of 35 Individual.
Massachusetts
Amherst Student.
G. Larsen.......................... University of 37 Individual.
Massachusetts
Amherst Student.
People's Republic of China......... P.R. China........... 39 Government.
Treua Inc. (DBA Gradient).......... Gradient............. 40 Manufacturer.
New York State Energy Research and NYSERDA.............. 41 Efficiency Organization.
Development Authority.
Center for Law and Social Policy... CLASP................ 42 Efficiency Organization.
Association of Home Appliance AHAM................. 43 Trade Association.
Manufacturers.
Friedrich Air Conditioning......... Friedrich............ 44 Manufacturer.
Appliance Standards Awareness Joint Commenters..... 45 Efficiency Organizations.
Project (ASAP), American Council
for an Energy-Efficient Economy
(ACEEE), CLASP, Consumer
Federation of America (CFA),
National Consumer Law Center
(NCLC).
Consumer Federation of America CFA and NCLC......... 46 Efficiency Organizations.
(CFA), National Consumer Law
Center (NCLC).
Pacific Gas and Electric Company California IOUs...... 47 Utilities.
(PG&E), San Diego Gas and Electric
(SDG&E), Southern California
Edison (SCE).
Keith Rice......................... Rice................. 48 Individual.
GE Appliances...................... GEA.................. 49 Manufacturer.
Northwest Energy Efficiency NEEA and NWPCC....... 50 Efficiency Advocates.
Alliance (NEEA), Northwest Power
and Conservation Council (NWPCC).
Center for Climate and Energy Climate Commenters... 51 Efficiency Advocate Group.
Solutions (C2ES), Institute for
Policy Integrity (IPI), Natural
Resources Defense Council (NRDC),
Sierra Club, Union of Concerned
Scientists.
----------------------------------------------------------------------------------------------------------------
\1\ The comment submitted by this individual did not pertain to room air conditioners.
A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\15\
---------------------------------------------------------------------------
\15\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for room air conditioners. (Docket No.
EERE-2014-BT-STD-0059, which is maintained at www.regulations.gov)
The references are arranged as follows: (commenter name, comment
docket ID number, page of that document).
---------------------------------------------------------------------------
III. General Discussion
DOE developed this final rule after considering oral and written
comments, data, and information from interested parties that represent
a variety of interests. The following discussion addresses issues
raised by these commenters.
A. Product Classes and Scope of Coverage
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used or by capacity or other performance-related features that justify
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such
factors as the utility of the feature to the consumer and other factors
DOE determines are appropriate. (42 U.S.C. 6295(q)) DOE's NOPR analysis
indicated that the current room air conditioner products classes are
still appropriate. For further discussion and responses to comments
received regarding product classes see section IV.A.1 of this document.
B. Test Procedure
EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to quantify the efficiency of their product. DOE's
current energy conservation standards for room air conditioners are
expressed in terms of combined energy efficiency ratio (CEER), in Btu/
Wh. (See 10 CFR 430.32(b) and 10 CFR part 430, subpart B, appendix F.)
C. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially available products or in
[[Page 34306]]
working prototypes to be technologically feasible. Sections 6(b)(3)(i)
and 7(b)(1) of appendix A to 10 CFR part 430, subpart C (``appendix
A'').
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; (3) adverse impacts on
health or safety and (4) unique-pathway proprietary technologies.
Section 7(b)(2)-(5) of appendix A. Section IV.B of this document
discusses the results of the screening analysis for room air
conditioners, particularly the designs DOE considered, those it
screened out, and those that are the basis for the standards considered
in this final rule. For further details on the screening analysis for
this rulemaking, see chapter 4 of the final rule technical support
document (``TSD'').
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended standard for a type or class
of covered product, it must determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the
engineering analysis, DOE determined the maximum technologically
feasible (``max-tech'') improvements in energy efficiency for room air
conditioners, using the design parameters for the most efficient
products available on the market or in working prototypes. The max-tech
levels that DOE determined for this rulemaking are described in section
IV.C of this final rule and in chapter 5 of the final rule TSD.
D. Energy Savings
1. Determination of Savings
For each trial standard level (``TSL''), DOE projected energy
savings from application of the TSL to room air conditioners purchased
in the 30-year period that begins in the year of compliance with the
amended standards (2026-2055).\16\ The savings are measured over the
entire lifetime of products purchased in the 30-year analysis period.
DOE quantified the energy savings attributable to each TSL as the
difference in energy consumption between each standards case and the
no-new-standards case. The no-new-standards case represents a
projection of energy consumption that reflects how the market for a
product would likely evolve in the absence of amended energy
conservation standards.
---------------------------------------------------------------------------
\16\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------
DOE used its national impact analysis (``NIA'') spreadsheet models
to estimate national energy savings (``NES'') from potential amended
standards for room air conditioners. The NIA spreadsheet model
(described in section IV.H of this document) calculates energy savings
in terms of site energy, which is the energy directly consumed by
products at the locations where they are used. For electricity, DOE
reports national energy savings in terms of primary energy savings,
which is the savings in the energy that is used to generate and
transmit the site electricity. For natural gas, the primary energy
savings are considered to be equal to the site energy savings. DOE also
calculates NES in terms of FFC energy savings. The FFC metric includes
the energy consumed in extracting, processing, and transporting primary
fuels (i.e., coal, natural gas, petroleum fuels), and thus presents a
more complete picture of the impacts of energy conservation
standards.\17\ DOE's approach is based on the calculation of an FFC
multiplier for each of the energy types used by covered products or
equipment. For more information on FFC energy savings, see section
IV.H.2 of this document.
---------------------------------------------------------------------------
\17\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------
2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking. For example,
the United States has now rejoined the Paris Agreement on February 19,
2021. As part of that agreement, the United States has committed to
reducing GHG emissions in order to limit the rise in mean global
temperature.\18\ As such, energy savings that reduce GHG emission have
taken on greater importance. Additionally, some covered products and
equipment have most of their energy consumption occur during periods of
peak energy demand. The impacts of these products on the energy
infrastructure can be more pronounced than products with relatively
constant demand. In evaluating the significance of energy savings, DOE
considers differences in primary energy and FFC effects for different
covered products and equipment when determining whether energy savings
are significant. FFC effects include the energy consumed in electricity
production (depending on load shape), in distribution and transmission,
and in extracting, processing, and transporting primary fuels (i.e.,
coal, natural gas, petroleum fuels), and thus present a more complete
picture of the impacts of energy conservation standards. Accordingly,
DOE evaluates the significance of energy savings on a case-by-case
basis, taking into account the significance of cumulative FFC national
energy savings, the cumulative FFC emissions reductions, and the need
to confront the global climate crisis, among other factors.
---------------------------------------------------------------------------
\18\ See E.O. 14008, 86 FR 7619 (Feb. 1, 2021) (``Tackling the
Climate Crisis at Home and Abroad'').
---------------------------------------------------------------------------
As stated, the standard levels adopted in this final rule are
projected to result in national energy savings of 1.41 quad, the
equivalent of the electricity use of 15 million homes in one year. They
are projected to reduce CO2 emissions by 48.5 Mt. Based on
these findings, DOE has determined the energy savings from the standard
levels adopted in this final rule are ``significant'' within the
meaning of 42 U.S.C. 6295(o)(3)(B).
E. Economic Justification
1. Specific Criteria
As noted previously, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this final rule.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of potential amended standards on
manufacturers, DOE conducts a manufacturer impact analysis (``MIA''),
as discussed in section IV.J of this document. DOE first uses an annual
cash-flow approach to determine the quantitative impacts. This step
includes both a short-term assessment--based on the cost and capital
requirements during the period between when a regulation is issued and
when entities must comply with the regulation--and a long-term
assessment over a 30-year period. The industry-wide impacts analyzed
include (1) INPV, which values the industry on the basis of expected
future cash flows;
[[Page 34307]]
(2) cash flows by year; (3) changes in revenue and income; and (4)
other measures of impact, as appropriate. Second, DOE analyzes and
reports the impacts on different types of manufacturers, including
impacts on small manufacturers. Third, DOE considers the impact of
standards on domestic manufacturer employment and manufacturing
capacity, as well as the potential for standards to result in plant
closures and loss of capital investment. Finally, DOE takes into
account cumulative impacts of various DOE regulations and other
regulatory requirements on manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and payback period (``PBP'') associated with new or
amended standards. These measures are discussed further in the
following section. For consumers in the aggregate, DOE also calculates
the national net present value of the consumer costs and benefits
expected to result from particular standards. DOE also evaluates the
impacts of potential standards on identifiable subgroups of consumers
that may be affected disproportionately by a standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels (``EL'') are calculated relative to the case that reflects
projected market trends in the absence of new or amended standards.
DOE's LCC and PBP analysis is discussed in further detail in section
IV.F of this document.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section IV.H of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes, and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards adopted in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It
also directs the Attorney General to determine the impact, if any, of
any lessening of competition likely to result from a standard and to
transmit such determination to the Secretary within 60 days of the
publication of a proposed rule, together with an analysis of the nature
and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the
Department of Justice (``DOJ'') in making such a determination, DOE
transmitted copies of its proposed rule and the NOPR TSD to the
Attorney General for review, with a request that the DOJ provide its
determination on this issue. In its assessment letter responding to
DOE, DOJ concluded that the proposed energy conservation standards for
room air conditioners are unlikely to have a significant adverse impact
on competition. DOE is publishing the Attorney General's assessment at
the end of this final rule.
f. Need for National Energy Conservation
DOE also considers the need for national energy and water
conservation in determining whether a new or amended standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy
savings from the adopted standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
system. DOE conducts a utility impact analysis to estimate how
standards may affect the Nation's needed power generation capacity, as
discussed in section IV.M of this document.
DOE maintains that environmental and public health benefits
associated with the more efficient use of energy are important to take
into account when considering the need for national energy
conservation. The adopted standards are likely to result in
environmental benefits in the form of reduced emissions of air
pollutants and greenhouse gases (``GHGs'') associated with energy
production and use. DOE conducts an emissions analysis to estimate how
potential standards may affect these emissions, as discussed in section
IV.J.3 of this document; the estimated emissions impacts are reported
in section V.B.6 of this document. DOE also estimates the economic
value of emissions reductions resulting from the considered TSLs, as
discussed in section IV.L of this document.
g. Other Factors
In determining whether an energy conservation standard is
economically justified, DOE may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent DOE identifies any relevant information regarding economic
justification that does not fit into the other categories described
previously, DOE could consider such information under ``other
factors.''
[[Page 34308]]
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effect potential amended
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F of this final rule.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to room air conditioners. Separate subsections
address each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended or new
energy conservation standards. The national impacts analysis uses a
second spreadsheet set that provides shipments projections and
calculates national energy savings and net present value of total
consumer costs and savings expected to result from potential energy
conservation standards. DOE uses the third spreadsheet tool, the
Government Regulatory Impact Model (GRIM), to assess manufacturer
impacts of potential standards. These three spreadsheet tools are
available on the DOE website for this rulemaking: www.regulations.gov/docket??D=EERE-2014-BT-STD-0059. Additionally, DOE used output from the
latest version of the Energy Information Administration's (``EIA's'')
Annual Energy Outlook (``AEO'') for the emissions and utility impact
analyses.
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
that provides an overall picture of the market for the products
concerned, including the purpose of the products, the industry
structure, manufacturers, market characteristics, and technologies used
in the products. This activity includes both quantitative and
qualitative assessments, based primarily on publicly available
information. The subjects addressed in the market and technology
assessment for this rulemaking include: (1) a determination of the
scope of the rulemaking and product classes, (2) manufacturers and
industry structure, (3) existing efficiency programs, (4) shipments
information, (5) market and industry trends, and (6) technologies or
design options that could improve the energy efficiency of room air
conditioners. The key findings of DOE's market assessment are
summarized in the following sections. See chapter 3 of the final rule
TSD for further discussion of the market and technology assessment.
1. Scope of Coverage and Product Classes
In the April 2022 NOPR, DOE did not propose any substantive changes
to the room air conditioner scope of coverage or product classes, but
did propose making clarifying amendments to the product class
descriptions. Specifically, DOE proposed to revise the threshold values
of cooling capacity in the product class descriptions to the nearest
hundred Btu/h that would not exceed the existing thresholds, which is
consistent with the cooling capacity delineation used in practice due
to the rounding instruction at 10 CFR 429.15(a)(3) so would not impact
compliance with current energy conservation standards. The proposed
change to the product class delineation would add clarity and
consistency amongst two existing regulatory provisions. 87 FR 20608.
DOE requested comment on the room air conditioner scope of coverage and
product classes.
Currently, reversible and one-way products are in separate product
classes and are therefore not compared in any analysis conducted by
DOE. However, according to the Center for Law and Social Policy
(``CLASP''), taking the efficiency of alternate heating methods into
account would allow DOE to treat the reverse cycle in both room and
central air conditioners not as a feature meriting its own product
class, but as a technology/design option to reduce energy consumption
and high energy bills. In this manner, a one-way air conditioner would
have the energy consumption of typical furnaces and boilers factored
into its annual performance metric, while a reversible air conditioner
could eliminate this energy consumption depending on its heating
capacity and cold-climate performance potentially leading to energy
conservation standards that require the use of reversing capabilities
in all air conditioners. (CLASP, No. 42 at p. 2)
Room air conditioner energy conservation standards are currently
based on the CEER metric, determined in accordance with the DOE test
procedure for room air conditioners at appendix F to 10 CFR 430
(``appendix F''). Appendix F does not currently account for the energy
consumption during heating operation, and therefore the CEER metric
reflects the energy efficiency of a room air conditioner during cooling
mode, and other low power modes. In order to account for the energy
cost of alternate heating methods for non-reverse cycle room air
conditioners, a test procedure amendment would be necessary to address
heating mode performance, which is outside of the scope of this energy
conservation standards rulemaking.
The Public Utilities recommended that DOE establish new product
classes for room air conditioners with reverse cycle and <8,000 British
thermal units per hour (``Btu/h'') and to consider less stringent
standards for such product classes so as to not preclude the
introduction of such equipment and deprive consumers of any potential
consumer utility. The Public Utilities also provided options for
potential standards in these suggested product classes, noting that
generally efficiencies for room air conditioners with reverse cycle are
lower than those without reverse cycle. (Public Utilities, No. 47 at
pp. 2-4)
DOE is not aware of any room air conditioners currently sold on the
market, or any prototypes in development, that meet the criteria
outlined by the Public Utilities. DOE is unaware of any data suggesting
that the current energy conservation standards preclude the
introduction of room air conditioners with reverse cycle capabilities
and capacity less than 8,000 Btu/h to the market. Furthermore, the lack
of extant products that meet these criteria leaves DOE without the
information needed to analyze whether a new product class is necessary.
Therefore, DOE is not amending the product class structure at this time
to
[[Page 34309]]
specifically address room air conditioners with reverse cycle
capabilities and capacity less than 8,000 Btu/h. DOE is, however,
adopting the clarifying amendments to the product class descriptions,
originally proposed in the April 2022 NOPR, to align with the rounding
instruction at 10 CFR 429.15(a)(3).
2. Technology Options
In the NOPR market analysis and technology assessment, DOE
identified 22 technology options initially determined to improve the
efficiency of room air conditioners, as measured by the DOE test
procedure:
Table IV.1--Technology Options for Room Air Conditioners
------------------------------------------------------------------------
-------------------------------------------------------------------------
Increased Heat Transfer Surface Area:
1. Increased heat exchanger surface area (frontal area, fin density
and depth of coil).
2. Condenser coil subcooler.
3. Suction line heat exchanger.
Increased Heat Transfer Coefficient:
4. Improved fin and tube design.
5. Hydrophilic coating on fins.
6. Microchannel heat exchangers.
7. Spray condensate on condenser coil.
Component Improvements:
8. Improved indoor blower and outdoor fan blade design.
9. Improved blower/fan motor design.
10. Improved compressor efficiency.
Improved Installation, Insulation, and Airflow:
11. Improved installation materials.
12. Reduced evaporator air recirculation.
13. Reduced thermal bridging and internal air leakage.
Part-load Performance:
14. Variable-speed compressors.
15. Variable-speed drive fans and blowers.
16. Thermostatic or electronic expansion valves.
17. Thermostatic cyclic controls.
18. Air and water economizers.
Standby Power Improvements:
19. Low standby-power electronics.
20. High frequency switching power supply.
Alternative Refrigerants:
21. Significant New Alternatives Policy (``SNAP'')-approved
refrigerants (R-32, R-441A, and R-290).
Other Improvements:
22. Washable air filters.
------------------------------------------------------------------------
a. Alternative Refrigerants
In the April 2022 NOPR, DOE analyzed R-32 (difluoromethane or HFC-
32), R-441A (hydrocarbon blend), and R-290 (propane or HC-290) as
potential design options to replace R-410A to improve unit efficiency.
DOE also analyzed the potential impact of implementing these
alternative refrigerants on overall system cost and component
efficiency. As discussed in chapter 3 of the NOPR TSD, while DOE did
find efficiency benefits associated with R-441A and R-290 refrigerants
relative to R410A, DOE did not rely upon those alternative refrigerants
in the engineering analysis due to practical concerns regarding
flammability and availability. DOE did not find reliable evidence of
significant efficiency benefits from a change to R-32 refrigerant.
However, based on DOE's expectation that manufacturers are likely to
change the primary refrigerant used in room air conditioners to R-32 in
response to recent California refrigerant regulations,\19\ DOE analyzed
the efficiency of compressors that use R-32 as part of the technology
analysis and implemented these compressors in the engineering analysis
in the April 2022 NOPR.
---------------------------------------------------------------------------
\19\ The California Air Resources Board (CARB) finalized its
rulemaking on Prohibitions on Use of Certain Hydrofluorocarbons in
Stationary Refrigeration, Chillers, Aerosols-Propellants, and Foam
End-Uses Regulation. See https://ww2.arb.ca.gov/rulemaking/2020/hfc2020. This regulation prohibits the sale of new room air
conditioners with refrigerants with a GWP of 750 or greater in
California beginning on January 1, 2023. See chapter 3 of this final
rule TSD for additional discussion.
---------------------------------------------------------------------------
NEEA and NWPCC supported the inclusion of R-32 in the engineering
analysis because of the potential energy savings, the number of
products already using R-32, and the new California refrigerant
requirements. In particular, NEEA agreed with the approached used by
DOE to incorporate R-32 compressors into the design options used to
achieve EL 3. (NEEA and NWPCC, No. 50 at pp. 4-5) NYSERDA also
supported DOE's incorporation of R-32 refrigerants and variable speed
compressors across the analysis, and urged DOE to move swiftly toward
finalizing this standard to lock in the beneficial impacts as soon as
possible. (NYSERDA, No. 41 at p. 3)
In this final rule analysis, DOE has maintained its approach to
incorporating R-32 from the NOPR analysis.
Larsen requested that DOE include calculations on the impacts of
alternate refrigerants in room air conditioners in updating the
standards of room air conditioners as well as changing DOE's priorities
to include environmental impact and quality of life. Larsen referenced
challenges to DOE's decision not to include refrigerants (R-32, R441A,
R-290) approved by the Environmental Protection Agency (EPA)
Significant New Alternatives Policy (``SNAP'') in its engineering
analysis, and stated that technological feasibility, predicted costs in
the wake of increased value in climate and health benefits, reduced
global warming potential compared to the proposed refrigerant R-410A,
and findings by the Oak Ridge National Laboratory that showed
[[Page 34310]]
increased efficiency by around 3 percent warrant the inclusion of these
calculations of benefits associated with alternative refrigerants,
specifically R-32. (G. Larsen, No. 37 at pp. 1-4)
EPCA requires that DOE focus on the efficiency impacts of various
design options, rather than the overall environmental impact. (42
U.S.C. 6295(o)(2)(A)) DOE does consider adverse effects on consumer
utility when evaluating technology options. As discussed in chapter 3
of the final rule TSD, DOE found varying reports of the efficiency
benefits attributable from the change-over from R-410A to R-32, and as
discussed in chapter 5 of the NOPR TSD, opted not to include R-32
specifically as an efficiency option but did include inherent
efficiency differences between R-32 compressors and R-410A compressors
in the analysis. Due to the varying reports of efficiency impacts and
the limitation of scope for this energy conservations standards
rulemaking, DOE maintains the same approach as the NOPR, to analyze a
change over to R-32 refrigerant so as to utilize the compressor
efficiency benefits of R-32 compressors relative to R-410A compressors,
without considering specific efficiency benefits attributable to the
refrigerant itself.
The Association of Home Appliance Manufacturers (AHAM) requested
that DOE consider the recent safety testing challenges and safety
concerns associated with the charge size of hydrocarbon refrigerants
such as R-290 as, according to AHAM, DOE and the Electric Power
Research Institute (``EPRI'') study projecting that use of R-290 would
yield significant efficiency gains fail to take into account the
practical considerations that prevent the use of R-290 in room air
conditioners. AHAM stated that the safety standard UL 60335-2-40 will
likely limit the charge size of hydrocarbon refrigerants such as R-290
to 114 grams due to lab safety concerns, significantly less than the
200-300 grams required for the smallest capacities of room air
conditioners according to AHAM. Additionally, AHAM requested that DOE
take the concerns of groups representing firefighters and fire services
into account and should not rely on R-290 refrigerant to achieve
efficiency gains in its analysis. (AHAM, No. 43 at p. 26)
In chapter 3 of the NOPR TSD, DOE noted that researchers have
observed efficiency benefits associated with using R-290 as a
refrigerant. However, DOE understands that this design option is still
new to the room air conditioner industry and poses substantial design
challenges to meet UL safety standards. DOE did not propose to rely on
R-290 refrigerant as a design option in the NOPR analysis and
maintained that approach in this final rule.
Systemair requested clarification regarding whether R-454B was
included in the analysis. (Systemair, Public Meeting Transcript, No. 38
at pp. 15-16) \20\ AHAM disagreed with the potential use of R-454B as a
refrigerant as mentioned by Systemair because of considerable cost
increases as it is a more expensive refrigerant than R-32, lower
efficiency than R-32 compressors, and lack of availability. AHAM
recommended that DOE reject the use of R-454B as a technology option.
(AHAM, No. 43 at p. 27) Additionally, UL stated that for any
refrigerant considered in DOE's analysis, SNAP approval would be
required. (UL, Public Meeting Transcript, No. 38 at pp. 16-17)
---------------------------------------------------------------------------
\20\ A notation in the form ``Systemair, Public Meeting
Transcript, No. 38 at pp. 15-16'' identifies an oral comment that
DOE received on May 3, 2022 during the public meeting, and was
recorded in the public meeting transcript in the docket for this
test procedure rulemaking (Docket No. EERE-2014-BT-STD-0059-0030).
This particular notation refers to a comment (1) made by Systemair
during the public meeting; (2) recorded in document number 38, which
is the public meeting transcript that is filed in the docket of this
energy conservations standards rulemaking; and (3) which appears on
pages 15 through 16 of document number 38.
---------------------------------------------------------------------------
SNAP approved R-454B for use in residential air conditioning
applications, subject to certain use conditions, in a final rule
published on May 6, 2021. 86 FR 24444. Therefore, DOE investigated R-
454B as a design option for this final rule analysis. DOE did find some
efficiency benefit associated with implementation of R-454B but noted
the additional costs associated with the technology and the design and
supply challenges that AHAM discussed. The full design option analysis
of R-454B can be found in the technology assessment in chapter 3 of the
final rule TSD.
b. Product Weight
AHAM stated that DOE did not sufficiently evaluate the impact of
its proposals with respect to product weight, and requested that DOE
consider design parameters of 50 or 150 pound weight thresholds for one
or two person lifts set by manufacturers for worker safety standards,
consumer utility, and other distribution requirements. According to
information collected by AHAM from members on their models' weight and
dimension characteristics, AHAM stated that there is a strong
relationship between product weight and cooling capacity and claimed
that DOE is underestimating the change in weight associated with
technology options and design required to meet DOE's proposed standards
for a significant number of models in the market. According to AHAM
member data, there will likely be significant increase to product
weight that exceeds DOE's identified acceptable limits, and that by
generalizing the increase in product weight by product class, DOE is
overlooking a significant portion of the market. According to AHAM,
this increase in product weight is an ongoing consideration as products
are often removed from windows seasonally, and senior citizens who rely
on these products will have more difficulty with heavier products.
According to member data, AHAM estimated that product weight increases
of up to 14.6 pounds for Product Classes 1-3 would be required to meet
the proposed standards, with each estimated resulting product weight
above the 51-pound threshold determined by DOE as a reasonable upper
limit for single-person portability. For Product Class 1, AHAM
predicted product weight increases between 21 and 56 percent, compared
to DOE's estimate of 17 to 46 percent. AHAM further estimated weight
increases between 7 and 22 percent for Product Classes 3, 4, 5a, 8a,
and 16. (AHAM, No. 43 at pp. 19-21)
DOE understands that product weight is a concern to consumers,
which is why DOE considered the effect on product weight when
conducting the engineering analysis. DOE considered weight restrictions
only for Product Class 1 because units in Product Class 2 already
commonly exceed the 50-pound Occupational Safety and Health
Administration (OSHA) recommendation for a single-person lift, implying
that single-person lifts are not an important consumer attribute for
Product Class 2 or for larger units. DOE modeled the potential
increases in product weight due to more efficient compressors using
compressor weight data from product teardowns. Based on this analysis,
DOE expects that manufacturers will be able to preserve single-person
lift capability for those products for which it is important to
consumers (i.e., units within Product Class 1), as DOE predicts a unit
weight increase between 17 and 46 percent for the models in DOE's
teardown sample to achieve the max-tech efficiency level, but in no
instance would unit weight exceed 51 pounds. DOE's analysis indicates
that unit weights resulting from higher efficiency level design options
that exceed a 150-pound two-person carry threshold were limited to two
product classes, PC 5b and PC 11,
[[Page 34311]]
where existing units either nearly or already exceed 150 pounds. DOE
expects that these large units are already installed primarily with the
assistance of professional installers, limiting the impact of increased
weight on the consumer utility of these units.
B. Screening Analysis
DOE uses the following four screening criteria to determine which
technology options are suitable for further consideration in an energy
conservation standards rulemaking:
(1) Technological feasibility. Technologies that are not
incorporated in commercial products or in commercially viable,
existing prototypes will not be considered further.
(2) Practicability to manufacture, install, and service. If it
is determined that mass production of a technology in commerical
products and reliable installation and servicing of the technology
could not be achieved on the scale necessary to serve the relevant
market at the time of the projected compliance date of the standard,
then that technology will not be considered further.
(3) Impacts on product utility. If a technology is determined to
have a significant adverse impact on the utility of the product to
significant subgroups of consumers or result in the unavailability
of any covered product type with performance characteristics
(including reliability), features, sizes, capacities, and volumes
that are substantially the same as products generally available in
the United States at the time, it will not be considered further.
(4) Safety of technologies. If it is determined that a
technology would have significant adverse impacts on health or
safety, it will not be considered further.
(5) Unique-pathway proprietary technologies. If a technology has
proprietary protection and represents a unique pathway to achieving
a given efficiency level, that technology will not be considered
further due to the potential for monopolistic concerns.
Sections 6(b)(3) and 7(b) of appendix A.
In sum, if DOE determines that a technology, or a combination of
technologies, fails to meet one or more of the listed five criteria, it
will be excluded from further consideration in the engineering
analysis. The reasons for eliminating any technology are discussed in
the following sections.
The subsequent sections include comments from interested parties
pertinent to the screening criteria, DOE's evaluation of each
technology option against the screening analysis criteria, and whether
DOE determined that a technology option should be excluded (``screened
out'') based on the screening criteria.
1. Screened-Out Technologies
In the April 2022 NOPR, DOE proposed screening out air and water
economizers and suction-line heat exchangers in the screening analysis,
based on their negative impacts on product utility to consumers and on
manufacturing impracticality.
AHAM requested that DOE screen out installation materials like
accordion side-curtains as there is no way to account for the energy
savings according to the existing test procedure given that these
features are not installed in the calorimeter during efficiency
testing. AHAM also requested that DOE screen out the use of an extended
polystyrene (EPS) panel as a technology option as the test procedure
will not capture any efficiency gains given that calorimeters are
balanced to avoid high differential pressure, which is the source of
efficiency gains for this technology option. Additionally, AHAM stated
that an EPS panel may conflict with the effectiveness of other
technology options such as the condenser coil subcooler and increased
heat transfer area. Further, AHAM stated that as most units on the
market already use washable air filters, this technology option will
not result in significant energy savings or efficiency gains. (AHAM,
No. 43 at pp. 27-28)
While the DOE test procedure does not account for the efficiency
effects of installation materials (e.g., side-curtains, EPS panels,
washable air filters), the technologies still meet the screening
criteria, in that they are technically feasible, widely used and not a
barrier to availability, manufacturing, installation, or service, do
not pose a risk to health, and are not a proprietary technology.
Therefore, DOE did not screen out installation materials at this stage.
DOE notes that, as discussed in chapter 5 of the NOPR TSD, installation
materials were not a design option used to construct efficiency levels
for this analysis.
2. Remaining Technologies
Through a review of each technology, DOE concluded that all of the
other identified technologies listed in section IV.B.2 of this document
met all five screening criteria to be examined further as design
options in DOE's final rule analysis. In summary, DOE did not screen
out the following technology options:
Table IV.2 displays the design options retained for the engineering
analysis.
Table IV.2--Retained Design Options
------------------------------------------------------------------------
-------------------------------------------------------------------------
Increased Heat Transfer Surface Area:
1. Increased heat exchanger surface area (frontal area, fin density
and depth of coil).
2. Condenser coil subcooler.
Increased Heat Transfer Coefficient:
3. Improved fin and tube design.
4. Hydrophilic coating on fins.
5. Microchannel heat exchangers.
6. Spray condensate on condenser coil.
Component Improvements:
7. Improved indoor blower and outdoor fan blade design.
8. Improved blower/fan motor design.
9. Improved compressor efficiency.
Improved Installation, Insulation, and Airflow:
10. Improved installation materials.
11. Reduced evaporator air recirculation.
12. Reduced thermal bridging and internal air leakage.
Part-load Performance:
13. Variable-speed compressors.
14. Variable-speed drive fans and blowers.
15. Thermostatic or electronic expansion valves.
16. Thermostatic cyclic controls.
Standby Power Improvements:
17. Low standby-power electronics.
18. High-frequency switching power supply.
[[Page 34312]]
Alternative Refrigerants:
19. SNAP-approved refrigerants (R-32, R-441A and R-290).
Other Improvements:
20. Washable air filters.
------------------------------------------------------------------------
DOE determined that these technology options are technologically
feasible because they are being used or have previously been used in
commercially-available products or working prototypes. DOE also finds
that all of the remaining technology options meet the other screening
criteria (i.e., practicable to manufacture, install, and service and do
not result in adverse impacts on consumer utility, product
availability, health, or safety). For additional details, see chapter 4
of the final rule TSD.
C. Engineering Analysis
The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of room air conditioners.
There are two elements to consider in the engineering analysis; the
selection of efficiency levels to analyze (i.e., the ``efficiency
analysis'') and the determination of product cost at each efficiency
level (i.e., the ``cost analysis''). In determining the performance of
higher-efficiency products, DOE considers technologies and design
option combinations not eliminated by the screening analysis. For each
product class, DOE estimates the baseline cost, as well as the
incremental cost for the product/equipment at efficiency levels above
the baseline. The output of the engineering analysis is a set of cost-
efficiency ``curves'' that are used in downstream analyses (i.e., the
LCC and PBP analyses and the NIA).
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design-option approach). Using the efficiency-level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing products (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended
using the design option approach to interpolate to define ``gap fill''
levels (to bridge large gaps between other identified efficiency
levels) and/or to extrapolate to the ``max-tech'' level (particularly
in cases where the ``max-tech'' level exceeds the maximum efficiency
level currently available on the market).
In this rulemaking, DOE relied on a combination of these two
approaches. For each product class, DOE analyzed a few units from
different manufacturers to ensure the analysis was representative of
various designs on the market. The analysis involved physically
disassembling commercially available products, reviewing publicly
available cost information, and modeling equipment cost. From this
information, DOE estimated the manufacturer production costs (``MPCs'')
for a range of products currently available on the market. DOE then
considered the design options manufacturers would likely rely on to
improve product efficiencies. From this information, DOE estimated the
cost and efficiency impacts of incorporating specific design options at
each efficiency level.
DOE analyzed six efficiency levels as part of the engineering
analysis: (1) The current DOE standard (baseline); (2) an intermediate
level above the baseline but below the ENERGY STAR level, either
halfway between the two or at a level where a number of models were
certified (EL 1); (3) the ENERGY STAR efficiency criterion (EL 2); (4)
the efficiency attainable by a unit with the most efficient R-32
single-speed compressor on the market (EL 3); (5) an intermediate level
representing the efficiency of variable-speed units on the market, as
tested by DOE using the recently amended test procedure (EL 4); and (6)
the maximum technologically feasible (max-tech) efficiency (EL 5).
In evaluating the technologies manufacturers could use to achieve
the analyzed efficiency levels, DOE considered design options which
made the largest impact on unit efficiency and for which the cost-
efficiency relationship was well defined. Accordingly, DOE implemented
increased heat exchanger area, condenser coil subcoolers, improved
blower motor efficiency, improved compressor efficiency, variable-speed
compressors, and low standby-power electronic controls as design
options, some or all of which were used to estimate the cost required
to reach each efficiently level. DOE did not consider in its analysis
certain technologies that met the screening criteria but that DOE was
unable to evaluate for one or more of the following reasons: (1) Data
were not available to evaluate the energy efficiency characteristics of
the technology, (2) available data suggested that the efficiency
benefits of the technology are negligible, and (3) certain technologies
cannot be measured according to the conditions and methods specified in
the existing test procedure. Further information on how the design
options were chosen and implemented in the engineering analysis is
available in chapter 5 of the final rule TSD.
a. Baseline Efficiency/Energy Use
For each product/equipment class, DOE generally selects a baseline
model as a reference point for each class, and measures changes
resulting from potential energy conservation standards against the
baseline. The baseline model in each product/equipment class represents
the characteristics of a product/equipment typical of that class (e.g.,
capacity, physical size). Generally, a baseline model is one that just
meets current energy conservation standards, or, if no standards are in
place, the baseline is typically the most common or least efficient
unit on the market.
Of the 48 total units DOE selected for analysis in this rulemaking,
19 of them were baseline units that fell within 12 of the 16 room air
conditioner product classes and served as reference points for each
analyzed product class. DOE used these reference points to assess the
effects of amended energy conservation standards, which in turn support
the engineering, LCC, and PBP analyses. The baseline units in each of
the analyzed product classes represent the
[[Page 34313]]
basic characteristics of equipment in that class.
b. Higher Efficiency Levels
DOE considered five efficiency levels (``ELs'') above the baseline
for this analysis. As discussed in chapter 5 of the final rule TSD, DOE
modeled EL 1, EL 2, and EL 3 by analyzing the cost and efficiency
impacts of implementing improved single-speed compressors. DOE also
analyzed the impact of implementing tube-only or tube-and-fin
subcoolers at EL 3 if the analyzed unit did not already have one. At EL
4, DOE considered the efficiency impacts of variable-speed compressors
already available on the market and replacing permanent split capacitor
(``PSC'') fan motors with more efficient electronically commutated
motors (``ECMs'').
As part of DOE's analysis, the maximum available efficiency level
is the highest efficiency unit currently available on the market. DOE
also defines a ``max-tech'' efficiency level to represent the maximum
possible efficiency for a given product. As discussed in chapter 5 of
the final rule TSD, for the max-tech level, DOE modeled replacing
single-speed compressors with the maximum efficiency variable-speed
compressors available, reducing standby power to the minimum observed
in DOE's teardown sample, and increasing the cabinet and heat exchanger
to the largest feasible sizes to improve efficiency. For all product
classes, the max-tech level identified for EL 5 exceeds any other
regulatory or voluntary efficiency criteria currently in effect in the
United States.
The max-tech level is based entirely on modeled combinations of
design options that have not yet been combined in a commercially
available room air conditioner. Notably, while the key design option
implemented at max-tech, variable-speed compressors, is also considered
at EL 4, the significant difference between the two is the level of
variable-speed compressor efficiency being considered. At EL 4, DOE
considers the variable-speed compressors currently implemented in room
air conditioners on the market today, for which performance has been
characterized through testing. At EL 5, DOE is considering the highest
efficiency variable-speed compressor identified in compressor catalogs,
which are not currently implemented in room air conditioner models on
the market today or in prototypes. Therefore, the efficiency level at
max-tech, EL 5, for each product class is a numerical estimation for
the theoretical implementation of the highest efficiency variable-speed
compressors. Furthermore, the DOE room air conditioner test procedure
measures variable-speed unit performance differently than test
procedures for other air conditioning products, so limited performance
and efficiency data are available for the most efficient examples of
this emergent technology for room air conditioners.
Additionally, the most efficient variable-speed compressors that
DOE identified in compressor catalogs that were implemented in the
analysis at the max-tech efficiency level are manufactured by one
manufacturer and have rated Energy Efficiency Ratios (``EERs'') between
11.2 and 11.7 Btu/Wh, with a range of rated capacities between 4,705
Btu/h and 16,170 Btu/h. Given the lack of information regarding
availability of these highest efficiency variable-speed compressors,
and the limited number of variable-speed compressors rated at or near
the compressors considered for the max-tech efficiency level, there may
not be widespread availability of these high-efficiency variable-speed
compressors.
Gradient stated that EL 4 accurately represents an intermediate
efficiency level that represents the efficiency of variable-speed units
on the market. According to Gradient, variable-speed compressors for
room air conditioners with a capacity greater than 8,000 Btu/h are at
this time a mature technology that is available from most
manufacturers, and the technology needed for implementing variable-
speed drives is no longer specialized. Therefore, Gradient strongly
supported the proposal of EL 4 as the minimum efficiency level for room
air conditioners with a capacity greater than 8,000 Btu/h. (Gradient,
No. 40 at p. 2) NEEA and NWPCC also supported the new EL 4 level
representing the efficiency of variable-speed units on the market below
max tech. (NEEA and NWPCC, No. 50 at p. 5)
DOE agrees with Gradient that multiple units with cooling
capacities greater than 8,000 Btu/h from several manufacturers
employing variable-speed compressors are now available on the market.
Further, DOE concludes that variable-speed compressors with
efficiencies higher than those currently observed on the market are
technically feasible, but there is uncertainty as to whether they would
be available in the quantities that would be required to implement them
on the necessary scale at the time that compliance with the standards
being adopted in this final rule will be required.
In their comments, NEEA and NWPCC expressed disappointment in the
reduction of EL 3 CEER from the preliminary analysis to the NOPR
analysis because of the significant cost-effective national energy
savings achievable by using high efficiency single-speed compressors.
However, they agreed with the methodology used to reach the change, as
they recognize that the reduction in maximum single-speed compressor
efficiency to 12.7 Btu/Wh was based on a comprehensive survey of
available compressors and accounted for the changeover to R-32
refrigerant. (NEEA and NWPCC, No. 50 at p. 5)
DOE is not making any changes to EL 3 in this final rule analysis,
retaining the reduction in maximum single-speed compressor efficiency
to 12.7 Btu/Wh as discussed in the NOPR.
AHAM requested clarification regarding DOE's conclusion that some
of the technology options would not result in changes to chassis size
and weight. (AHAM, Public Meeting Transcript, No. 38 at pp. 26-27) P.R.
China stated that the proposed increases to efficiency ranging from 20
to 50 percent depending on the product class are unreasonable due to
size, weight, and cost concerns and instead recommended controlling the
increase in standards of each product class to about 15 percent.
According to P.R. China, the upgrading technology paths introduced in
the April 2022 NOPR would lead to increased costs and size of chassis
associated with the proposed energy efficiency levels, and can lead to
increased burden on consumers, and increased carbon emissions in the
production process. Therefore, P.R. China suggests optimizing the
proposed standards to reduce potential impacts on the supply chain.
(P.R. China, No. 39 at pp. 3-4) Friedrich also indicated that based on
its industry experience, EL 3 would require room air conditioner
chassis to be enlarged and become heavier, due, in substantial part, to
increased heat exchanger cross-sectional area and compressor size.
(Friedrich, No. 44 at p. 5)
According to AHAM, DOE underestimated the impacts that the
considered technology options will have on chassis size, specifically
with adoption of variable-speed compressors, feasible chassis width,
and installation impacts/costs. AHAM stated that DOE should evaluate
the space needed for compressor controls and transformers when
considering the space needed for variable-speed compressors, as these
additional components may not fit into existing sleeve sizes.
Additionally, AHAM stated that at the proposed
[[Page 34314]]
amended standard levels, chassis sizes will increase significantly to
greater than DOE's estimated maximum feasible chassis width and
therefore DOE is underestimating a significant portion of the market.
AHAM presented percent changes to product dimensions based on member
data that ranged from 6 to 15 percent in height, 2 to 19 percent in
width, and 2 to 21 percent in depth across Product Classes 1, 2, 3, 4,
and 16. AHAM indicated that these increased dimensions would lead to
more efficient room air conditioners that are potentially incompatible
with older buildings, and would require either reinstallation, changes
to the building's infrastructure, or purchase of second-hand less
efficient products that do fit windows in these older buildings leading
to negative health impacts for low income consumers and those in
underserved communities. AHAM also stated that with increased chassis
sizes and weight, there will be the potential for an increase in
packaging and structural robustness costs to ensure the product is not
damaged during transport and to ensure the product passes the drop
tests requirement outlined in UL 60335-2-40, Annex GG. AHAM requested
that DOE update its analysis according to the information provided.
(AHAM, No. 43 at pp. 21-23)
Friedrich disputed the technological feasibility of increasing
compressor efficiency to the levels DOE used to model EL 3 and EL 4.
Friedrich stated that it was unable to source a single-speed compressor
that would achieve EL 3 with an EER of 12.7 Btu/h and that the most
efficient single-speed compressor it was able to source has an EER of
10.8 Btu/h. Friedrich added that it was also unable to source a
variable-speed compressor with an EER of 13.2 Btu/h, though Friedrich
did not provide any information about the variable-speed compressors
that are available to them. (Friedrich, No. 52 at p. 2)
DOE identified the highly efficient compressors used in the design
analysis in rotary compressor catalogues from companies that typically
provide compressors for room air conditioners. The highest efficiency
compressors available on the market used R-32 refrigerant. DOE
incorporated only those compressors rated at American Society of
Heating, Refrigerating, and Air-Conditioning Engineers (``ASHRAE'')
test conditions in this analysis. On this basis, DOE concluded that
these higher efficiency compressors would be an available option for
increasing the efficiency of room air conditioners subject to the
amended standards, including those discussed in Friedrich's comments.
DOE's analysis indicates that manufacturers should not need to
increase chassis sizes in order to implement variable-speed compressors
at EL 4. DOE has observed that compressor controls and transformers do
not require additional chassis size; room air conditioners with
variable-speed compressors currently on the market have similar or
smaller chassis sizes compared to their equivalent single-speed
counterparts, as discussed further in chapter 5 of the final rule TSD.
With respect to more robust packaging, DOE agrees that as chassis sizes
increase, additional packaging is needed. Therefore, DOE has altered
the NOPR analysis to incorporate an incremental cost for packaging into
its engineering analysis at max-tech, where DOE modeled chassis size
increases.
As a part of the engineering analysis, DOE considered the weight
increases associated with each design option for which a substantive
weight impact was expected. Those design options included changes to
the compressor efficiency, implementation of variable-speed
compressors, and adjustments to the heat exchangers (including
subcoolers) and resulting chassis size changes, which are discussed in
detail both in this document and in chapters 3 and 5 of the final rule
TSD. DOE determined that there is sufficient room in the chassis to
swap a more efficient compressor of similar overall size and
configuration, and therefore would not impact the overall size of the
room air conditioner, unlike increases to the heat exchanger which
would necessarily increase the model's overall size. In that way, DOE
considered the changes to a model's overall size and weight resulting
from implementing design options at each efficiency level. GEA
indicated that, in order to meet the EL 3 requirements, either a
variable-speed compressor or a large chassis size increase would be
required, while DOE modeled the cost of meeting this efficiency level
using only component replacements and a single-speed compressor. (GEA,
No. 49 at pp.1-2)
While manufacturers may elect to either implement variable-speed
compressors or increase chassis size as a means to reach EL 3, DOE's
analysis shows that the most efficient single-speed compressor alone
can allow room air conditioners to reach EL 3. As DOE's analysis
estimates that manufacturers are likely to use the most cost-effective
design options, DOE modeled EL 3 using the most efficient single-speed
compressors instead of other possible design options.
Friedrich suggested that compressor data found in catalogues would
be better if averaged rather than selecting the most efficient data for
DOE's analysis, given that manufacturers may not always be able to
implement the best compressors in their products. (Friedrich, Public
Meeting Transcript, No. 38 at pp. 18-19)
EPCA requires DOE to adopt the maximum standards that are both
technically justified and economically feasible. (42 U.S.C.
6295(o)(2)(A)) When assessing efficiency levels, and in particular the
maximum technologically feasible room air conditioner efficiency level,
DOE considered the compressor with the maximum available efficiency,
based on product literature, to determine the limits of technical
feasibility in room air conditioner compressors. Using an average would
not provide DOE with the maximum technologically feasible result,
though DOE notes that when considering efficiency levels above baseline
and below max-tech, compressors of various efficiency were assessed and
implemented in the analysis.
Gradient requested clarification regarding the evaporating and
condensing temperature test conditions used to characterize compressor
efficiency in catalogue data surveyed by DOE. (Gradient, Public Meeting
Transcript, No. 38 at pp. 17-18)
In developing the engineering analysis, DOE considered compressors
for which performance data were available in accordance with ASHRAE or
Air Conditioning, Heating, & Refrigeration Institute test conditions,
which use a condenser temperature of 54.4 [deg]C and an evaporation
temperature of 7.2 [deg]C. These compressor test conditions are an
industry standard, and are commonly used in characterizing and
determining relative compressor efficiency improvements.
Friedrich stated that most of the technology options in DOE's
analysis, such as a suction line heat exchanger, do not offer any
benefit for the refrigerant used, or have already been used to maximize
efficiency like with condenser coil subcoolers, and direct current (DC)
fan and blower motors. Friedrich also stated that microchannel heat
exchangers may not be appropriate for R-32 applications where
minimizing leakage is paramount, as such heat exchangers have issues
with galvanic corrosion. (Friedrich, No. 44 at p. 9)
As discussed in chapters 3 and 5 of the final rule TSD, DOE
evaluates each technology option for its potential efficiency benefit.
However, when developing the engineering analysis, DOE typically
focuses on design options with substantial impact on efficiency that
DOE expects manufacturers would
[[Page 34315]]
implement in their designs to improve efficiency. In the case of
condenser coil subcoolers, while DOE did find that most units
implemented some form of this technology, DOE identified different
types of subcoolers with varying efficiency benefits, and therefore
retained subcoolers as a design option for those units for which
efficiency improvements using a subcooler or improved subcooler design
were feasible. In the case of fan and blower motors, DOE identified ECM
motor technology as a potential improvement over the commonly
implemented PSC motors, and considered the improvement at the two
highest efficiency levels. DOE did not consider the implementation of
microchannel heat exchangers as a design option for the engineering
analysis due to the high cost and lack of room air conditioner
application-specific efficiency data.
NEEA and NWPCC stated that they could provide data on the cost-
effectiveness of high efficiency models. (NEEA and NWPCC, No. 50 at p.
4)
DOE did not receive any additional information from NEEA and NWPCC
on high efficiency models ahead of this final rule.
2. Cost Analysis
The cost analysis portion of the engineering analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
product, the availability and timeliness of purchasing the product on
the market. The cost approaches are summarized as follows:
Physical teardowns: Under this approach, DOE physically
dismantles a commercially available product, component-by-component, to
develop a detailed bill of materials for the product.
Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the bill of materials for the product.
Price surveys: If neither a physical nor catalog teardown
is feasible (for example, for tightly integrated products such as
fluorescent lamps, which are infeasible to disassemble and for which
parts diagrams are unavailable) or cost-prohibitive and otherwise
impractical (e.g. large commercial boilers), DOE conducts price surveys
using publicly available pricing data published on major online
retailer websites and/or by soliciting prices from distributors and
other commercial channels.
In the present case, DOE conducted the analysis using physical
teardowns. The resulting bill of materials (``BOM'') provides the basis
for the MPC estimates. DOE estimated the cost of the highest efficiency
single-speed and variable-speed compressors implemented in EL3 and EL
5, respectively, by extrapolating the costs from price surveys of other
compressors. DOE used this approach because, as discussed previously,
DOE is not aware of these most efficient single-speed and variable-
speed compressors being implemented in any available room air
conditioners to date.
To account for manufacturers' non-production costs and profit
margin, DOE applies a multiplier (the manufacturer markup) to the MPC.
The resulting manufacturer selling price (``MSP'') is the price at
which the manufacturer distributes a unit into commerce. DOE developed
an average manufacturer markup by examining the annual Securities and
Exchange Commission (``SEC'') 10-K reports \21\ filed by publicly-
traded manufacturers primarily engaged in appliance manufacturing and
whose combined product range includes room air conditioners. Chapter 12
of the final rule TSD provides additional information on the
manufacturer markup.
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\21\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. Available at
www.sec.gov/edgar/search/ (last accessed September 7, 2022).
---------------------------------------------------------------------------
3. Cost-Efficiency Relationship
The results of the engineering analysis are presented as cost-
efficiency data for each of the efficiency levels for each of the
product classes that were analyzed, as well as those extrapolated from
a product class with similar cooling capacity and features. DOE
developed estimates of MPCs for each unit in the teardown sample, and
also performed additional modeling for each of the teardown samples, to
develop a comprehensive set of MPCs at each efficiency level. DOE then
consolidated the resulting MPCs for each of DOE's teardown units and
modeled units using a weighted average for product classes in which DOE
analyzed units from multiple manufacturers. DOE's weighting factors
were based on a market penetration analysis for each of the
manufacturers within each product class. The resulting weighted-average
incremental MPCs (i.e., the additional costs manufacturers would likely
incur by producing room air conditioners at each efficiency level
compared to the baseline) are provided in Tables 5.5.5 and 5.5.6 in
chapter 5 of the final rule TSD. See chapter 5 of the final rule TSD
for additional detail on the engineering analysis.
Gradient agreed with the incremental cost for Product Classes 1
through 5b including the expected trend of increased cost for higher
capacity units, but stated that the incremental cost for variable-speed
compressor technology should depend only on the capacity of the system,
and as such, Gradient recommended applying the incremental costs for
Product Classes 1 through 5b to systems of similar capacity in other
product classes. (Gradient, No. 40 at p. 2)
DOE based its incremental costs for each product class on data
derived from teardowns of units in that product class and a design
option analysis. The differences in incremental costs observed between
non-louvered and louvered units are not due to differences in cost
estimates for the variable-speed compressor design option, but inherent
differences in incremental cost estimates for a particular
configuration. These inherent differences in incremental costs are
driven by differences in design and component types, as shown by DOE's
teardown analysis, as discussed in further detail in chapter 5 of the
final rule TSD.
AHAM stated that reducing energy consumption in room air
conditioners requires balancing multiple tradeoffs between cost,
functional performance, and energy efficiency among numerous
components, with different mixes of technology for each product
platform. Accordingly, AHAM stated that manufacturers have therefore
selected virtually all of the viable technologies across their product
lines and requested that DOE recognize that there is limited new
technology that would allow for significant per-unit reduction in
energy consumption in room air conditioners and that the more radical
or comprehensive the design change, the more likely that retooling is
necessary and, thus, the greater the product cost increase and capital
investment requirement. AHAM concluded that while there may be
declining costs over time associated with energy efficient components,
these are due to changes in productivity and/or value engineering that
is independent of energy efficiency. (AHAM, No. 43 at pp. 18-19)
While DOE recognizes that manufacturers face tradeoffs regarding
cost, performance, and efficiency, DOE identified several feasible
technologies for improving product efficiency across product lines that
have only been implemented in a few room air
[[Page 34316]]
conditioner models to date, such as variable-speed compressors and ECM
fan motors. DOE's analysis in this final rule takes into account costs
associated with retooling and capital investments when determining
economic justification. See section IV.J.2.c of this document for a
description of the conversion cost methodology.
4. Consumer Utility
According to AHAM, consumers may elect to use window units in wall
sleeves because higher capacity through-the-wall room air conditioners
are already more costly, larger, and heavier than their window
counterparts, which may limit efficiency gains and even lead to safety
concerns due to inadequate cooling of high-pressure components. AHAM
requested that DOE avoid this result not only because it undercuts
energy conservation savings goals, but also because it increases safety
risks for consumers, with a disproportionate burden on lower income and
underserved communities. (AHAM, No. 43 at pp. 22-23)
In its analyses, DOE assumes that consumers will install products
according to manufacturer instructions and that they will not install
units in an unsafe manner. DOE has no information from which to
estimate the potential efficiency effects of the incorrect installation
described.
D. Markups Analysis
The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices, which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin.
In the April 2022 NOPR, DOE assumed the main party in the
distribution chain after manufacturers was retailers.
Friedrich requested additional details regarding the assumption
that 100 percent of room air conditioners sales occur through the
retail distribution channel. (Friedrich, Public Meeting Transcript, No.
38 at p. 29)
Unlike other larger space cooling equipment that require additional
ductwork or installation materials, DOE was unable to find data
suggesting that room air conditioners require a general or mechanical
contractor for installation. In the absence of data or additional
comment provided by stakeholders, DOE maintains the assumption in this
final rule that 100 percent of sales occur through the retail
distribution channel.
DOE developed baseline and incremental markups for each actor in
the distribution chain. Baseline markups are applied to the price of
products with baseline efficiency, while incremental markups are
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental
markup is typically less than the baseline markup and is designed to
maintain similar per-unit operating profit before and after new or
amended standards.\22\
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\22\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that in markets that are reasonably
competitive it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------
DOE relied on economic data from the U.S. Census Bureau to estimate
average baseline and incremental markups. Specifically, DOE used the
2017 Annual Retail Trade Survey for the ``electronics and appliance
stores'' sector to develop retailer markups.\23\
---------------------------------------------------------------------------
\23\ U.S. Census Bureau, Annual Retail Trade Survey. 2017.
www.census.gov/programs-surveys/arts.html.
---------------------------------------------------------------------------
Chapter 6 of the final rule TSD provides details on DOE's
development of markups for room air conditioners.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of room air conditioners at different efficiencies
in representative U.S. single-family homes, multi-family residences,
and commercial buildings, and to assess the energy savings potential of
increased room air conditioner efficiency. The energy use analysis
estimates the range of energy use of room air conditioners in the field
(i.e., as they are actually used by consumers). The energy use analysis
provides the basis for other analyses DOE performed, particularly
assessments of the energy savings and the savings in consumer operating
costs that could result from adoption of amended or new standards.
To estimate annual room air conditioner usage and energy
consumption in the April 2022 NOPR, DOE first calculated the number of
operating hours in cooling mode for each room air conditioner in the
residential and commercial samples using the reported energy use for
room air conditioning in the EIA's Residential Energy Consumption
Survey (``RECS'') 2015 \24\ and Commercial Building Energy Consumption
Survey (``CBECS'') 2012,\25\ along with historical estimates of the EER
of the room air conditioner(s) in each sample home or building. DOE
based the latter on the reported age (or simulated age) of the unit and
historical data on shipment-weighted average EER.
---------------------------------------------------------------------------
\24\ U.S. Department of Energy-Energy Information
Administration. Residential Energy Consumption Survey. 2015.
www.eia.gov/consumption/residential/data/2015/.
\25\ U.S. Department of Energy-Energy Information
Administration. Commercial Buildings Energy Consumption Survey.
2012. www.eia.gov/consumption/commercial/data/2012/.
---------------------------------------------------------------------------
AHAM questioned the accuracy of the RECS data more generally,
pointing to several sources of potential error or uncertainty within
the dataset. (AHAM, No. 43 at pp. 8-10)
RECS represents the largest available data-set of installed
residential appliance stock that is designed to be nationally
representative.\26\ Although there may be error or uncertainty in
household responses, as in any survey, there is no evidence that
responses to any of the questions regarding room air conditioners
suffers from a systematic bias that would impact the energy use or LCC
analysis. Additionally, the RECS end use energy consumption data, used
is the energy use analysis, is derived from household energy bills
provided by respondents and is an exact measurement that is not subject
to response error from the household. The RECS end-use estimates are
based on an engineering approach and calibrated based on the relative
uncertainties of and correlations between the end uses.\27\ A study
comparing field-energy estimates from the Pecan Street Project \28\ to
end-use estimates from RECS found good agreement between the air
conditioning, water heating, and refrigerator consumption estimates as
a fraction of the whole-home energy.\29\ Although the authors found
that the total energy consumption by end use was higher in RECS
households, the authors attribute the difference to selection bias
associated with the volunteer households within the Pecan Street
dataset. For this final rule, DOE maintains that the RECS dataset
[[Page 34317]]
provides the most reasonable, nationally representative estimate for
room air conditioner energy consumption in the U.S.
---------------------------------------------------------------------------
\26\ www.eia.gov/consumption/residential/reports/2015/comparison/index.php.
\27\ Energy Information Administration. RECS 2015 Consumption
and Expenditures Technical Documentation Summary. www.eia.gov/consumption/residential/reports/2015/methodology/pdf/2015C&EMethodology.pdf (last accessed September 12, 2022).
\28\ www.pecanstreet.org/dataport/.
\29\ Brock Glasgo, Chris Hendrickson, In[ecirc]s M.L. Azevedo.
Using advanced metering infrastructure to characterize residential
energy use. The Electricity Journal, Volume 30, Issue 3, 2017, Pages
64-70.
---------------------------------------------------------------------------
AHAM and Friedrich stated that it appears highly likely that DOE
has overestimated the cooling hours substantially based on end-use
energy consumption estimates from RECS 2015, and thus the energy usage
and related potential savings from more efficient room air
conditioners. (AHAM, No. 43, at p. 8; Friedrich, No. 44 at pp. 7-8)
According to AHAM, in many, if not most cases, room air conditioners
are not thermostat-driven, load-following but, rather, are turned on
and off by users as required, and assuming a load-following pattern
substantially overstates the number of hours a room air conditioner is
actually on.\30\ AHAM believes it to be more common that room air
conditioners are turned on and off by user choice such as when it is
especially hot or when a room is occupied, and that the usage hours in
that control mode are likely to be much lower than estimates based on
load modeling. In support of this point, AHAM stated that in the RECS
data, nearly half the respondents report turning on their room air
conditioners only when needed and an additional 17 percent adjust the
temperature manually, while only 30 percent report setting one
temperature and leaving the unit as is.
---------------------------------------------------------------------------
\30\ RECS reports space cooling end-use energy consumption
estimates based on calculated cooling load based on household
characteristics and weather data.
---------------------------------------------------------------------------
DOE acknowledges that the statistical nature of the RECS end-use
load analysis includes some uncertainty, but maintains that the RECS
end-use energy consumption estimates remain the best available dataset
for determining the hours of operation associated with room air
conditioners. DOE notes that the responses within the household survey
portion of RECS for room air conditioner usage do not necessarily imply
higher or lower usage relative to DOE's estimates from RECS energy
consumption data. For example, respondents that turn their unit on and
off manually could potentially use their unit more than expected based
only on cooling load-based operation.
DOE performed a sensitivity analysis to estimate the potential
impact of overestimating operating hours for households that turn their
unit on and off as needed. For this sensitivity analysis, DOE reduced
the operating hours by half for households reported in RECS as turning
their unit on and off as needed. Although energy savings are reduced
due to the overall lower operating hours in this sensitivity analysis,
the average LCC savings remains positive for all product classes at the
adopted TSL with a majority of consumers receiving a net benefit. The
average shipment-weighted LCC savings are $62 (relative to $85 in the
reference case) and 25% of consumers are impacted negatively (relative
to 17 percent in the reference case). As noted above, the assumption of
reduced usage associated with household that manually turn their unit
on or off is a conservative assumption given that these households
could potentially use their unit more than estimated based cooling-load
based operation. See appendix 8F of the final rule TSD for the full
results of the analysis.
AHAM and Friedrich stated that portable air conditioners are a more
appropriate analog for room air conditioner usage rather than assuming
a cooling load-driven model, since both products are used as a last
resort to meet a specific need and suggested DOE base operating hours
on a field-metering study of portable air conditioners. (AHAM, No. 43
at p. 13; Friedrich, No. 44 at p. 8)
The portable air conditioner field-metering study referenced by
AHAM and Friedrich analyzed only 19 units for less than a full cooling
season.\31\ As stated in the report itself, given the limited number of
test sites in two locations in the Northeast, the study was not
intended to be statistically representative of portable air conditioner
(``AC'') users in the United States. Even if portable air conditioners
were a good analog to room air conditioners, the limitations of this
dataset in terms of sample size and representation of usage would
preclude its application for the energy use analysis.
---------------------------------------------------------------------------
\31\ Burke et al., 2014. ``Using Field-Metered Data to Quantify
Annual Energy Use of Residential Portable Air Conditioners.'' LBNL,
Berkeley, CA. LBNL Report LBNL-6469E. September 2014.
---------------------------------------------------------------------------
In the April 2022 NOPR, DOE accounted for the reduction in energy
use of models with a variable-speed compressor during part load
operation based on the methodology developed for the DOE test
procedure. DOE accounted for geographic-dependent climate variability
by calculating U.S. State-dependent performance adjustment factors
(``PAFs'') using historical climate data spanning the period from 2008-
2016 from the National Oceanic and Atmospheric Administration. For each
state in the United States, DOE performed a temperature bin analysis to
calculate within the cooling season (June through August) the fraction
of time the outdoor dry bulb temperature was in one of four temperature
bins: 80-84 degrees Fahrenheit (``[deg]F''), 85-89 [deg]F, 90-94
[deg]F, and 95-99 [deg]F. DOE then calculated the corresponding PAF for
each state using the methodology developed for variable-speed drive
units in the test procedure and applied the PAF to the EER at full
load.
AHAM stated that before DOE assigns significant value to expensive
variable speed/capacity compressors and related control and other
systems in its engineering analysis, it needs to validate its
assumptions about room air conditioner operating conditions, operating
hours, and the likelihood of part load operation. (AHAM, No. 43 at p.
17)
The methodology used in the April 2022 NOPR to estimate the energy
savings associated with part-load operation is based on the DOE test
procedure, as well as available data regarding room air conditioner
usage. The development of the test procedure involved testing the
performance of variable-speed units relative to single-speed units in a
laboratory setting and measuring the relative efficiency gained by
part-load operation. DOE is unaware of additional data that can be
utilized to estimate the performance of variable-speed units. DOE's
application of PAFs for variable-speed units used in the energy use
analysis is consistent with the methodology used in DOE test procedure
and represents DOE's best estimates to capture the efficiency gains of
part load operation based on available data.
Rice stated that the energy use analysis in the April 2022 NOPR
does not use the correct weighting factors to calculate room air
conditioner (``RAC'') CEERs and performance adjustment factors
(``PAFs''). Rice states that the weighting factors used by DOE were the
fractional time spent in each bin, while the correct approach would be
to use fractional cooling delivered, as done in the RAC test procedure
final rule. Rice suggested DOE modify its approach in the final rule to
use weighting factors derived by the fractional cooling delivered.
(Rice, No. 48 at p. 2)
DOE clarifies that the calculated State-dependent CEERs and PAFs in
the April 2022 NOPR were estimated on the fractional cooling delivered,
as suggested by Rice, which are derived from the fractional time spent
in each temperature bin. The description of the analysis has been
updated in the final rule TSD to reflect this clarification.
In the April 2022 NOPR analysis, DOE included the impact of fan-
only mode energy consumption in the total energy
[[Page 34318]]
use, based on available data for portable ACs. Based on field metering
data of portable air conditioners, fan-only mode is estimated at 30
percent of cooling mode hours. DOE assumed that models below ENERGY
STAR efficiency level would operate in fan-only mode 30 percent of
cooling mode hours.\32\ For ELs that meet or exceed the ENERGY STAR
level, DOE estimated the amount of time the unit spent in fan-only mode
based on the ENERGY STAR Version 4.2 criterion for room air
conditioners criterion requiring that the unit run in off-cycle fan
mode less than 17 percent of the time spent in off-cycle mode. Thus,
for ELs that meet or exceed the ENERGY STAR efficiency level, DOE
assumed units would operate in fan-only mode 5 percent of cooling mode
hours.
---------------------------------------------------------------------------
\32\ Ibid.
---------------------------------------------------------------------------
NEEA and NWPCC stated that DOE's assumption of fan-only mode being
30 percent of cooling mode hours for models below ENERGY STAR
efficiency level is a reasonable assumption. Additionally, NEEA and
NWPCC agree that more efficient units (those meet or exceed the ENERGY
STAR level) would be less likely to operate in fan-only mode given
their variable-speed fans and motors and support the assumed operation
of fan-only model to be 5 percent of cooling mode hours for these
units. (NEEA and NWPCC, No. 50 at p. 5)
In the April 2022 NOPR, DOE assumed that approximately half of room
air conditioners are unplugged for half of the year. The ``unplugged''
time associated with these units is averaged over all units.
The California IOUs provided data supporting DOE's assumption. In
an online survey conducted on behalf of the California IOUs by
Evergreen Economics, results show that 48 percent of households with a
room air conditioner reported removing their unit and reinstalling
their equipment each year. (California IOUs, No. 47 at pp. 4-5)
DOE appreciates the data provided by the California IOUs supporting
its assumption. DOE maintains its assumption for this final rule.
P.R. China suggested DOE account for the degradation in energy
efficiency over the lifetime of the product and in different operating
environments in the energy use and LCC analyses. (P.R. China, No. 39 at
p. 4)
DOE is unaware of data suggesting a decrease in product efficiency
over the lifetime of room air conditioners. Moreover, there is no
indication that the degradation would preferentially impact more
efficient products over less efficient ones. As this effect would
impact the energy use of units at various efficiency levels, it would
likely have a small impact on the overall LCC savings results.
Chapter 7 of the final rule TSD provides details on DOE's energy
use analysis for room air conditioners.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
room air conditioners. The effect of new or amended energy conservation
standards on individual consumers usually involves a reduction in
operating cost and an increase in purchase cost. DOE used the following
two metrics to measure consumer impacts:
The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). To compute the operating costs, DOE
discounts future operating costs to the time of purchase and sums them
over the lifetime of the product.
The PBP is the estimated amount of time (in years) it
takes consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of room air conditioners in the
absence of new or amended energy conservation standards. In contrast,
the PBP for a given efficiency level is measured relative to the
baseline product.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units and commercial buildings. As stated previously, DOE
developed household samples from the 2015 RECS and 2012 CBECS. For each
sample household, DOE determined the energy consumption for room air
conditioners and the appropriate energy price. By developing a
representative sample of households, the analysis captured the
variability in energy consumption and energy prices associated with the
use of room air conditioners.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability.
The computer model DOE uses to calculate the LCC and PBP relies on
a Monte Carlo simulation to incorporate uncertainty and variability
into the analysis. The Monte Carlo simulations randomly sample input
values from the probability distributions and room air conditioner user
samples. For this rulemaking, the Monte Carlo approach is implemented
in MS Excel together with the Crystal Ball\TM\ add-on.\33\ The model
calculated the LCC and PBP for products at each efficiency level for
10,000 housing units or commercial buildings per simulation run. The
analytical results include a distribution of 10,000 data points showing
the range of LCC savings for a given efficiency level relative to the
no-new-standards case efficiency distribution. In performing an
iteration of the Monte Carlo simulation for a given consumer, product
efficiency is chosen based on its probability. If the chosen product
efficiency is greater than or equal to the efficiency of the standard
level under consideration, the LCC and PBP calculation reveals that a
consumer is not impacted by the standard level. By accounting for
consumers who already purchase more-efficient products, DOE avoids
overstating the potential benefits from increasing product efficiency.
DOE calculated the LCC and PBP for all consumers of room air
conditioners as if each were to purchase a new product in the first
year of required compliance with new or amended standards. Amended
standards apply to room air conditioners manufactured 3 years after the
date on which any new or amended standard is published. (42 U.S.C.
[[Page 34319]]
6925(m)(4)(A)(i)) Therefore, DOE used 2026 as the first year of
compliance with any amended standards for room air conditioners.
---------------------------------------------------------------------------
\33\ 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 September 6, 2022).
---------------------------------------------------------------------------
Table IV.3 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the final rule TSD and its appendices.
Table IV.3--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost................. Derived by multiplying MPCs by
manufacturer and retailer markups and
sales tax, as appropriate. Used
historical data to derive a price
scaling index to project product costs.
Installation Costs........... Baseline installation cost determined
with data from RSMeans 2022.
Annual Energy Use............ The total annual energy use by operating
mode multiplied by the hours per year in
each mode. Variability: Based on the
2015 RECS and 2012 CBECS.
Energy Prices................ Electricity: Based on Edison Electric
Institute data for 2021. Variability:
Regional energy prices determined for
each Census Division.
Energy Price Trends.......... Based on AEO2022 price projections by
Census Division.
Repair and Maintenance Costs. Assumed no change with efficiency level
for maintenance costs. Repair costs
estimated for each product class and
efficiency level.
Product Lifetime............. Weibull probability distribution
developed from historical shipments,
American Housing Survey, and RECS, with
an average lifetime of 9 years.
Discount Rates............... 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.
Compliance Date.............. 2026.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the final rule
TSD.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described
previously (along with sales taxes). DOE used different markups for
baseline products and higher-efficiency products, because DOE applies
an incremental markup to the increase in MSP associated with higher-
efficiency products.
Economic literature and historical data suggest that the real costs
of many products may trend downward over time according to ``learning''
or ``experience'' curves. Experience curve analysis implicitly includes
factors such as efficiencies in labor, capital investment, automation,
materials prices, distribution, and economies of scale at an industry-
wide level. To derive the learning rate parameter for room air
conditioners that utilize single-speed compressors, DOE obtained
historical Producer Price Index (``PPI'') data for room air
conditioners from the Bureau of Labor Statistics (``BLS''). A PPI
specific to ``room air-conditioners and dehumidifiers, except portable
dehumidifiers'' was available for the time period between 1990 and
2009.\34\ After 2009, DOE used the primary products series of ``air-
conditioning, refrigeration and forced air heating equipment'', which
includes room air conditioners, spanning the years 2010-2021.\35\
Inflation-adjusted price indices were calculated by dividing the PPI
series by the gross domestic product index from Bureau of Economic
Analysis for the same years. Using the combined data from 1990-2021,
the estimated learning rate (defined as the fractional reduction in
price expected from each doubling of cumulative production) is 24
percent. For efficiency levels that include variable-speed compressors,
DOE applied a different price trend to the controls portion of the
variable-speed compressors that contributes to the price increments
moving from EL 3 (an efficiency level achieved with the highest
efficiency single-speed compressor) to EL 4 and EL 5. DOE used PPI data
on ``semiconductors and related device manufacturing'' between 1967 and
2021 to estimate the historic price trend of electronic components in
the control. The regression performed as an exponential trend line fit
results in an R-square of 0.99, with an annual price decline rate of
6.3 percent. See chapter 8 of the final rule TSD for further details on
this topic.
---------------------------------------------------------------------------
\34\ Room air-conditioners and dehumidifiers, except portable
dehumidifiers PPI series ID: PCU3334153334156; www.bls.gov/ppi/.
\35\ Air-conditioning, refrigeration, and forced air heating
equipment manufacturing, Primary Products PPI series ID:
PCU333415333415P; www.bls.gov/ppi/.
---------------------------------------------------------------------------
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product. In the April 2022
NOPR, DOE assumed that the installation cost would be constant for all
efficiency levels and, thus, did not include installation costs in the
LCC calculation.
AHAM stated that even with minimal size increases in smaller room
air conditioners, different chassis sizes will necessitate different
installation brackets that do not cover louvers. AHAM requested that
DOE analyze costs of necessary retrofits if chassis size changes and
the increased installation costs due to heavier products. (AHAM, No. 43
at p. 23)
DOE agrees that a standard that changes the chassis size or weight
of units may increase installation costs. For the final rule, DOE used
data from RSMeans 2022 to estimate the labor and material cost
necessary for installing units at various capacities. DOE matched the
RSMeans installation costs derived by capacity to the corresponding
baseline level within each product class. To account for additional
labor hours in higher efficiency equipment with significantly larger
dimensions and/or weight, DOE based the labor hour estimates on labor
hours for higher capacity room air conditioners with similar
dimensions/weight. DOE notes that chassis size only increases at the
max-tech level and does not project an increased cost due to retrofits
at the adopted TSL.
3. Annual Energy Consumption
For each sampled household or business, DOE determined the energy
consumption for room air conditioners at different efficiency levels
using the approach described previously in section IV.E of this
document.
[[Page 34320]]
a. Rebound Effect
A direct rebound effect occurs when a product that is made more
efficient is used more intensively, such that the expected energy
savings from the efficiency improvement may not fully materialize. At
the same time, consumers benefit from increased utilization of products
due to rebound. Higher-efficiency room air conditioners reduce the
operating costs for a consumer, which can lead to greater use of room
air conditioners. Overall consumer welfare (taking into account
additional costs and benefits of increased usage) is generally
understood to increase from rebound. DOE did not find any data on the
rebound effect that is specific to room air conditioners. In the April
2011 Direct Final Rule, DOE estimated a rebound of 15 percent for room
air conditioners for the NIA but did not include rebound in the LCC
analysis. 76 FR 22454, 22511. Given the uncertainty and lack of data
specific to room air conditioners, DOE did not include the rebound
effect in the LCC analysis for this final rule. DOE does include
rebound in the NIA for a conservative estimate of national energy
savings and the corresponding impact to consumer NPV. See sections
IV.H.2 and IV.H.3 of this document for further details on how the
rebound effect is applied in the NIA.
4. Energy Prices
Because marginal electricity price more accurately captures the
incremental savings associated with a change in energy use from higher
efficiency, it provides a better representation of incremental change
in consumer costs than average electricity prices. Therefore, DOE
applied average electricity prices for the energy use of the product
purchased in the no-new-standards case, and marginal electricity prices
for the incremental change in energy use associated with the other
efficiency levels considered.
DOE derived electricity prices in 2021 using data from Edison
Electric Institute (``EEI'') Typical Bills and Average Rates reports.
Based upon comprehensive, industry-wide surveys, this semi-annual
report presents typical monthly electric bills and average kilowatt-
hour costs to the customer as charged by investor-owned utilities. For
the residential sector, DOE calculated electricity prices using the
methodology described in Coughlin and Beraki (2018).\36\ For the
commercial sector, DOE calculated electricity prices using the
methodology described in Coughlin and Beraki (2019).\37\
---------------------------------------------------------------------------
\36\ Coughlin, K. and B. Beraki.2018. Residential Electricity
Prices: A Review of Data Sources and Estimation Methods. Lawrence
Berkeley National Lab. Berkeley, CA. Report No. LBNL-2001169.
https://ees.lbl.gov/publications/residential-electricity-prices-review.
\37\ Coughlin, K. and B. Beraki. 2019. Non-residential
Electricity Prices: A Review of Data Sources and Estimation Methods.
Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL-
2001203. https://ees.lbl.gov/publications/non-residential-electricity-prices.
---------------------------------------------------------------------------
DOE calculated weighted-average values for average and marginal
price for the nine census divisions for both the residential and
commercial sectors. As the EEI data are published separately for summer
and winter, DOE calculated seasonal prices for each division and
sector. See chapter 8 of the final rule TSD for details.
To estimate energy prices in future years, DOE multiplied the 2021
energy prices by the projection of annual average price changes for
each of the nine census divisions from the Reference case in AEO2022,
which has an end year of 2050.\38\ To estimate price trends after 2050,
DOE used a constant value based on the simple average between 2046
through 2050.
---------------------------------------------------------------------------
\38\ U.S. Department of Energy-Energy Information
Administration. Annual Energy Outlook 2022 with Projections to 2050.
Washington, DC. Available at www.eia.gov/forecasts/aeo/ (last
accessed September 6, 2022).
---------------------------------------------------------------------------
5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance; maintenance costs are
associated with maintaining the operation of the product. Typically,
small incremental increases in product efficiency produce no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products. In this final rule analysis, DOE did not include
maintenance costs in the LCC.
In the April 2022 NOPR, DOE assumed that repair frequencies are low
and increase for the higher-capacity units due to more expensive
equipment costs. DOE assumed that 1 percent of small-sized units (below
8,000 Btu/h), 2 percent of medium-sized units (8,000 to 20,000 Btu/h),
and 3 percent of large-sized units (above 20,000 Btu/h) are maintained
or repaired each year. DOE assumed that an average service call and
repair/maintenance takes about 1 hour for small and medium-sized units
and 2 hours for large units, and that the average material cost is
equal to one-half of the incremental equipment cost.
Friedrich states that DOE failed to incorporate increased repairs
costs to service room air conditioners with variable-speed compressors
and increased heat exchanger sizes. According to Friedrich, the
likelihood and repair cost will increase due to complexity of
components with variable-speed compressors or additional braze joints
for larger heat exchangers. (Friedrich, No. 44 at pp. 8-9)
DOE's analysis incorporates an increased repair cost due to the
higher incremental costs associated with units with variable-speed
compressors for more expensive components as suggested by Friedrich.
DOE is unaware of any data indicating an increased likelihood of repair
due to variable-speed compressors or increased heat exchanger sizes. A
retrospective analysis of the April 2011 Direct Final Rule found that
DOE's approach to estimating repair costs at each efficiency level
based on the incremental equipment cost agreed with an analysis of
consumer survey data.\39\ DOE maintains its approach to estimating
repair rates and costs for this final rule.
---------------------------------------------------------------------------
\39\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A
Retrospective Analysis of the 2011 Direct Final Rule for Room Air
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------
6. Product Lifetime
For room air conditioners, DOE developed a distribution of
lifetimes from which specific values are assigned to the appliances in
the samples. DOE conducted an analysis of actual lifetime in the field
using a combination of historical shipments data, the stock of the
considered appliances in the American Housing Survey, and responses in
RECS on the age of the appliances in the homes. The data allowed DOE to
estimate a survival function, which provides an average appliance
lifetime. This analysis yielded a lifetime probability distribution
with an average lifetime for room air conditioners of approximately 9
years.
Friedrich states that the increase in braze joints needed for
larger heat exchangers may increase the potential for refrigerant
leaks. Friedrich adds that in the event of a refrigerant leak,
consumers are more likely to retire their unit early rather than repair
the unit due to the high repair cost resulting in a short lifetime for
efficiency levels with this technology. (Friedrich, No. 44 at p. 9)
As described in section IV.F.5, the April 2022 NOPR assumed a low
repair rate (1-3 percent). Data was not provided by stakeholders during
the rulemaking demonstrating the impact that larger heat exchangers
would have on the repair rate or repair cost which
[[Page 34321]]
could potentially lead to shorter product lifetimes. For this final
rule, DOE maintained the same lifetime distribution for all efficiency
levels.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households to estimate the present value of future operating cost
savings. DOE estimated a distribution of discount rates for room air
conditioners based on the opportunity cost of consumer funds.
DOE applies weighted average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\40\ The LCC analysis estimates net present value over the
lifetime of the product, so the appropriate discount rate will reflect
the general opportunity cost of household funds, taking this time scale
into account. Given the long time horizon modeled in the LCC, the
application of a marginal interest rate associated with an initial
source of funds is inaccurate. Regardless of the method of purchase,
consumers are expected to continue to rebalance their debt and asset
holdings over the LCC analysis period, based on the restrictions
consumers face in their debt payment requirements and the relative size
of the interest rates available on debts and assets. DOE estimates the
aggregate impact of this rebalancing using the historical distribution
of debts and assets.
---------------------------------------------------------------------------
\40\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: transaction costs; risk premiums and
response to uncertainty; time preferences; interest rates at which a
consumer is able to borrow or lend. The implicit discount rate is
not appropriate for the LCC analysis because it reflects a range of
factors that influence consumer purchase decisions, rather than the
opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------
To establish residential discount rates for the LCC analysis, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
energy cost savings. It estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's Survey of Consumer Finances \41\
(``SCF'') for 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019.
Using the SCF and other sources, DOE developed a distribution of rates
for each type of debt and asset by income group to represent the rates
that may apply in the year in which amended standards would take
effect. DOE assigned each sample household a specific discount rate
drawn from one of the distributions. The average rate across all types
of household debt and equity and income groups, weighted by the shares
of each type, is 4.3 percent.
---------------------------------------------------------------------------
\41\ U.S. Board of Governors of the Federal Reserve System.
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010,
2013, 2016, and 2019. (Last accessed September 6, 2022.)
www.federalreserve.gov/econresdata/scf/scfindex.htm.
---------------------------------------------------------------------------
See chapter 8 of the final rule TSD for further details on the
development of consumer discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards).
DOE utilized confidential 2019 shipments data disaggregated by
product class and efficiency provided by AHAM in response to the June
2020 Preliminary Analysis to estimate the efficiency distribution in
2019. In the April 2022 NOPR, DOE assumed an annual 0.25 percent
increase in shipment-weighted CEER for each product class to develop
the efficiency distribution in 2026. The efficiency trend is supported
by a retrospective analysis of the April 2011 Direct Final Rule which
used a similar efficiency trend for single-speed compressor units.\42\
For this final rule, DOE assumed this trend applied to efficiency
levels with single-speed compressors (EL 0, EL 1, EL 2, and EL 3).
---------------------------------------------------------------------------
\42\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A
Retrospective Analysis of the 2011 Direct Final Rule for Room Air
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------
In the 2022 NOPR, DOE assumed the adoption of variable-speed
technologies would follow a Bass diffusion curve which describes how
new technologies diffuse into the consumer market. DOE assumed that
units with variable-speed technologies would account for 5 percent of
shipments in each product class by 2026.
In response to the April 2022 NOPR, NEEA and NWPCC provided sales
estimates for variable-speed units and all room air conditioners sold
as part of the EPA ENERGY STAR[supreg] Retail Products Platform
(ESRPP). NEEA and NWPCC encouraged DOE to use these data to calibrate
the Bass diffusion curve for variable-speed models. (NEEA and NWPCC,
No. 50 at pp. 2-4)
DOE thanks NEEA and NWPCC for the provided sales data needed to
calibrate the Bass diffusion curve for the adoption of variable-speed
technologies. The ESRPP data provided by NEEA and NWPCC indicated a
faster adoption of variable-speed technologies than estimated in the
April 2022 NOPR between 2018 and 2022, in particular for capacities
greater than 8,000 Btu/h. For this final rule, DOE calibrated its Bass
diffusion curve model for variable-speed models to reach 7 percent of
shipments in 2026 with faster adoption for capacities greater than
8,000 Btu/h based on the provided data.
The estimated market shares for the no-new-standards case for room
air conditioners in 2026 are shown in Tables IV.4 through IV.6. See
chapter 8 of the final rule TSD for further information on the
derivation of the efficiency distributions.
Table IV.4--Room Air Conditioners Without Reverse Cycle and With Louvered Sides: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
<6,000 Btu/h (PC1) 6,000-7,900 Btu/h (PC2) 8,000-13,900 Btu/h (PC3)
-----------------------------------------------------------------------------------------------
Efficiency level Efficiency Efficiency Efficiency
---------------- Market share ---------------- Market share ---------------- Market share
CEER (%) CEER (%) CEER (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................ 11.0 7.7 11.0 0.0 10.9 0.0
1....................................................... 11.4 85.2 11.4 74.6 11.4 30.3
2....................................................... 12.1 2.1 12.1 18.3 12.0 58.0
3....................................................... 13.1 0.0 13.7 2.1 14.3 0.9
4....................................................... 16.0 5.0 16.0 5.0 16.0 10.7
[[Page 34322]]
5....................................................... 20.2 0.0 21.2 0.0 21.9 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
14,000-19,900 Btu/h (PC4)
20,000-27,900 Btu/h (PC5a)
>=28,000 Btu/h (PC5b)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................ 10.7 0.0 9.4 0.0 9.0 40.3
1....................................................... 11.1 0.0 9.8 9.0 9.4 45.7
2....................................................... 11.8 89.1 10.3 80.3 9.9 9.0
3....................................................... 14.0 0.1 11.8 0.0 10.3 0.0
4....................................................... 16.0 10.7 13.8 10.7 13.2 5.0
5....................................................... 19.8 0.0 18.7 0.0 16.3 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table IV.5--Room Air Conditioners Without Reverse Cycle and Without Louvered Sides: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
8,000-10,900 Btu/h (PC 8a) 11,000-13,900 Btu/h (PC8b) 14,000-19,900 Btu/h (PC9)
-----------------------------------------------------------------------------------------------
Efficiency level Efficiency Efficiency Efficiency
---------------- Market share ---------------- Market share ---------------- Market share
CEER (%) CEER (%) CEER (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................ 9.6 0.0 9.5 0.0 9.3 39.1
1....................................................... 10.1 11.4 10.0 0.0 9.7 46.9
2....................................................... 10.6 83.6 10.5 94.3 10.2 9.0
3....................................................... 12.3 0.0 12.3 0.7 10.9 0.0
4....................................................... 14.1 5.0 13.9 5.0 13.7 5.0
5....................................................... 18.7 0.0 19.0 0.0 16.8 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table IV.6--Room Air Conditioners With Reverse Cycle, Casement-Slider: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
w/louvers (PC11) wo/louvers (PC12) Casement-slider (PC16)
-----------------------------------------------------------------------------------------------
<20,000 Btu/h <14,000 Btu/h
Efficiency level -----------------------------------------------------------------------------------------------
Efficiency Efficiency Efficiency
---------------- Market share ---------------- Market share ---------------- Market share
CEER (%) CEER (%) CEER (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................ 9.8 50.7 9.3 39.1 10.4 34.4
1....................................................... 10.4 35.2 9.7 46.9 10.8 51.6
2....................................................... 10.8 9.0 10.2 9.0 11.4 9.0
3....................................................... 12.3 0.0 11.3 0.0 13.2 0.0
4....................................................... 14.4 5.0 13.7 5.0 15.3 5.0
5....................................................... 18.0 0.0 16.4 0.0 19.1 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
9. Payback Period Analysis
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more-efficient products,
compared to baseline products, through energy cost savings. Payback
periods are expressed in years. Payback periods that exceed the life of
the product mean that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first-year annual operating expenditures relative to the baseline. The
PBP calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed.
As noted previously, EPCA establishes a rebuttable presumption that
a standard is economically justified if the Secretary finds that the
additional cost to the consumer of purchasing a product complying with
an energy conservation standard level will be less than three times the
value of the first year's energy savings resulting from the standard,
as calculated under the applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE
determined the value of the first year's energy savings by calculating
the energy savings in accordance with the applicable DOE test
procedure, and multiplying those savings by the average energy price
projection for the year in which compliance with the amended standards
would be required.
G. Shipments Analysis
DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\43\
The
[[Page 34323]]
shipments model takes an accounting approach, tracking market shares of
each product class and the vintage of units in the stock. Stock
accounting uses product shipments as inputs to estimate the age
distribution of in-service product stocks for all years. The age
distribution of in-service product stocks is a key input to
calculations of both the NES and NPV, because operating costs for any
year depend on the age distribution of the stock.
---------------------------------------------------------------------------
\43\ 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.
---------------------------------------------------------------------------
Total shipments for room air conditioners are developed by
considering the demand from replacements for units in stock that fail
and the demand from first-time owners in existing homes. DOE calculated
shipments due to replacements using the retirement function developed
for the LCC analysis. DOE calculated shipments due to first-time owners
in existing households using estimates from room air conditioner
saturation in RECS 2015 and projections of housing stock from AEO2022.
See chapter 8 of the final rule TSD for details.
DOE considers the impacts on shipments from changes in product
purchase price and operating cost associated with higher energy
efficiency levels using a price elasticity and an efficiency
elasticity. As in the April 2022 NOPR, DOE employs a 0.2-percent
efficiency elasticity rate and a price elasticity of -0.45 in its
shipments model. These values are based on analysis of aggregated data
for five residential appliances including room air conditioners.\44\
The market impact is defined as the difference between the product of
price elasticity of demand and the change in price due to a standard
level, and the product of the efficiency elasticity and the change in
operating costs due to a standard level.
---------------------------------------------------------------------------
\44\ Fujita, K. (2015) Estimating Price Elasticity using Market-
Level Appliance Data. Lawrence Berkeley National Laboratory, LBNL-
188289.
---------------------------------------------------------------------------
H. National Impact Analysis
The NIA assesses the national energy savings (``NES'') and the NPV
from a national perspective of total consumer costs and savings that
would be expected to result from new or amended standards at specific
efficiency levels.\45\ (``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 room air conditioners sold from 2026 through 2055.
---------------------------------------------------------------------------
\45\ The NIA accounts for impacts in the 50 states and U.S.
territories.
---------------------------------------------------------------------------
DOE evaluates the impacts of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each
product class in the absence of new or amended energy conservation
standards. For this projection, DOE considers historical trends in
efficiency and various forces that are likely to affect the mix of
efficiencies over time. DOE compares the no-new-standards case with
projections characterizing the market for each product class if DOE
adopted new or amended standards at specific energy efficiency levels
(i.e., the TSLs or standards cases) for that class. For the standards
cases, DOE considers how a given standard would likely affect the
market shares of products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses typical values
(as opposed to probability distributions) as inputs.
Table IV.7 summarizes the inputs and methods DOE used for the NIA
analysis for the final rule. Discussion of these inputs and methods
follows the table. See chapter 10 of the final rule TSD for further
details.
Table IV.7--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments.................... Annual shipments from shipments model.
Compliance Date of Standard.. 2026.
Efficiency Trends............ Bass diffusion curve to allocate
shipments to ELs with variable-speed
technology and annual 0.25% increase in
shipment-weighted CEER for ELs with
single-speed technology.
Annual Energy Consumption per Calculated for each efficiency level
Unit. based on inputs from energy use
analysis.
Total Installed Cost per Unit Calculated for each efficiency level
based on inputs from the LCC analysis.
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 Calculated for each efficiency level on
per Unit. inputs from the LCC analysis.
Energy Price Trends.......... AEO2022 projections (to 2050) and a
constant value derived from simple
average between 2046-2050 thereafter.
Energy Site-to-Primary and A time-series conversion factor based on
FFC Conversion. AEO2022.
Discount Rate................ Three and seven percent.
Present Year................. 2022.
------------------------------------------------------------------------
1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.8 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes for the year of anticipated compliance with
an amended or new standard. To project the trend in efficiency absent
amended standards for room air conditioners over the entire shipments
projection period, DOE assumed that market share for ELs with variable-
speed technologies would follow a Bass diffusion curve, while the
shipment-weighted CEER for ELs with single-speed compressors would
increase annually by 0.25 percent in CEER based on historical trends in
[[Page 34324]]
shipment-weighted efficiency.\46\ The approach is further described in
chapter 10 of the final rule TSD.
---------------------------------------------------------------------------
\46\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A
Retrospective Analysis of the 2011 Direct Final Rule for Room Air
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------
In its reference scenario, DOE assumed that variable-speed
technologies would comprise 25 percent of the market by the end of the
analysis period (2055). DOE also performed sensitivity scenarios
assuming a low penetration of variable-speed technologies (10 percent
of the market in 2055) and a high penetration of variable-speed
technologies (50 percent of the market in 2055). The results of these
scenarios can be found in appendix 10E of the final rule TSD.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the shipment-weighted efficiency for the year that standards
are assumed to become effective in 2026. In the year of compliance, the
market shares of products in the no-new-standards case that do not meet
the standard under consideration would ``roll up'' to the minimum EL
that meets the standard, and the market share of products above the
standard would remain unchanged. As in the no-new-standards case, DOE
assumed an annual increase of 0.25 percent in CEER over the analysis
period for ELs with single-speed technology.
2. National Energy Savings
The national energy savings analysis involves a comparison of
national energy consumption of the considered products between each
potential standards case (``TSL'') and the case with no new or amended
energy conservation standards. DOE calculated the national energy
consumption by multiplying the number of units (stock) of each product
(by vintage or age) by the unit energy consumption (also by vintage).
DOE calculated annual NES based on the difference in national energy
consumption for the no-new-standards case and for each higher
efficiency standard case. DOE estimated energy consumption and savings
based on site energy and converted the electricity consumption and
savings to primary energy (i.e., the energy consumed by power plants to
generate site electricity) using annual conversion factors derived from
AEO2022. Cumulative energy savings are the sum of the NES for each year
over the timeframe of the analysis.
Use of higher-efficiency products is sometimes associated with a
direct rebound effect, which refers to an increase in utilization of
the product due to the increase in efficiency. DOE did not find any
data on the rebound effect specific to room air conditioners, but it
applied a direct rebound effect of 15 percent as suggested by Sorrell
et al. for space cooling appliances.\47\ The calculated NES at each
efficiency level is therefore reduced by 15 percent in residential
applications. DOE also included the rebound effect in the NPV analysis
by accounting for the additional net benefit from increased room air
conditioner usage as described in section IV.H.3 of this document.
---------------------------------------------------------------------------
\47\ Sorrell, S., J. Dimitropoulos, M. Sommerville. 2009.
Empirical estimates of the direct rebound effect: A review. Energy
Policy 37 (2009) 1356-1371.
---------------------------------------------------------------------------
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use FFC measures of energy use and
greenhouse gas and other emissions in the national impact analyses and
emissions analyses included in future energy conservation standards
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the
approaches discussed in the August 18, 2011 document, DOE published a
statement of amended policy in which DOE explained its determination
that EIA's National Energy Modeling System (``NEMS'') is the most
appropriate tool for its FFC analysis and its intention to use NEMS for
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain,
multi-sector, partial equilibrium model of the U.S. energy sector \48\
that EIA uses to prepare its Annual Energy Outlook. The FFC factors
incorporate losses in production and delivery in the case of natural
gas (including fugitive emissions) and additional energy used to
produce and deliver the various fuels used by power plants. The
approach used for deriving FFC measures of energy use and emissions is
described in appendix 10B of the final rule TSD.
---------------------------------------------------------------------------
\48\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2018, DOE/EIA-0581(2019), April 2019.
Available at www.eia.gov/outlooks/aeo/nems/documentation/ (last
accessed September 7, 2022).
---------------------------------------------------------------------------
3. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are (1) total annual installed cost, (2) total
annual operating costs (energy costs and repair and maintenance costs),
and (3) a discount factor to calculate the present value of costs and
savings. DOE calculates net savings each year as the difference between
the no-new-standards case and each standards case in terms of total
savings in operating costs versus total increases in installed costs.
DOE calculates operating cost savings over the lifetime of each product
shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed room
air conditioner price trends based on combined historical PPI data of
``room air-conditioners and dehumidifiers, except portable
dehumidifiers'' and primary air-conditioning, refrigeration and forced
air heating equipment. DOE applied the same trends to project prices
for each product class at each considered efficiency level. By 2055,
the end date of the analysis period, the average single-speed
compressor room air conditioner price is projected to drop 18 percent
and the variable-speed compressor room air conditioner price is
projected to drop about 31 percent relative to 2026. DOE's projection
of product prices is described in appendix 10C of the final rule TSD.
To evaluate the effect of uncertainty regarding the price trend
estimates, DOE investigated the impact of alternate product price
projections on the consumer NPV for the considered TSLs for room air
conditioners. In addition to the default price trend, DOE considered
high and low product price sensitivity cases. In the high price
scenario, DOE based the price decline of the non-variable speed
controls portion on room air conditioner PPI data limited to the period
1990-2009, which shows a faster price decline relative to the full time
series. For the variable-speed controls portion, DOE used a faster
price decline derived from the exponential fit of ``semiconductors and
related device manufacturing'' PPI series spanning between 1994 and
2021. In the low price decline scenario, DOE assumed a constant price
for the non-variable-speed controls portion of the price and a slower
price decline estimate for the variable-speed controls portion derived
from the exponential fit of ``semiconductors and related device
manufacturing'' PPI series spanning between 1967 and 1993. The
derivation of these price trends and the results of these sensitivity
cases are described in appendix 10C of the final rule TSD.
The operating cost savings are energy cost savings, which are
calculated using the estimated energy savings in each year and the
projected price of the appropriate form of energy. To estimate energy
prices in future years, DOE multiplied the average regional energy
prices by the projection of annual national-average residential energy
price
[[Page 34325]]
changes in the Reference case from AEO2022, which has an end year of
2050. To estimate price trends after 2050, DOE used a constant value
derived from a simple average of the price trend between 2046 through
2050. As part of the NIA, DOE also analyzed scenarios that used inputs
from variants of the AEO2022 Reference case that have lower and higher
economic growth. Those cases have lower and higher energy price trends
compared to the Reference case. NIA results based on these cases are
presented in appendix 10C of the final rule TSD.
As previously described, DOE assumed a 15 percent rebound from an
increase in utilization of the product arising from the increase in
efficiency (i.e., the direct rebound effect). In considering the
consumer welfare gained due to the direct rebound effect, DOE accounted
for change in consumer surplus attributed to additional cooling from
the purchase of a more efficient unit. Overall consumer welfare is
generally understood to be enhanced from rebound. The net consumer
impact of the rebound effect is included in the calculation of
operating cost savings in the consumer NPV results. See appendix 10F of
the final rule TSD for details on DOE's treatment of the monetary
valuation of the rebound effect.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
final rule, DOE estimated the NPV of consumer benefits using both a 3-
percent and a 7-percent real discount rate. DOE uses these discount
rates in accordance with guidance provided by the Office of Management
and Budget (``OMB'') to Federal agencies on the development of
regulatory analysis.\49\ The discount rates for the determination of
NPV are in contrast to the discount rates used in the LCC analysis,
which are designed to reflect a consumer's perspective. The 7-percent
real value is an estimate of the average before-tax rate of return to
private capital in the U.S. economy. The 3-percent real value
represents the ``social rate of time preference,'' which is the rate at
which society discounts future consumption flows to their present
value.
---------------------------------------------------------------------------
\49\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at
www.whitehouse.gov/omb/memoranda/m03-21.html (last accessed
September 7, 2022).
---------------------------------------------------------------------------
I. Consumer Subgroup Analysis
In analyzing the potential impact of new or amended energy
conservation standards on consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a new or amended national standard. The purpose of a
subgroup analysis is to determine the extent of any such
disproportional impacts. DOE evaluates impacts on particular subgroups
of consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. For this final rule, DOE
analyzed the impacts of the considered standard levels on two
subgroups: (1) low-income households and (2) senior-only households.
The analysis used subsets of the RECS 2015 sample composed of
households that meet the criteria for the considered subgroups. DOE
determined households in the low-income subgroup analysis using poverty
thresholds from the U.S. Federal Poverty Guidelines which are based on
household income and occupancy.\50\ The subgroup, which represents a
total of 12.1 million room ACs in 7.3 million low-income households
across the U.S., is composed of 55 percent renters, 43 percent home-
owners, 2 percent occupants living in homes without paying rent.
Approximately 90 percent of the low-income sample have an annual
household income of less than $20,000. Both the low-income and National
consumer samples share a similar geographic distribution in ownership
with a plurality (49 percent) of room AC units concentrated on the East
Coast of the U.S. Based on an analysis of RECS 2015, low-income
households were found to have 12 percent higher operating hours
relative to the National sample. DOE used the LCC and PBP spreadsheet
model to estimate the impacts of the considered efficiency levels on
these subgroups. Chapter 11 in the final rule TSD describes the
consumer subgroup analysis.
---------------------------------------------------------------------------
\50\ Department of Health and Human Services, Poverty
Thresholds. Available at https://aspe.hhs.gov/2015-poverty-guidelines (last accessed September 7, 2022).
---------------------------------------------------------------------------
AHAM stated that many lower and middle-income households have
negative discretionary income and requested that DOE change its
approach towards sub-group analysis to take into account real
limitations on purchasing capability and the effects of increased costs
on discretionary income, credit ratings, and the ability of consumers
to meet other necessary bills. Additionally, AHAM stated that DOE does
not take into account the 23 percent of households with incomes under
$15,000 who are ``unbanked'' in its financial framework and therefore
needs to rethink its approach to sub-groups and include a more
comprehensive approach to impact analysis to ensure that traditionally
marginalized subgroups are included in its analysis. (AHAM, No. 43 at
pp. 5-8) AHAM and Friedrich commented that excessively stringent
standards are likely to negatively impact the populations that use
these and noted that it is particularly important not to price-out
lower income and underserved communities from purchasing room air
conditioners. (AHAM, No. 43 at pp. 3-4; Friedrich, No. 44 at pp. 2-4)
DOE's approach to the low-income consumer subgroup analysis
includes households that do not have assets or debts included in the
SCF. It is likely that a majority of these ``unbanked'' households
primarily rely on cash to complete transactions and as a form of
savings, which is included in the distribution of discount rates
associated with low-income consumers. Consumers that rely entirely on
cash are assigned a discount rate of 0 percent as there is no lost
opportunity cost from alternative non-cash assets or debts. For
households that utilize non-traditional, non-bank financing, DOE's
methodology includes a distribution of high discount rates (>10%) which
are representative of the opportunity cost associated with non-bank
lines of credit. Additionally, DOE's subgroup analysis for low-income
households found that, at the adopted TSL, the estimated installed cost
increase is $28 while the average discounted lifetime operating cost
savings is $110. (See section V.B.1.b for results of the consumer
subgroup analysis.) DOE also notes that its low-income subgroup
analysis is a conservative estimate in that it assumes that renter
households purchase the unit. In cases where the landlord purchases the
unit but the renter pays the electricity bill, the renting household
may not pay an increased purchase price due to a standard, but would
benefit from reduced operating costs.
CFA and NCLC supported DOE's proposed TSL and noted that low-income
consumers in particular would benefit from reduced operating costs
associated with more efficient room air conditioners as low-income
households pay a disproportionately higher percentage of their incomes
on energy bills compared to other households. (CFA and NCLC, No. 46 at
pp. 1-2)
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on
[[Page 34326]]
manufacturers of room air conditioners and to estimate the potential
impacts of such standards on employment and manufacturing capacity. The
MIA has both quantitative and qualitative aspects and includes analyses
of projected industry cash flows, the INPV, investments in research and
development (``R&D'') and manufacturing capital, and domestic
manufacturing employment. Additionally, the MIA seeks to determine how
amended energy conservation standards might affect manufacturing
employment, capacity, and competition, as well as how standards
contribute to overall regulatory burden. Finally, the MIA serves to
identify any disproportionate impacts on manufacturer subgroups,
including small business manufacturers.
The quantitative part of the MIA primarily relies on the Government
Regulatory Impact Model (``GRIM''), an industry cash flow model with
inputs specific to this rulemaking. The key GRIM inputs include data on
the industry cost structure, unit production costs, product shipments,
manufacturer markups, and investments in R&D and manufacturing capital
required to produce compliant products. The key GRIM outputs are the
INPV, which is the sum of industry annual cash flows over the analysis
period, discounted using the industry-weighted average cost of capital,
and the impact to domestic manufacturing employment. The model uses
standard accounting principles to estimate the impacts of more-
stringent energy conservation standards on a given industry by
comparing changes in INPV and domestic manufacturing employment between
a no-new-standards case and the various standards cases. To capture the
uncertainty relating to manufacturer pricing strategies following
amended standards, the GRIM estimates a range of possible impacts under
different markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as a potential standard's impact on manufacturing capacity,
competition within the industry, the cumulative impact of other DOE and
non-DOE regulations, and impacts on manufacturer subgroups. The
complete MIA is outlined in chapter 12 of the final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the room air conditioner
manufacturing industry based on the market and technology assessment
and publicly-available information. This included a top-down analysis
of room air conditioner manufacturers that DOE used to derive
preliminary financial inputs for the GRIM (e.g., revenues; materials,
labor, overhead, and depreciation expenses; selling, general, and
administrative expenses (``SG&A''); and R&D expenses). DOE also used
public sources of information to further calibrate its initial
characterization of the room air conditioner manufacturing industry,
including company filings of form 10-K from the SEC,\51\ corporate
annual reports, April 2011 Direct Final Rule, the U.S. Census Bureau's
Annual Survey of Manufactures (``ASM''),\52\ and reports from Dun &
Bradstreet.\53\ 76 FR 22454.
---------------------------------------------------------------------------
\51\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. Available at
www.sec.gov/edgar/search/ (last accessed September 7, 2022).
\52\ U.S. Census Bureau, Annual Survey of Manufactures.
``Summary Statistics for Industry Groups and Industries in the U.S
(2020).'' Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2020-asm.html (last accessed September 7, 2022).
\53\ The Dun & Bradstreet Hoovers login is available at:
app.dnbhoovers.com (last accessed September 7, 2022).
---------------------------------------------------------------------------
In Phase 2 of the MIA, DOE prepared a framework industry cash-flow
analysis to quantify the potential impacts of amended energy
conservation standards. The GRIM uses several factors to determine a
series of annual cash flows starting with the announcement of the
standard and extending over a 30-year period following the compliance
date of the standard. These factors include annual expected revenues,
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures.
In general, energy conservation standards can affect manufacturer cash
flow in three distinct ways: (1) creating a need for increased
investment, (2) raising production costs per unit, and (3) altering
revenue due to higher per-unit prices and changes in sales volumes.
In addition, during Phase 2, DOE developed interview guides to
distribute to manufacturers of room air conditioners in order to
develop other key GRIM inputs, including product and capital conversion
costs, and to gather additional information on the anticipated effects
of energy conservation standards on revenues, direct employment,
capital assets, industry competitiveness, and subgroup impacts.
In Phase 3 of the MIA, DOE conducted structured, detailed
interviews with representative manufacturers. During these interviews,
DOE discussed engineering, manufacturing, procurement, and financial
topics to validate assumptions used in the GRIM and to identify key
issues or concerns. As part of Phase 3, DOE also evaluated subgroups of
manufacturers that may be disproportionately impacted by amended
standards or that may not be accurately represented by the average cost
assumptions used to develop the industry cash flow analysis. Such
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers (``LVMs''), niche players, and/or manufacturers
exhibiting a cost structure that largely differs from the industry
average. DOE identified one subgroup for a separate impact analysis:
small business manufacturers. The small business subgroup is discussed
in section VII.B, ``Review under the Regulatory Flexibility Act'' and
in chapter 12 of the final rule TSD.
2. Government Regulatory Impact Model and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to
amended standards that result in a higher or lower industry value. The
GRIM uses a standard, annual discounted cash-flow analysis that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from 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 to
2055. DOE calculated INPVs by summing the stream of annual discounted
cash flows during this period. For manufacturers of room air
conditioners, DOE used a real discount rate of 7.2 percent, which was
derived from industry financials and then modified according to
feedback received during manufacturer interviews.
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. The difference in INPV between the no-new-standards
case and a standards case represents the financial impact of the
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis and shipments analysis, and information gathered from industry
stakeholders during the course of manufacturer interviews. The GRIM
results are presented in section V.B.2 of
[[Page 34327]]
this document. Additional details about the GRIM, the discount rate,
and other financial parameters can be found in chapter 12 of the final
rule TSD.
a. Manufacturer Production Costs
Manufacturing more efficient products is typically more expensive
than manufacturing baseline products due to the use of more complex
components, which are typically more costly than baseline components.
The changes in the MPCs of covered products can affect the revenues,
gross margins, and cash flow of the industry. DOE models the
relationship between efficiency and MPCs as a part of its engineering
analysis. For a complete description of the MPCs, see chapter 5 of the
final rule TSD or section IV.C of this document.
b. Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments by
efficiency level. Changes in sales volumes and efficiency mix over time
can significantly affect manufacturer finances. For this analysis, the
GRIM uses the NIA's annual shipment projections derived from the
shipments analysis from 2023 (the base year) to 2055 (the end year of
the analysis period). See chapter 9 of the final rule TSD for
additional details or section IV.G of this document for additional
details.
c. Product and Capital Conversion Costs
Amended energy conservation standards could cause manufacturers to
incur conversion costs to bring their production facilities and product
designs into compliance. DOE evaluated the level of conversion-related
expenditures that would be needed to comply with each considered
efficiency level in each product class. For the MIA, DOE classified
these conversion costs into two major groups: (1) product conversion
costs; and (2) capital conversion costs. Product conversion costs are
investments in research, development, testing, marketing, and other
non-capitalized costs necessary to make product designs comply with
amended energy conservation standards. Capital conversion costs are
investments in property, plant, and equipment necessary to adapt or
change existing production facilities such that new compliant product
designs can be fabricated and assembled.
To calculate the MPCs for room air conditioners at and above the
baseline, DOE performed teardowns for representative units. The data
generated from these analyses were then used to estimate the capital
investments in equipment, tooling, and conveyor required of original
equipment manufacturers (``OEMs'') at each efficiency level, taking
into account such factors as product design, raw materials, purchased
components, and fabrication method. Changes in equipment, tooling, and
conveyer were used to estimate capital conversion costs. Additionally,
capital conversion costs accounted for investments in appearance
tooling made by manufacturers that are not OEMs.
DOE relied on feedback from industry to evaluate the product
conversion costs industry would likely incur at the considered standard
levels. DOE integrated feedback from manufacturers, both OEM and non-
OEM, on redesign effort and staffing to estimate product conversion
costs. Manufacturer numbers were aggregated to protect confidential
information. DOE adjusted the conversion cost estimates developed in
support of the April 2022 NOPR to 2021$ for this analysis.
The conversion cost figures used in the GRIM can be found in
section V.B.2 of this document. For additional information on the
capital and product conversion costs, see chapter 12 of the final rule
TSD.
In general, DOE assumes all conversion-related investments occur
between the year of publication of the final rule and the year by which
manufacturers must comply with the new standard. The conversion cost
figures used in the GRIM can be found in section V.B.2 of this
document. For additional information on the estimated capital and
product conversion costs, see chapter 12 of the final rule TSD.
d. Manufacturer Markup Scenarios
MSPs include direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs) and all non-production
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate
the MSPs in the GRIM, DOE applied a manufacturer markup to the MPCs
estimated in the engineering analysis for each product class and
efficiency level. Modifying these markups in the standards case yields
different sets of impacts on manufacturers. For the MIA, DOE modeled
two standards-case scenarios to represent uncertainty regarding the
potential impacts on prices and profitability for manufacturers
following the implementation of amended energy conservation standards:
(1) a preservation of gross margin percentage scenario; and (2) a
preservation of per-unit operating profit scenario. These scenarios
lead to different markup values that, when applied to the MPCs, result
in varying revenue and cash flow impacts.
Under the preservation of gross margin percentage scenario, DOE
applied a single uniform ``gross margin percentage'' across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within a product class. As MPCs increase with
efficiency, this scenario implies that the absolute dollar markup will
increase as well. DOE assumed a gross margin percentage of 21 percent
for all product classes.\54\ Manufacturers tend to believe it is
optimistic to assume that they would be able to maintain the same gross
margin percentage markup as their production costs increase,
particularly for minimally efficient products. Therefore, DOE assumes
that this scenario represents a high bound to industry profitability
under an amended energy conservation standard.
---------------------------------------------------------------------------
\54\ The gross margin percentage of 21 percent is based on a
manufacturer markup of 1.26.
---------------------------------------------------------------------------
In the preservation of per-unit operating profit scenario, as the
cost of production goes up under a standards case, manufacturers are
generally required to reduce their markups to a level that maintains
base-case operating profit. DOE implemented this scenario in the GRIM
by lowering the manufacturer markups at each TSL to yield approximately
the same earnings before interest and taxes in the standards case as in
the no-new-standards case in the year after the compliance date of the
amended standards. The implicit assumption behind this scenario is that
the industry can only maintain its operating profit in absolute dollars
after the standard. A comparison of industry financial impacts under
the two scenarios is presented in section V.B.2.a of this document.
3. Discussion of MIA Comments
In response to the April 2022 NOPR, AHAM submitted written comments
about the impact of supply chain constraints, tariffs, cumulative
regulatory burden, and elevated shipping costs on manufacturers of room
air conditioners. (AHAM, No. 43 at pp. 28-31)
AHAM noted that manufacturers continue to face global supply chain
challenges--including procuring semiconductors and experiencing
transportation delays--and urged DOE to further review the current
situation manufacturers are facing and to account for this in the MIA.
(AHAM, No. 43 at
[[Page 34328]]
p. 31) Although DOE is appreciative of these recent challenges, in the-
long term manufacturers of room air conditioners face both evolving
challenges and evolving opportunities. DOE does not attempt the
forecast the global supply chain challenges in the timeframe of
compliance. Increased costs associated with recent supply chain issues
have been implemented in the cost analysis by way of 5-year moving
averages for materials, purchase parts, and shipping costs.
AHAM noted that room air conditioners as well as room air
conditioner chassis are currently subject to United States Trade
Representative (``USTR'') China section 301 tariffs at 25 percent and
10 percent, respectively. AHAM requested that DOE follow up with
individual manufacturers to fully assess the impact of tariffs, as
according to AHAM, these tariffs will likely remain in place. (AHAM,
No. 43 at pp. 30-31) DOE contractors conducted manufacturer interviews
during the NOPR phases of analysis to solicit information on
manufacturer costs. Furthermore, DOE published its MPCs as part of the
NOPR TSD. DOE's final rule analysis incorporates both confidential
feedback and public comments from manufacturers on MPCs, which
incorporates all costs and would include tariffs.
AHAM encouraged DOE to incorporate the financial results of the
cumulative regulatory burden analysis into the MIA, stating that this
could be done by adding the combined cost of complying with multiple
regulations into the product conversion costs in the GRIM. (AHAM, No.
43 at pp. 28-29) AHAM noted other regulations impact room air
conditioner manufacturers such as residential clothes washers, consumer
clothes dryers, commercial clothes washers, consumer refrigerator/
freezers, miscellaneous refrigeration products, cooking products,
dishwashers, room air conditioners, dehumidifiers, portable air
conditioners, and room air cleaner rulemakings. (AHAM, No. 43 at p. 29)
Additionally, AHAM noted that DOE should not discount the time and
resources needed for stakeholders to review test procedure and energy
conservation standard rulemakings and assess their potential impacts.
(AHAM, No. 43 at p. 28)
If DOE were to combine the conversion costs from multiple
regulations, as requested, it would be appropriate to match the
combined conversion costs against combined revenues of the regulated
products. DOE expects that combined results would make it more
difficult to discern the direct impact of this amended standard on room
air conditioner manufacturers.
With regard to AHAM's request that DOE not discount the costs for
stakeholders to review rulemakings, although appreciative that
monitoring and responding to rulemakings does impose costs for
stakeholders, DOE believes that this is outside the scope of analysis
for individual product rulemakings. Because EPCA requires DOE to
establish and maintain the energy conservation program for consumer
products and to periodically propose new and amended standards and test
procedures, DOE considers this rulemaking activity to be part of the
analytical baseline. That is, these activities would exist regardless
of the regulatory option that DOE adopts through a rulemaking and would
be independent from the conversion costs required to adapt product
designs and manufacturing facilitates to meet an amended standard.
Nonetheless, DOE welcomes any available data on the costs of
monitoring. As noted in the April 2022 NOPR, a summary of the job
titles and annual hours per job title at a prototypical company would
allow DOE to construct a detailed analysis of AHAM's monitoring costs
and would help DOE assess whether these costs would materially affect
future analyses.
AHAM noted that changes to room air conditioner chassis dimensions
and product weight will increase shipping and transportation costs and
requested that DOE account for this in its MIA through revision. (AHAM,
No. 43 at p. 31)
As noted in sections IV.A.2.b and IV.C.1.b of this document, DOE
evaluated the impact of design options on weight and chassis
dimensions. DOE evaluated the impact of those changes in weight and
dimensions on overseas container and domestic shipping rates. For
efficiency levels below max-tech, DOE did not find increases in
shipping costs at efficiency levels. At max-tech, there are increases
in shipping costs that could affect downstream analyses. However, as
discussed in the walk-down, DOE is not adopting max-tech for any
product classes. Additional information about shipping costs is
available in chapter 5 of the TSD.
K. Emissions Analysis
The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO2, NOX, SO2, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH4 and
N2O, as well as the reductions in emissions of other gases
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion.
The analysis of electric power sector emissions of CO2,
NOX, SO2, and Hg uses emissions intended to
represent the marginal impacts of the change in electricity consumption
associated with amended or new standards. The methodology is based on
results published for the AEO, including a set of side cases that
implement a variety of efficiency-related policies. The methodology is
described in appendix 13A in the final rule TSD. The analysis presented
in this rule uses projections from AEO2022. Power sector emissions of
CH4 and N2O from fuel combustion are estimated
using Emission Factors for Greenhouse Gas Inventories published by the
EPA.\55\
---------------------------------------------------------------------------
\55\ Available at www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf (last accessed July 12,
2022).
---------------------------------------------------------------------------
FFC upstream emissions, which include emissions from fuel
combustion during extraction, processing, and transportation of fuels,
and ``fugitive'' emissions (direct leakage to the atmosphere) of
CH4 and CO2, are estimated based on the
methodology described in chapter 15 of the final rule TSD.
The emissions intensity factors are expressed in terms of physical
units per megawatt-hour (``MWh'') or million British thermal units
(``MMBtu'') of site energy savings. For power sector emissions,
specific emissions intensity factors are calculated by sector and end
use. Total emissions reductions are estimated using the energy savings
calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
DOE's no-new-standards case for the electric power sector reflects
the AEO, which incorporates the projected impacts of existing air
quality regulations on emissions. AEO2022 generally represents current
legislation and environmental regulations, including recent government
actions, that were in place at the time of preparation of AEO2022,
including the emissions control programs discussed in the following
paragraphs.\56\
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\56\ For further information, see the Assumptions to AEO2022
report that sets forth the major assumptions used to generate the
projections in the Annual Energy Outlook. Available at www.eia.gov/outlooks/aeo/assumptions/ (last accessed September 6, 2022).
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[[Page 34329]]
SO2 emissions from affected electric generating units
(``EGUs'') are subject to nationwide and regional emissions cap-and-
trade programs. Title IV of the Clean Air Act sets an annual emissions
cap on SO2 for affected EGUs in the 48 contiguous States and
the District of Columbia (``DC''). (42 U.S.C. 7651 et seq.)
SO2 emissions from numerous States in the eastern half of
the United States are also limited under the Cross-State Air Pollution
Rule (``CSAPR''). 76 FR 48208 (Aug. 8, 2011). CSAPR requires these
States to reduce certain emissions, including annual SO2
emissions, and went into effect as of January 1, 2015.\57\ AEO2022
incorporates implementation of CSAPR, including the update to the CSAPR
ozone season program emission budgets and target dates issued in 2016.
81 FR 74504 (Oct. 26, 2016). Compliance with CSAPR is flexible among
EGUs and is enforced through the use of tradable emissions allowances.
Under existing EPA regulations, for states subject to SO2
emissions limits under CSAPR, any excess SO2 emissions
allowances resulting from the lower electricity demand caused by the
adoption of an efficiency standard could be used to permit offsetting
increases in SO2 emissions by another regulated EGU.
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\57\ CSAPR requires states to address annual emissions of
SO2 and NOX, precursors to the formation of
fine particulate matter (``PM2.5'') pollution, in order
to address the interstate transport of pollution with respect to the
1997 and 2006 PM2.5 National Ambient Air Quality
Standards (``NAAQS''). CSAPR also requires certain states to address
the ozone season (May-September) emissions of NOX, a
precursor to the formation of ozone pollution, in order to address
the interstate transport of ozone pollution with respect to the 1997
ozone NAAQS. 76 FR 48208 (Aug. 8, 2011). EPA subsequently issued a
supplemental rule that included an additional five states in the
CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011)
(Supplemental Rule), and EPA issued the CSAPR Update for the 2008
ozone NAAQS. 81 FR 74504 (Oct. 26, 2016).
---------------------------------------------------------------------------
However, beginning in 2016, SO2 emissions began to fall
as a result of the Mercury and Air Toxics Standards (``MATS'') for
power plants. 77 FR 9304 (Feb. 16, 2012). The final rule establishes
power plant emission standards for mercury, acid gases, and non-mercury
metallic toxic pollutants. In order to continue operating, coal plants
must have either flue gas desulfurization or dry sorbent injection
systems installed. Both technologies, which are used to reduce acid gas
emissions, also reduce SO2 emissions. Because of the
emissions reductions under the MATS, it is unlikely that excess
SO2 emissions allowances resulting from the lower
electricity demand would be needed or used to permit offsetting
increases in SO2 emissions by another regulated EGU.
Therefore, energy conservation standards that decrease electricity
generation will generally reduce SO2 emissions. DOE
estimated SO2 emissions reduction using emissions factors
based on AEO2022.
CSAPR also established limits on NOX emissions for
numerous States in the eastern half of the United States. Energy
conservation standards would have little effect on NOX
emissions in those States covered by CSAPR emissions limits if excess
NOX emissions allowances resulting from the lower
electricity demand could be used to permit offsetting increases in
NOX emissions from other EGUs. In such case, NOX
emissions would remain near the limit even if electricity generation
goes down. Depending on the configuration of the power sector in the
different regions and the need for allowances, however, NOX
emissions might not remain at the limit in the case of lower
electricity demand. That would mean that standards might reduce
NOX emissions in covered States. Despite this possibility,
DOE has chosen to be conservative in its analysis and has maintained
the assumption that standards will not reduce NOX emissions
in States covered by CSAPR. Standards would be expected to reduce
NOX emissions in the States not covered by CSAPR. DOE used
AEO2022 data to derive NOX emissions factors for the group
of States not covered by CSAPR.
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, DOE's energy conservation
standards would be expected to slightly reduce Hg emissions. DOE
estimated mercury emissions reduction using emissions factors based on
AEO2022, which incorporates the MATS.
L. Monetizing Emissions Impacts
As part of the development of this final rule, for the purpose of
complying with the requirements of Executive Order 12866, DOE
considered the estimated monetary benefits from the reduced emissions
of CO2, CH4, N2O, NOX, and
SO2 that are expected to result from each of the TSLs
considered. In order to make this calculation analogous to the
calculation of the NPV of consumer benefit, DOE considered the reduced
emissions expected to result over the lifetime of products shipped in
the projection period for each TSL. This section summarizes the basis
for the values used for monetizing the emissions benefits and presents
the values considered in this final rule.
On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-
30087) granted the Federal Government's emergency motion for stay
pending appeal of the February 11, 2022, preliminary injunction issued
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of
the Fifth Circuit's order, the preliminary injunction is no longer in
effect, pending resolution of the Federal Government's appeal of that
injunction or a further court order. Among other things, the
preliminary injunction enjoined the defendants in that case from
``adopting, employing, treating as binding, or relying upon'' the
interim estimates of the social cost of greenhouse gases--which were
issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of
reducing greenhouse gas emissions. In the absence of further
intervening court orders, DOE has reverted to its approach prior to the
injunction and present monetized benefits where appropriate and
permissible under law. DOE requests comment on how to address the
climate benefits and other non-monetized effects of the proposal.
1. Monetization of Greenhouse Gas Emissions
DOE estimates the monetized benefits of the reductions in emissions
of CO2, CH4, and N2O by using a
measure of the SC of each pollutant (e.g., SC-CO2). These
estimates represent the monetary value of the net harm to society
associated with a marginal increase in emissions of these pollutants in
a given year, or the benefit of avoiding that increase. These estimates
are intended to include (but are not limited to) climate-change-related
changes in net agricultural productivity, human health, property
damages from increased flood risk, disruption of energy systems, risk
of conflict, environmental migration, and the value of ecosystem
services.
DOE exercises its own judgment in presenting monetized climate
benefits as recommended by applicable Executive orders, and DOE would
reach the same conclusion presented in this final rule in the absence
of the social cost of greenhouse gases including the February 2021
interim estimates presented by the Interagency Working Group on the
Social Cost of Greenhouse Gases.
DOE estimated the global social benefits of CO2,
CH4, and N2O reductions (i.e., SC-GHGs) using the
estimates presented in the ``Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive
Order 13990,'' published in February
[[Page 34330]]
2021 by the IWG. The SC-GHGs is the monetary value of the net harm to
society associated with a marginal increase in emissions in a given
year, or the benefit of avoiding that increase. In principle, SC-GHGs
includes the value of all climate change impacts, including (but not
limited to) changes in net agricultural productivity, human health
effects, property damage from increased flood risk and natural
disasters, disruption of energy systems, risk of conflict,
environmental migration, and the value of ecosystem services. The SC-
GHGs therefore, reflects the societal value of reducing emissions of
the gas in question by one metric ton. The SC-GHGs is the theoretically
appropriate value to use in conducting benefit-cost analyses of
policies that affect CO2, N2O and CH4
emissions. As a member of the IWG involved in the development of the
February 2021 SC-GHG TSD, DOE agrees that the interim SC-GHG estimates
represent the most appropriate estimate of the SC-GHG until revised
estimates have been developed reflecting the latest, peer-reviewed
science.
The SC-GHGs estimates presented here were developed over many
years, using transparent process, peer-reviewed methodologies, the best
science available at the time of that process, and with input from the
public. Specifically, in 2009, the IWG, that included the DOE and other
executive branch agencies and offices was established to ensure that
agencies were using the best available science and to promote
consistency in the social cost of carbon (SC-CO2) values
used across agencies. The IWG published SC-CO2 estimates in
2010 that were developed from an ensemble of three widely cited
integrated assessment models (IAMs) that estimate global climate
damages using highly aggregated representations of climate processes
and the global economy combined into a single modeling framework. The
three IAMs were run using a common set of input assumptions in each
model for future population, economic, and CO2 emissions
growth, as well as equilibrium climate sensitivity--a measure of the
globally averaged temperature response to increased atmospheric
CO2 concentrations. These estimates were updated in 2013
based on new versions of each IAM. In August 2016 the IWG published
estimates of the social cost of methane (SC-CH4) and nitrous
oxide (SC-N2O) using methodologies that are consistent with
the methodology underlying the SC-CO2 estimates. The
modeling approach that extends the IWG SC-CO2 methodology to
non-CO2 GHGs has undergone multiple stages of peer review.
The SC-CH4 and SC-N2O estimates were developed by
Marten et al.\58\ and underwent a standard double-blind peer review
process prior to journal publication. In 2015, as part of the response
to public comments received to a 2013 solicitation for comments on the
SC-CO2 estimates, the IWG announced a National Academies of
Sciences, Engineering, and Medicine review of the SC-CO2
estimates to offer advice on how to approach future updates to ensure
that the estimates continue to reflect the best available science and
methodologies. In January 2017, the National Academies released their
final report, ``Valuing Climate Damages: Updating Estimation of the
Social Cost of Carbon Dioxide,'' and recommended specific criteria for
future updates to the SC-CO2 estimates, a modeling framework
to satisfy the specified criteria, and both near-term updates and
longer-term research needs pertaining to various components of the
estimation process (National Academies, 2017).\59\ Shortly thereafter,
in March 2017, President Trump issued Executive Order 13783, which
disbanded the IWG, withdrew the previous TSDs, and directed agencies to
ensure SC-CO2 estimates used in regulatory analyses are
consistent with the guidance contained in OMB's Circular A-4,
``including with respect to the consideration of domestic versus
international impacts and the consideration of appropriate discount
rates'' (E.O. 13783, section 5(c)). Benefit-cost analyses following
E.O. 13783 used SC-GHG estimates that attempted to focus on the U.S.-
specific share of climate change damages as estimated by the models and
were calculated using two discount rates recommended by Circular A-4, 3
percent and 7 percent. All other methodological decisions and model
versions used in SC-GHG calculations remained the same as those used by
the IWG in 2010 and 2013, respectively.
---------------------------------------------------------------------------
\58\ Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold,
and A. Wolverton. Incremental CH4 and N2O
mitigation benefits consistent with the US Government's SC-
CO2 estimates. Climate Policy. 2015. 15(2): pp. 272-298.
\59\ National Academies of Sciences, Engineering, and Medicine.
Valuing Climate Damages: Updating Estimation of the Social Cost of
Carbon Dioxide. 2017. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------
On January 20, 2021, President Biden issued Executive Order 13990,
which re-established the IWG and directed it to ensure that the U.S.
Government's estimates of the social cost of carbon and other
greenhouse gases reflect the best available science and the
recommendations of the National Academies (2017). The IWG was tasked
with first reviewing the SC-GHG estimates currently used in Federal
analyses and publishing interim estimates within 30 days of the E.O.
that reflect the full impact of GHG emissions, including by taking
global damages into account. The interim SC-GHG estimates published in
February 2021 are used here to estimate the climate benefits for this
rulemaking. The E.O. instructs the IWG to undertake a fuller update of
the SC-GHG estimates by January 2022 that takes into consideration the
advice of the National Academies (2017) and other recent scientific
literature. The February 2021 SC-GHG TSD provides a complete discussion
of the IWG's initial review conducted under E.O. 13990. In particular,
the IWG found that the SC-GHG estimates used under E.O. 13783 fail to
reflect the full impact of GHG emissions in multiple ways.
First, the IWG found that the SC-GHG estimates used under E.O.
13783 fail to fully capture many climate impacts that affect the
welfare of U.S. citizens and residents, and those impacts are better
reflected by global measures of the SC-GHG. Examples of omitted effects
from the E.O. 13783 estimates include direct effects on U.S. citizens,
assets, and investments located abroad, supply chains, U.S. military
assets and interests abroad, and tourism, and spillover pathways such
as economic and political destabilization and global migration that can
lead to adverse impacts on U.S. national security, public health, and
humanitarian concerns. In addition, assessing the benefits of U.S. GHG
mitigation activities requires consideration of how those actions may
affect mitigation activities by other countries, as those international
mitigation actions will provide a benefit to U.S. citizens and
residents by mitigating climate impacts that affect U.S. citizens and
residents. A wide range of scientific and economic experts have
emphasized the issue of reciprocity as support for considering global
damages of GHG emissions. If the United States does not consider
impacts on other countries, it is difficult to convince other countries
to consider the impacts of their emissions on the United States. The
only way to achieve an efficient allocation of resources for emissions
reduction on a global basis--and so benefit the United States and its
citizens--is for all countries to base their policies on global
estimates of damages. As a member of the IWG involved in the
development of the
[[Page 34331]]
February 2021 SC-GHG TSD, DOE agrees with this assessment and,
therefore, in this rule DOE centers attention on a global measure of
SC-GHG. This approach is the same as that taken in DOE regulatory
analyses from 2012 through 2016. A robust estimate of climate damages
that accrue only to U.S. citizens and residents does not currently
exist in the literature. As explained in the February 2021 TSD,
existing estimates are both incomplete and an underestimate of total
damages that accrue to the citizens and residents of the United States
because they do not fully capture the regional interactions and
spillovers discussed above, nor do they include all of the important
physical, ecological, and economic impacts of climate change recognized
in the climate change literature. As noted in the February 2021 SC-GHG
TSD, the IWG will continue to review developments in the literature,
including more robust methodologies for estimating a U.S.-specific SC-
GHG value, and explore ways to better inform the public of the full
range of carbon impacts. As a member of the IWG, DOE will continue to
follow developments in the literature pertaining to this issue.
Second, the IWG found that the use of the social rate of return on
capital (7 percent under current OMB Circular A-4 guidance) to discount
the future benefits of reducing GHG emissions inappropriately
underestimates the impacts of climate change for the purposes of
estimating the SC-GHG. Consistent with the findings of the National
Academies (2017) and the economic literature, the IWG continued to
conclude that the consumption rate of interest is the theoretically
appropriate discount rate in an intergenerational context,\60\ and
recommended that discount rate uncertainty and relevant aspects of
intergenerational ethical considerations be accounted for in selecting
future discount rates.
---------------------------------------------------------------------------
\60\ Interagency Working Group on Social Cost of Carbon. Social
Cost of Carbon for Regulatory Impact Analysis under Executive Order
12866. 2010. United States Government. (Last accessed April 15,
2022.) www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf; Interagency Working Group on Social Cost of
Carbon. Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order No. 12866. 2013. (Last
accessed April 15, 2022.) 78 FR 70586, November 26, 2013,
www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact; Interagency Working Group on Social Cost of
Greenhouse Gases, United States Government. Technical Support
Document: Technical Update on the Social Cost of Carbon for
Regulatory Impact Analysis-Under Executive Order 12866. August 2016.
(Last accessed January 18, 2022.) www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf; Interagency Working
Group on Social Cost of Greenhouse Gases, United States Government.
Addendum to Technical Support Document on Social Cost of Carbon for
Regulatory Impact Analysis under Executive Order 12866: Application
of the Methodology to Estimate the Social Cost of Methane and the
Social Cost of Nitrous Oxide. August 2016. (Last accessed January
18, 2022.) www.epa.gov/sites/default/files/2016-12/documents/addendum_to_sc-ghg_tsd_august_2016.pdf.
---------------------------------------------------------------------------
Furthermore, the damage estimates developed for use in the SC-GHG
are estimated in consumption-equivalent terms, and so an application of
OMB Circular A-4's guidance for regulatory analysis would then use the
consumption discount rate to calculate the SC-GHG. DOE agrees with this
assessment and will continue to follow developments in the literature
pertaining to this issue. DOE also notes that while OMB Circular A-4,
as published in 2003, recommends using 3 percent and 7 percent discount
rates as ``default'' values, Circular A-4 also reminds agencies that
``different regulations may call for different emphases in the
analysis, depending on the nature and complexity of the regulatory
issues and the sensitivity of the benefit and cost estimates to the key
assumptions.'' On discounting, Circular A-4 recognizes that ``special
ethical considerations arise when comparing benefits and costs across
generations,'' and Circular A-4 acknowledges that analyses may
appropriately ``discount future costs and consumption benefits . . . at
a lower rate than for intragenerational analysis.'' In the 2015
Response to Comments on the Social Cost of Carbon for Regulatory Impact
Analysis (``RIA''), OMB, DOE, and the other IWG members recognized that
``Circular A-4 is a living document'' and ``the use of 7 percent is not
considered appropriate for intergenerational discounting. There is wide
support for this view in the academic literature, and it is recognized
in Circular A-4 itself.'' Thus, DOE concludes that a 7% discount rate
is not appropriate to apply to value the social cost of greenhouse
gases in the analysis presented in this analysis.
To calculate the present and annualized values of climate benefits,
DOE uses the same discount rate as the rate used to discount the value
of damages from future GHG emissions, for internal consistency. That
approach to discounting follows the same approach that the February
2021 TSD recommends ``to ensure internal consistency--i.e., future
damages from climate change using the SC-GHG at 2.5 percent should be
discounted to the base year of the analysis using the same 2.5 percent
rate.'' DOE has also consulted the National Academies' 2017
recommendations on how SC-GHG estimates can ``be combined in RIAs with
other cost and benefits estimates that may use different discount
rates.'' The National Academies reviewed several options, including
``presenting all discount rate combinations of other costs and benefits
with [SC-GHG] estimates.''
As a member of the IWG involved in the development of the February
2021 SC-GHG TSD, DOE agrees with the above assessment and will continue
to follow developments in the literature pertaining to this issue.
While the IWG works to assess how best to incorporate the latest, peer
reviewed science to develop an updated set of SC-GHG estimates, it set
the interim estimates to be the most recent estimates developed by the
IWG prior to the group being disbanded in 2017. The estimates rely on
the same models and harmonized inputs and are calculated using a range
of discount rates. As explained in the February 2021 SC-GHG TSD, the
IWG has recommended that agencies revert to the same set of four values
drawn from the SC-GHG distributions based on three discount rates as
were used in regulatory analyses between 2010 and 2016 and were subject
to public comment. For each discount rate, the IWG combined the
distributions across models and socioeconomic emissions scenarios
(applying equal weight to each) and then selected a set of four values
recommended for use in benefit-cost analyses: an average value
resulting from the model runs for each of three discount rates (2.5
percent, 3 percent, and 5 percent), plus a fourth value, selected as
the 95th percentile of estimates based on a 3 percent discount rate.
The fourth value was included to provide information on potentially
higher-than-expected economic impacts from climate change. As explained
in the February 2021 SC-GHG TSD, and DOE agrees, this update reflects
the immediate need to have an operational SC-GHG for use in regulatory
benefit-cost analyses and other applications that was developed using a
transparent process, peer-reviewed methodologies, and the science
available at the time of that process. Those estimates were subject to
public comment in the context of dozens of proposed rulemakings as well
as in a dedicated public comment period in 2013.
There are a number of limitations and uncertainties associated with
the SC-GHG estimates. First, the current scientific and economic
understanding of discounting approaches suggests discount rates
appropriate for intergenerational analysis in the context of climate
change are likely to be less
[[Page 34332]]
than 3 percent, near 2 percent or lower.\61\ Second, the IAMs used to
produce these interim estimates do not include all of the important
physical, ecological, and economic impacts of climate change recognized
in the climate change literature and the science underlying their
``damage functions''--i.e., the core parts of the IAMs that map global
mean temperature changes and other physical impacts of climate change
into economic (both market and nonmarket) damages--lags behind the most
recent research. For example, limitations include the incomplete
treatment of catastrophic and non-catastrophic impacts in the
integrated assessment models, their incomplete treatment of adaptation
and technological change, the incomplete way in which inter-regional
and intersectoral linkages are modeled, uncertainty in the
extrapolation of damages to high temperatures, and inadequate
representation of the relationship between the discount rate and
uncertainty in economic growth over long time horizons. Likewise, the
socioeconomic and emissions scenarios used as inputs to the models do
not reflect new information from the last decade of scenario generation
or the full range of projections. The modeling limitations do not all
work in the same direction in terms of their influence on the SC-
CO2 estimates. However, as discussed in the February 2021
TSD, the IWG has recommended that, taken together, the limitations
suggest that the interim SC-GHG estimates used in this final rule
likely underestimate the damages from GHG emissions. DOE concurs with
this assessment.
---------------------------------------------------------------------------
\61\ Interagency Working Group on Social Cost of Greenhouse
Gases (IWG). 2021. Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive
Order 13990. February. United States Government. Available at:
www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-science-evidence-based-estimates-of-the-benefits-of-reducing-climate-pollution/.
---------------------------------------------------------------------------
AHAM objected to DOE using the social cost of carbon and other
monetization of emissions reductions benefits in its analysis of the
factors EPCA requires DOE to balance to determine the appropriate
standard. AHAM stated that while it may be acceptable for DOE to
continue its current practice of examining the social cost of carbon
and monetization of other emissions reductions benefits as
informational so long as the underlying interagency analysis is
transparent and vigorous, the monetization analysis should not impact
the TSLs DOE selects as a new or amended standard. AHAM noted that the
scientific and economic knowledge surrounding the contribution of
CO2 and other greenhouse gases to climate change is an
upgoing field of study and monetization values are subject to change.
AHAM further commented that it was unclear whether DOE relied upon the
emissions monetization analysis when proposing a TSL. (AHAM, No. 43 at
pp. 29-30)
As stated in section III.E.1.f of this document, DOE maintains that
environmental and public health benefits associated with the more
efficient use of energy, including those connected to global climate
change, are important to take into account when considering the need
for national energy conservation, which is one of the factors that EPCA
requires DOE to evaluate in determining whether a potential energy
conservation standard is economically justified. (42 U.S.C.
6295(o)(2)(B)(i)(VI)) In addition, Executive Order 13563, which was re-
affirmed on January 20, 2021, states that each agency must, among other
things: ``select, in choosing among alternative regulatory approaches,
those approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity).'' \62\ E.O. 13563,
section 1(b). For these reasons, DOE includes monetized emissions
reductions in its evaluation of potential standard levels. As
previously stated, however, DOE would reach the same conclusion
presented in this final rule in the absence of the social cost of
greenhouse gases.
---------------------------------------------------------------------------
\62\ www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/modernizing-regulatory-review/.
---------------------------------------------------------------------------
The Climate Commenters stated that DOE appropriately applies the
social cost estimates developed by the Interagency Working Group on the
Social Cost of Greenhouse Gases to its analysis of emissions reduction
benefits generated by the proposed rule. They stated that DOE should
expand upon its rationale for adopting a global damages valuation and
for the range of discount rates it applies to climate effects, as there
are additional legal, economic, and policy reasons for such
methodological decisions that can further bolster DOE's support for
these choices. They added that DOE should consider conducting
sensitivity analysis using a sound domestic-only social cost estimate
as a backstop, and should explicitly conclude that the rule is cost-
benefit justified even using a domestic-only valuation that may still
undercount climate benefits. They also urged DOE to consider providing
additional sensitivity analysis using discount rates lower than 2.5
percent for climate impacts. (Climate Commenters, No. 51 at pp. 1-2)
In response, DOE maintains that the reasons for using global
measures of the SC-GHG previously discussed are sufficient for the
purposes of this rulemaking. DOE notes that further discussion of this
topic is contained in the February 2021 SC-GHG TSD, and DOE agrees with
the assessment therein. Regarding conducting sensitivity analysis using
a domestic-only social cost estimate, DOE agrees with the assessment in
the February 2021 SC-GHG TSD that the only currently-available
quantitative characterization of domestic damages from GHG emissions is
both incomplete and an underestimate of the share of total damages that
accrue to the citizens and residents of the United States. Therefore,
it would be of questionable value to conduct the suggested sensitivity
analysis at this time. DOE considered performing sensitivity analysis
using discount rates lower than 2.5 percent for climate impacts, as
suggested by the IWG, but it concluded that such analysis would not add
meaningful information or impact the rationale in the context of this
rulemaking.
The Climate Commenters also stated that DOE should provide
additional justification for combining climate effects discounted at an
appropriate consumption-based discount rate with other costs and
benefits discounted at a capital-based rate (i.e., 7%).\63\ (Climate
Commenters, No. 51 at p. 2) The reasons for using consumption-based
discount rates for future climate effects were discussed previously,
and are further elaborated in the February 2021 SC-GHG TSD. Combining
climate benefits with health benefits and consumer economic benefits is
in keeping with the guidance of OMB Circular A-4 to count all
significant costs and benefits. DOE is aware that there are different
approaches to combining climate benefits with other cost and benefits
estimates that may use different discount rates, and the approach
applied in this document (as well as in numerous other past DOE
rulemaking actions) is among those discussed in the National Academies
2017 report (p. 182).\64\
---------------------------------------------------------------------------
\63\ In several places in this final rule (e.g., Tables I-3 and
I-4), the climate benefits of potential standards are combined with
other benefits and costs that are discounted at rates of 3% and 7%,
based on OMB Circular A-4 guidance.
\64\ National Academies of Sciences, Engineering, and Medicine.
Valuing Climate Damages: Updating Estimation of the Social Cost of
Carbon Dioxide. 2017. The National Academies Press: Washington, DC.
Available at https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of.
---------------------------------------------------------------------------
[[Page 34333]]
DOE's derivations of the SC-CO2, SC-N2O, and
SC-CH4 values used for this final rule are discussed in the
following sections, and the results of DOE's analyses estimating the
benefits of the reductions in emissions of these pollutants are
presented in section V.B.6 of this document.
a. Social Cost of Carbon
The SC-CO2 values used for this final rule were based on
the values developed for the IWG's February 2021 TSD. Table IV.8 shows
the updated sets of SC-CO2 estimates from the IWG's TSD in
5-year increments from 2020 to 2050. The full set of annual values that
DOE used is presented in appendix 14A of the final rule TSD. For
purposes of capturing the uncertainties involved in regulatory impact
analysis, DOE has determined it is appropriate to include all four sets
of SC-CO2 values, as recommended by the IWG.\65\
---------------------------------------------------------------------------
\65\ For example, the February 2021 TSD discusses how the
understanding of discounting approaches suggests that discount rates
appropriate for intergenerational analysis in the context of climate
change may be lower than 3 percent.
Table IV.8--Annual SC-CO2 Values From 2021 Interagency Update, 2020-2050
[2020$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
------------------------------------------------------------------
Year 5% 3% 2.5% 3%
------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2020......................................... 14 51 76 152
2025......................................... 17 56 83 169
2030......................................... 19 62 89 187
2035......................................... 22 67 96 206
2040......................................... 25 73 103 225
2045......................................... 28 79 110 242
2050......................................... 32 85 116 260
----------------------------------------------------------------------------------------------------------------
For 2051 to 2070, DOE used SC-CO2 estimates published by
EPA, adjusted to 2021$.\66\ These estimates are based on methods,
assumptions, and parameters identical to the 2020-2050 estimates
published by the IWG. DOE expects additional climate benefits to accrue
for any longer-life room air conditioners after 2070, but a lack of
available SC-CO2 estimates for emissions years beyond 2070
prevents DOE from monetizing these potential benefits in this analysis.
---------------------------------------------------------------------------
\66\ See EPA, Revised 2023 and Later Model Year Light-Duty
Vehicle GHG Emissions Standards: Regulatory Impact Analysis,
Washington, DC, December 2021. Available at: www.epa.gov/system/files/documents/2021-12/420r21028.pdf (last accessed September 12,
2022).
---------------------------------------------------------------------------
DOE multiplied the CO2 emissions reduction estimated for
each year by the SC-CO2 value for that year in each of the
four cases. DOE adjusted the values to 2021$ using the implicit price
deflator for gross domestic product (``GDP'') from the Bureau of
Economic Analysis. To calculate a present value of the stream of
monetary values, DOE discounted the values in each of the four cases
using the specific discount rate that had been used to obtain the SC-
CO2 values in each case.
b. Social Cost of Methane and Nitrous Oxide
The SC-CH4 and SC-N2O values used for this
final rule were based on the values presented in the February 2021 TSD.
Table IV.9 shows the updated sets of SC-CH4 and SC-
N2O estimates from the latest interagency update in 5-year
increments from 2020 to 2050. The full set of annual values used is
presented in appendix 14A of the final rule TSD. To capture the
uncertainties involved in regulatory impact analysis, DOE has
determined it is appropriate to include all four sets of SC-
CH4 and SC-N2O values, as recommended by the IWG.
DOE derived values after 2050 using the approach described above for
the SC-CO2.
Table IV.9--Annual SC-CH4 and SC-N2O Values From 2021 Interagency Update, 2020-2050
[2020$ per metric ton]
--------------------------------------------------------------------------------------------------------------------------------------------------------
SC-CH4 SC-N2O
-------------------------------------------------------------------------------------------
Discount rate and statistic Discount rate and statistic
-------------------------------------------------------------------------------------------
Year 5% 3% 2.5% 3% 5% 3% 2.5% 3%
-------------------------------------------------------------------------------------------
95th 95th
Average Average Average percentile Average Average Average percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020........................................................ 670 1500 2000 3900 5800 18000 27000 48000
2025........................................................ 800 1700 2200 4500 6800 21000 30000 54000
2030........................................................ 940 2000 2500 5200 7800 23000 33000 60000
2035........................................................ 1100 2200 2800 6000 9000 25000 36000 67000
2040........................................................ 1300 2500 3100 6700 10000 28000 39000 74000
2045........................................................ 1500 2800 3500 7500 12000 30000 42000 81000
2050........................................................ 1700 3100 3800 8200 13000 33000 45000 88000
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 34334]]
DOE multiplied the CH4 and N2O emissions
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates for that year in each of the cases. DOE
adjusted the values to 2021$ using the implicit price deflator for
gross domestic product (``GDP'') from the Bureau of Economic Analysis.
To calculate a present value of the stream of monetary values, DOE
discounted the values in each of the cases using the specific discount
rate that had been used to obtain the SC-CH4 and SC-
N2O estimates in each case.
2. Monetization of Other Emissions Impacts
For the final rule, DOE estimated the monetized value of
NOX and SO2 emissions reductions from electricity
generation using benefit per ton estimates for that sector from the
EPA's Benefits Mapping and Analysis Program.\67\ DOE used EPA's values
for PM2.5-related benefits associated with NOX
and SO2 and for ozone-related benefits associated with
NOX for 2025 and 2030, and 2040, calculated with discount
rates of 3 percent and 7 percent. DOE used linear interpolation to
define values for the years not given in the 2025 to 2040 range; for
years beyond 2040 the values are held constant. DOE derived values
specific to the sector for room air conditioners using a method
described in appendix 14B of the final rule TSD.
---------------------------------------------------------------------------
\67\ Estimating the Benefit per Ton of Reducing PM2.5
Precursors from 21 Sectors. www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors.
---------------------------------------------------------------------------
DOE multiplied the site emissions reduction (in tons) in each year
by the associated $/ton values, and then discounted each series using
discount rates of 3 percent and 7 percent as appropriate.
M. Utility Impact Analysis
The utility impact analysis estimates several effects on the
electric power generation industry that would result from the adoption
of new or amended energy conservation standards. The utility impact
analysis estimates the changes in installed electrical capacity and
generation that would result for each TSL. The analysis is based on
published output from the NEMS associated with AEO2022. NEMS produces
the AEO Reference case, as well as a number of side cases that estimate
the economy-wide impacts of changes to energy supply and demand. For
the current analysis, impacts are quantified by comparing the levels of
electricity sector generation, installed capacity, fuel consumption and
emissions in the AEO2022 Reference case and various side cases. Details
of the methodology are provided in the appendices to chapters 13 and 15
of the final rule TSD.
The output of this analysis is a set of time-dependent coefficients
that capture the change in electricity generation, primary fuel
consumption, installed capacity and power sector emissions due to a
unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of potential new or
amended energy conservation standards.
N. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a standard. Employment impacts from new or amended
energy conservation standards include both direct and indirect impacts.
Direct employment impacts are any changes in the number of employees of
manufacturers of the products subject to standards. The MIA addresses
those impacts. Indirect employment impacts are changes in national
employment that occur due to the shift in expenditures and capital
investment caused by the purchase and operation of more-efficient
appliances. Indirect employment impacts from standards consist of the
net jobs created or eliminated in the national economy, other than in
the manufacturing sector being regulated, caused by (1) reduced
spending by consumers on energy, (2) reduced spending on new energy
supply by the utility industry, (3) increased consumer spending on the
products to which the new standards apply and other goods and services,
and (4) the effects of those three factors throughout the economy.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sector
employment statistics developed by the Labor Department's BLS. BLS
regularly publishes its estimates of the number of jobs per million
dollars of economic activity in different sectors of the economy, as
well as the jobs created elsewhere in the economy by this same economic
activity. Data from BLS indicate that expenditures in the utility
sector generally create fewer jobs (both directly and indirectly) than
expenditures in other sectors of the economy.\68\ There are many
reasons for these differences, including wage differences and the fact
that the utility sector is more capital-intensive and less labor-
intensive than other sectors. Energy conservation standards have the
effect of reducing consumer utility bills. Because reduced consumer
expenditures for energy likely lead to increased expenditures in other
sectors of the economy, the general effect of efficiency standards is
to shift economic activity from a less labor-intensive sector (i.e.,
the utility sector) to more labor-intensive sectors (e.g., the retail
and service sectors). Thus, the BLS data suggest that net national
employment may increase due to shifts in economic activity resulting
from energy conservation standards.
---------------------------------------------------------------------------
\68\ See U.S. Department of Commerce-Bureau of Economic
Analysis. Regional Multipliers: A User Handbook for the Regional
Input-Output Modeling System (``RIMS II''). 1997. U.S. Government
Printing Office: Washington, DC. Available at www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf (last accessed July 1, 2021).
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this final rule using an input/output model of the
U.S. economy called Impact of Sector Energy Technologies version 4
(``ImSET'').\69\ ImSET is a special-purpose version of the ``U.S.
Benchmark National Input-Output'' (``I-O'') model, which was designed
to estimate the national employment and income effects of energy-saving
technologies. The ImSET software includes a computer- based I-O model
having structural coefficients that characterize economic flows among
187 sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\69\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W.
Schultz. ImSET 4.0: Impact of Sector Energy Technologies Model
Description and User's Guide. 2015. Pacific Northwest National
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------
DOE notes that ImSET is not a general equilibrium forecasting
model, and that the uncertainties involved in projecting employment
impacts, especially changes in the later years of the analysis. Because
ImSET does not incorporate price changes, the employment effects
predicted by ImSET may over-estimate actual job impacts over the long
run for this rule. Therefore, DOE used ImSET only to generate results
for near-term timeframes (2026-2030), where these uncertainties are
reduced. For more details on the employment impact analysis, see
chapter 16 of the final rule TSD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for room
air conditioners. It addresses the TSLs examined by DOE, the projected
[[Page 34335]]
impacts of each of these levels if adopted as energy conservation
standards for room air conditioners, and the standards levels that DOE
is adopting in this final rule. Additional details regarding DOE's
analyses are contained in the final rule TSD supporting this document.
A. Trial Standard Levels
In general, DOE typically evaluates potential amended standards for
products and equipment by grouping individual efficiency levels for
each class into TSLs. Use of TSLs allows DOE to identify and consider
manufacturer cost interactions between the product classes, to the
extent that there are such interactions, and market cross elasticity
from consumer purchasing decisions that may change when different
standard levels are set.
In the analysis conducted for this final rule, DOE analyzed the
benefits and burdens of five TSLs for room air conditioners. DOE
maintained the same TSL structure as proposed in the NOPR. TSL 5
represents the max-tech energy efficiency for all product classes and
corresponds to EL 5. TSL 4 corresponds to EL 4 for all product classes,
consistent with the implementation of commercially available variable-
speed compressors based on the current availability of variable speed
compressors at cooling capacities >=8,000 Btu/h. However, as of 2022,
there are no models commercially available that incorporate variable-
speed compressors for cooling capacities less than 8,000 Btu/h, and the
uncertainties of the possibilities of incorporating variable-speed
compressors in smaller units may have the potential to eliminate room
air conditioners with the smallest cooling capacities from the market.
TSL 3, therefore, is constructed with EL 4 for product classes with
cooling capacities >=8,000 Btu/h, corresponding to the inclusion of
commercially available variable-speed compressors, and EL 3 for cooling
capacities <8,000 Btu/h, corresponding to the incorporation of maximum
energy efficient single-speed compressors. TSL 2 corresponds to EL 3
for all product classes and represents room air conditioners with the
maximum energy efficient single-speed compressor. TSL 1 corresponds to
EL 2 for all product classes and represents the current ENERGY STAR
level. DOE presents the results for the TSLs in this document, while
the results for all efficiency levels that DOE analyzed are in the
final rule TSD. DOE presents the results for the TSLs in this document,
while the results for all efficiency levels that DOE analyzed are in
the final rule TSD.
Table V.1 presents the TSLs and the corresponding efficiency levels
that DOE has identified for potential amended energy conservation
standards for room air conditioners.
Table V.1--Trial Standard Levels for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
Product class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
CEER (Btu/Wh)
------------------------------------------------------
Room Air Conditioner without reverse cycle, with louvered
sides:
<6,000 Btu/h (PC 1).................................. 12.1 13.1 13.1 16.0 20.2
6,000 to 7,900 Btu/h (PC 2).......................... 12.1 13.7 13.7 16.0 21.2
8,000 to 13,900 Btu/h (PC 3)......................... 12.0 14.3 16.0 16.0 21.9
14,000 to 19,900 Btu/h (PC 4)........................ 11.8 14.0 16.0 16.0 19.8
20,000 to 27,900 Btu/h (PC 5a)....................... 10.3 11.8 13.8 13.8 18.7
>=28,000 Btu/h (PC 5b)............................... 9.9 10.3 13.2 13.2 16.3
Room Air Conditioner without reverse cycle, without
louvered sides:
<6,000 Btu/h (PC 6).................................. 11.0 12.8 12.8 14.7 19.4
6,000 to 7,900 Btu/h (PC 7).......................... 11.0 12.8 12.8 14.7 19.4
8,000 to 10,900 Btu/h (PC 8a)........................ 10.6 12.3 14.1 14.1 18.7
11,000 to 13,900 Btu/h (PC 8b)....................... 10.5 12.3 13.9 13.9 19.0
14,000 to 19,900 Btu/h (PC 9)........................ 10.2 10.9 13.7 13.7 16.8
>=20,000 Btu/h (PC 10)............................... 10.3 11.0 13.8 13.8 17.0
Room Air Conditioner with reverse cycle, with louvered
sides:
<20,000 Btu/h (PC 11)................................ 10.8 12.3 14.4 14.4 18.0
>=20,000 Btu/h (PC 13)............................... 10.2 11.7 13.7 13.7 18.5
Room Air Conditioner with reverse cycle, without louvered
sides:
<14,000 Btu/h (PC 12)................................ 10.2 11.3 13.7 13.7 16.4
>=14,000 Btu/h (PC 14)............................... 9.6 11.2 12.8 12.8 17.4
Casement:
Casement-Only (PC 15)................................ 10.5 12.2 13.9 13.9 17.6
Casement-Slide (PC 16)............................... 11.4 13.2 15.3 15.3 19.1
----------------------------------------------------------------------------------------------------------------
DOE constructed the TSLs for this final rule to include ELs
representative of ELs with similar characteristics (i.e., using similar
technologies and/or efficiencies, and having roughly comparable
equipment availability). The use of representative ELs provided for
greater distinction between the TSLs. While representative ELs were
included in the TSLs, DOE considered all efficiency levels as part of
its analysis.\70\ DOE did not consider a TSL with EL 1 because DOE's
projected efficiency distribution indicated a significant portion of
the market would meet or exceed EL 1 in the no-new-standards case by
the compliance year leading to smaller national energy savings and
lower LCC savings for a standard set at EL 1 relative to EL 2. As such,
the least efficient level considered for TSLs in this final rule is EL
2.
---------------------------------------------------------------------------
\70\ Efficiency levels that were analyzed for this NOPR are
discussed in section IV.C.1 of this document. Results by efficiency
level are presented in chapters 8, 10, and 12 of the final rule TSD.
---------------------------------------------------------------------------
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on room air conditioners
consumers by looking at the effects that potential amended standards at
each TSL would have on the LCC and PBP. DOE also examined the impacts
of potential standards on selected consumer subgroups. These analyses
are discussed in the following sections.
[[Page 34336]]
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products affect consumers in two
ways: (1) purchase price increases and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e., product price plus installation costs), and
operating costs (i.e., annual energy use, energy prices, energy price
trends, repair costs, and maintenance costs). The LCC calculation also
uses product lifetime and a discount rate. Chapter 8 of the final rule
TSD provides detailed information on the LCC and PBP analyses.
Tables V.2 through V.25 show the LCC and PBP results for the TSLs
considered for each product class. In the first of each pair of tables,
the simple payback is measured relative to the baseline product. In the
second table, the impacts are measured relative to the efficiency
distribution in the in the no-new-standards case in the compliance year
(see section IV.F.8 of this document). Because some consumers purchase
products with higher efficiency in the no-new-standards case, the
average savings are less than the difference between the average LCC of
the baseline product and the average LCC at each TSL. The savings refer
only to consumers who are affected by a standard at a given TSL. Those
who already purchase a product with efficiency at or above a given TSL
are not affected. Consumers for whom the LCC increases at a given TSL
experience a net cost.
Table V.2--Average LCC and PBP Results for Room Air Conditioners PC 1, Without Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 11.0 419 64 486 906 ......... 9.3
1...................................................... ......... 11.4 421 63 474 895 1.0 9.3
2...................................................... 1 12.1 424 57 428 852 0.6 9.3
3...................................................... 2,3 13.1 429 52 397 826 0.8 9.3
4...................................................... 4 16.0 518 43 328 846 4.6 9.3
5...................................................... 5 20.2 532 35 267 799 3.8 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 1, Without
Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
11.4 1 0
1......................................... 12.1 41 2
2, 3...................................... 13.1 65 3
4......................................... 16.0 47 41
5......................................... 20.2 93 34
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.4--Average LCC and PBP Results for Room Air Conditioners PC 2, Without Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 11.0 437 82 635 1,072 ......... 9.3
1...................................................... ......... 11.4 440 80 614 1,054 1.0 9.3
2...................................................... 1 12.1 444 73 563 1,007 0.7 9.3
3...................................................... 2,3 13.7 463 65 504 967 1.5 9.3
4...................................................... 4 16.0 539 56 431 970 3.8 9.3
5...................................................... 5 21.2 599 44 337 936 4.2 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 2, Without
Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
11.4 0 0
1......................................... 12.1 35 2
[[Page 34337]]
2, 3...................................... 13.7 72 14
4......................................... 16.0 69 38
5......................................... 21.2 103 42
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.6--Average LCC and PBP Results for Room Air Conditioners PC 3, Without Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 10.9 561 106 809 1,370 ......... 9.3
1...................................................... ......... 11.4 564 102 781 1,345 0.7 9.3
2...................................................... 1 12.0 576 93 710 1,287 1.2 9.3
3...................................................... 2 14.3 584 79 603 1,187 0.9 9.3
4...................................................... 3,4 16.0 669 69 524 1,193 2.9 9.3
5...................................................... 5 21.9 727 51 394 1,122 3.1 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 3, Without
Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
11.4 0 0
1......................................... 12.0 17 2
2......................................... 14.3 105 2
3, 4...................................... 16.0 100 26
5......................................... 21.9 171 30
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.8--Average LCC and PBP Results for Room Air Conditioners PC 4, Without Reverse Cycle and With Louvers, 14,000-19,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 10.7 703 121 921 1,623 ......... 9.3
1...................................................... ......... 11.1 705 118 896 1,601 0.7 9.3
2...................................................... 1 11.8 713 107 813 1,526 0.7 9.3
3...................................................... 2 14.0 739 91 692 1,431 1.2 9.3
4...................................................... 3,4 16.0 835 77 588 1,423 3.0 9.3
5...................................................... 5 19.8 868 63 479 1,347 2.8 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.9--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 4, Without
Reverse Cycle and With Louvers, 14,000-19,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
11.1 0 0
1......................................... 11.8 0 0
2......................................... 14.0 85 9
3,4....................................... 16.0 92 33
[[Page 34338]]
5......................................... 19.8 168 30
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.10--Average LCC and PBP Results for Room Air Conditioners PC 5a, Without Reverse Cycle and With Louvers, 20,000-27,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.4 876 148 1,086 1,962 ......... 9.3
1...................................................... ......... 9.8 879 142 1,047 1,926 0.6 9.3
2...................................................... 1 10.3 893 132 969 1,862 1.1 9.3
3...................................................... 2 11.8 909 115 849 1,758 1.0 9.3
4...................................................... 3,4 13.8 1,014 93 688 1,703 2.5 9.3
5...................................................... 5 18.7 1,057 69 511 1,567 2.3 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.11--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 5a, Without
Reverse Cycle and With Louvers, 20,000-27,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
9.8 0 0
1......................................... 10.3 6 1
2......................................... 11.8 99 5
3,4....................................... 13.8 148 30
5......................................... 18.7 284 27
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.12--Average LCC and PBP Results for Room Air Conditioners PCs 5b, Without Reverse Cycle and With Louvers, Greater Than 28,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.0 926 180 1,322 2,248 ......... 9.3
1...................................................... ......... 9.4 929 172 1,268 2,197 0.4 9.3
2...................................................... 1 9.9 935 159 1,170 2,105 0.4 9.3
3...................................................... 2 10.3 939 151 1,114 2,053 0.5 9.3
4...................................................... 3,4 13.2 1,080 113 833 1,912 2.3 9.3
5...................................................... 5 16.3 1,106 91 675 1,781 2.0 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.13--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PCs 5b, Without
Reverse Cycle and With Louvers, Greater Than 28,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
9.4 21 0
1......................................... 9.9 101 0
2......................................... 10.3 150 1
3, 4...................................... 13.2 284 24
5......................................... 16.3 415 21
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
[[Page 34339]]
Table V.14--Average LCC and PBP Results for Room Air Conditioners PC 8a, Without Reverse Cycle and Without Louvered Sides, 8,000-10,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.6 577 108 823 1,400 ......... 9.3
1...................................................... ......... 10.1 580 103 787 1,368 0.8 9.3
2...................................................... 1 10.6 584 96 731 1,316 0.6 9.3
3...................................................... 2 12.3 611 83 634 1,245 1.4 9.3
4...................................................... 3,4 14.1 695 71 539 1,234 3.2 9.3
5...................................................... 5 18.7 764 54 417 1,181 3.5 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.15--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 8a, Without
Reverse Cycle and Without Louvered Sides, 8,000-10,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
10.1 0 0
1......................................... 10.6 6 0
2......................................... 12.3 73 15
3,4....................................... 14.1 84 34
5......................................... 18.7 137 38
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.16--Average LCC and PBP Results for Room Air Conditioners PC 8b, Without Reverse Cycle and Without Louvered Sides, 11,000-13,999 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.5 626 132 1,010 1,636 ......... 9.3
1...................................................... ......... 10.0 629 127 968 1,597 0.6 9.3
2...................................................... 1 10.5 634 116 885 1,520 0.5 9.3
3...................................................... 2 12.3 670 100 764 1,434 1.4 9.3
4...................................................... 3,4 13.9 738 86 656 1,394 2.4 9.3
5...................................................... 5 19.0 846 64 492 1,338 3.2 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.17--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 8b, Without
Reverse Cycle and Without Louvered Sides, 11,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
10.0 0 0
1......................................... 10.5 0 0
2......................................... 12.3 81 17
3,4....................................... 13.9 119 26
5......................................... 19.0 175 37
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.18--Average LCC and PBP Results for Room Air Conditioners PC 9, Without Reverse Cycle and Without Louvered Sides, 14,000-19,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.3 756 119 901 1,658 ......... 9.3
1...................................................... ......... 9.7 760 115 867 1,627 0.8 9.3
2...................................................... 1 10.2 770 106 803 1,573 1.1 9.3
[[Page 34340]]
3...................................................... 2 10.9 795 99 754 1,549 2.0 9.3
4...................................................... 3,4 13.7 877 77 584 1,461 2.9 9.3
5...................................................... 5 16.8 964 63 482 1,446 3.7 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.19--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 9, Without
Reverse Cycle and Without Louvered Sides, 14,000-19,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
9.7 12 1
1......................................... 10.2 58 4
2......................................... 10.9 81 19
3, 4...................................... 13.7 165 24
5......................................... 16.8 180 39
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.20--Average LCC and PBP Results for Room Air Conditioners PC 11, With Reverse Cycle and With Louvered Sides, Less Than 20,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.8 659 108 829 1,488 ......... 9.3
1...................................................... ......... 10.4 663 102 788 1,451 0.8 9.3
2...................................................... 1 10.8 668 94 725 1,392 0.6 9.3
3...................................................... 2 12.3 705 83 645 1,349 1.9 9.3
4...................................................... 3,4 14.4 778 71 546 1,324 3.2 9.3
5...................................................... 5 18.0 826 58 448 1,274 3.4 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.21--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 11, With
Reverse Cycle and With Louvered Sides, Less Than 20,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
10.4 18 2
1......................................... 10.8 69 2
2......................................... 12.3 110 19
3,4....................................... 14.4 134 30
5......................................... 18.0 185 34
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.22--Average LCC and PBP Results for Room Air Conditioners PC 12, With Reverse Cycle and Without Louvered Sides, Less Than 14,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 9.3 776 88 674 1,449 ......... 9.3
1...................................................... ......... 9.7 779 85 649 1,428 1.0 9.3
2...................................................... 1 10.2 788 79 603 1,391 1.3 9.3
3...................................................... 2 11.3 812 72 550 1,362 2.2 9.3
4...................................................... 3,4 13.7 854 59 449 1,302 2.6 9.3
[[Page 34341]]
5...................................................... 5 16.4 915 50 383 1,298 3.6 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.23--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 12, With
Reverse Cycle and Without Louvered Sides, Less Than 14,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
9.7 8 2
1......................................... 10.2 40 8
2......................................... 11.3 67 22
3,4....................................... 13.7 124 21
5......................................... 16.4 128 36
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.24--Average LCC and PBP Results for Room Air Conditioners PC 16, Casement-Slider
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2021$)
----------------------------------------------------- Simple Average
EL TSL CEER Lifetime payback lifetime
Installed First year's operating LCC (years) (years)
cost operating cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................... ......... 10.4 554 88 677 1,230 ......... 9.3
1...................................................... ......... 10.8 556 85 654 1,211 1.0 9.3
2...................................................... 1 11.4 560 78 599 1,159 0.7 9.3
3...................................................... 2 13.2 571 69 529 1,100 0.9 9.3
4...................................................... 3,4 15.3 672 59 452 1,124 4.0 9.3
5...................................................... 5 19.1 689 48 372 1,061 3.4 9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.25--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 16, Casement-
Slider
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-----------------------------------------------------
TSL CEER Average LCC savings * Percent of consumers that
(2021$) experience net cost
----------------------------------------------------------------------------------------------------------------
10.8 7 2
1......................................... 11.4 51 3
2......................................... 13.2 107 5
3,4....................................... 15.3 84 38
5......................................... 19.1 147 32
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on low-income households and senior-only households for
product classes with a sufficient sample size in RECS 2015 to perform a
Monte Carlo analysis. Tables V.26 through V.28 compares the average LCC
savings and PBP at each efficiency level for the consumer subgroups
with similar metrics for the entire consumer sample for product classes
1, 2, and 3. The percentage of consumers with either a net benefit or
cost are calculated relative to consumers within that subgroup. Product
Classes 4, 5a, 5b, 8a, 8b, 9, 11, 12, and 16 were not analyzed due to
their low presence (<5%) in low-income and senior-only households based
on shipments and stock estimates from RECS 2015. 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. Chapter 11 of the final
rule TSD presents the complete LCC and PBP results for the subgroups.
[[Page 34342]]
Table V.26--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
PC 1, Without Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only All households
households * households ** [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2021$): ............... ................ ...............
TSL 1................................................... $41 ................ $39
TSL 2, 3................................................ $66 ................ $62
TSL 4................................................... $53 ................ $40
TSL 5................................................... $99 ................ $84
Payback Period (years): ............... ................ ...............
TSL 1................................................... 0.7 ................ 0.7
TSL 2,3................................................. 0.8 ................ 0.9
TSL 4................................................... 4.7 ................ 5.1
TSL 5................................................... 3.9 ................ 4.2
Consumers with Net Benefit (%): ............... ................ ...............
TSL 1................................................... 93% ................ 92%
TSL 2, 3................................................ 94% ................ 92%
TSL 4................................................... 59% ................ 53%
TSL 5................................................... 72% ................ 66%
Consumers with Net Cost (%): ............... ................ ...............
TSL 1................................................... 0% ................ 1%
TSL 2, 3................................................ 1% ................ 3%
TSL 4................................................... 36% ................ 42%
TSL 5................................................... 28% ................ 34%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 60.0 percent of all households for this product class.
** Insufficient sample size to conduct subgroup analysis.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
consumers.
Table V.27--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
PC 2, Without Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only All households
households * households ** [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2021$): ............... ................ ...............
TSL 1....................................................... $37 $42 $36
TSL 2, 3.................................................... $78 $90 $75
TSL 4....................................................... $76 $97 $72
TSL 5....................................................... $117 $150 $109
Payback Period (years): ............... ................ ...............
TSL 1....................................................... 0.7 0.6 0.7
TSL 2, 3.................................................... 1.5 1.3 1.5
TSL 4....................................................... 3.8 3.3 3.9
TSL 5....................................................... 4.1 3.6 4.2
Consumers with Net Benefit (%): ............... ................ ...............
TSL 1....................................................... 74% 72% 73%
TSL 2, 3.................................................... 83% 83% 80%
TSL 4....................................................... 60% 66% 59%
TSL 5....................................................... 61% 68% 60%
Consumers with Net Cost (%): ............... ................ ...............
TSL 1....................................................... 1% 3% 2%
TSL 2, 3.................................................... 10% 10% 13%
TSL 4....................................................... 35% 29% 36%
TSL 5....................................................... 39% 32% 40%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 50.1 percent of all households for this product class.
** Senior-only households represent 24.7 percent of all households for this product class.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
consumers.
Table V.28--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
PC 3, Without Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only All households
households * households ** [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC savings (2021$):
TSL 1................................................... $20 $16 $16
TSL 2................................................... $122 $98 $101
TSL 3,4................................................. $122 $83 $94
TSL 5................................................... $214 $149 $161
Payback Period (years):
TSL 1................................................... 1.1 1.3 1.3
TSL 2................................................... 0.8 0.9 0.9
[[Page 34343]]
TSL 3,4................................................. 2.6 3.2 3.1
TSL 5................................................... 2.8 3.4 3.3
Consumers with Net Benefit (%):
TSL 1................................................... 27% 25% 27%
TSL 2................................................... 86% 86% 87%
TSL 3,4................................................. 64% 55% 64%
TSL 5................................................... 71% 60% 70%
Consumers with Net Cost (%):
TSL 1................................................... 2% 4% 2%
TSL 2................................................... 2% 2% 2%
TSL 3,4................................................. 25% 34% 26%
TSL 5................................................... 29% 40% 30%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 25.7 percent of all households for this product class.
** Senior-only households represent 26.6 percent of all households for this product class.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
consumers.
c. Rebuttable Presumption Payback
As discussed in section II.A of this document, EPCA establishes a
rebuttable presumption that an energy conservation standard is
economically justified if the increased purchase cost for a product
that meets the standard is less than three times the value of the
first-year energy savings resulting from the standard. In calculating a
rebuttable presumption payback period for each of the considered TSLs,
DOE used discrete values, and, as required by EPCA, based the energy
use calculation on the DOE test procedures for room air conditioners.
In contrast, the PBPs presented in section V.B.1.a of this document
were calculated using distributions that reflect the range of energy
use in the field.
Table V.29 presents the rebuttable-presumption payback periods for
the considered TSLs for room air conditioners. While DOE examined the
rebuttable-presumption criterion, it considered whether the standard
levels considered for this rule are economically justified through a
more detailed analysis of the economic impacts of those levels,
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range
of impacts to the consumer, manufacturer, Nation, and environment. The
results of that analysis serve as the basis for DOE to definitively
evaluate the economic justification for a potential standard level,
thereby supporting or rebutting the results of any preliminary
determination of economic justification.
Table V.29--Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class --------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(years)
----------------------------------------------------------------------------------------------------------------
PC 1: Room Air Conditioners, without reverse cycle, with louvered 1.1 1.2 1.2 7.2 5.5
sides, and less than 6,000 Btu/h..................................
PC 2: Room Air Conditioners, without reverse cycle, with louvered 1.0 1.8 1.8 6.1 5.1
sides, and 6,000 to 7,900 Btu/h...................................
PC 3: Room Air Conditioners, without reverse cycle, with louvered 1.4 0.9 4.0 4.0 3.2
sides, and 8,000 to 13,900 Btu/h..................................
PC 4: Room Air Conditioners, without reverse cycle, with louvered 0.7 0.8 2.8 2.8 2.2
sides, and 14,000 to 19,900 Btu/h.................................
PC 5a: Room Air Conditioners, without reverse cycle, with louvered 0.7 0.6 1.8 1.8 1.4
sides, and 20,000 to 27,900 Btu/h.................................
PC 5b: Room Air Conditioners, without reverse cycle, with louvered 0.3 0.3 1.5 1.5 1.3
sides, and 28,000 Btu/h or more...................................
PC 8a: Room Air Conditioners, without reverse cycle, without 0.7 1.2 4.3 4.3 3.5
louvered sides, and 8,000 to 10,900 Btu/h.........................
PC 8b: Room Air Conditioners, without reverse cycle, without 0.6 1.3 3.7 3.7 3.2
louvered sides, and 11,000 to 13,900 Btu/h........................
PC 9: Room Air Conditioners, without reverse cycle, without 0.8 1.2 2.7 2.7 2.4
louvered sides, and 14,000 to 19,900 Btu/h........................
PC 11: Room Air Conditioners, with reverse cycle, with louvered 0.8 1.9 4.4 4.4 3.5
sides, and less than 20,000 Btu/h.................................
PC 12: Room Air Conditioners, with reverse cycle, without louvered 1.5 2.1 3.6 3.6 3.7
sides, and less than 14,000 Btu/h.................................
PC 16: Room Air Conditioners, Casement-Slider...................... 0.8 1.0 4.9 4.9 3.9
----------------------------------------------------------------------------------------------------------------
[[Page 34344]]
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on manufacturers of room air conditioners. The
next section describes the expected impacts on manufacturers at each
considered TSL. Chapter 12 of the final rule TSD explains the analysis
in further detail.
a. Industry Cash Flow Analysis Results
In this section, DOE provides GRIM results from the analysis, which
examines changes in the industry that would result from a standard. The
following tables summarize the estimated financial impacts (represented
by changes in INPV) of potential amended energy conservation standards
on manufacturers of room air conditioners, as well as the conversion
costs that DOE estimates manufacturers of room air conditioners would
incur at each TSL.
The impact of potential amended energy conservation standards were
analyzed under two scenarios: (1) the preservation of gross margin
percentage; and (2) the preservation of per-unit operating profit, as
discussed in section IV.J.2.d of this document. The preservation of
gross margin percentage scenario provides the upper bound while the
preservation of per-unit operating profit scenario results in the lower
(or more severe) bound to impacts of potential amended standards on
industry.
Each of the modeled scenarios results in a unique set of cash flows
and corresponding INPV for each TSL. INPV is the sum of the discounted
cash flows to the industry from the publication of the final rule
through the end of the analysis period (2023-2055). The ``change in
INPV'' results refer to the difference in industry value between the
no-new-standards case and standards case at each TSL. To provide
perspective on the short-run cash flow impact, DOE includes a
comparison of free cash flow between the no-new-standards case and the
standards case at each TSL in the year before amended standards would
take effect. This figure provides an understanding of the magnitude of
the required conversion costs relative to the cash flow generated by
the industry in the no-new-standards case.
Conversion costs are one-time investments for manufacturers to
bring their manufacturing facilities and product designs into
compliance with potential amended standards. As described in section
IV.J.2.c of this document, conversion cost investments occur between
the year of publication of the final rule and the year by which
manufacturers must comply with the new standard. The conversion costs
can have a significant impact on the short-term cash flow on the
industry and generally result in lower free cash flow in the period
between the publication of the final rule and the compliance date of
potential amended standards. Conversion costs are independent of the
manufacturer markup scenarios and are not presented as a range in this
analysis.
Table V.30--Manufacturer Impact Analysis Results for the Room Air Conditioner Industry *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
No-New STDs
Units case TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
INPV............................ $2021 MM......... 1,198.5 1,188.7 to 1,192.9...... 1,167.8 to 1,197.2...... 1,140.8 to 1,284.1...... 1,097.7 to 1,369.0..... 857.5 to 1,211.5.
Change in INPV.................. %................ ........... (0.8) to (0.5).......... (2.6) to (0.1).......... (4.8) to 7.1............ (8.4) to 14.2.......... (28.4) to 1.1.
Free Cash Flow (2025)........... $2021 MM......... 86.1 79.9.................... 72.6.................... 76.9.................... 75.5................... (55.3).
Change in Free Cash Flow (2025). %................ ........... (7.2)................... (15.7).................. (10.7).................. (12.4)................. (164.2).
Conversion Costs................ $2021 MM......... ........... 14.6.................... 31.3.................... 24.8.................... 29.0................... 319.7.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Negative values denoted by parentheses.
At TSL 1, the standard is set to existing ENERGY STAR levels (EL 2)
for all product classes. DOE estimates the change in INPV to be minimal
under both manufacturer markup scenarios. INPV is expected to range
from -0.8 percent to -0.5 percent. At this level, free cash flow is
estimated to decrease by 7.2 percent compared to the no-new-standards
case value of $86.1 million in the year 2025, the year before the
standards year. DOE's shipments analysis estimates approximately 32
percent of current shipments meet this level. At TSL 1, DOE does not
expect industry to adopt new or larger chassis sizes. Capital
conversion costs may be necessary for incremental updates in tooling.
Product conversion costs are driven by specification, sourcing, and
testing of more efficient compressors. DOE estimates capital conversion
costs of $11.4 million and product conversion costs of $3.2 million.
Conversion costs total $14.6 million.
At TSL 2, the standard reflects an efficiency level attainable by
units with the most efficient R-32 single-speed compressor on the
market, in combination with other design options, for all product
classes (EL 3). DOE estimates the change in INPV to range from -2.6
percent to -0.1 percent. At this level, free cash flow is estimated to
decrease by 15.7 percent compared to the base-case value in the year
before the standards year. DOE's shipments analysis estimates
approximately 2 percent of current shipments meet this level. At TSL 2,
DOE does not expect industry to adopt new or larger chassis designs.
Capital conversion costs may be necessitated by the incorporation of
additional design options, such as the inclusion of sub-cooling.
Product conversion costs are driven by the need to redesign models to
incorporate more efficient single-speed compressors as well as other
design options. DOE estimates capital conversion costs of $26.2 million
and product conversion costs of $5.1 million. Conversion costs total
$31.3 million.
At TSL 3, the standard varies based by product class. For product
classes with cooling capacities less than 8,000 Btu/h, the standard
reflects an efficiency level attainable by units with the most
efficient R-32 single-speed compressor on the market (EL 3) in
combination with other design options. For product classes with cooling
capacities greater than or equal to 8,000 Btu/h, the standard reflects
an efficiency level consistent with the implementation commercially
available variable-speed compressors (EL 4). DOE estimates the change
in INPV to range from -4.8 percent to 7.1 percent. At this level, free
cash flow is estimated to decrease by 10.7 percent compared to the
base-case value in the year before the standards year. DOE's shipments
analysis estimates approximately 2 percent of current shipments meet
this level.
At this level, DOE does not expect industry to adopt new or larger
chassis designs. For product classes with cooling capacities greater
than or equal to the 8,000 Btu/h threshold, additional capital
conversion costs may be necessary to adjust appearance tooling. DOE
anticipates greater redesign efforts and product conversion costs as
[[Page 34345]]
manufacturers move these products to variable-speed compressor designs.
DOE estimates capital conversion costs of $7.1 million and product
conversion costs of $17.7 million. Conversion costs total $24.8
million.
In interviews and through review of market data, DOE found that all
but one OEM currently produce R-32 room air conditioner models.
Additionally, based on interview feedback, all OEMs intend to entirely
transition to R-32 room air conditioners by 2023 regardless of DOE
actions related to the energy conservation standards for room air
conditioners. Thus, DOE did not consider the redesign costs related to
R-32 as conversion costs that are the result of any amended energy
conservation standards. DOE accounted for the costs associated with the
transition to low-GWP refrigerants in its modeling of the GRIM,
consistent with the April 2022 NOPR.
At TSL 4, the standard reflects the efficiency consistent with the
implementation of commercially available variable-speed compressors for
all product classes (EL 4). DOE estimates the change in INPV to range
from -8.4 percent to 14.2 percent. At this level, free cash flow is
estimated to decrease by 12.4 percent compared to the base-case value
in the year before the standards year. DOE's shipments analysis
estimates that less than 2 percent of current shipments meet this
level. At this level, DOE does not expect industry to adopt new or
larger chassis designs. Capital conversion costs may be necessary for
adjustments in appearance tooling. Compared to lower efficiency levels,
DOE anticipates significantly greater redesign efforts and product
conversion costs as manufacturers move all products to variable-speed
compressor designs. Based on DOE's Compliance Certification Database
(``CCD''),\71\ DOE estimates that OEMs would need to redesign all
product platforms to meet the efficiency levels required by TSL 4. DOE
estimates capital conversion costs of $6.9 million and product
conversion costs of $22.0 million. Conversion costs total $29.0
million.
---------------------------------------------------------------------------
\71\ U.S. Department of Energy's Compliance Certification
Database. Available at: regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (last accessed: March 17, 2021).
---------------------------------------------------------------------------
At TSL 5, the standard reflects max-tech efficiency (EL 5) for all
product classes. DOE estimates the change in INPV to range from -28.4
percent to 1.1 percent. At this level, free cash flow is estimated to
decrease by 164.2 percent compared to the base-case value in the year
before the standards year. In DOE's review of the market, no models
currently meet this level. DOE estimates capital conversion costs of
$297.5 million and product conversion costs of $22.2 million.
Conversion costs total $319.7 million.
At this level, DOE expects changes to chassis size for certain
window and through-the-wall units. As a result, capital conversion
costs increase significantly as manufacturers adjust equipment and
tooling to accommodate new dimensions. As with EL 4, DOE anticipates
significant redesign efforts and product conversion costs as
manufacturers move all products to variable-speed compressor designs.
OEMs would need to redesign all product platforms to meet the
efficiency levels required by TSL 5.
At TSL 5, the large conversion costs result in a free cash flow
dropping below zero in the years before the standard year. The negative
free cash flow calculation indicates manufacturers may need to access
cash reserves or outside capital to finance conversion efforts.
b. Direct Impacts on Employment
DOE's research indicates no room air conditioners are currently
made in domestic production facilities. DOE expects that amended
standards would have no impact on domestic production employment, which
would remain at zero. Manufacturers maintain offices in the United
States to handle design, marketing, technical support, and other
business needs. Large changes in total annual shipments may lead to
companies reducing their non-production room air conditioner staff.
However, DOE's shipments model does not forecast substantial changes in
total annual shipments for TSL 3. If total shipments remain relatively
steady DOE would not expect any change to non-production employment as
a result of amended standards. See section IV.G of this document for
additional details on DOE's shipments analysis.
c. Impacts on Manufacturing Capacity
In interviews, manufacturers noted that the majority of room air
conditioners are manufactured overseas by high-volume manufacturers
producing product for a range of international markets. Manufacturers
had few concerns about production line constraints below the max-tech
level (TSL 5). However, at the max-tech level, some manufacturers noted
concerns about having sufficient technical resources to oversee the
redesign and testing of all room air conditioner products to
incorporate variable-speed technology. Additionally, DOE notes that the
most efficient variable-speed compressors that were implemented at the
max-tech level (TSL 5) are offered by only a single manufacturer. Based
on public information, DOE was unable to determine the availability and
pricing of these compressors. Given the lack of information regarding
availability of these highest efficiency variable-speed compressors and
the limited number of variable-speed compressors rated at or near the
efficiency of compressors considered for the max-tech efficiency level,
there may not be sufficient availability of the highest efficiency
variable-speed compressors to meet the entire industry's production
capacity needs at all cooling capacities of room air conditioners at
the max-tech level (TSL 5).
d. Impacts on Subgroups of Manufacturers
Using average cost assumptions to develop industry cash-flow
estimates may not capture the differential impacts among subgroups of
manufacturers. Small manufacturers, niche players, or manufacturers
exhibiting a cost structure that differs substantially from the
industry average could be affected disproportionately. DOE investigated
small businesses as a manufacturer subgroup that could be
disproportionally impacted by energy conservation standards and could
merit additional analysis. DOE did not identify any other adversely
impacted manufacturer subgroups for this rulemaking based on the
results of the industry characterization.
DOE analyzes the impacts on small businesses in a separate analysis
in section VII.B of this document as part of the Regulatory Flexibility
Analysis. For a discussion of the impacts on the small business
manufacturer subgroup, see the Regulatory Flexibility Analysis in
section VII.B of this document and chapter 12 of the final rule TSD.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the regulatory actions
of other Federal agencies and States that affect the manufacturers of a
covered product or equipment. While any one regulation may not impose a
significant burden on manufacturers, the combined effects of several
existing or impending regulations may have serious consequences for
some manufacturers, groups of manufacturers, or an entire industry.
Multiple regulations affecting the same manufacturer can strain profits
and lead companies to abandon product lines or markets with lower
expected
[[Page 34346]]
future returns than competing products. For these reasons, DOE conducts
an analysis of cumulative regulatory burden as part of its rulemakings
pertaining to appliance efficiency.
Table V.31 presents the results of DOE's analysis which includes
product-specific regulations that will take effect approximately three
years before or after the 2026 compliance date of any amended energy
conservation standards for room air conditioners.
Table V.31--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Room Air Conditioner Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of OEMs
affected from Industry conversion
Federal energy conservation Number of the room air Approx. standards year Industry conversion costs (millions costs/product revenue
standard OEMs * conditioner $) ***
rule **
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Warm Air Furnaces 81 FR 16 1 2023...................... $7.5 to $22.2 (2014$).............. 1.7% to 5.1%.[dagger]
2420 (January 15, 2016).
Small, Large, and Very Large 29 4 2018 and 2023 [Dagger].... $520.8 (2014$)..................... 4.9%.
Commercial Package Air
Conditioning and Heating
Equipment 81 FR 2420 (January 15,
2016).
Residential Central Air 51 8 2023...................... $342.6 (2015$)..................... 0.5%.
Conditioners and Heat Pumps 82 FR
1786 (January 6, 2017).
Portable Air Conditioners 85 FR 11 5 2025...................... $320.9 (2015$)..................... 6.7%.
1378 (January 10, 2020).
Commercial Packaged Boilers 85 FR 43 1 2023...................... $21.2 (2015$)...................... 2.3%.
1592 (January 10, 2020).
Commercial Water Heating Equipment 14 1 2026...................... $34.6 (2020$)...................... 4.7%.
[dagger][dagger] 87 FR 30610 (May
19, 2022).
Consumer Furnaces [dagger][dagger] 15 2 2029...................... $150.6 (2020$)..................... 1.4%.
87 FR 40590 (July 7, 2022).
Consumer Pool Heaters 21 1 2028...................... $38.8 (2020$)...................... 1.9%.
[dagger][dagger] 87 FR 22640
(April 15, 2022).
Consumer Clothes Dryers 15 4 2027...................... $149.7 (2020$)..................... 1.8%.
[dagger][dagger] 87 FR 51734
(August 23, 2022).
Microwave Ovens [dagger][dagger] 18 4 2026...................... $46.1 (2021$)...................... 0.7%.
87 FR 52282 (August 24, 2022).
Consumer Conventional Cooking 34 3 2027...................... $183.4 (2021$)..................... 1.2%.
Products [dagger][dagger] 88 FR
6818 (February 1, 2023).
Residential Clothes Washers 19 4 2027...................... $690.8 (2021$)..................... 5.2%.
[dagger][dagger] 88 FR 13520
(March 3, 2023).
Refrigerators, Freezers, and 49 4 2027...................... $1,323.6 (2021$)................... 3.8%.
Refrigerator-Freezers
[dagger][dagger] 88 FR 12452
(February 27, 2023).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory
burden.
** This column presents the number of manufacturers producing room air conditioner products that are also listed as manufacturers in the listed energy
conservation standard contributing to cumulative regulatory burden.
*** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs are the
upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue from just the
covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are made and lasts from the
publication year of the final rule to the compliance year of the final rule. The conversion period typically ranges from 3 to 5 years, depending on
the energy conservation standard.
[dagger] Low and high conversion cost scenarios were analyzed as part of this direct final rule. The range of estimated conversion expenses presented
here reflects those two scenarios.
[Dagger] The direct final rule for small, large, and very large commercial package air conditioning and heating equipment adopts an amended standard in
2018 and a higher amended standard in 2023. The conversion costs are spread over an 8-year conversion period ending in 2022, with over 80 percent of
the conversion costs occurring between 2019 and 2022.
[dagger][dagger] These rulemakings are in the proposed rule stage and all values are subject to change until finalized.
3. National Impact Analysis
This section presents DOE's estimates of the national energy
savings and the NPV of consumer benefits that would result from each of
the TSLs considered as potential amended standards.
a. Significance of Energy Savings
To estimate the energy savings attributable to potential amended
standards for room air conditioners, DOE compared their energy
consumption under the no-new-standards case to their anticipated energy
consumption under each TSL. The savings are measured over the entire
lifetime of products purchased in the 30-year period that begins in the
year of anticipated compliance with amended standards (2026-2055).
Table V.32 presents DOE's projections of the national energy savings
for each TSL considered for room air conditioners. The savings were
calculated using the approach described in section IV.H.2 of this
document.
Table V.32--Cumulative National Energy Savings for Room Air Conditioners; 30 Years of Shipments
[2026-2055]
----------------------------------------------------------------------------------------------------------------
Trial standard level
----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(quads)
----------------------------------------------------------------------------------------------------------------
Primary energy................................. 0.30 0.91 1.35 1.80 3.35
FFC energy..................................... 0.31 0.95 1.41 1.87 3.48
----------------------------------------------------------------------------------------------------------------
[[Page 34347]]
OMB Circular A-4 \72\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis using 9 years, rather than 30
years, of product shipments. The choice of a 9-year period is a proxy
for the timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\73\ The review timeframe established in EPCA is generally
not synchronized with the product lifetime, product manufacturing
cycles, or other factors specific to room air conditioners. Thus, such
results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology. The NES
sensitivity analysis results based on a 9-year analytical period are
presented in Table V.33. The impacts are counted over the lifetime of
room air conditioners purchased in 2026-2055.
---------------------------------------------------------------------------
\72\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ (last accessed
May 22, 2023).
\73\ Section 325(m) of EPCA requires DOE to review its standards
at least once every 6-years, and requires, for certain products, a
3-year period after any new standard is promulgated before
compliance is required, except that in no case may any new standards
be required within 6-years of the compliance date of the previous
standards. While adding a 6-year review to the 3-year compliance
period adds up to 9 years, DOE notes that it may undertake reviews
at any time within the 6-year period and that the 3-year compliance
date may yield to the 6-year backstop. A 9-year analysis period may
not be appropriate given the variability that occurs in the timing
of standards reviews and the fact that for some products, the
compliance period is 5 years rather than 3 years.
Table V.33--Cumulative National Energy Savings for Room Air Conditioners; 9 Years of Shipments
[2026-2034]
----------------------------------------------------------------------------------------------------------------
Trial standard level
----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(quads)
----------------------------------------------------------------------------------------------------------------
Primary energy savings......................... 0.12 0.36 0.50 0.64 1.09
FFC energy savings............................. 0.12 0.38 0.52 0.67 1.13
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the TSLs considered for room air
conditioners. In accordance with OMB's guidelines on regulatory
analysis,\74\ DOE calculated NPV using both a 7-percent and a 3-percent
real discount rate. Table V.34 shows the consumer NPV results with
impacts counted over the lifetime of products purchased in 2026-2055.
---------------------------------------------------------------------------
\74\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ (last accessed
May 22, 2023).
Table V.34--Cumulative Net Present Value of Consumer Benefits for Room Air Conditioners; 30 Years of Shipments
[2026-2055]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(billion 2021$)
----------------------------------------------------------------------------------------------------------------
3 percent...................................... 2.89 8.76 11.46 13.83 24.27
7 percent...................................... 1.47 4.45 5.39 6.11 10.63
----------------------------------------------------------------------------------------------------------------
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.35. The impacts are counted over the
lifetime of products purchased in 2026-2055. As mentioned previously,
such results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology or decision
criteria.
Table V.35--Cumulative Net Present Value of Consumer Benefits for Room Air Conditioners; 9 Years of Shipments
[2026-2034]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
(billion 2021$)
----------------------------------------------------------------------------------------------------------------
3 percent...................................... 1.45 4.39 4.94 5.34 9.33
7 percent...................................... 0.92 2.77 2.96 3.02 5.31
----------------------------------------------------------------------------------------------------------------
[[Page 34348]]
The previous results reflect the use of a default trend to estimate
the change in price for room air conditioners over the analysis period
(see section IV.H.3 of this document). DOE also conducted a sensitivity
analysis that considered one scenario with a lower rate of price
decline than the reference case and one scenario with a higher rate of
price decline than the reference case. The results of these alternative
cases are presented in appendix 10C of the final rule TSD. In the high-
price-decline case, the NPV of consumer benefits is higher than in the
default case. In the low-price-decline case, the NPV of consumer
benefits is lower than in the default case. Under each sensitivity
scenario, net benefits remain positive at the adopted TSL.
c. Indirect Impacts on Employment
DOE estimates that amended energy conservation standards for room
air conditioners will reduce energy expenditures for consumers of those
products, with the resulting net savings being redirected to other
forms of economic activity. These expected shifts in spending and
economic activity could affect the demand for labor. As described in
section IV.N of this document, DOE used an input/output model of the
U.S. economy to estimate indirect employment impacts of the TSLs that
DOE considered. There are uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Therefore, DOE generated results for near-term timeframes
(2026-2030), where these uncertainties are reduced.
The results suggest that the adopted standards are likely to have a
negligible impact on the net demand for labor in the economy. The net
change in jobs is so small that it would be imperceptible in national
labor statistics and might be offset by other, unanticipated effects on
employment. Chapter 16 of the final rule TSD presents detailed results
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
As discussed in section IV.C.1.b of this document, DOE has
concluded that the standards adopted in this final rule will not lessen
the utility or performance of the room air conditioners under
consideration in this rulemaking. Manufacturers of these products
currently offer units that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
DOE considered any lessening of competition that would be likely to
result from new or amended standards. As discussed in section III.E.1.e
of this document, EPCA directs the Attorney General of the United
States (``Attorney General'') to determine the impact, if any, of any
lessening of competition likely to result from a proposed standard and
to transmit such determination in writing to the Secretary within 60
days of the publication of a proposed rule, together with an analysis
of the nature and extent of the impact. To assist the Attorney General
in making this determination, DOE provided DOJ with copies of the NOPR
and the TSD for review. In its assessment letter responding to DOE, DOJ
concluded that the proposed energy conservation standards for room air
conditioners are unlikely to have a significant adverse impact on
competition. DOE is publishing the Attorney General's assessment at the
end of this final rule.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Reduced electricity
demand due to energy conservation standards is also likely to reduce
the cost of maintaining the reliability of the electricity system,
particularly during peak-load periods. Chapter 15 in the final rule TSD
presents the estimated impacts on electricity generating capacity,
relative to the no-new-standards case, for the TSLs that DOE considered
in this rulemaking.
Energy conservation resulting from potential energy conservation
standards for room air conditioners is expected to yield environmental
benefits in the form of reduced emissions of certain air pollutants and
greenhouse gases. Table V.36 provides DOE's estimate of cumulative
emissions reductions expected to result from the TSLs considered in
this rulemaking. The emissions were calculated using the multipliers
discussed in section IV.J.3 of this document. DOE reports annual
emissions reductions for each TSL in chapter 13 of the final rule TSD.
Table V.36--Cumulative Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
Trial standard level
----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 9.97 30.44 45.05 59.87 110.45
CH4 (thousand tons)............................ 0.72 2.21 3.26 4.32 7.94
N2O (thousand tons)............................ 0.10 0.31 0.45 0.60 1.10
NOX (thousand tons)............................ 4.99 15.27 22.48 29.81 54.71
SO2 (thousand tons)............................ 4.40 13.45 19.80 26.26 48.20
Hg (tons)...................................... 0.03 0.08 0.12 0.16 0.30
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 0.76 2.31 3.43 4.56 8.45
CH4 (thousand tons)............................ 71.16 216.71 322.37 429.43 796.29
N2O (thousand tons)............................ 0.00 0.01 0.02 0.02 0.04
NOX (thousand tons)............................ 11.42 34.77 51.71 68.88 127.68
SO2 (thousand tons)............................ 0.06 0.17 0.25 0.33 0.61
Hg (tons)...................................... 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 10.73 32.74 48.48 64.43 118.90
[[Page 34349]]
CH4 (thousand tons)............................ 71.88 218.92 325.63 433.76 804.23
N2O (thousand tons)............................ 0.10 0.32 0.47 0.62 1.15
NOX (thousand tons)............................ 16.41 50.04 74.20 98.69 182.39
SO2 (thousand tons)............................ 4.46 13.62 20.05 26.60 48.82
Hg (tons)...................................... 0.03 0.08 0.12 0.16 0.30
----------------------------------------------------------------------------------------------------------------
As part of the analysis for this rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
that DOE estimated for each of the considered TSLs for room air
conditioners. Section IV.L.1 of this document discusses the estimated
SC-CO2 values that DOE used. Table V.37 presents the value
of CO2 emissions reduction at each TSL for each of the SC-
CO2 cases. The time-series of annual values is presented for
the selected TSL in chapter 14 of the final rule TSD.
Table V.37--Present Value of CO2 Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
SC-CO2 case
-----------------------------------------------------------------
Discount rate and statistics
TSL -----------------------------------------------------------------
5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
(million 2021$)
----------------------------------------------------------------------------------------------------------------
1............................................. 111 461 714 1,402
2............................................. 342 1,415 2,189 4,307
3............................................. 499 2,075 3,215 6,313
4............................................. 658 2,745 4,257 8,350
5............................................. 1,194 5,013 7,789 15,250
----------------------------------------------------------------------------------------------------------------
As discussed in section IV.L.2 of this document, DOE estimated the
climate benefits likely to result from the reduced emissions of methane
and N2O that DOE estimated for each of the considered TSLs
for room air conditioners. Table V.38 presents the value of the
CH4 emissions reduction at each TSL, and Table V.39 presents
the value of the N2O emissions reduction at each TSL. The
time-series of annual values is presented for the selected TSL in
chapter 14 of the final rule TSD.
Table V.38--Present Value of Methane Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
SC-CH4 case
-----------------------------------------------------------------
Discount rate and statistics
TSL -----------------------------------------------------------------
5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
(million 2021$)
----------------------------------------------------------------------------------------------------------------
1............................................. 34 95 132 253
2............................................. 103 292 403 775
3............................................. 151 431 596 1,144
4............................................. 200 573 793 1,519
5............................................. 365 1,055 1,463 2,797
----------------------------------------------------------------------------------------------------------------
[[Page 34350]]
Table V.39--Present Value of Nitrous Oxide Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
SC-N2O case
-----------------------------------------------------------------
Discount rate and statistics
TSL -----------------------------------------------------------------
5% 3% 2.5% 3%
-----------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
(million 2021$)
----------------------------------------------------------------------------------------------------------------
1............................................. 0.4 1.6 2.4 4.2
2............................................. 1.3 4.8 7.4 12.8
3............................................. 1.8 7.0 10.8 18.7
4............................................. 2.4 9.3 14.3 24.8
5............................................. 4.4 17.0 26.1 45.1
----------------------------------------------------------------------------------------------------------------
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
global and U.S. economy continues to evolve rapidly. DOE, together with
other Federal agencies, will continue to review methodologies for
estimating the monetary value of reductions in CO2 and other
GHG emissions. This ongoing review will consider the comments on this
subject that are part of the public record for this and other
rulemakings, as well as other methodological assumptions and issues.
DOE notes, however, that the adopted standards would be economically
justified even without inclusion of monetized benefits of reduced GHG
emissions.
DOE also estimated the monetary value of the economic benefits
associated with NOX and SO2 emissions reductions
anticipated to result from the considered TSLs for room air
conditioners. The dollar-per-ton values that DOE used are discussed in
section IV.L of this document. Table V.40 presents the present value
for NOX emissions reduction for each TSL calculated using 7-
percent and 3-percent discount rates, and Table V.41 presents similar
results for SO2 emissions reductions. The results in these
tables reflect application of EPA's low dollar-per-ton values, which
DOE used to be conservative. The time-series of annual values is
presented for the selected TSL in chapter 14 of the final rule TSD.
Table V.40--Present Value of NOX Emissions Reduction for Room Air
Conditioners Shipped in 2026-2055
------------------------------------------------------------------------
TSL 7% Discount rate 3% Discount rate
------------------------------------------------------------------------
(million 2021$)
------------------------------------------------------------------------
1............................... 329 713
2............................... 1,022 2,196
3............................... 1,465 3,209
4............................... 1,915 4,238
5............................... 3,408 7,714
------------------------------------------------------------------------
Table V.41--Present Value of SO2 Emissions Reduction for Room Air
Conditioners Shipped in 2026-2055
------------------------------------------------------------------------
TSL 7% Discount rate 3% Discount rate
------------------------------------------------------------------------
(million 2021$)
------------------------------------------------------------------------
1............................... 127 264
2............................... 394 814
3............................... 560 1,182
4............................... 730 1,556
5............................... 1,290 2,813
------------------------------------------------------------------------
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No
other factors were considered in this analysis.
8. Summary of Economic Impacts
Table V.42 presents the NPV values that result from adding the
estimates of the economic benefits resulting from reduced GHG and
NOX and SO2 emissions to the NPV of consumer
benefits calculated for each TSL considered in this rulemaking. The
consumer benefits are domestic U.S. monetary savings that occur as a
result of purchasing the covered room air conditioners, and are
measured for the lifetime of products shipped in 2026-2055. The
benefits associated with reduced GHG emissions resulting from the
adopted standards are global benefits, and are also calculated based on
the lifetime of room air conditioners shipped in 2026-2055.
[[Page 34351]]
Table V.42--Consumer NPV Combined With Present Value of Benefits From Climate and Health
----------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
3% discount rate for NPV of Consumer and Health Benefits (billion 2021$)
----------------------------------------------------------------------------------------------------------------
5% d.r., Average SC-GHG case................... 4.0 12.2 16.5 20.5 36.4
3% d.r., Average SC-GHG case................... 4.4 13.5 18.4 22.9 40.9
2.5% d.r., Average SC-GHG case................. 4.7 14.4 19.7 24.7 44.1
3% d.r., 95th percentile SC-GHG case........... 5.5 16.9 23.3 29.5 52.9
----------------------------------------------------------------------------------------------------------------
7% discount rate for NPV of Consumer and Health Benefits (billion 2021$)
----------------------------------------------------------------------------------------------------------------
5% d.r., Average SC-GHG case................... 2.1 6.3 8.1 9.6 16.9
3% d.r., Average SC-GHG case................... 2.5 7.6 9.9 12.1 21.4
2.5% d.r., Average SC-GHG case................. 2.8 8.5 11.2 13.8 24.6
3% d.r., 95th percentile SC-GHG case........... 3.6 11.0 14.9 18.7 33.4
----------------------------------------------------------------------------------------------------------------
C. Conclusion
When considering new or amended energy conservation standards, the
standards that DOE adopts for any type (or class) of covered product
must be designed to achieve the maximum improvement in energy
efficiency that the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining
whether a standard is economically justified, the Secretary must
determine whether the benefits of the standard exceed its burdens by,
to the greatest extent practicable, considering the seven statutory
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or
amended standard must also result in significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B))
In the April 2022 NOPR, DOE proposed energy conservation standards
for room air conditioners at TSL 3, as constructed for that analysis.
The minimum CEERs corresponding to TSL 3 from the April 2022 NOPR are
shown in Table V.43. 87 FR 20608, 20678 (Apr. 7, 2022).
Table V.43--April 2022 NOPR Proposed Energy Conservation Standards for
Room Air Conditioners
------------------------------------------------------------------------
Equipment class CEER (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and less 13.1
than 6,000 Btu/h.......................................
2. Without reverse cycle, with louvered sides and 6,000 13.7
to 7,900 Btu/h.........................................
3. Without reverse cycle, with louvered sides and 8,000 16.0
to 13,900 Btu/h........................................
4. Without reverse cycle, with louvered sides and 14,000 16.0
to 19,900 Btu/h........................................
5a. Without reverse cycle, with louvered sides and 13.8
20,000 to 27,900 Btu/h.................................
5b. Without reverse cycle, with louvered sides and 13.2
28,000 Btu/h or more...................................
6. Without reverse cycle, without louvered sides, and 12.8
less than 6,000 Btu/h..................................
7. Without reverse cycle, without louvered sides and 12.8
6,000 to 7,900 Btu/h...................................
8a. Without reverse cycle, without louvered sides and 14.1
8,000 to 10,900 Btu/h..................................
8b. Without reverse cycle, without louvered sides and 13.9
11,000 to 13,900 Btu/h.................................
9. Without reverse cycle, without louvered sides and 13.7
14,000 to 19,900 Btu/h.................................
10. Without reverse cycle, without louvered sides and 13.8
20,000 Btu/h or more...................................
11. With reverse cycle, with louvered sides, and less 14.4
than 20,000 Btu/h......................................
12. With reverse cycle, without louvered sides, and less 13.7
than 14,000 Btu/h......................................
13. With reverse cycle, with louvered sides, and 20,000 13.7
Btu/h or more..........................................
14. With reverse cycle, without louvered sides, and 12.8
14,000 Btu/h or more...................................
15. Casement-Only....................................... 13.9
16. Casement-Slider..................................... 15.3
------------------------------------------------------------------------
Gradient, NYSERDA, NEEA, and NWPCC supported DOE's proposed
standards and stated that these proposed standards are technologically
achievable and cost-effective, and should therefore be adopted in order
to provide the predicted cost and energy savings. (Gradient, No. 40 at
pp. 1-2; NYSERDA, No. 41 at p. 2; NEEA and NWPCC, No. 50 at pp. 1-2)
While NYSERDA supported DOE's proposed energy conservation
standards for room air conditioners, NYSERDA strongly urged DOE to set
more aggressive standards at or potentially even above the proposed ELs
if the analysis supports more aggressive standards such as those that
incorporate ECM fan motors in the smaller capacity product class sizes,
given the multitude of technology options DOE showed could be used to
achieve higher efficiencies. (NYSERDA, No. 41 at p. 2)
DOE reviewed the comments directly concerning proposed standards
and TSLs analyzed in the April 2022 NOPR. In this final rule, DOE
reassessed the benefits and burdens of the TSLs while considering all
comments received, as detailed.
For this final rule, DOE considered the impacts of amended
standards for room air conditioners at each TSL, beginning with the
maximum technologically feasible level, to determine whether that level
was economically justified. Where the max-tech level was not justified,
DOE then considered the next most efficient level and undertook the
same evaluation until it reached the highest efficiency level that is
both technologically feasible and economically justified and saves a
significant amount of energy.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, tables in this section present a summary of the results of
DOE's quantitative analysis for each TSL. In addition to the
[[Page 34352]]
quantitative results presented in the tables, DOE also considers other
burdens and benefits that affect economic justification. These include
the impacts on identifiable subgroups of consumers who may be
disproportionately affected by a national standard and impacts on
employment.
DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy
savings in the absence of Government intervention. Much of this
literature attempts to explain why consumers appear to undervalue
energy efficiency improvements. There is evidence that consumers
undervalue future energy savings as a result of (1) a lack of
information; (2) a lack of sufficient salience of the long-term or
aggregate benefits; (3) a lack of sufficient savings to warrant
delaying or altering purchases; (4) excessive focus on the short term,
in the form of inconsistent weighting of future energy cost savings
relative to available returns on other investments; (5) computational
or other difficulties associated with the evaluation of relevant
tradeoffs; and (6) a divergence in incentives (for example, between
renters and owners, or builders and purchasers). Having less than
perfect foresight and a high degree of uncertainty about the future,
consumers may trade off these types of investments at a higher than
expected rate between current consumption and uncertain future energy
cost savings.
In DOE's current regulatory analysis, potential changes in the
benefits and costs of a regulation due to changes in consumer purchase
decisions are included in two ways. First, if consumers forego the
purchase of a product in the standards case, this decreases sales for
product manufacturers, and the impact on manufacturers attributed to
lost revenue is included in the MIA. Second, DOE accounts for energy
savings attributable only to products actually used by consumers in the
standards case; if a standard decreases the number of products
purchased by consumers, this decreases the potential energy savings
from an energy conservation standard. DOE provides estimates of
shipments and changes in the volume of product purchases in chapter 9
of the final rule TSD. However, DOE's current analysis does not
explicitly control for heterogeneity in consumer preferences,
preferences across subcategories of products or specific features, or
consumer price sensitivity variation according to household income.\75\
---------------------------------------------------------------------------
\75\ P.C. Reiss and M.W. White. Household Electricity Demand,
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883.
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------
While DOE is not prepared at present to provide a fuller
quantifiable framework for estimating the benefits and costs of changes
in consumer purchase decisions due to an energy conservation standard,
DOE is committed to developing a framework that can support empirical
quantitative tools for improved assessment of the consumer welfare
impacts of appliance standards. DOE has posted a paper that discusses
the issue of consumer welfare impacts of appliance energy conservation
standards, and potential enhancements to the methodology by which these
impacts are defined and estimated in the regulatory process.\76\ DOE
welcomes comments on how to more fully assess the potential impact of
energy conservation standards on consumer choice and how to quantify
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------
\76\ Sanstad, A.H. Notes on the Economics of Household Energy
Consumption and Technology Choice. 2010. Lawrence Berkeley National
Laboratory. www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (last accessed July 1, 2021).
---------------------------------------------------------------------------
1. Benefits and Burdens of TSLs Considered for Room Air Conditioner
Standards
Tables V.44 and V.45 summarize the quantitative impacts estimated
for each TSL for room air conditioners. The national impacts are
measured over the lifetime of room air conditioners purchased in the
30-year period that begins in the anticipated year of compliance with
amended standards (2026-2055). The energy savings, emissions
reductions, and value of emissions reductions refer to full-fuel-cycle
results. DOE is presenting monetized benefits in accordance with the
applicable Executive orders and DOE would reach the same conclusion
presented in this rule in the absence of the social cost of greenhouse
gases, including the Interim Estimates presented by the Interagency
Working Group. The efficiency levels contained in each TSL are
described in section V.A of this document.
Table V.44--Summary of Analytical Results for Room Air Conditioners TSLs--National Impacts
----------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy Savings
----------------------------------------------------------------------------------------------------------------
Quads............................................... 0.31 0.95 1.41 1.87 3.48
----------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)........................... 10.73 32.74 48.48 64.43 118.90
CH4 (thousand tons)................................. 71.88 218.92 325.63 433.76 804.23
N2O (thousand tons)................................. 0.10 0.32 0.47 0.62 1.15
NOX (thousand tons)................................. 16.41 50.04 74.20 98.69 182.39
SO2 (thousand tons)................................. 4.46 13.62 20.05 26.60 48.82
Hg (tons)........................................... 0.03 0.08 0.12 0.16 0.30
----------------------------------------------------------------------------------------------------------------
Present Value of Benefits and Costs (3% discount rate, billion 2021$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings..................... 3.23 9.99 14.63 19.37 35.77
Climate Benefits *.................................. 0.56 1.71 2.51 3.33 6.09
[[Page 34353]]
Health Benefits **.................................. 0.98 3.01 4.39 5.79 10.53
-----------------------------------------------------------
Total Benefits [dagger]......................... 4.76 14.71 21.54 28.49 52.38
Consumer Incremental Product Costs [Dagger]......... 0.33 1.23 3.17 5.55 11.49
-----------------------------------------------------------
Consumer Net Benefits........................... 2.89 8.76 11.46 13.83 24.27
Total Net Benefits.......................... 4.43 13.48 18.37 22.95 40.89
----------------------------------------------------------------------------------------------------------------
Present Value of Benefits and Costs (7% discount rate, billion 2021$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings..................... 1.66 5.20 7.46 9.79 17.65
Climate Benefits *.................................. 0.56 1.71 2.51 3.33 6.09
Health Benefits **.................................. 0.46 1.42 2.02 2.65 4.70
-----------------------------------------------------------
Total Benefits [dagger]......................... 2.68 8.32 12.00 15.76 28.43
Consumer Incremental Product Costs [Dagger]......... 0.19 0.75 2.08 3.67 7.02
-----------------------------------------------------------
Consumer Net Benefits........................... 1.47 4.45 5.39 6.11 10.63
Total Net Benefits.......................... 2.49 7.58 9.92 12.08 21.41
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
These results include benefits to consumers which accrue after 2055 from the products shipped in 2026-2055.
* Climate benefits are calculated using four different estimates of the SC-CO2, SC-CH4, and SC-N2O. Together
these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated
with the average SC-GHG at a 3 percent discount rate are shown, but the Department does not have a single
central SC-GHG point estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted
the Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary
injunction issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's
order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government's
appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined
the defendants in that case from ``adopting, employing, treating as binding, or relying upon'' the interim
estimates of the social cost of greenhouse gases--which were issued by the Interagency Working Group on the
Social Cost of Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas
emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents
monetized greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate. DOE emphasizes
the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as installation costs.
Table V.45--Summary of Analytical Results for Room Air Conditioners TSLs: Manufacturer and Consumer Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (million 2021$) (No- 1,188.7 to 1,192.9............ 1,167.8 to 1,197.2............ 1,140.8 to 1,284.1............ 1,097.7 to 1,369.0........... 857.5 to 1,211.5.
new-standards case INPV =
1,189.5).
Industry NPV (% change)........... (0.8) to (0.5)................ (2.6) to (0.1)................ (4.8) to 7.1.................. (8.4) to 14.2................ (28.4) to 1.1.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2021$)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners, 41............................ 65............................ 65............................ 47........................... 93.
without reverse cycle, with
louvered sides, and less than
6,000 Btu/h.
PC2: Room Air Conditioners, 35............................ 72............................ 72............................ 69........................... 103.
without reverse cycle, with
louvered sides, and 6,000 to
7,900 Btu/h.
PC3: Room Air Conditioners, 17............................ 105........................... 100........................... 100.......................... 171.
without reverse cycle, with
louvered sides, and 8,000 to
13,900 Btu/h.
PC4: Room Air Conditioners, 0............................. 85............................ 92............................ 92........................... 168.
without reverse cycle, with
louvered sides, and 14,000 to
19,900 Btu/h.
PC5a: Room Air Conditioners, 6............................. 99............................ 148........................... 148.......................... 284.
without reverse cycle, with
louvered sides, and 20,000 to
27,900 Btu/h.
PC5b: Room Air Conditioners, 101........................... 150........................... 284........................... 284.......................... 415.
without reverse cycle, with
louvered sides, and 28,000 Btu/h
or more.
PC8a: Room Air Conditioners, 6............................. 73............................ 84............................ 84........................... 137.
without reverse cycle, without
louvered sides, and 8,000 to
10,900 Btu/h.
[[Page 34354]]
PC8b: Room Air Conditioners, 0............................. 81............................ 119........................... 119.......................... 175.
without reverse cycle, without
louvered sides, and 11,000 to
13,900 Btu/h.
PC9: Room Air Conditioners, 58............................ 81............................ 165........................... 165.......................... 180.
without reverse cycle, without
louvered sides, and 14,000 to
19,900 Btu/h.
PC11: Room Air Conditioners, with 69............................ 110........................... 134........................... 134.......................... 185.
reverse cycle, with louvered
sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with 40............................ 67............................ 124........................... 124.......................... 128.
reverse cycle, without louvered
sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners, 51............................ 107........................... 84............................ 84........................... 147.
Casement-Slider.
Shipment-Weighted Average *....... 27............................ 83............................ 85............................ 78........................... 134.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners, 0.6........................... 0.8........................... 0.8........................... 4.6.......................... 3.8.
without reverse cycle, with
louvered sides, and less than
6,000 Btu/h.
PC2: Room Air Conditioners, 0.7........................... 1.5........................... 1.5........................... 3.8.......................... 4.2.
without reverse cycle, with
louvered sides, and 6,000 to
7,900 Btu/h.
PC3: Room Air Conditioners, 1.2........................... 0.9........................... 2.9........................... 2.9.......................... 3.1.
without reverse cycle, with
louvered sides, and 8,000 to
13,900 Btu/h.
PC4: Room Air Conditioners, 0.7........................... 1.2........................... 3.0........................... 3.0.......................... 2.8.
without reverse cycle, with
louvered sides, and 14,000 to
19,900 Btu/h.
PC5a: Room Air Conditioners, 1.1........................... 1.0........................... 2.5........................... 2.5.......................... 2.3.
without reverse cycle, with
louvered sides, and 20,000 to
27,900 Btu/h.
PC5b: Room Air Conditioners, 0.4........................... 0.5........................... 2.3........................... 2.3.......................... 2.0.
without reverse cycle, with
louvered sides, and 28,000 Btu/h
or more.
PC8a: Room Air Conditioners, 0.6........................... 1.4........................... 3.2........................... 3.2.......................... 3.5.
without reverse cycle, without
louvered sides, and 8,000 to
10,900 Btu/h.
PC8b: Room Air Conditioners, 0.5........................... 1.4........................... 2.4........................... 2.4.......................... 3.2.
without reverse cycle, without
louvered sides, and 11,000 to
13,900 Btu/h.
PC9: Room Air Conditioners, 1.1........................... 2.0........................... 2.9........................... 2.9.......................... 3.7.
without reverse cycle, without
louvered sides, and 14,000 to
19,900 Btu/h.
PC11: Room Air Conditioners, with 0.6........................... 1.9........................... 3.2........................... 3.2.......................... 3.4.
reverse cycle, with louvered
sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with 1.3........................... 2.2........................... 2.6........................... 2.6.......................... 3.6.
reverse cycle, without louvered
sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners, 0.7........................... 0.9........................... 4.0........................... 4.0.......................... 3.4.
Casement-Slider.
Shipment-Weighted Average *....... 0.8........................... 1.0........................... 1.9........................... 3.6.......................... 3.5.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Consumers That Experience a Net Cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners, 2%............................ 3%............................ 3%............................ 41%.......................... 34%.
without reverse cycle, with
louvered sides, and less than
6,000 Btu/h.
PC2: Room Air Conditioners, 2%............................ 14%........................... 14%........................... 38%.......................... 42%.
without reverse cycle, with
louvered sides, and 6,000 to
7,900 Btu/h.
PC3: Room Air Conditioners, 2%............................ 2%............................ 26%........................... 26%.......................... 30%.
without reverse cycle, with
louvered sides, and 8,000 to
13,900 Btu/h.
PC4: Room Air Conditioners, 0%............................ 9%............................ 33%........................... 33%.......................... 30%.
without reverse cycle, with
louvered sides, and 14,000 to
19,900 Btu/h.
PC5a: Room Air Conditioners, 1%............................ 5%............................ 30%........................... 30%.......................... 27%.
without reverse cycle, with
louvered sides, and 20,000 to
27,900 Btu/h.
PC5b: Room Air Conditioners, 0%............................ 1%............................ 24%........................... 24%.......................... 21%.
without reverse cycle, with
louvered sides, and 28,000 Btu/h
or more.
PC8a: Room Air Conditioners, 0%............................ 15%........................... 34%........................... 34%.......................... 38%.
without reverse cycle, without
louvered sides, and 8,000 to
10,900 Btu/h.
[[Page 34355]]
PC8b: Room Air Conditioners, 0%............................ 17%........................... 26%........................... 26%.......................... 37%.
without reverse cycle, without
louvered sides, and 11,000 to
13,900 Btu/h.
PC9: Room Air Conditioners, 4%............................ 19%........................... 24%........................... 24%.......................... 39%.
without reverse cycle, without
louvered sides, and 14,000 to
19,900 Btu/h.
PC11: Room Air Conditioners, with 2%............................ 19%........................... 30%........................... 30%.......................... 34%.
reverse cycle, with louvered
sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with 8%............................ 22%........................... 21%........................... 21%.......................... 36%.
reverse cycle, without louvered
sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners, 3%............................ 5%............................ 38%........................... 38%.......................... 32%.
Casement-Slider.
Shipment-Weighted Average *....... 2%............................ 6%............................ 17%........................... 34%.......................... 34%.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* Weighted by shares of each product class in total projected shipments in 2026.
DOE first considered TSL 5, which represents the max-tech
efficiency levels. At this level, DOE expects room air conditioners
would require the maximum available efficiency variable-speed
compressor at all product classes. TSL 5 would save an estimated 3.48
quads of energy, an amount DOE considers significant. Under TSL 5, the
NPV of consumer benefit would be $10.63 billion using a discount rate
of 7 percent, and $24.27 billion using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 5 are 118.9 Mt of
CO2, 48.8 thousand tons of SO2, 182.4 thousand tons of
NOX, 0.3 tons of Hg, 804.2 thousand tons of CH4,
and 1.1 thousand tons of N2O. The estimated monetary value
of the climate benefits from reduced GHG emissions (associated with the
average SC-GHG at a 3-percent discount rate) at TSL 5 is $6.09 billion.
The estimated monetary value of the health benefits from reduced
SO2 and NOX emissions at TSL 5 is $4.70 billion
using a 7-percent discount rate and $10.53 billion using a 3-percent
discount rate.
Using a 7-percent discount rate for consumer benefits and costs,
health benefits from reduced SO2 and NOX
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated total NPV at TSL 5 is $21.41
billion. Using a 3-percent discount rate for all benefits and costs,
the estimated total NPV at TSL 5 is $40.89 billion. The estimated total
NPV is provided for additional information, however DOE primarily
relies upon the NPV of consumer benefits when determining whether a
proposed standard level is economically justified.
At TSL 5, for the product classes with the largest market share,
the average LCC impact is $93 for PC 1, $103 for PC 2, and $171 for PC
3. The simple payback period is 3.8 years for PC 1, 4.2 years for PC 2,
and 3.1 years for PC 3. The fraction of consumers who experience a net
LCC cost is 34 percent for PC 1, 42 percent for PC 2, and 30 percent
for PC 3. Overall, 34 percent of consumers would experience a net cost.
At TSL 5, the projected change in INPV ranges from a decrease of
$341.0 million to an increase of $13.0 million, which corresponds to a
decrease of 28.4 percent and an increase of 1.1 percent, respectively.
Conversion costs total $319.7 million.
As discussed in section IV.C.1 of this document, DOE believes there
is uncertainty regarding the estimated compressor cost and availability
of the highest efficiency variable-speed compressors across the full
range of capacities at TSL 5, particularly in the smaller capacity room
air conditioners. These uncertainties stem from the fact that the
efficiency level for TSL 5 is obtained by using the highest efficiency
variable-speed compressors that are currently available to be
incorporated into room air conditioners at the time the analysis was
competed. In addition, variable speed compressors representing these
efficiencies are manufactured by just one manufacturer. It is unclear
whether the highest efficiency variable-speed compressors will be
available to all manufacturers of room air conditioners since there is
only a single supplier at this time. In addition, these highest
efficiency variable-speed compressors are not currently available in
the full range of capacities of air room air conditioners, which could
limit the current product offerings by manufacturers. Furthermore, due
to the single supplier for these highest efficiency variable-speed
compressors and their unknown manufacturing volume and potential
bottlenecks for ramp-up manufacturing capabilities, there is a
likelihood that there may not be sufficient supply to meet the demand
of the market for the full range of cooling capacities for room air
conditioners, should TSL 5 be selected. This may have the potential to
result in the unavailability of room air conditioners of certain
cooling capacities from the market, which would contradict the
requirements in 42 U.S.C. 6295(o)(4) for any amended energy
conservation standards, as well impact the overall number of room air
conditioners available on the market should TSL 5 be selected.
The Secretary concludes that at TSL 5 for room air conditioners,
the benefits of energy savings, positive NPV of consumer benefits,
emission reductions, and the estimated monetary value of the climate
and health benefits would be outweighed by the impacts on
manufacturers, including the conversion costs and profit margin impacts
that could result in a large reduction in INPV, and the potential for
product unavailability due to limitations in key components such as the
highest efficiency variable-speed compressors necessary to reach the
max-tech efficiency levels. Consequently, the Secretary has concluded
that TSL 5 is not economically justified.
DOE then considered TSL 4. At TSL 4, DOE expects that all room air
conditioners product classes would require variable-speed compressors.
TSL 4 would save an estimated 1.87 quads of energy, an amount DOE
considers significant. Under TSL 4, the NPV of consumer benefit would
be $6.11 billion using a discount rate of 7 percent, and $13.83 billion
using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 4 are 64.4 Mt of
CO2, 26.6 thousand tons of SO2, 98.7 thousand
[[Page 34356]]
tons of NOX, 0.16 tons of Hg, 433.8 thousand tons of
CH4, and 0.62 thousand tons of N2O. The estimated
monetary value of the climate benefits from reduced GHG emissions
(associated with the average SC-GHG at a 3-percent discount rate) at
TSL 4 is $3.33 billion. The estimated monetary value of the health
benefits from reduced SO2 and NOX emissions at
TSL 4 is $2.65 billion using a 7-percent discount rate and $5.79
billion using a 3-percent discount rate.
Using a 7-percent discount rate for consumer benefits and costs,
health benefits from reduced SO2 and NOX
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated total NPV at TSL 4 is $12.08
billion. Using a 3-percent discount rate for all benefits and costs,
the estimated total NPV at TSL 4 is $22.95 billion. The estimated total
NPV is provided for additional information, however DOE primarily
relies upon the NPV of consumer benefits when determining whether a
proposed standard level is economically justified.
At TSL 4, for the product classes with the largest market share,
the average LCC impact is $47 for PC 1, $69 for PC 2, and $100 for PC
3. The simple payback period is 4.6 years for PC 1, 3.8 years for PC 2,
and 2.9 years for PC 3. The fraction of consumers who experience a net
LCC cost is 41 percent for PC 1, 38 percent for PC 2, and 26 percent
for PC 3. Overall, 34 percent of consumers would experience a net cost
across all product classes.
At TSL 4, the projected change in INPV ranges from a decrease of
$100.8 million to an increase of $170.5 million, which corresponds to a
decrease of 8.4 percent and an increase of 14.2 percent, respectively.
Conversion costs total $29.0 million.
TSL 4 represents commercially available room air conditioners that
implement variable-speed compressors, based on models with cooling
capacities greater than 8,000 Btu/h. However, for room air conditioners
with the smallest cooling capacities (i.e., less than 8,000 Btu/h),
uncertainties exist regarding both the availability of variable-speed
compressors that can be integrated into these smaller-size units and
the feasibility of incorporating these variable-speed compressors with
related components into a more space-constrained chassis than for
larger-capacity room air conditioners. There are no models commercially
available that incorporate variable-speed compressors for cooling
capacities less than 8,000 Btu/h, and the uncertainty in the
availability of those compressors may have the potential to eliminate
room air conditioners with the smallest cooling capacities from the
market, should TSL 4 be selected. While there are similarly no room air
conditioners currently on the market with variable-speed compressors at
cooling capacities greater than 22,000 Btu/h, other air conditioning
products with such cooling capacities (e.g., mini-split air
conditioners) do exist in the U.S. market, thereby not giving rise to
the same uncertainties as for the smallest cooling capacities. Based on
an analysis of RECS 2015 and historical shipments data, approximately
78 percent of consumers in the low-income sample purchase units in PC 1
and PC 2. The unavailability of products at this capacity range would
disproportionally impact the low-income consumers and their ability to
access cooling from room air conditioners.
The Secretary concludes that at TSL 4 for room air conditioners,
the benefits of energy savings, positive NPV of consumer benefits,
emission reductions, and the estimated monetary value of the climate
and health benefits would be outweighed by the impacts on
manufacturers, including the conversion costs and profit margin impacts
that could result in a reduction in INPV and potential unavailability
of key components for small-capacity product classes. Consequently, the
Secretary has concluded that TSL 4 is not economically justified.
DOE then considered TSL 3, which would save an estimated 1.41 quads
of energy, an amount DOE considers significant. TSL 3 represents the
same efficiency levels as TSL 4 for product classes with cooling
capacities greater than or equal to 8,000 Btu/h. For product classes,
less than 8,000 Btu/h, TSL 3 corresponds to the implementation of the
maximum efficiency single-speed compressor (i.e., one efficiency level
lower than at TSL 4). At TSL 3, the NPV of consumer benefit would be
$5.39 billion using a discount rate of 7 percent, and $11.46 billion
using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 3 are 48.5 Mt of
CO2, 20.1 thousand tons of SO2, 74.2 thousand
tons of NOX, 0.1 tons of Hg, 325.6 thousand tons of
CH4, and 0.5 thousand tons of N2O. The estimated
monetary value of the climate benefits from reduced GHG emissions
(associated with the average SC-GHG at a 3-percent discount rate) at
TSL 3 is $2.51 billion. The estimated monetary value of the health
benefits from reduced SO2 and NOX emissions at
TSL 3 is $2.02 billion using a 7-percent discount rate and $4.39
billion using a 3-percent discount rate.
Using a 7-percent discount rate for consumer benefits and costs,
SO2 reduction benefits, and NOX reduction
benefits, and the 3-percent discount rate for GHG social costs, the
estimated combined monetized NPV at TSL 3 is $9.92 billion. Using a 3-
percent discount rate for all consumer and emissions benefits and
costs, the estimated combined monetized NPV at TSL 3 is $18.37 billion.
The estimated total monetized NPV is provided for additional
information; however, DOE primarily relies upon the consumer NPV when
determining whether a standard level is economically justified.
At TSL 3, for the product classes with the largest market share,
the average LCC impact is $65 for PC 1, $72 for PC 2, and $100 for PC
3. The simple payback period is 0.8 years for PC 1, 1.5 years for PC 2,
and 2.9 years for PC 3. The fraction of consumers who experience a net
LCC cost is 3 percent for PC 1, 14 percent for PC 2, and 26 percent for
PC 3. Overall, 17 percent of consumers would experience a net cost
across all product classes.
Based on an analysis of RECS 2015 and historical shipments data,
approximately 78% of consumers in the low-income sample purchase units
in PC 1 and PC 2. At TSL 3, the percentage of consumers who experience
a net LCC cost is 1 percent for PC 1 and 10 percent for PC 2.
Additionally, the low-income subgroup analysis conservatively estimates
the impact to low-income consumers by assuming all renters (64% of low-
income sample) are paying the first cost of a room air conditioner. In
cases where the landlord purchases the unit and renter pays electricity
bill, the renter would not pay an increased first cost, but would
benefit from operating cost savings due to a higher efficiency
standard.
At TSL 3, the projected change in manufacturer INPV ranges from a
decrease of $57.7 million to an increase of $85.6 million, which
corresponds to a decrease of 4.8 percent and an increase of 7.1
percent, respectively. Conversion costs total $24.8 million.
After considering the analysis and weighing the benefits and
burdens, the Secretary has concluded that a standard set at TSL 3 for
room air conditioners would be economically justified. At this TSL, the
average LCC savings for room air conditioner consumers is positive,
meaning that the average consumer would experience net savings from the
standard. An estimated 17 percent of room air conditioner consumers
would experience a net cost. The FFC national energy savings of 1.41
quads are
[[Page 34357]]
significant and the NPV of consumer benefits is positive using both a
3-percent and 7-percent discount rate. Notably, the benefits to
consumers vastly outweigh the cost to manufacturers. At TSL 3, the NPV
of consumer benefits, even measured at the more conservative discount
rate of 7 percent, is 96 times higher than the maximum estimated
manufacturers' loss in INPV. The positive LCC savings--a different way
of quantifying consumer benefits--reinforces this conclusion. The
standard levels at TSL 3 are economically justified even without
weighing the estimated monetary value of emissions reductions. When
those monetized climate benefits from GHG emissions reductions and
health benefits from SO2 and NOX emissions
reductions are included--representing $2.51 billion in climate benefits
(associated with the average SC-GHG at a 3-percent discount rate), and
$4.39 billion (using a 3-percent discount rate) or $2.02 billion (using
a 7-percent discount rate) in health benefits--the rationale becomes
stronger still.
As stated, DOE conducts the walk-down analysis to determine the TSL
that represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified as required under
EPCA. The walk-down is not a comparative analysis, as a comparative
analysis would result in the maximization of net benefits instead of
energy savings that are technologically feasible and economically
justified, which would be contrary to the statute. 86 FR 70892, 70908.
Although DOE has not conducted a comparative analysis to select the
amended energy conservation standards, DOE notes that as compared to
TSL 4 and TSL 5, TSL 3 has a shorter payback period, smaller
percentages of consumer experiencing a net cost, a lower maximum
decrease in INPV, and lower manufacturer conversion costs.
Although DOE considered amended standard levels for room air
conditioners by grouping the efficiency levels for each product class
into TSLs, DOE evaluates all analyzed efficiency levels in its
analysis. For room air conditioners with cooling capacities greater
than or equal to 8,000 Btu/h, TSL 3 corresponds to EL 4, the highest
efficiency level below max-tech, incorporating commercially available
variable-speed compressors. The variable-speed compressor required to
achieve the max-tech efficiency level is currently available from only
a single manufacturer, leading to the likelihood there may not be
sufficient supply at that efficiency level to meet the demand of the
market for the full range of cooling capacities for room air
conditioners. For room air conditioners with cooling capacities less
than 8,000 Btu/h, TSL 3 corresponds to EL 3, incorporating the maximum
energy efficient single-speed compressors commercially available. Both
EL 4 and EL 5 for room air conditioners with cooling capacities less
than 8,000 Btu/h incorporate variable-speed compressors based on
modeling of available compressors for models with cooling capacities
greater than or equal to 8,000 Btu/h. Uncertainties exist at those
efficiency levels regarding both the availability of variable-speed
compressors that can be integrated into these smaller-size units and
the feasibility of incorporating these variable-speed compressors with
related components into a more space-constrained chassis than for
larger-capacity room air conditioners. There are no models commercially
available that incorporate variable-speed compressors for cooling
capacities less than 8,000 Btu/h. Additionally, average LCC savings are
higher at EL 3 relative to EL 4 for product classes with cooling
capacities less than 8,000 Btu/h. The adopted standard levels at TSL 3
results in positive LCC savings for all product classes, significantly
reduce the number of consumers experiencing a net cost, and reduce the
decrease in INPV and conversion costs to the point where DOE has
concluded they are economically justified, as discussed for TSL 3 in
the preceding paragraphs.
Therefore, based on the previous considerations, DOE adopts the
energy conservation standards for room air conditioners at TSL 3. The
amended energy conservation standards for room air conditioners, which
are expressed as CEER, are shown in Table V.46.
Table V.46--Amended Energy Conservation Standards for Room Air
Conditioners
------------------------------------------------------------------------
Adopted standard CEER
Product class (Btu/h)
------------------------------------------------------------------------
Room Air Conditioner without reverse cycle,
with louvered sides:
<6,000 Btu/h (1).......................... 13.1
6,000 to 7,900 Btu/h (2).................. 13.7
8,000 to 13,900 Btu/h (3)................. 16.0
14,000 to 19,900 Btu/h (4)................ 16.0
20,000 to 27,900 Btu/h (5a)............... 13.8
>=28,000 Btu/h (5b)....................... 13.2
Room Air Conditioner without reverse cycle,
without louvered sides:
<6,000 Btu/h (6).......................... 12.8
6,000 to 7,900 Btu/h (7).................. 12.8
8,000 to 10,900 Btu/h (8a)................ 14.1
11,000 to 13,900 Btu/h (8b)............... 13.9
14,000 to 19,900 Btu/h (9)................ 13.7
>=20,000 Btu/h (10)....................... 13.8
Room Air Conditioner with reverse cycle, with
louvered sides:
<20,000 Btu/h (11)........................ 14.4
>=20,000 Btu/h (13)....................... 13.7
Room Air Conditioner with reverse cycle,
without louvered sides:
<14,000 Btu/h (12)........................ 13.7
>=14,000 Btu/h (14)....................... 12.8
Casement:
Casement-Only (15)........................ 13.9
Casement-Slider (16)...................... 15.3
------------------------------------------------------------------------
[[Page 34358]]
2. Annualized Benefits and Costs of the Adopted Standards
The benefits and costs of the adopted standards can also be
expressed in terms of annualized values. The annualized net benefit is
(1) the annualized national economic value (expressed in 2021$) of the
benefits from operating products that meet the adopted standards
(consisting primarily of operating cost savings from using less
energy), minus increases in product purchase costs, and (2) the
annualized monetary value of the climate and health benefits.
Table V.47 shows the annualized values for room air conditioners
under TSL 3, expressed in 2021$. The results under the primary estimate
are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
NOX and SO2 reductions, and the 3-percent
discount rate case for GHG social costs, the estimated cost of the
adopted standards for room air conditioners is $205.2 million per year
in increased equipment installed costs, while the estimated annual
benefits are $736.9 million from reduced equipment operating costs,
$140.1 million in GHG reductions, and $199.9 million from reduced
NOX and SO2 emissions. In this case, the net
benefit amounts to $871.7 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the adopted standards for room air conditioners is
$176.8 million per year in increased equipment costs, while the
estimated annual benefits are $815.8 million in reduced operating
costs, $140.1 million from GHG reductions, and $244.8 million from
reduced NOX and SO2 emissions. In this case, the
net benefit amounts to $1,023.9 million per year.
Table V.47--Annualized Benefits and Costs of Adopted Standards (TSL 3) for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
Million 2021$/year
--------------------------------------------------------------
Low-net-benefits High-net-benefits
Primary estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................. 815.8 784.9 851.9
Climate Benefits *............................... 140.1 137.6 142.5
Health Benefits **............................... 244.8 240.6 248.9
--------------------------------------------------------------
Total Benefits [dagger]...................... 1,200.6 1,163.2 1,243.3
Consumer Incremental Product Costs [Dagger]...... 176.8 199.0 152.2
--------------------------------------------------------------
Net Benefits................................. 1,023.9 964.1 1,091.1
----------------------------------------------------------------------------------------------------------------
7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................. 736.9 712.3 765.4
Climate Benefits *............................... 140.1 137.6 142.5
Health Benefits **............................... 199.9 196.8 203.0
--------------------------------------------------------------
Total Benefits [dagger]...................... 1,076.9 1,046.7 1,111.0
Consumer Incremental Product Costs [Dagger]...... 205.2 227.0 181.0
--------------------------------------------------------------
Net Benefits................................. 871.7 819.7 930.0
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
These results include benefits to consumers which accrue after 2057 from the products shipped in 2028-2057.
The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the
Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
at a 3 percent discount rate are shown, but the Department does not have a single central SC-GHG point
estimate, and it emphasizes the importance and value of considering the benefits calculated using all four
sets of SC-GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted the
Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's order, the
preliminary injunction is no longer in effect, pending resolution of the Federal Government's appeal of that
injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in
that case from ``adopting, employing, treating as binding, or relying upon'' the interim estimates of the
social cost of greenhouse gases--which were issued by the Interagency Working Group on the Social Cost of
Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas emissions. As
reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized
greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as installation costs.
VI. Cooling Capacity Verification
In the April 2022 NOPR, DOE proposed to add the cooling capacity of
room air conditioners to 10 CFR 429.134 to help regulated entities
understand how DOE will determine the product class that applies to a
given basic model in the context of an enforcement investigation. DOE
proposed a similar approach to other products, where DOE would compare
the mean of the tested cooling capacity from the units of a
[[Page 34359]]
given basic model that DOE has tested for enforcement rounded to the
nearest hundred to the certified cooling capacity by the manufacturer.
DOE would use the certified cooling capacity of the manufacturer if the
mean of the DOE tested units is within 5 percent of the certified
cooling capacity. If the manufacturer does not have a valid
certification, including if the certified cooling capacity was
incorrectly certified, or the certified cooling capacity is found to be
outside of the 5 percent tolerance, DOE would use the rounded mean of
the DOE tested units within the enforcement sample to determine the
applicable product class and energy conservation standard for this
particular basic model.
DOE received no comments on the proposed cooling capacity
verification instructions and maintains that the provisions proposed in
the April 2022 NOPR provide additional clarity and transparency to the
enforcement process. Therefore, DOE is adopting the 10 CFR 429.134
amendments, as proposed in the April 2022 NOPR, in this final rule.
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Executive Order (``E.O.'') 12866, ``Regulatory Planning and
Review,'' 58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by
E.O. 13563, ``Improving Regulation and Regulatory Review'', 76 FR 3821
(Jan. 21, 2011), requires agencies, to the extent permitted by law, to:
(1) propose or adopt a regulation only upon a reasoned determination
that its benefits justify its costs (recognizing that some benefits and
costs are difficult to quantify); (2) tailor regulations to impose the
least burden on society, consistent with obtaining regulatory
objectives, taking into account, among other things, and to the extent
practicable, the costs of cumulative regulations; (3) select, in
choosing among alternative regulatory approaches, those approaches that
maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; distributive impacts;
and equity); (4) to the extent feasible, specify performance
objectives, rather than specifying the behavior or manner of compliance
that regulated entities must adopt; and (5) identify and assess
available alternatives to direct regulation, including providing
economic incentives to encourage the desired behavior, such as user
fees or marketable permits, or providing information upon which choices
can be made by the public. DOE emphasizes as well that E.O. 13563
requires agencies to use the best available techniques to quantify
anticipated present and future benefits and costs as accurately as
possible. In its guidance, the Office of Information and Regulatory
Affairs (``OIRA'') in OMB has emphasized that such techniques may
include identifying changing future compliance costs that might result
from technological innovation or anticipated behavioral changes. For
the reasons stated in the preamble, this final regulatory action is
consistent with these principles.
Section 6(a) of E.O. 12866 also requires agencies to submit
``significant regulatory actions'' to OIRA for review. OIRA has
determined that this final regulatory action constitutes a
``significant regulatory action'' within the scope of section 3(f)(1)
of E.O. 12866. Accordingly, pursuant to section 6(a)(3)(C) of E.O.
12866, DOE has provided to OIRA an assessment, including the underlying
analysis, of benefits and costs anticipated from the final regulatory
action, together with, to the extent feasible, a quantification of
those costs; and an assessment, including the underlying analysis, of
costs and benefits of potentially effective and reasonably feasible
alternatives to the planned regulation, and an explanation why the
planned regulatory action is preferable to the identified potential
alternatives. These assessments are summarized in this preamble and
further detail can be found in the technical support document for this
rulemaking.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (``IRFA'')
and a final regulatory flexibility analysis (``FRFA'') for any rule
that by law must be proposed for public comment, unless the agency
certifies that the rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities. As required
by E.O. 13272, ``Proper Consideration of Small Entities in Agency
Rulemaking,'' 67 FR 53461 (Aug. 16, 2002), DOE published procedures and
policies on February 19, 2003, to ensure that the potential impacts of
its rules on small entities are properly considered during the
rulemaking process. 68 FR 7990. DOE has made its procedures and
policies available on the Office of the General Counsel's website
(www.energy.gov/gc/office-general-counsel).
DOE reviewed this final rule under the provisions of the Regulatory
Flexibility Act and the procedures and policies published on February
19, 2003. DOE certifies that the final rule would not have significant
economic impact on a substantial number of small entities. The factual
basis of this certification is set forth in the following paragraphs.
For manufacturers of room air conditioners, the U.S. Small Business
Administration (``SBA'') has set a size threshold, which defines those
entities classified as ``small businesses'' for the purposes of the
statute. DOE used the SBA's small business size standards to determine
whether any small entities would be subject to the requirements of the
rule. (See 13 CFR part 121.) The size standards are listed by North
American Industry Classification System (``NAICS'') code and industry
description and are available at www.sba.gov/document/support--table-size-standards. Manufacturing of room air conditioners is classified
under NAICS 333415, ``Air-Conditioning and Warm Air Heating Equipment
and Commercial and Industrial Refrigeration Equipment Manufacturing.''
The SBA sets a threshold of 1,250 employees or fewer for an entity to
be considered as a small business for this category.
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. (42 U.S.C. 6291-
6317) Title III, Part B of EPCA \77\ established the Energy
Conservation Program for Consumer Products Other Than Automobiles. (42
U.S.C. 6291-6309) These products include room air conditioners, the
subject of this rulemaking.
---------------------------------------------------------------------------
\77\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
---------------------------------------------------------------------------
Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in significant conservation of energy.
(42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6
years after issuance of any final rule establishing or amending a
standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a notice of
proposed rulemaking including new proposed energy conservation
standards
[[Page 34360]]
(proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m))
In accordance with these and other statutory provisions discussed
in this document, DOE is adopting amended energy conservation standards
for room air conditioners.
To estimate the number of companies that could be small business
manufacturers of products covered by this final rule, DOE conducted a
market survey using public information and subscription-based company
reports to identify potential small manufacturers. DOE's research
involved DOE's Compliance Certification Database (``CCD''),\78\
California Energy Commission's Modernized Appliance Efficiency Database
System (``MAEDbS''),\79\ ENERGY STAR Product Finder,\80\ individual
company websites, and market research tools (e.g., reports from Dun &
Bradstreet \81\) to create a list of companies that manufacture,
produce, import, or assemble the products covered by this rulemaking.
DOE also asked stakeholders and industry representatives if they were
aware of any other small manufacturers during manufacturer interviews
and at DOE public meetings.
---------------------------------------------------------------------------
\78\ U.S. Department of Energy's Compliance Certification
Database. Available at: regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (last accessed: March 17, 2021).
\79\ California Energy Commission's Modernized Appliance
Efficiency Database System. Available at:
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (last
accessed: March 17, 2021).
\80\ U.S. Environmental Protection Agency's ENERGY STAR data
set. Available at: energystar.gov/productfinder/ (last accessed
March 17, 2021).
\81\ Dun & Bradstreet subscription login is available at:
app.dnbhoovers.com (last accessed September 14, 2022).
---------------------------------------------------------------------------
DOE identified eight OEMs of room air conditioner products sold in
the United States. Upon initial review, one OEM was identified as a
small manufacturer based in the United States. However, in August 2021,
a large manufacturer acquired the small manufacturer.\82\ Following
that acquisition, no domestic room air conditioner OEMs qualify as a
small business. Given the lack of small entities with a direct
compliance burden, DOE certifies that the proposed rule would not have
``a significant economic impact on a substantial number of small
entities.''
---------------------------------------------------------------------------
\82\ Rheem Manufacturing Company. Press Release. Available at:
www.rheem.com/about/news-releases/rheem-acquires-friedrich-air-conditioning (published August 30, 2021).
---------------------------------------------------------------------------
DOE did not receive written comments in response to the April 2022
NOPR that specifically addressed the potential impacts on small
businesses.
DOE has transmitted the certification and supporting statement of
factual basis to the Chief Counsel for Advocacy of the SBA for review
under 5 U.S.C. 605(b).
C. Review Under the Paperwork Reduction Act
Manufacturers of room air conditioners must certify to DOE that
their products comply with any applicable energy conservation
standards. In certifying compliance, manufacturers must test their
products according to the DOE test procedures for room air
conditioners, including any amendments adopted for those test
procedures. DOE has established regulations for the certification and
recordkeeping requirements for all covered consumer products and
commercial equipment, including room air conditioners. (See generally
10 CFR part 429.) The collection-of-information requirement for the
certification and recordkeeping is subject to review and approval by
OMB under the Paperwork Reduction Act (``PRA''). This requirement has
been approved by OMB under OMB control number 1910-1400. Public
reporting burden for the certification is estimated to average 35 hours
per response, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act of 1969
(``NEPA''), DOE has analyzed this rule in accordance with NEPA and
DOE's NEPA implementing regulations (10 CFR part 1021). DOE has
determined that this rule qualifies for categorical exclusion under 10
CFR part 1021, subpart D, appendix B, section B5.1, because it is a
rulemaking that establishes energy conservation standards for consumer
products or industrial equipment, none of the exceptions identified in
section B5.1(b) apply, no extraordinary circumstances exist that
require further environmental analysis, and it meets the requirements
for application of a categorical exclusion. See 10 CFR 1021.410.
Therefore, DOE has determined that promulgation of this rule is not a
major Federal action significantly affecting the quality of the human
environment within the meaning of NEPA, and does not require an
environmental assessment or an environmental impact statement.
E. Review Under Executive Order 13132
E.O. 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), imposes
certain requirements on Federal agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. The Executive order requires agencies to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and to carefully assess
the necessity for such actions. The Executive order also requires
agencies to have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that have federalism implications. On March 14, 2000, DOE
published a statement of policy describing the intergovernmental
consultation process it will follow in the development of such
regulations. 65 FR 13735. DOE has examined this rule and has determined
that it would not have a substantial direct effect on the States, on
the relationship between the National Government and the States, or on
the distribution of power and responsibilities among the various levels
of government. EPCA governs and prescribes Federal preemption of State
regulations as to energy conservation for the products that are the
subject of this final rule. States can petition DOE for exemption from
such preemption to the extent, and based on criteria, set forth in
EPCA. (42 U.S.C. 6297) Therefore, no further action is required by
Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil
Justice Reform,'' 61 FR 4729 (Feb. 7, 1996), imposes on Federal
agencies the general duty to adhere to the following requirements: (1)
eliminate drafting errors and ambiguity, (2) write regulations to
minimize litigation, (3) provide a clear legal standard for affected
conduct rather than a general standard, and (4) promote simplification
and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review
required by section 3(a), section 3(b) of E.O. 12988 specifically
requires that Executive agencies make every reasonable effort to ensure
that the regulation (1) clearly specifies the
[[Page 34361]]
preemptive effect, if any, (2) clearly specifies any effect on existing
Federal law or regulation, (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction,
(4) specifies the retroactive effect, if any, (5) adequately defines
key terms, and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of E.O. 12988 requires Executive agencies to
review regulations in light of applicable standards in section 3(a) and
section 3(b) to determine whether they are met or it is unreasonable to
meet one or more of them. DOE has completed the required review and
determined that, to the extent permitted by law, this final rule meets
the relevant standards of E.O. 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'')
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, section. 201 (codified at 2 U.S.C.
1531). For a regulatory action likely to result in a rule that may
cause the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector of $100 million or more in any one
year (adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them. On March 18, 1997, DOE published
a statement of policy on its process for intergovernmental consultation
under UMRA. 62 FR 12820. DOE's policy statement is also available at
www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
DOE has concluded that this final rule may require expenditures of
$100 million or more in any one year by the private sector. Such
expenditures may include (1) investment in research and development and
in capital expenditures by room air conditioner manufacturers in the
years between the final rule and the compliance date for the new
standards and (2) incremental additional expenditures by consumers to
purchase higher-efficiency room air conditioners, starting at the
compliance date for the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the final rule. (2 U.S.C. 1532(c)) The content requirements
of section 202(b) of UMRA relevant to a private sector mandate
substantially overlap the economic analysis requirements that apply
under section 325(o) of EPCA and Executive Order 12866. This
SUPPLEMENTARY INFORMATION section and the TSD for this final rule
respond to those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. (2 U.S.C. 1535(a)) DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the rule unless DOE publishes an
explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m),
this final rule establishes amended energy conservation standards for
room air conditioners that are designed to achieve the maximum
improvement in energy efficiency that DOE has determined to be both
technologically feasible and economically justified, as required by
6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives
considered by DOE is presented in chapter 17 of the TSD for this final
rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
Pursuant to E.O. 12630, ``Governmental Actions and Interference
with Constitutionally Protected Property Rights,'' 53 FR 8859 (Mar. 18,
1988), DOE has determined that this rule would not result in any
takings that might require compensation under the Fifth Amendment to
the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
information quality guidelines established by each agency pursuant to
general guidelines issued by OMB. OMB's guidelines were published at 67
FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR
62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving
Implementation of the Information Quality Act (April 24, 2019), DOE
published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has
reviewed this final rule under the OMB and DOE guidelines and has
concluded that it is consistent with applicable policies in those
guidelines.
K. Review Under Executive Order 13211
E.O. 13211, ``Actions Concerning Regulations That Significantly
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22,
2001), requires Federal agencies to prepare and submit to OIRA at OMB,
a Statement of Energy Effects for any significant energy action. A
``significant energy action'' is defined as any action by an agency
that promulgates or is expected to lead to promulgation of a final
rule, and that (1) is a significant regulatory action under Executive
Order 12866, or any successor order; and (2) is likely to have a
significant adverse effect on the supply, distribution, or use of
energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any significant energy action, the
agency must give a detailed statement of any adverse effects on energy
supply, distribution, or use should the proposal be implemented, and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use.
DOE has concluded that this regulatory action, which sets forth
amended energy conservation standards for room air conditioners, is not
a significant energy action because the standards are not likely to
have a significant adverse effect on the supply,
[[Page 34362]]
distribution, or use of energy, nor has it been designated as such by
the Administrator at OIRA. Accordingly, DOE has not prepared a
Statement of Energy Effects on this final rule.
L. Information Quality
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (``OSTP''), issued its Final Information
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan.
14, 2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the Bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' 70 FR 2664, 2667.
In response to OMB's Bulletin, DOE conducted formal peer reviews of
the energy conservation standards development process and the analyses
that are typically used and prepared a report describing that peer
review.\83\ Generation of this report involved a rigorous, formal, and
documented evaluation using objective criteria and qualified and
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the
productivity and management effectiveness of programs and/or projects.
Because available data, models, and technological understanding have
changed since 2007, DOE has engaged with the National Academy of
Sciences to review DOE's analytical methodologies to ascertain whether
modifications are needed to improve the Department's analyses. DOE is
in the process of evaluating the resulting report.\84\
---------------------------------------------------------------------------
\83\ The 2007 ``Energy Conservation Standards Rulemaking Peer
Review Report'' is available at the following website: energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0 (last accessed September 12, 2022).
\84\ The report is available at www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards.
---------------------------------------------------------------------------
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is a ``major rule'' as
defined by 5 U.S.C. 804(2).
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects
10 CFR Part 429
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Reporting and
recordkeeping requirements.
10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
Small businesses.
Signing Authority
This document of the Department of Energy was signed on March 22,
2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for
Energy Efficiency and Renewable Energy, pursuant to delegated authority
from the Secretary of Energy. That document with the original signature
and date is maintained by DOE. For administrative purposes only, and in
compliance with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register Liaison Officer has been authorized to
sign and submit the document in electronic format for publication, as
an official document of the Department of Energy. This administrative
process in no way alters the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on May 10, 2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
For the reasons stated in the preamble, DOE amends parts 429 and
430 of chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, as set forth below:
PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 429 continues to read as follows:
Authority: 42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
0
2. Amend Sec. 429.134 by adding paragraph (bb) to read as follows:
Sec. 429.134 Product-specific enforcement provisions.
* * * * *
(bb) Room air conditioners. The cooling capacity will be measured
pursuant to the test requirements of 10 CFR part 430 for each unit
tested. The results of the measurement(s) will be averaged and compared
to the value of cooling capacity certified by the manufacturer for the
basic model. The certified cooling capacity will be considered valid
only if the measurement is within five percent of the certified cooling
capacity.
(1) If the certified cooling capacity is found to be valid, the
certified cooling capacity will be used as the basis for determining
the minimum combined energy efficiency ratio allowed for the basic
model.
(2) If the certified cooling capacity is found to be invalid, the
average measured cooling capacity of the units in the sample will be
used as the basis for determining the minimum combined energy
efficiency ratio allowed for the basic model.
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
3. The authority citation for part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
4. Amend Sec. 430.32 by revising paragraph (b) to read as follows:
Sec. 430.32 Energy and water conservation standards and their
compliance dates.
* * * * *
(b) Room air conditioners. (1) The following standards remain in
effect from June 1, 2014, until May 26, 2026:
[[Page 34363]]
Table 3 to Paragraph (b)
------------------------------------------------------------------------
Combined energy
Equipment class efficiency ratio
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and 11.0
with a certified cooling capacity \1\ less than
6,000 Btu/h.........................................
2. Without reverse cycle, with louvered sides and 11.0
with a certified cooling capacity of 6,000 to 7,999
Btu/h...............................................
3. Without reverse cycle, with louvered sides and 10.9
with a certified cooling capacity of 8,000 to 13,999
Btu/h...............................................
4. Without reverse cycle, with louvered sides and 10.7
with a certified cooling capacity of 14,000 to
19,999 Btu/h........................................
5a. Without reverse cycle, with louvered sides and 9.4
with a certified cooling capacity of 20,000 Btu/h to
27,999 Btu/h........................................
5b. Without reverse cycle, with louvered sides and 9.0
with a certified cooling capacity of 28,000 Btu/h or
more................................................
6. Without reverse cycle, without louvered sides, and 10.0
with a certified cooling capacity less than 6,000
Btu/h...............................................
7. Without reverse cycle, without louvered sides and 10.0
with a certified cooling capacity of 6,000 to 7,999
Btu/h...............................................
8a. Without reverse cycle, without louvered sides and 9.6
with a certified cooling capacity of 8,000 to 10,999
Btu/h...............................................
8b. Without reverse cycle, without louvered sides and 9.5
with a certified cooling capacity of 11,000 to
13,999 Btu/h........................................
9. Without reverse cycle, without louvered sides and 9.3
with a certified cooling capacity of 14,000 to
19,999 Btu/h........................................
10. Without reverse cycle, without louvered sides and 9.4
with a certified cooling capacity of 20,000 Btu/h or
more................................................
11. With reverse cycle, with louvered sides, and with 9.8
a certified cooling capacity less than 20,000 Btu/h.
12. With reverse cycle, without louvered sides, and 9.3
with a certified cooling capacity less than 14,000
Btu/h...............................................
13. With reverse cycle, with louvered sides, and with 9.3
a certified cooling capacity of 20,000 Btu/h or more
14. With reverse cycle, without louvered sides, and 8.7
with a certified cooling capacity of 14,000 Btu/h or
more................................................
15. Casement-Only.................................... 9.5
16. Casement-Slider.................................. 10.4
------------------------------------------------------------------------
\1\ The certified cooling capacity is determined by the manufacturer in
accordance with 10 CFR 429.15(a)(3).
(2) The following standards apply to products manufactured starting
May 26, 2026:
Table 4 to Paragraph (b)(2)
------------------------------------------------------------------------
Combined energy
Equipment class efficiency ratio
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and 13.1
with a certified cooling capacity \1\ less than
6,000 Btu/h.........................................
2. Without reverse cycle, with louvered sides and 13.7
with a certified cooling capacity of 6,000 to 7,900
Btu/h...............................................
3. Without reverse cycle, with louvered sides and 16.0
with a certified cooling capacity of 8,000 to 13,900
Btu/h...............................................
4. Without reverse cycle, with louvered sides and 16.0
with a certified cooling capacity of 14,000 to
19,900 Btu/h........................................
5a. Without reverse cycle, with louvered sides and 13.8
with a certified cooling capacity of 20,000 Btu/h to
27,900 Btu/h........................................
5b. Without reverse cycle, with louvered sides and 13.2
with a certified cooling capacity of 28,000 Btu/h or
more................................................
6. Without reverse cycle, without louvered sides, and 12.8
with a certified cooling capacity less than 6,000
Btu/h...............................................
7. Without reverse cycle, without louvered sides and 12.8
with a certified cooling capacity of 6,000 to 7,900
Btu/h...............................................
8a. Without reverse cycle, without louvered sides and 14.1
with a certified cooling capacity of 8,000 to 10,900
Btu/h...............................................
8b. Without reverse cycle, without louvered sides and 13.9
with a certified cooling capacity of 11,000 to
13,900 Btu/h........................................
9. Without reverse cycle, without louvered sides and 13.7
with a certified cooling capacity of 14,000 to
19,900 Btu/h........................................
10. Without reverse cycle, without louvered sides and 13.8
with a certified cooling capacity of 20,000 Btu/h or
more................................................
11. With reverse cycle, with louvered sides, and with 14.4
a certified cooling capacity less than 20,000 Btu/h.
12. With reverse cycle, without louvered sides, and 13.7
with a certified cooling capacity less than 14,000
Btu/h...............................................
13. With reverse cycle, with louvered sides, and with 13.7
a certified cooling capacity of 20,000 Btu/h or more
14. With reverse cycle, without louvered sides, and 12.8
with a certified cooling capacity of 14,000 Btu/h or
more................................................
15. Casement-Only.................................... 13.9
16. Casement-Slider.................................. 15.3
------------------------------------------------------------------------
\1\ The certified cooling capacity is determined by the manufacturer in
accordance with 10 CFR 429.15(a)(3).
* * * * *
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix A--Letter From the Department of Justice to the Department of
Energy
U.S. Department of Justice, Antitrust Division, Jonathan S. Kanter,
Assistant Attorney General, Main Justice Building, 950 Pennsylvania
Avenue NW, Washington, DC 20530-0001, (202) 514-2401/(202) 616-2645
(Fax), May 31, 2022
Ami Grace-Tardy, Assistant General Counsel for Legislation,
Regulation and Energy Efficiency, U.S. Department of Energy,
Washington, DC 20585, [email protected]
Dear Assistant General Counsel Grace-Tardy:
I am responding to your April 7, 2022, letter seeking the views
of the Attorney General about the potential impact on competition of
proposed energy conservation standards for room air conditioners
(room ACs). Your request was submitted under Section
325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as
amended (EPCA), 42 U.S.C. 6295(o)(2)(B)(i)(V) and 42 U.S.C. 6316(a),
which requires the Attorney General to make a determination of the
impact of any lessening of competition that is likely to result from
the imposition of proposed energy conservation standards. The
Attorney General's responsibility for responding to requests from
other departments about the effect of a program on competition has
been delegated to the Assistant Attorney General for the Antitrust
Division in 28 CFR 0.40(g).
In conducting its analysis, the Antitrust Division examines
whether a proposed standard may lessen competition, for example, by
substantially limiting consumer choice or increasing industry
concentration. A lessening of competition could result in higher
prices to manufacturers and consumers. We have reviewed the proposed
standards contained in the Notice of Proposed Rulemaking (87 FR
20608 April 7, 2022), and the related technical support documents.
We also reviewed the transcript
[[Page 34364]]
from the public meeting held on May 3, 2022 and reviewed public
comments submitted by industry members in response to DOE's Request
for Information in this matter.
Based on the information currently available, we do not believe
that the proposed energy conservation standards for room ACs are
likely to have a significant adverse impact on competition.
Sincerely,
Jonathan S. Kanter,
[FR Doc. 2023-10287 Filed 5-25-23; 8:45 am]
BILLING CODE 6450-01-P