[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Proposed Rules]
[Pages 59692-59709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16177]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89 , No. 141 / Tuesday, July 23, 2024 /
Proposed Rules
[[Page 59692]]
DEPARTMENT OF ENERGY
10 CFR Part 430
[EERE 2017-BT-STD-0019]
RIN 1904-AF65
Energy Conservation Program: Energy Conservation Standards for
Consumer Water Heaters
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notification of data availability and request for comment.
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SUMMARY: On July 28, 2023, the U.S. Department of Energy (``DOE'')
published a notice of proposed rulemaking (``NOPR''), in which DOE
proposed amended energy conservation standards for consumer water
heaters (``July 2023 NOPR''). In this notification of data availability
(``NODA''), DOE is updating portions of its analysis for gas
instantaneous water heaters. DOE requests comments, data, and
information regarding the updated analysis.
DATES: DOE will accept comments, data, and information regarding this
NODA no later than August 22, 2024.
ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at www.regulations.gov under docket
number EERE-2017-BT-STD-0019. Follow the instructions for submitting
comments. Alternatively, interested persons may submit comments,
identified by docket number EERE-2017-BT-STD-0019, by any of the
following methods:
(1) Email: [email protected]. Include the
docket number EERE-2017-BT-STD-0019 in the subject line of the message.
(2) Postal Mail: Appliance and Equipment Standards Program, U.S.
Department of Energy, Building Technologies Office, Mailstop EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. If possible,
please submit all items on a compact disc (CD), in which case it is not
necessary to include printed copies.
No telefacsimiles (``faxes'') will be accepted. For detailed
instructions on submitting comments and additional information on this
process, see section IV of this document.
Docket: The docket for this activity, which includes Federal
Register notices, comments, and other supporting documents/materials,
is available for review at www.regulations.gov. All documents in the
docket are listed in the www.regulations.gov index. However, not all
documents listed in the index may be publicly available, such as
information that is exempt from public disclosure.
The docket web page can be found at www.regulations.gov/docket/EERE-2017-BT-STD-0019. The docket web page contains instructions on how
to access all documents, including public comments, in the docket. See
section IV of this document for information on how to submit comments
through www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW, Washington, DC, 20585-0121. Email:
[email protected].
Mr. Uchechukwu ``Emeka'' Eze, U.S. Department of Energy, Office of
the General Counsel, GC-33, 1000 Independence Avenue SW, Washington,
DC, 20585-0121. Telephone: (202) 586-4798. Email:
[email protected].
For further information on how to submit a comment or review other
public comments and the docket, contact the Appliance and Equipment
Standards Program staff at (202) 287-1445 or by email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Discussion
A. Engineering Analysis
B. Markups Analysis
C. Energy Use Analysis
D. Life-Cycle Cost and Payback Period Analysis
1. Installation Cost
2. Energy Efficiency Distribution in the No-New-Standards Case
E. Shipments Analysis
F. National Impact Analysis
G. Consumer Subgroup Analysis
H. Manufacturer Impact Analysis
1. Manufacturer Production Costs
2. Shipments Projections
3. Product and Capital Conversion Costs
4. Manufacturer Markup Scenarios
I. Utility Impact Analysis, Emissions Analysis, and Monetizing
Emissions Impacts
III. Analytical Results
1. Life-Cycle Cost and Payback Period
a. Consumer Subgroup Analysis
b. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Direct Impacts on Employment
3. National Impact Analysis
a. National Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Need of the Nation To Conserve Energy
5. Summary of Economic Impacts
IV. Public Participation
V. Approval of the Office of the Secretary
I. Introduction
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include consumer water
heaters, the subject of this document. (42 U.S.C. 6292(a)(4))
Generally, DOE defines a ``water heater,'' consistent with EPCA's
definition at 42 U.S.C. 6291(27) and codified at 10 CFR 430.2, as a
product which utilizes oil, gas, or electricity to heat potable water
for use outside the heater upon demand. ``Gas-fired instantaneous water
heater,'' defined at 10 CFR 430.2, means a water heater that uses gas
as the main energy source, has a nameplate input rating less than
200,000 Btu per hour, and contains no more than one gallon of water per
4,000 Btu per hour of input.
On July 28, 2023, DOE published in the Federal Register a notice of
proposed rulemaking (``July 2023 NOPR'') and technical support document
(``NOPR TSD'') with a 60-day comment period that proposed new and
amended standards for consumer water heaters. 88 FR 49058 (Jul. 28,
2023). On September 13, 2023, DOE presented the
[[Page 59693]]
proposed standards and accompanying analysis at a public meeting.
On May 6, 2024, DOE published in the Federal Register a final rule
that amended the energy conservation standards for certain consumer
water heaters. 89 FR 37778 (May 6, 2024). In that final rule, DOE
finalized standards for all consumer water heaters with the exception
of gas-fired instantaneous water heaters (``GIWHs'') as defined in 10
CFR 430.2. For gas-fired instantaneous water heaters, DOE indicated
that it was not finalizing standards in the May 2024 final rule, as it
continued to consider comments submitted in response to earlier
rulemaking stages before finalizing a decision on amended standards.
Id. at 89 FR 37794.
In this document, DOE is providing a full set of analytical results
specific to gas-fired instantaneous water heaters that include updates
as compared to the analysis conducted for the July 2023 NOPR. DOE is
not summarizing or responding to any gas-fired instantaneous water
heater-specific comments in this document; DOE is continuing to
consider all of the gas-fired instantaneous water heater-specific
stakeholder comments received in response to the July 2023 NOPR and
September 2023 Public Webinar and will address these comments in a
future action. Based on consideration of all of the public comments
received, including any additional comments received in response to
this NODA, DOE may adopt energy efficiency levels (``ELs'') that are
either higher or lower than the proposed standards.
II. Discussion
In the following sections, DOE details its updated analysis for
gas-fired instantaneous water heaters and is showing the analysis and
results relevant to these products. A full description of the
methodology used to conduct the analysis is available in the July 2023
NOPR TSD.\1\ DOE is using the same methods as the NOPR. DOE seeks
comment on any issues raised by this NODA, including those specifically
identified below. Updates to the analysis for this NODA are then
discussed in the subsections below.
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\1\ Available at: www.regulations.gov/document/EERE-2017-BT-STD-0019-0058 (Last accessed July 3, 2024).
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A. Engineering Analysis
The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of gas-fired instantaneous
water heaters. There are two elements to consider in the engineering
analysis; the selection of efficiency levels to analyze (i.e., the
``efficiency analysis'') and the determination of product cost at each
efficiency level (i.e., the ``cost analysis''). DOE estimates the
baseline cost, as well as the incremental cost for the product at
efficiency levels above the baseline. The output of the engineering
analysis is a set of cost-efficiency ``curves'' that are used in
downstream analyses (i.e., the life-cycle cost and payback period
(``LCC'' and ``PBP'') analyses, the manufacturer impact analysis
(``MIA''), and the national impact analysis (``NIA'')).
In this NODA, DOE has analyzed the same efficiency levels for gas-
fired instantaneous water heaters as were considered in the July 2023
NOPR, which are shown in table II.1, expressed in terms of uniform
energy factor (UEF). 88 FR 49058, 49093. These levels span the range
from the ``baseline'' levels, which reflect the current energy
conservation standard levels, to the maximum technologically feasible
(``max-tech'') levels. As discussed in the July 2023 NOPR, a coalition
of seven public- and private-sector organizations collectively referred
to as the ``Joint Stakeholders'' submitted recommendations for the
amended standard levels for various classes of consumer water heaters,
including gas-fired instantaneous water heaters. 89 FR 37778, 37790.
Efficiency level 2 corresponds to the levels recommended by the Joint
Stakeholders in the Joint Stakeholder Recommendation (``JSR'').
Table II.1--Gas-Fired Instantaneous: Veff <2 gal,
Rated Input >50,000 Btu/h
----------------------------------------------------------------------------------------------------------------
UEF
Efficiency level ---------------------------------------------------------------
Very small * Low * Medium High
----------------------------------------------------------------------------------------------------------------
0 (Baseline--Current Federal Energy Conservation 0.80 0.81 0.81 0.81
Standard)......................................
1............................................... [dagger] 0.86 [dagger] 0.87 0.87 0.89
2 (JSR)......................................... [dagger] 0.89 [dagger] 0.91 0.91 0.93
3............................................... [dagger] 0.90 [dagger] 0.92 0.92 0.95
4 (Max-Tech).................................... [dagger] 0.91 [dagger] 0.93 0.93 0.96
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* Only one brand has commercially-available products in the very small draw pattern and low draw pattern at the
time of this analysis.
[dagger] DOE applied the differences in efficiency levels from the medium draw pattern to define the Efficiency
Levels 1 through 4 for the very small draw pattern and the low draw pattern.
In this NODA, DOE maintains the design options as they were
discussed in the July 2023 NOPR (see 88 FR 49058, 49095), with the
exception described below regarding the need for fully modulating
burners to achieve EL 3 and EL 4. In the July 2023 NOPR, DOE
tentatively described both EL 3 and EL 4 as efficiency levels that
would typically require fully modulating burners to achieve. In that
analysis, DOE had analyzed an additional efficiency level that was not
considered at previous rulemaking stages, EL 3, which was close to the
max-tech level, EL 4, and used generally similar design options. 88 FR
49058, 49092-49094 (July 28, 2023). However, based on further review of
the designs of gas-fired instantaneous water heating products currently
on the market, DOE has found that products that meet EL 3 but not EL 4
use step modulation rather than fully modulating burners.\2\
Additionally, based on a review of product literature, in the current
market, most manufacturers use fully modulating burners in designs that
achieve EL 4. However, a review of publicly available product
information suggests that although some manufacturers may employ fully
modulating burners at the max-tech efficiency today, EL 4 would still
be technologically feasible to achieve with heat exchanger improvements
alone, without needing to implement a fully modulating burner. This
result is consistent with the conclusion in the NOPR. Because the
[[Page 59694]]
pathway relying on heat exchanger improvements could be more cost-
effective for manufacturers to mass-produce designs at a scale
necessary to meet national demand, DOE expects that such designs may be
more common if standards were to be set at EL 4 than in the current
market. Therefore, DOE analyzes EL 4 to be achievable using either step
modulating or fully modulating burners and the manufacturer production
cost (``MPC'') estimated in this NODA reflects an average of these
design pathways. Table II.2 shows the design options at each efficiency
level considered for this NODA.
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\2\ The EL 3 GIWHs use step modulation. An upgrade to step
modulation is not necessary to achieve EL 3. Rather, the design
upgrade to achieve EL 3 is a larger condensing heat exchanger.
Table II.2--Design Options for Gas-Fired Instantaneous: Veff <2 gal,
Rated Input >50,000 Btu/h
------------------------------------------------------------------------
EL Design options
------------------------------------------------------------------------
0...................................... Step modulating burner; Non-
condensing tube-and-fin heat
exchanger.
1...................................... Step modulating burner;
Condensing tube heat
exchanger.
2...................................... Step modulating burner; Larger
condensing heat exchanger.
3...................................... Step modulating burner; Larger,
flat plate condensing heat
exchanger.
4...................................... Step modulating or fully
modulating burner; Larger
condensing heat exchanger.
------------------------------------------------------------------------
The results of the engineering analysis are reported as cost-
efficiency data in the form of MPCs and shipping costs calculated for
each efficiency level. DOE determined these MPCs using the same
methodology as the July 2023 NOPR, by developing bills of materials
(``BOMs'') based on a combination of physical and catalog teardowns and
using information in the BOMs along with component and material price
data to estimate MPCs. DOE updated the inputs to the BOMs (e.g.,
material prices, component prices) to estimate the MPCs for this NODA
using the most recent data available. For shipping costs, DOE similarly
maintained the methodology from the July 2023 NOPR (see 88 FR 49058,
49095-49096) but updated the cost per trailer using the most recent
data available. Because many gas-fired instantaneous water heaters sold
in the United States are manufactured overseas, these shipping costs
include the cost of shipping products from overseas to the United
States, and then from the coast to the middle of the country. Table
II.3 summarizes the results of the engineering analysis conducted for
this NODA and DOE specifically seeks comment on the engineering
analysis results presented in the NODA for gas instantaneous water
heaters.
Table II.3--Engineering Analysis Results for Gas-Fired Instantaneous: Veff <2 gal,
Rated Input >50,000 Btu/h
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UEF
----------------------------------------------------------------
EL Medium 120,000 High 199,000 MPC (2022$) MSP (2022$) Shipping (2022$)
Very small Low Btu/h Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................. N/A N/A 0.81 0.81 Med: 302.00...... Med: 437.90...... Med: 4.40.
High: 318.90..... High: 462.41..... High: 7.42.
1.............................. N/A N/A 0.87 0.89 Med: 429.63...... Med: 622.96...... Med: 6.87.
High: 448.39..... High: 650.16..... High: 9.23.
2.............................. N/A N/A 0.91 0.93 Med: 433.41...... Med: 628.45...... Med: 9.90.
High: 453.23..... High: 657.19..... High: 11.13.
3.............................. N/A N/A 0.92 0.95 Med: 439.02...... Med: 636.58...... Med: 9.90.
High: 460.25..... High: 667.36..... High: 11.13.
4.............................. N/A N/A 0.93 0.96 Med: 457.04...... Med: 662.70...... Med: 9.90.
High: 479.29..... High: 694.97..... High: 11.13.
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To account for manufacturers' non-production costs and profit
margin, DOE applies a multiplier (the manufacturer markup) to the MPC
as was done for the NOPR. The resulting manufacturer selling price
(``MSP'') is the price at which the manufacturer distributes a unit
into commerce. For this NODA, DOE maintained the methodology and
resulting manufacturer markups from the July 2023 NOPR. 88 FR 49058,
49100.
For further discussion of the engineering analysis, see chapter 5
of the NOPR TSD.
B. Markups Analysis
The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices, which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin. DOE used the same distribution channels and markup values as in
the July 2023 NOPR.
In addition to the markups, DOE obtained State and local taxes from
data provided by the Sales Tax Clearinghouse.\3\ These data represent
weighted average taxes that include county and city rates. DOE derived
shipment-weighted average tax values for each State considered in the
analysis. These sales tax values have been updated from those in the
July 2023 NOPR, based on the most recent available data at the time of
conducting the analysis but the methods remain the same as the NOPR.
Consistent with NOPR, taxes are not included the national assessment of
benefits and costs, only with respect to LCC and PBP.
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\3\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along
with Combined Average City and County Rates (November 10, 2023).
Available at www.thestc.com/STrates.stm (last accessed December 1,
2023).
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For further discussion of the markups analysis, see chapter 6 of
the NOPR TSD.
C. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of gas-fired instantaneous water heaters at
different efficiencies in representative U.S. single-family homes,
mobile homes, multi-family residences, and commercial buildings, and to
assess the energy savings potential of increased gas-fired
instantaneous water heater efficiency. The energy use analysis
estimates the range of energy use of gas-fired instantaneous water
heaters in the field (i.e., as they are actually used by
[[Page 59695]]
consumers). The energy use analysis provides the basis for other
analyses DOE performed, particularly assessments of the energy savings
and the savings in consumer operating costs that could result from
adoption of amended or new standards.
DOE estimated the annual energy consumption of gas-fired
instantaneous water heaters at specific energy efficiency levels across
a range of climate zones, building characteristics, and water heating
applications.
To determine the field energy use of gas-fired instantaneous water
heaters used in homes, in the July 2023 NOPR, DOE established a sample
of households using gas-fired instantaneous water heaters from EIA's
2015 Residential Energy Consumption Survey (``RECS 2015''), which was
the most recent such survey that was then fully available.\4\ The RECS
data provide information on the vintage of the home, as well as water
heating energy use in each household. These data reflect how water
heaters are actually used by consumers. DOE used the household samples
not only to determine water heater annual energy consumption, but also
as the basis for conducting the LCC and PBP analyses. DOE projected
household weights and household characteristics in 2030, the first full
year of compliance with any amended or new energy conservation
standards for gas-fired instantaneous water heaters. To characterize
future new homes, DOE used a subset of homes in RECS that were built
after 2000.
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\4\ Energy Information Administration (``EIA''), 2015
Residential Energy Consumption Survey (``RECS''). Available at
www.eia.gov/consumption/residential/ (last accessed December 1,
2023).
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For this NODA, DOE incorporated RECS 2020 as the basis of the
building sample development and updated the analyses accordingly.\5\
Incorporating RECS 2020 improves the representativeness of the
residential building sample as RECS 2020 brings a threefold increase in
sample size compared to RECS 2015.\6\ A larger sample size generally
results in smaller standard errors, especially for estimates of smaller
subpopulations. In this NODA, DOE maintains the same methodology in
residential sample development as the July 2023 NOPR, using the updated
RECS.
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\5\ Energy Information Administration (``EIA''), 2020
Residential Energy Consumption Survey (``RECS''). Available at
www.eia.gov/consumption/residential/ (last accessed December 1,
2023).
\6\ According to published data and EIA website, RECS 2020 is
based upon responses collected from in total 18,496 households which
is three times greater than 5,686 respondents in RECS 2015.
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To determine the field energy use of gas-fired instantaneous water
heaters used in commercial buildings, DOE established a sample of
buildings using gas-fired instantaneous water heaters from EIA's 2018
Commercial Building Energy Consumption Survey (``CBECS 2018''), which
remains the most recent such survey that is currently fully
available.\7\ DOE has maintained its sample development methodology
used in July 2023 NOPR for gas-fired instantaneous water heaters used
in commercial applications.
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\7\ U.S. Department of Energy: Energy Information
Administration, Commercial Buildings Energy Consumption Survey
(2018). Available at: www.eia.gov/consumption/commercial/data/2018/index.php?view=microdata (last accessed Dec. 1, 2023). In CBECS
2018, there are about 800 records that indicate usage of a GIWH out
of about 6500 total records.
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For further discussion of the energy use analysis, see chapter 7 of
the NOPR TSD.
D. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
gas-fired instantaneous water heaters. The effect of new or amended
energy conservation standards on individual consumers usually involves
a reduction in operating cost and an increase in purchase cost. DOE
used the following two metrics to measure consumer impacts:
The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). Future operating costs are based on the
energy use analysis and projected energy prices. To compute the
operating costs, DOE discounts future operating costs to the time of
purchase and sums them over the lifetime of the product.
The PBP is the estimated amount of time (in years) it
takes consumers to recover these increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of gas-fired instantaneous water
heaters in the absence of a standard at the analyzed EL. In contrast,
the PBP for a given efficiency level is measured relative to the
baseline product.
For each considered efficiency level, DOE calculated the LCC and
PBP for a nationally representative set of housing units and commercial
buildings. As stated previously, DOE developed household samples from
the RECS 2020 and CBECS 2018 for this NODA. Equipment cost changes are
updates to the engineering. Operating cost changes are the result of
sample and energy price updates. The LCC results shown below in section
III show both separately. For each sample household and commercial
building, DOE determined the energy consumption for the gas-fired
instantaneous water heaters and the appropriate energy price. By
developing a representative sample of households and commercial
buildings, the analysis captured the variability in energy consumption
and energy prices associated with the use of gas-fired instantaneous
water heaters.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, shipping costs, and sales taxes--and installation
costs. Inputs to the calculation of operating expenses include annual
energy consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability. This methodology is the same as presented
in the NOPR and described in more detail in the NOPR TSD.
The computer model DOE uses to calculate the LCC relies on a Monte
Carlo simulation to incorporate uncertainty and variability into the
analysis. The Monte Carlo simulations randomly sample input values from
the probability distributions and gas-fired instantaneous water heater
user samples. For this rulemaking, the Monte Carlo approach is
implemented in MS Excel together with the Crystal Ball\TM\ add-on.\8\
The model calculated the LCC for products at each efficiency level for
10,000 water heater installations in housing and commercial building
units per simulation run. The analytical
[[Page 59696]]
results include a distribution of 10,000 data points showing the range
of LCC savings for a given efficiency level relative to the no-new-
standards case efficiency distribution. In performing an iteration of
the Monte Carlo simulation for a given consumer, product efficiency is
chosen based on its probability. At the high end of the range, if the
chosen product efficiency is greater than or equal to the efficiency of
the standard level under consideration, the LCC calculation reveals
that the hypothetical consumer represented by that data point is not
impacted by the standard level because that consumer is already
purchasing a more-efficient product. At the low end of the range, if
the chosen product efficiency is less than the efficiency of the
standard level under consideration, the LCC calculation reveals that
the hypothetical consumer represented by that data point is impacted by
the standard level. By accounting for consumers who already purchase
more-efficient products, DOE avoids overstating the potential benefits
from increasing product efficiency. DOE believes the efficiency
assignment methodology better reflects purchasing behavior in the
market today than alternative approaches that focus solely on trading
off upfront and operating costs.
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\8\ Crystal Ball\TM\ is commercially-available software tool to
facilitate the creation of these types of models by generating
probability distributions and summarizing results within Excel,
available at www.oracle.com/technetwork/middleware/crystalball/overview/index.html (last accessed December 1, 2023).
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DOE calculated the LCC and PBP for consumers of gas-fired
instantaneous water heaters as if each were to purchase a new product
in the first year of required compliance with new or amended standards.
New and amended standards apply to gas-fired instantaneous water
heaters manufactured 5 years after the date on which any new or amended
standard is published. (42 U.S.C. 6295(m)(4)(A)(ii)) Therefore, DOE
used 2030 as the first full year of compliance with any amended
standards for gas-fired instantaneous water heaters. As in the NOPR,
DOE determined for this NODA that it is highly unlikely that consumers
will switch water heating products in response to a potential amended
standard for gas-fired instantaneous water heaters. DOE received public
comment regarding this determination in response to the NOPR, and seeks
any additional data regarding expected consumer behavior and/or the
costs of replacing non-condensing GIWH under the potential amended
standard.
Table II.4 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. Updates to the source or method
as compared to the July 2023 NOPR are discussed in the following
sections, which are limited to installation costs and the efficiency
distribution.
For further discussion of the life-cycle cost and payback period
analyses, see chapter 8 of the NOPR TSD.
Table II.4--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost................. Derived by multiplying MPCs by
manufacturer and retailer markups and
sales tax, as appropriate. Used
historical data to derive a price
scaling index to project product costs.
Installation Costs........... Installation cost determined with data
from RSMeans and other sources.
Efficiency Distribution...... Derived based on available shipments data
by efficiency and data from
certification databases.
Annual Energy Use............ Determined based on hot water use
calculated from the water heating energy
use reported in the RECS 2020 and CBECS
2018.
Energy Prices................ Natural Gas: Based on EIA's Natural Gas
Navigator data for 2022.
Electricity: Based on EIA's Form 861 data
for 2022.
Propane and Fuel Oil: Based on EIA's
State Energy Data System (``SEDS'') for
2021.
Variability: Regional energy prices
determined for 50 states and District of
Columbia for residential and commercial
applications.
Marginal prices used for natural gas and
electricity prices.
Energy Price Trends.......... Based on the Annual Energy Outlook 2023
(AEO2023) price projections.
Repair and Maintenance Costs. Based on RSMeans data and other sources.
Assumed variation in cost by efficiency.
Product Lifetime............. Based on shipments data, multi-year RECS,
American Housing Survey, American Home
Comfort Survey data.
Discount Rates............... Residential: approach involves
identifying all possible debt or asset
classes that might be used to purchase
the considered appliances, or might be
affected indirectly. Primary data source
was the Federal Reserve Board's Survey
of Consumer Finances.
Commercial: Calculated as the weighted
average cost of capital. Primary data
source was Damodaran Online.
Compliance Date.............. 2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in the July 2023 NOPR if there
are no updates.
1. Installation Cost
The installation cost is the cost to the consumer of installing the
gas-fired instantaneous water heater, in addition to the cost of the
water heater itself. The cost of installation covers all labor,
overhead, and material costs associated with the replacement of an
existing water heater or the installation of a water heater in a new
home, as well as delivery of the new water heater, removal of the
existing water heater, and any applicable permit fees.
[[Page 59697]]
DOE's analysis of installation costs estimated specific
installation costs for each sample household based on building
characteristics given in RECS 2020 and CBECS 2018. For this NODA, as in
the NOPR, DOE used 2023 RSMeans data for the installation cost
estimates, including labor costs.9 10 11 12 DOE's analysis
of installation costs accounted for regional differences in labor costs
by aggregating city-level labor rates from RSMeans into 50 U.S. States
and the District of Columbia to match RECS 2020 data and CBECS 2018
data.
---------------------------------------------------------------------------
\9\ RSMeans Company Inc., RSMeans Mechanical Cost Data.
Kingston, MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
\10\ RSMeans Company Inc., RSMeans Residential Repair &
Remodeling Cost Data. Kingston, MA (2023) (available at:
www.rsmeans.com/products/books/2023-cost-data-books) (last accessed
December 1, 2023).
\11\ RSMeans Company Inc., RSMeans Plumbing Cost Data. Kingston,
MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
\12\ RSMeans Company Inc., RSMeans Electrical Cost Data.
Kingston, MA (2023) (available at: www.rsmeans.com/products/books/2023-cost-data-books) (last accessed December 1, 2023).
---------------------------------------------------------------------------
For this NODA, DOE made further improvements to the methodology
used in the July 2023 NOPR to better account for the venting costs for
gas-fired instantaneous water heaters. First, DOE incorporated the
usage of a concentric pipe (a pipe used for both air intake and
venting) for some installations in the analysis, which was not included
in the NOPR analysis. Specifically, DOE estimated that 90 percent of
the non-condensing and 50 percent of the condensing gas-fired
instantaneous water heaters would use concentric pipes for the benefit
of only having to make one wall penetration. Because a single
concentric pipe is cheaper to install than two separate pipes (one for
air intake and one for venting), this installation scenario reduces
overall installation costs, particularly for non-condensing gas-fired
instantaneous water heaters. Additionally, because metal venting for
non-condensing water heaters is more expensive per foot than plastic
venting for condensing water heaters, updates to the analysis that
decrease the length of total venting required for some installations
will lower the LCC savings when replacing a non-condensing gas-fired
instantaneous water heater with a condensing gas-fired instantaneous
water heater for these installations.
Second, DOE adjusted its methodology of estimating the minimum
length of the vent run for this NODA. In the July 2023 NOPR, DOE
calculated the minimum vent length based on housing configuration and
installation location and estimated that the shortest route to vent a
gas instantaneous water heater is 3 ft. DOE conducted further research
of product literature and concluded that for many installations a
shorter vent run could be achieved, primarily by venting through a side
wall. Therefore, for this NODA, DOE recalibrated its methodology and
estimated that the minimum vent length can be as low as 1 ft for a
certain subset of installations.
Lastly, in the July 2023 NOPR, DOE did not account for the outdoor
installation of gas-fired tankless water heaters. For this NODA, DOE
utilized the location information from RECS 2020 and assumed that half
of the residential households that report their water heaters being
installed in an ``outdoor closet, crawlspace, or outdoor'' would
actually install the tankless water heater on the outside of a wall
without venting. Therefore, DOE estimates that among the entire sample,
about 12 percent of gas instantaneous water heaters are installed
outdoors, and DOE does not apply the venting costs for those
households. As with lowering the minimum vent length above, this update
to the analysis reduces LCC savings when replacing a non-condensing
gas-fired instantaneous water heater with a condensing gas-fired
instantaneous water heater for these installations.
The revisions to the installation cost and venting cost analysis
discussed above are specific to the gas-fired instantaneous water
heater market. After accounting for concentric pipes, shorter vent
lengths, and outdoor installations, the average total installed costs
for gas-fired instantaneous water heaters (at all ELs) are lower than
in the July 2023 NOPR. However, the average total installed cost
reduction as part of the NODA analysis for non-condensing gas-fired
instantaneous water heaters is greater than for condensing gas-fired
instantaneous water heaters. Therefore, DOE estimates higher average
incremental costs when replacing a non-condensing gas-fired water
heater with a condensing gas-fired water heater.
DOE seeks public comment on the replacement cost analysis.
2. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards). This approach reflects the fact that some
consumers may purchase products with efficiencies greater than the
baseline levels.
To estimate the energy efficiency distribution of gas-fired
instantaneous water heaters for 2030, DOE used available shipments data
by efficiency including in previous AHRI submitted historical shipment
data,\13\ ENERGY STAR unit shipments data,\14\ and data from a BRG
Building Solutions report (a third-party market research report).\15\
To cover gaps in the available shipments data, DOE used DOE's public
CCD model certification database \16\ and AHRI certification directory,
which catalog a number of technical parameters for certified
models.\17\ As compared to the July 2023 NOPR, the NODA analysis uses
updated versions of the BRG Building Solutions report, DOE's CCD model
database, and AHRI certification directory. The updated energy
efficiency distribution of gas-fired instantaneous water heaters for
2030 is nearly identical to the July 2023 NOPR.
---------------------------------------------------------------------------
\13\ AHRI. Confidential Instantaneous Gas-fired Water Heater
Shipments Data from 2004-2007 to LBNL. March 3, 2008.
\14\ ENERGY STAR. Unit Shipments data 2010-2022. multiple
reports (available at: www.energystar.gov/partner_resources/products_partner_resources/brand_owner_resources/unit_shipment_data)
(last accessed May 1, 2023).
\15\ BRG Building Solutions. The North American Heating &
Cooling Product Markets (2023 Edition). 2023.
\16\ U.S. Department of Energy's Compliance Certification
Database is available at regulations.doe.gov/certification-data
(last accessed Dec. 1, 2023).
\17\ Air Conditioning Heating and Refrigeration Institute.
Consumer's Directory of Certified Efficiency Ratings for Heating and
Water Heating Equipment. May 16, 2023 (available at
www.ahridirectory.org) (last accessed December 1, 2023).
---------------------------------------------------------------------------
The estimated market shares for the no-new-standards case for gas-
fired instantaneous water heaters are shown in Table II.5.
[[Page 59698]]
Table II.5--No-New-Standards Case Energy Efficiency Distributions in 2030 for Gas-Fired Instantaneous Water
Heaters
----------------------------------------------------------------------------------------------------------------
Draw pattern *
---------------------------------------------------------------
Medium High
Efficiency level ---------------------------------------------------------------
Market share Market share
UEF ** (%) UEF ** (%)
----------------------------------------------------------------------------------------------------------------
0............................................... 0.81 30 0.81 30
1............................................... 0.87 8 0.89 8
2............................................... 0.91 48 0.93 47
3............................................... 0.92 6 0.95 7
4............................................... 0.93 8 0.96 8
----------------------------------------------------------------------------------------------------------------
* Very small and low draw patterns do not exist for gas-fired instantaneous water heaters.
** UEF at the representative rated capacity.
The LCC Monte Carlo simulations draw from the efficiency
distributions and assign an efficiency to the water heater purchased by
each sample household in the no-new-standards case according to these
distributions.
As in the July 2023 NOPR, DOE used AHCS data \18\ to adjust its
water heater efficiency distributions as follows: (1) the market share
of higher efficiency equipment for households under 1,500 sq. ft. was
decreased by 5 percentage points; and (2) the market share of
condensing equipment for households above 2,500 sq. ft. was increased
by 5 percentage points.
---------------------------------------------------------------------------
\18\ Decision Analysts, 2022 American Home Comfort Studies
(available at: www.decisionanalyst.com/Syndicated/HomeComfort/)
(last accessed January 5, 2024). See the NOPR TSD section 8.4 for
more discussion.
---------------------------------------------------------------------------
E. Shipments Analysis
DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, net present value (``NPV''), and future
manufacturer cash flows.\19\ The shipments model takes an accounting
approach, tracking market shares of each product class and the vintage
of units in the stock. Stock accounting uses product shipments as
inputs to estimate the age distribution of in-service product stocks
for all years. The age distribution of in-service product stocks is a
key input to calculations of both the national energy savings (``NES'')
and NPV, because operating costs for any year depend on the age
distribution of the stock.
---------------------------------------------------------------------------
\19\ DOE uses data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general,
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------
DOE developed shipment projections based on historical data and an
analysis of key market drivers for each product. DOE estimated gas-
fired instantaneous water heater shipments by projecting shipments in
three market segments: (1) replacement of existing gas-fired
instantaneous water heaters; (2) new housing; and (3) new owners in
buildings that did not previously have a gas-fired instantaneous water
heater or existing water heater owners that are adding an additional
gas-fired instantaneous water heater.\20\ DOE followed the same
methodology as in the July 2023 NOPR, with the exception of using an
updated BRG Building Solutions report.\21\
---------------------------------------------------------------------------
\20\ The new owners primarily consist of households that add or
switch to a different water heater option during a major remodel.
Because DOE calculates new owners as the residual between its
shipments model compared to historical shipments, new owners also
include shipments that switch away from water heater product class
to another.
\21\ BRG Building Solutions. The North American Heating &
Cooling Product Markets (2023 Edition). 2023.
---------------------------------------------------------------------------
For further discussion of the shipments analysis, see chapter 9 of
the NOPR TSD.
F. National Impact Analysis
The NIA assesses the NES and the NPV from a national perspective of
total consumer costs and savings that would be expected to result from
new or amended standards at specific efficiency levels.\22\
(``Consumer'' in this context refers to consumers of the product being
regulated.) DOE calculates the NES and NPV for the potential standard
levels considered based on projections of annual product shipments,
along with the annual energy consumption and total installed cost data
from the energy use and LCC analyses. For the present analysis, DOE
projected the energy savings, operating cost savings, product costs,
and NPV of consumer benefits over the lifetime of gas-fired
instantaneous water heaters sold from 2030 through 2059.
---------------------------------------------------------------------------
\22\ The NIA accounts for impacts in the United States and U.S.
territories.
---------------------------------------------------------------------------
DOE evaluates the impacts of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for gas-
fired instantaneous water heaters in the absence of new or amended
energy conservation standards. For this projection, DOE considers
historical trends in efficiency and various forces that are likely to
affect the mix of efficiencies over time. DOE compares the no-new-
standards case with projections characterizing the market if DOE
adopted new or amended standards at specific energy efficiency levels.
For the standards cases, DOE considers how a given standard would
likely affect the market shares of products with efficiencies greater
than the standard.
Table II.6 summarizes the inputs and methods DOE used for the NIA
analysis for the NODA. Compared to the NOPR, the NIA for the NODA
includes slightly updated shipments, slightly updated efficiency
distribution, updated annual energy consumption per unit (due to the
update to RECS 2020), and updated total installed costs per unit, all
as discussed in the preceding sections. The annual energy cost per unit
also changes due to the annual energy consumption update, though the
energy prices remain the same.
For further discussion of the national impact analysis, see chapter
10 of the NOPR TSD.
[[Page 59699]]
Table II.6--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments......................... Annual shipments from shipments
model.
Compliance Date of Standard....... 2030.
Efficiency Trends................. No-new-standards case: Based on
historical data.
Standard cases: Roll-up in the
compliance year and then DOE
estimated growth in shipment-
weighted efficiency in all the
standards cases.
Annual Energy Consumption per Unit Annual weighted-average values are a
function of energy use at each EL.
Total Installed Cost per Unit..... Annual weighted-average values are a
function of cost at each EL.
Incorporates projection of future
product prices based on historical
data.
Annual Energy Cost per Unit....... Annual weighted-average values as a
function of the annual energy
consumption per unit and energy
prices.
Repair and Maintenance Cost per Annual values do not change with
Unit. efficiency level.
Energy Price Trends............... AEO2023 projections (to 2050) and
extrapolation thereafter.
Energy Site-to-Primary and FFC A time-series conversion factor
Conversion. based on AEO2023.
Discount Rate..................... Three and seven percent.\1\
Present Year...................... 2023.
------------------------------------------------------------------------
\1\ For assessment of climate effects, DOE uses 2% and 3%.
G. Consumer Subgroup Analysis
In analyzing the potential impact of new or amended energy
conservation standards on consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a new or amended national standard. The purpose of a
subgroup analysis is to determine the extent of any such
disproportional impacts. DOE evaluates impacts on particular subgroups
of consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. DOE analyzed the impacts of
the considered standard levels on three subgroups: (1) low-income
households, (2) senior-only households, and (3) small businesses. The
analysis used subsets of the RECS 2020 sample composed of households
and CBECS 2018 sample composed of commercial buildings that meet the
criteria for the three subgroups. DOE used the LCC and PBP spreadsheet
model to estimate the impacts of the considered efficiency levels on
these subgroups. DOE followed the same methodology as in the July 2023
NOPR, with the exception of updating from RECS 2015 to RECS 2020, as
discussed previously.
For further discussion of the consumer subgroup analysis, see
chapter 11 of the NOPR TSD.
H. Manufacturer Impact Analysis
DOE uses the Government Regulatory Impact Model (``GRIM'') to
quantify the changes in cash flow due to new or amended standards that
result in a higher or lower industry value. The GRIM uses a standard,
annual, discounted cash-flow analysis that incorporates manufacturer
costs, manufacturer markups, shipments, and industry financial
information as inputs. The GRIM models changes in costs, distribution
of shipments, investments, and manufacturer margins that could result
from an amended energy conservation standard. The GRIM spreadsheet uses
the inputs to arrive at a series of annual cash flows, beginning in
2023 (the base year of the analysis) and continuing 30 years after the
analyzed 2030 compliance year. DOE calculated industry net present
value (``INPV'') by summing the stream of annual discounted cash flows
during the analysis period. Consistent with the July 2023 NOPR, DOE
used a real discount rate of 9.3 percent for the gas-fired
instantaneous water heater industry. Key inputs to the GRIM (i.e.,
MPCs, shipments projections, conversion costs, and manufacturer markup
scenarios) are discussed in the following sections.
For further discussion of the manufacturer impact analysis, see
chapter 12 of the NOPR TSD.
1. Manufacturer Production Costs
The changes in the MPCs of covered products can affect the
revenues, gross margins, and cash flow of the industry. See section
II.A of this document for details on the NODA engineering analysis.
2. Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments by
efficiency level. Consistent with the July 2023 NOPR, the GRIM uses the
NIA's annual shipment projections derived from the shipments analysis.
88 FR 49058, 49120. See section II.E of this document for details on
the NODA shipments analysis.
3. Product and Capital Conversion Costs
For this NODA, DOE revised its July 2023 NOPR conversion cost
estimates for gas-fired instantaneous water heaters for efficiency
levels that would likely necessitate condensing technology (i.e., EL 1-
EL 4) to reflect the potential investments associated with repurposing
a newly built domestic manufacturing facility that is currently
optimized for production of non-condensing gas-fired instantaneous
water heaters. DOE otherwise maintained its conversion cost estimates
from the July 2023 NOPR. 88 FR 49058, 49127-49128. See table II.7 for
the estimated industry conversion costs at each analyzed efficiency
level.
[[Page 59700]]
Table II.7--Conversion Costs for Gas-Fired Instantaneous Water Heaters
------------------------------------------------------------------------
Capital Product
conversion conversion
Efficiency level costs costs
(millions (millions
2022$) 2022$)
------------------------------------------------------------------------
Baseline................................ $0.0 $0.0
EL 1.................................... 13.5 2.5
EL 2.................................... 16.3 3.6
EL 3.................................... 53.8 4.7
EL 4.................................... 53.8 4.7
------------------------------------------------------------------------
4. Manufacturer Markup Scenarios
This NODA uses the same manufacturer markup scenarios as the July
2023 NOPR. 88 FR 49058, 49128.
I. Utility Impact Analysis, Emissions Analysis, and Monetizing
Emissions Impacts
For this NODA pertaining to gas-instantaneous water heaters, DOE
conducted the utility impact and emissions analyses using the same
methodology as in the July 2023 NOPR. With the exception of the social
cost of greenhouse gas (SC-GHG) estimates discussed below, DOE also
used the same data sources that it used in the July 2023 NOPR.
To monetize the benefits of reducing GHG emissions, the July 2023
NOPR used the interim SC-GHG estimates presented in the ``Technical
Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide
Interim Estimates Under Executive Order 13990'' published in February
2021 by the Interagency Working Group on the SC-GHG (IWG). As a member
of the IWG involved in the development of the February 2021 SC-GHG TSD,
DOE agreed that the interim SC-GHG estimates represented the most
appropriate estimate of the SC-GHG until revised estimates were
developed reflecting the latest, peer-reviewed science. See 87 FR
78382, 78406-78408 for discussion of the development and details of the
IWG SC-GHG estimates. The IWG has continued working on updating the
interim estimates, but has not published final estimates.
Accordingly, in the regulatory analysis of its December 2023 final
rule, ``Standards of Performance for New, Reconstructed, and Modified
Sources and Emissions Guidelines for Existing Sources: Oil and Natural
Gas Sector Climate Review'' (89 FR 16820, March 8, 2024), the
Environmental Protection Agency (EPA) estimated climate benefits using
a new, updated set of SC-GHG estimates (2023 SC-GHG estimates). EPA
documented the methodology underlying the new estimates in the
regulatory impact analysis (``RIA'') for the December 2023 final rule
and in greater detail in a technical report entitled ``Report on the
Social Cost of Greenhouse Gases: Estimates Incorporating Recent
Scientific Advances'' that was presented as supplementary material to
the RIA.\23\ The 2023 SC-GHG estimates ``incorporate recent research
addressing recommendations of the Natural Academies of Science,
Engineering, and Medicine (National Academies), responses to public
comments on an earlier sensitivity analysis using draft SC-GHG
estimates included in EPA's December 2022 proposal [87 FR 74702,
December 6, 2022] in the oil and natural gas sector standards of
performance rulemaking, and comments from a 2023 external peer review
of the accompanying technical report.'' \24\
---------------------------------------------------------------------------
\23\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024)
\24\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024)
---------------------------------------------------------------------------
On December 22, 2023, the IWG issued a memorandum directing that
``agencies should use their professional judgment to determine which
estimates of the SC-GHG reflect the best available evidence, are most
appropriate for particular analytical contexts, and best facilitate
sound decision-making'' consistent with Office of Management and Budget
(OMB) Circular No. A-4 and applicable law.\25\
---------------------------------------------------------------------------
\25\ https://www.whitehouse.gov/wp-content/uploads/2023/12/IWG-Memo-12.22.23.pdf (last accessed July 3, 2024).
---------------------------------------------------------------------------
DOE has been extensively involved in the IWG process and related
work on the SC-GHGs for over a decade. This involvement includes DOE's
role as the federal technical monitor for the seminal 2017 report on
the SC-GHG issued by the National Academies, which provided extensive
recommendations on how to strengthen and update the SC-GHG
estimates.\26\ DOE has also participated in the IWG's work since 2021.
DOE technical experts involved in this work reviewed the 2023 SC-GHG
methodology and report in light of the National Academies'
recommendations and DOE's understanding of the state of the science.
---------------------------------------------------------------------------
\26\ Valuing Climate Damages: Updating Estimation of the Social
Cost of Carbon Dioxide The National Academies Press
(available at: https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of)
(last accessed July 3, 2024).
---------------------------------------------------------------------------
Based on this review, DOE has preliminarily determined that the
updated 2023 SC-GHG estimates, including the approach to discounting,
represent a significant improvement in estimating the SC-GHG through
incorporating the most recent advancements in the scientific literature
and by addressing recommendations on prior methodologies. In
particular, the 2023 SC-GHG estimates implement the key recommendations
of the National Academies, and they incorporate the extensive
scientific findings and methodological advances that have occurred
since the last IWG updates in 2013, 2015, and 2016.
The 2023 SC-GHG estimates have also been peer-reviewed. As
indicated by their statements, the peer reviewers strongly supported
the new methodology, calling it ``a huge advance,'' ``a real step
change,'' and ``an important improvement'' in estimating the SC-GHG,
and noting that it addressed the National Academies' and others'
recommendations and ``generally represents well the emerging consensus
in the literature.''
The most significant improvements in the 2023 SC-GHG estimates
carry out recommendations made by the National Academies. In its
report, the National Academies' principal recommendation was to develop
and use ``a new framework that would strengthen the scientific basis,
provide greater transparency, and improve characterization of the
uncertainties of the estimates.'' \27\ The IWG's estimates
[[Page 59701]]
since 2010 have relied on averaging the values produced by three
integrated assessment models, each of which generates a set of SC-GHG
estimates based on the inputs and assumptions built into that
particular model.\28\ The National Academies recommended an entirely
new approach that would ``unbundle'' this process and instead use a
framework in which each step of the SC-GHG calculation is developed as
one of four separate but integrated ``modules'': the socioeconomic
module, the climate module, the damages module, and the discounting
module. The report provided detailed recommendations on developing and
using these modules, including how to address discounting,
socioeconomic projections, climate modeling, and uncertainty.
---------------------------------------------------------------------------
\27\ Report Recommends New Framework for Estimating the Social
Cost of Carbon [verbar] National Academies (available at: https://www.nationalacademies.org/news/2017/01/report-recommends-new-framework-for-estimating-the-social-cost-of-carbon) (last accessed
July 3, 2023).
\28\ See https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf, 6 (last accessed July 3, 2023).
---------------------------------------------------------------------------
DOE preliminarily concludes that the 2023 SC-GHG estimates are
consistent with the National Academies' (2017) recommendations and
represent major scientific advancements over the IWG's approach. In
addition, DOE supports the incorporation of more recent scientific
findings and data throughout the development of each of the 2023 SC-GHG
modules and the underlying components of those modules.
Thus, in accordance with the IWG memo, and having reviewed the 2023
SC-GHG methodologies and updates, DOE has preliminarily determined that
the updated 2023 SC-GHG estimates reflect the best available scientific
and analytical evidence and methodologies, are accordingly the most
appropriate for DOE analyses, and best facilitate sound decision-making
by substantially improving the transparency of the estimates and
representations of uncertainty inherent in such estimates. DOE welcomes
comment on this preliminary determination.\29\ In a final rulemaking,
DOE will determine what role, if any, these estimates will play in any
final decision adopting amended energy conservation standards for gas-
instantaneous water heaters.
---------------------------------------------------------------------------
\29\ See EPA's SC-GHG website for all of the technical files
related to the updated estimates, including the final SC-GHG report
(provided as supplementary material to the Dec 2023 Oil and Gas rule
final RIA); all replication instructions and computer code for the
estimates; all files related to the public comment and peer review
process; and a workbook to assist analysts in applying the
estimates: https://www.epa.gov/environmental-economics/scghg.
---------------------------------------------------------------------------
For this NODA, DOE used these updated 2023 SC-GHG values to
monetize the climate benefits of the emissions reductions associated at
each EL for gas-fired instantaneous water heaters. Using the 2023 SC-
GHG estimates provide a better informed range of potential climate
benefits associated with amended standards. The EPA technical report
presents SC-GHG values for emissions years through 2080; therefore, DOE
did not monetize the climate benefits of GHG emissions reductions
occurring after 2080. DOE expects additional climate impacts to accrue
from GHG emissions changes post 2080, but due to a lack of readily
available SC-GHG estimates for emissions years beyond 2080 and the
relatively small emission effects expected from those years, DOE has
not monetized these additional impacts in this analysis. The overall
climate benefits are generally greater when using the higher, updated
2023 SC-GHG estimates, compared to the climate benefits using the older
IWG SC-GHG estimates, which were used in the July 2023 NOPR. To
facilitate a comparison, DOE also performed a sensitivity analysis
using the IWG's 2021 interim SC-GHG estimates. The results are shown in
section III.4 below. The net benefits of the rule are positive,
however, under either SC-GHG calculation methodology.
For this NODA, DOE monetized NOX and SO2
using the same methodology and data sources as described in chapter 14
of the NOPR TSD.
III. Analytical Results
1. Life-Cycle Cost and Payback Period
DOE analyzed the economic impacts on gas-fired instantaneous water
heater consumers by looking at the effects that potential new and
amended standards at each EL would have on the LCC and PBP.\30\ DOE
also examined the impacts of potential standards on selected consumer
subgroups. These analyses are discussed in the following sections.
---------------------------------------------------------------------------
\30\ DOE has made an updated LCC spreadsheet model available in
the docket with these results relating specifically to gas
instantaneous water heaters.
---------------------------------------------------------------------------
In general, higher-efficiency products affect consumers in two
ways: (1) purchase price increases and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e., product price plus installation costs), and
operating costs (i.e., annual energy use, energy prices, energy price
trends, repair costs, and maintenance costs). The LCC calculation also
uses product lifetime and a discount rate.
Tables III.1 and III.2 show the LCC and PBP results. In the first
table, the simple payback is measured relative to the baseline product.
In the second table, the impacts are measured relative to the
efficiency distribution in the no-new-standards case in the compliance
year (see section II.D.2 of this document). Because some consumers
purchase products with higher efficiency in the no-new-standards case,
the average savings are less than the difference between the average
LCC of the baseline product and the average LCC at each EL. The savings
refer only to consumers who are affected by a standard at a given EL.
Those who already purchase a product with efficiency at or above a
given EL are not affected. Consumers for whom the LCC increases at a
given EL experience a net cost.
Table III.1--Average LCC and PBP Results for Gas-Fired Instantaneous Water Heaters
(Veff <2 gal, Rated Input >50,000 Btu/h)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2022$)
---------------------------------------------------------------- Simple payback Average
Efficiency level First year's Lifetime (years) Lifetime
Installed cost operating cost operating cost LCC (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 2,019 291 4,363 6,382 .............. 20.0
1....................................................... 2,213 274 4,153 6,365 12.1 20.0
2....................................................... 2,226 266 4,029 6,255 8.5 20.0
3....................................................... 2,241 263 3,975 6,216 7.9 20.0
4....................................................... 2,282 260 3,931 6,213 8.5 20.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each EL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
[[Page 59702]]
Table III.2--Average LCC Savings Relative to the No-New-Standards Case
for Gas-Fired Instantaneous
Water Heaters (Veff <2 gal, Rated Input >50,000 Btu/h)
------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Percent of
Efficiency level Average LCC consumers that
savings * experience net
(2022$) cost
------------------------------------------------------------------------
1....................................... 2 17.1
2....................................... 109 14.8
3....................................... 86 24.7
4....................................... 83 38.9
------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
a. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered ELs on low-income households, senior-only households, and
small businesses.
Table III.3 compares the average LCC savings and PBP at each
efficiency level for the consumer subgroups with similar metrics for
the entire consumer sample. In most cases, the average LCC savings and
PBP for low-income households and senior-only households at the
considered efficiency levels are not substantially different from the
average for all households.
Table III.3--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired
Instantaneous Water Heaters (Veff <2 gal, Rated Input >50,000 Btu/h)
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only Small
EL households households businesses All households
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1............................................... 64 (36) (118) 2
2............................................... 183 77 (24) 109
3............................................... 123 72 18 86
4............................................... 128 63 9 83
----------------------------------------------------------------------------------------------------------------
Simple Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1............................................... 10.1 12.9 10.3 12.1
2............................................... 7.1 9.1 7.2 8.5
3............................................... 6.6 8.5 6.7 7.9
4............................................... 6.9 9.2 7.0 8.5
----------------------------------------------------------------------------------------------------------------
Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1............................................... 8.4 19.8 23.1 17.1
2............................................... 7.4 16.8 25.0 14.8
3............................................... 12.8 27.2 44.6 24.7
4............................................... 22.9 41.7 55.9 38.9
----------------------------------------------------------------------------------------------------------------
Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1............................................... 16.9 9.1 8.9 12.9
2............................................... 25.3 21.3 16.3 23.0
3............................................... 65.2 56.7 42.7 60.2
4............................................... 63.8 49.5 38.8 52.9
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate a negative number.
b. Rebuttable Presumption Payback
EPCA establishes a rebuttable presumption that an energy
conservation standard is economically justified if the increased
purchase cost for a product that meets the standard is less than three
times the value of the first-year energy savings resulting from the
standard. (42 U.S.C. 6295(o)(2)(B)(iii)) In calculating a rebuttable
presumption payback period for each of the analyzed ELs, DOE used
discrete values, and, as required by EPCA, based the energy use
calculation on the DOE test procedures for gas-fired instantaneous
water heaters. In contrast, the PBPs presented in section III.1 of this
document were calculated using distributions that reflect the range of
energy use in the field.
Table III.4 presents the rebuttable-presumption payback periods for
the analyzed ELs.
[[Page 59703]]
Table III.4--Comparison of Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
EL 1 2 3 4
----------------------------------------------------------------------------------------------------------------
(years)
-------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters....... 10.2 7.4 7.0 7.5
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
Table III.5 presents the GRIM results for the updated gas-fired
instantaneous water heater analysis discussed in this NODA. The
methodology and assumptions used in the MIA did not change from the
July 2023 NOPR except for the analytical changes described in prior
sections (e.g., revised conversion cost estimates). Details of the MIA
inputs and methodology are available in chapter 12 of the TSD for the
July 2023 NOPR.\31\
---------------------------------------------------------------------------
\31\ https://www.regulations.gov/document/EERE-2017-BT-STD-0019-0058 (last accessed July 3, 2024).
Table III.5--Manufacturer Impact Analysis for Gas-Fired Instantaneous Water Heaters
--------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency level
Units No-new- ---------------------------------------------------------------------------
standards case 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................ 2022$ millions........ 1,122.2 1,101.9 to 1,092.2 to 1,067.3 to 1,061.6 to
1,157.7 1,158.1 1,143.1 1,167.2
Change in INPV *.................... 2022$ millions........ .............. (20.3) to 35.5 (30.0) to 35.9 (54.9) to 20.9 (60.5) to 45.0
%..................... .............. (1.8) to 3.2 (2.7) to 3.2 (4.9) to 1.9 (5.4) to 4.0
Free Cash Flow (2029)............... 2022$ millions........ 88.7 81.8 80.2 62.9 62.9
Change in Free Cash Flow * (2029)... 2022$ millions........ .............. (6.9) (8.5) (25.8) (25.8)
%..................... .............. (7.8) (9.6) (29.1) (29.1)
Product Conversion Costs............ 2022$ millions........ .............. 2.5 3.6 4.7 4.7
Capital Conversion Costs............ 2022$ millions........ .............. 13.5 16.3 53.8 53.8
Total Investment Required........... 2022$ millions........ .............. 16.0 19.9 58.5 58.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate a negative number.
b. Direct Impacts on Employment
For this NODA, DOE revised its direct employment analysis to
account for a recently built domestic production facility dedicated to
manufacturing gas-fired instantaneous water heaters. DOE estimates that
approximately 20 percent of gas-fired instantaneous water heaters are
currently produced in the United States. DOE derived this value by
using its shipments analysis and public market share feedback from
stakeholder comments to the July 2023 NOPR.\32\
---------------------------------------------------------------------------
\32\ In 2023 (the reference year), DOE estimates that
approximately 0.41 million out of the 1.22 million gas-fired
instantaneous water heater unit shipments are non-condensing. Public
information submitted in response to the July 2023 NOPR indicates
that the domestic market share of non-condensing gas-fired
instantaneous water heaters is 60 percent.
---------------------------------------------------------------------------
Based on public information and DOE's shipments analysis, DOE
projects that there would be approximately 128 domestic production
workers of gas-instantaneous water heaters in 2030 (the analyzed
compliance year) in the no-new-standards case. To establish a
conservative lower bound, DOE assumes all domestic manufacturers would
shift production to foreign countries at efficiency levels that would
likely necessitate condensing technology. Therefore, to avoid
underestimating the potential domestic direct employment impacts, DOE
models a lower-bound reduction in domestic direct employment of 128
production workers at EL 1 through EL 4 in 2030.
The upper bound domestic direct employment estimate corresponds to
a potential increase in the number of domestic workers that would
result from amended energy conservation standards if manufacturers
continue to produce the same scope of covered products within the
United States after compliance takes effect (i.e., 20 percent of gas-
instantaneous water heater shipments continue to be manufactured
domestically). Results of DOE's engineering and product teardown
analyses indicate that the labor content required to produce a
condensing gas-fired instantaneous water heater is approximately 59
percent more than the labor content required to produce a non-
condensing gas-fired instantaneous water heater. As such, DOE models an
upper-bound increase in domestic direct employment of 59 percent (an
increase of approximately 75 production workers) at EL 1 through EL 4
in 2030. DOE tentatively expects that domestic non-production
employment would not be significantly impacted at EL 1 through EL 4.
DOE seeks comment on this revision to the Direct Impacts on
Employment Analysis, including data pertaining to the potential
implications of the upper and lower bounds of this analysis on product
shipping costs and other markups that contribute to the total installed
costs for gas-fired instantaneous water heaters.
3. National Impact Analysis
This section presents DOE's estimates of the national energy
savings and the NPV of consumer benefits that would result from each of
the ELs considered as potential amended standards.
a. National Energy Savings
To estimate the energy savings attributable to potential amended
standards for gas-fired instantaneous water heaters, DOE compared their
energy consumption under the no-new-standards case to their anticipated
energy consumption under each EL. The savings are measured over the
entire lifetime of products purchased in the 30-year period that begins
in the year of anticipated compliance with amended standards (2030-
2059). Table III.6 presents DOE's projections of the national energy
savings for each EL considered for gas-fired instantaneous water
heaters. The savings were calculated using the approach described in
section II.F of this document.
[[Page 59704]]
Table III.6--Cumulative National Energy Savings for Gas-Fired Instantaneous Water Heaters;
30 Years of Shipments
[2030-2059]
----------------------------------------------------------------------------------------------------------------
Efficiency level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(quads)
----------------------------------------------------------------------------------------------------------------
Primary Energy
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters........... 0.32 0.52 0.76 0.97
----------------------------------------------------------------------------------------------------------------
FFC Energy
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters........... 0.35 0.58 0.85 1.07
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the ELs considered for gas-fired
instantaneous water heaters. In accordance with OMB's 2003 guidelines
on regulatory analysis,\33\ OMB finalized revisions to Circular A-4 in
November 2023, but this rule was proposed prior to the effective date
for proposals under the updated guidance. Hence, the 2003 Circular A-4
will be a basis for the analyses in this NODA. DOE calculated NPV using
both a 7-percent and a 3-percent real discount rate. Table III.7 shows
the consumer NPV results with impacts counted over the lifetime of
products purchased during the period 2030-2059.
---------------------------------------------------------------------------
\33\ U.S. Office of Management and Budget. Circular A-4:
Regulatory Analysis. September 17, 2003. https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf
(last accessed July 3, 2024).
Table III.7--Cumulative Net Present Value of Consumer Benefits for Gas-Fired Instantaneous Water Heaters; 30
Years of Shipments
[2030-2059]
----------------------------------------------------------------------------------------------------------------
Efficiency level
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
----------------------------------------------------------------------------------------------------------------
3 percent discount rate
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters........... 1.15 2.82 4.52 5.27
----------------------------------------------------------------------------------------------------------------
7 percent discount rate
----------------------------------------------------------------------------------------------------------------
Gas-fired Instantaneous Water Heaters........... 0.21 0.78 1.30 1.41
----------------------------------------------------------------------------------------------------------------
c. Indirect Impacts on Employment
DOE conducted the employment impact analysis using the same
methodology as in the July 2023 NOPR. DOE estimates that amended energy
conservation standards for gas-fired instantaneous water heaters will
reduce energy expenditures for consumers of those products, with the
resulting net savings being redirected to other forms of economic
activity. These expected shifts in spending and economic activity could
affect the demand for labor. DOE used an input/output model of the U.S.
economy to estimate indirect employment impacts of the ELs that DOE
considered. There are uncertainties involved in projecting employment
impacts, especially changes in the later years of the analysis.
Therefore, DOE generated results for near-term timeframes (2030-2035),
where these uncertainties are reduced. Results at each EL are presented
in Table III.8.
Table III.8--Short-Term Change in Employment
[1,000s of jobs]
------------------------------------------------------------------------
Efficiency level 2030 2035
------------------------------------------------------------------------
EL 1.............................. 0.0 to 0.5 0.1 to 0.6
EL 2.............................. 0.0 to 0.6 0.2 to 0.8
EL 3.............................. 0.0 to 0.7 0.3 to 1.0
EL 4.............................. 0.0 to 1.1 0.4 to 1.5
------------------------------------------------------------------------
[[Page 59705]]
The results suggest that the considered efficiency levels are
likely to have a negligible impact on the net demand for labor in the
economy. The net change in jobs is so small that it would be
imperceptible in national labor statistics and might be offset by
other, unanticipated effects on employment.
4. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Table III.9
presents the estimated impacts on electricity-generating capacity,
relative to the no-new-standards case, for the ELs that DOE considered
in this NODA.
Table III.9--Gas-Fired Instantaneous Water Heaters: Summary of Electric Utility Impact Results
----------------------------------------------------------------------------------------------------------------
EL
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Installed Capacity Reduction (MW)
----------------------------------------------------------------------------------------------------------------
2030............................................ (0.81) (0.75) (0.70) 5.00
2035............................................ (4.98) (4.61) (4.25) 32.1
2040............................................ (8.57) (7.92) (7.26) 58.6
2045............................................ (11.6) (10.7) (9.76) 84.8
2050............................................ (13.9) (12.7) (11.5) 109
----------------------------------------------------------------------------------------------------------------
Electricity Generation Reduction (GWh)
----------------------------------------------------------------------------------------------------------------
2030............................................ (2.07) (1.92) (1.78) 12.6
2035............................................ (12.1) (11.2) (10.4) 77.9
2040............................................ (21.0) (19.4) (17.8) 142
2045............................................ (27.9) (25.7) (23.5) 202
2050............................................ (32.5) (30.0) (27.2) 255
----------------------------------------------------------------------------------------------------------------
Note: Parentheses denote an increase in electric capacity or generation.
Energy conservation resulting from potential energy conservation
standards for gas-fired instantaneous water heaters is expected to
yield environmental benefits in the form of reduced emissions of
certain air pollutants and greenhouse gases. Table III.10 provides
DOE's estimate of cumulative emissions reductions expected to result
from the ELs considered in this NODA over a 30-year period of product
shipments. National impacts, which include physical emissions, are
estimated over 30 years of shipments extending to 2118.
Table III.10--Cumulative Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
Efficiency level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Electric Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 17 28 40 48
CH4 (thousand tons)............................. 0.3 0.6 0.8 1.1
N2O (thousand tons)............................. 0.03 0.06 0.08 0.11
SO2 (thousand tons)............................. 0.04 0.10 0.17 0.75
NOX (thousand tons)............................. 15 25 35 41
Hg (tons)....................................... (0.0004) (0.0004) (0.0003) 0.0035
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 2 4 6 7
CH4 (thousand tons)............................. 244 397 575 670
N2O (thousand tons)............................. 0.00 0.01 0.01 0.01
SO2 (thousand tons)............................. 0.01 0.02 0.03 0.04
NOX (thousand tons)............................. 38 62 89 104
Hg (tons)....................................... (0.0000) (0.0000) (0.0000) 0.0000
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 19 32 46 54
CH4 (thousand tons)............................. 244 398 576 671
N2O (thousand tons)............................. 0.04 0.06 0.09 0.12
SO2 (thousand tons)............................. 0.05 0.12 0.20 0.79
NOX (thousand tons)............................. 53 86 125 145
Hg (tons)....................................... (0.0004) (0.0004) (0.0003) 0.0035
----------------------------------------------------------------------------------------------------------------
Note: Totals may not equal sums due to rounding. Negative values refer to an increase in emissions.
[[Page 59706]]
As described in section II.I, DOE used the updated 2023 SC-GHG
values for estimating the climate benefits of reduced greenhouse gas
emissions. Table III.11 presents the value of CO2 emissions
reduction at each EL, table III.12 presents the value of the
CH4 emissions reduction at each EL, and table III.13
presents the value of the N2O emissions reduction at each
EL, using the 2023 SC-GHG values. The table provides results at each of
the three discount rates used in the 2023 SC-GHG estimates. Table
III.10 includes emissions reductions over 30 years of shipments
extending to 2118 while tables III.11 through III.13 estimate the
climate benefits through 2080.
Table III.11--Present Value of CO2 Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-
2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
Near-term Ramsey discount rate
EL -----------------------------------------------
2.5% 2.0% 1.5%
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
-----------------------------------------------
1............................................................... 2.0 3.6 6.4
2............................................................... 3.3 5.8 10.5
3............................................................... 4.8 8.3 15.1
4............................................................... 5.6 9.8 17.8
----------------------------------------------------------------------------------------------------------------
Table III.12--Present Value of Methane Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in
2030-2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
Near-term Ramsey discount rate
EL -----------------------------------------------
2.5% 2.0% 1.5%
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
-----------------------------------------------
1............................................................... 0.4 0.6 0.8
2............................................................... 0.7 0.9 1.3
3............................................................... 1.0 1.3 1.9
4............................................................... 1.1 1.6 2.3
----------------------------------------------------------------------------------------------------------------
Table III.13--Present Value of Nitrous Oxide Emissions Reduction for Gas-Fired Instantaneous Water Heaters
Shipped in 2030-2059 Using 2023 SC-GHG Values
----------------------------------------------------------------------------------------------------------------
Near-term Ramsey discount rate
EL -----------------------------------------------
2.5% 2.0% 1.5%
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
-----------------------------------------------
1............................................................... 0.0012 0.0019 0.0033
2............................................................... 0.0019 0.0032 0.0054
3............................................................... 0.0028 0.0046 0.0079
4............................................................... 0.0037 0.0061 0.0105
----------------------------------------------------------------------------------------------------------------
As part of the analysis for this rule, DOE conducted a sensitivity
analysis using the interim 2021 IWG SC-GHG values to estimate the
monetized climate benefits expected to result from the reduced
emissions of GHGs that DOE estimated for each of the considered ELs for
gas-fired instantaneous water heaters. Section II.I of this document
discusses the estimated SC-GHG values that DOE used for this
sensitivity analysis. Table III.14 presents the value of CO2
emissions reduction at each EL using the range of interim IWG SC-
CO2 values. Table III.15 presents the value of the
CH4 emissions reduction at each EL, and table III.16
presents the value of the N2O emissions reduction at each
EL. The table provides results at each of the four values used in the
2021 IWG SC-GHG estimates.
[[Page 59707]]
Table III.14--Present Value of CO2 Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in 2030-
2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
SC-CO2 case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
EL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
---------------------------------------------------------------
1............................................... 0.2 0.7 1.1 2.1
2............................................... 0.3 1.1 1.8 3.4
3............................................... 0.4 1.6 2.6 4.9
4............................................... 0.4 1.9 3.0 5.8
----------------------------------------------------------------------------------------------------------------
Table III.15--Present Value of Methane Emissions Reduction for Gas-Fired Instantaneous Water Heaters Shipped in
2030-2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
SC-CH4 case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
EL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
---------------------------------------------------------------
1............................................... 0.1 0.3 0.4 0.8
2............................................... 0.1 0.5 0.7 1.2
3............................................... 0.2 0.7 1.0 1.8
4............................................... 0.2 0.8 1.1 2.1
----------------------------------------------------------------------------------------------------------------
Table III.16--Present Value of Nitrous Oxide Emissions Reduction for Gas-Fired Instantaneous Water Heaters
Shipped in 2030-2059 Using 2021 IWG Values
----------------------------------------------------------------------------------------------------------------
SC-N2O case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
EL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
---------------------------------------------------------------
1............................................... 0.0001 0.0005 0.0008 0.0013
2............................................... 0.0002 0.0008 0.0013 0.0022
3............................................... 0.0003 0.0012 0.0018 0.0031
4............................................... 0.0004 0.0016 0.0025 0.0042
----------------------------------------------------------------------------------------------------------------
DOE also estimated the monetary value of the economic benefits
associated with NOX and SO2 emissions reductions
anticipated to result from the considered ELs for gas-fired
instantaneous water heaters. The dollar-per-ton values that DOE used
are the same as used in the July 2023 NOPR and discussed in the NOPR
TSD. Table III.17 presents the present value for NOX
emissions reduction for each EL calculated using 7-percent and 3-
percent discount rates, and table III.18 presents similar results for
SO2 emissions reductions. Emissions reductions for
NOX and SO2 are monetized over the entire
analytical period in the NIA (i.e., the full lifetime of products
shipped over 30 years, to 2118). The results in these tables reflect
application of EPA's low dollar-per-ton values, which DOE used to be
conservative.
Table III.17--Present Value of NOX Emissions Reduction for Gas-Fired
Instantaneous Water Heaters Shipped in 2030-2059
------------------------------------------------------------------------
7% Discount 3% Discount
EL rate rate
------------------------------------------------------------------------
(million 2022$)
-------------------------------
1....................................... 517 1,602
2....................................... 833 2,597
3....................................... 1,177 3,719
4....................................... 1,373 4,353
------------------------------------------------------------------------
[[Page 59708]]
Table III.18--Present Value of SO2 Emissions Reduction for Gas-Fired
Instantaneous Water Heaters Shipped in 2030-2059
------------------------------------------------------------------------
7% Discount 3% Discount
EL rate rate
------------------------------------------------------------------------
(million 2022$)
-------------------------------
1....................................... 0.04 0.2
2....................................... 0.9 2.8
3....................................... 1.8 5.7
4....................................... 12 38
------------------------------------------------------------------------
Not all the public health and environmental benefits from the
reduction of greenhouse gases,\34\ NOX, and SO2
are captured in the values above, and additional unquantified benefits
from the reductions of those pollutants as well as from the reduction
of direct PM and other co-pollutants may be significant. DOE has not
included monetary benefits of the reduction of Hg emissions because the
amount of reduction is very small.
---------------------------------------------------------------------------
\34\ https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (last accessed July 3, 2024).
---------------------------------------------------------------------------
5. Summary of Economic Impacts
Table III.19 presents the NPV values that result from adding the
estimates of the economic benefits resulting from reduced GHG and
NOX and SO2 emissions to the NPV of consumer
benefits calculated for each EL considered in this NODA. The consumer
benefits are domestic U.S. monetary savings that occur as a result of
purchasing the covered products, and are measured for the lifetime of
products shipped during the period 2030-2059. The climate benefits
associated with reduced GHG emissions resulting from a standard at the
analyzed EL are global benefits, and are also calculated based on the
lifetime of gas-fired instantaneous water heaters shipped during the
period 2030-2059.
Table III.19--Consumer NPV Combined With Present Value of Climate Benefits and Health Benefits
----------------------------------------------------------------------------------------------------------------
Category of climate benefits * EL 1 EL 2 EL 3 EL 4
----------------------------------------------------------------------------------------------------------------
Using 3% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
2.0% Near-term Ramsey DR........................ 6.9 12.1 17.9 21.0
----------------------------------------------------------------------------------------------------------------
Using 7% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
2.0% Near-term Ramsey DR........................ 4.9 8.3 12.1 14.1
----------------------------------------------------------------------------------------------------------------
* Climate benefits are only calculated for emissions reductions through 2080. Monetized climate effects are
presented under a 2 percent near-term Ramsey discount rate, consistent with the 2023 SC-GHG estimates. The
2003 version of OMB's Circular A-4 (https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) had generally recommended 3 percent and 7 percent as default discount rates for costs
and benefits, and as part of the IWG on the SC-GHG, OMB also recognized that climate effects should be
discounted only at appropriate consumption-based discount rates. In November 2023, OMB finalized an update to
Circular A-4, in which it recommended the general application of a 2.0 percent discount rate to costs and
benefits (subject to regular updates), as well as the consideration of the shadow price of capital when costs
or benefits are likely to accrue to capital. Because the SC-GHG estimates reflect net climate change damages
in terms of reduced consumption (or monetary consumption equivalents), the use of the social rate of return on
capital (7 percent and 3 percent under OMB's 2003 Circular A-4) to discount damages estimated in terms of
reduced consumption would inappropriately underestimate the impacts of climate change for the purposes of
estimating the SC-GHG.
IV. Public Participation
DOE requests comment on the updated analysis for gas-fired
instantaneous water heaters presented in the NODA. As noted in the July
2023 NOPR, DOE may adopt energy efficiency levels that are either
higher or lower than the proposed standards.
DOE will accept comments, data, and information regarding this NODA
no later than the date provided in the DATES section at the beginning
of this document. Interested parties Approval of the Office of the
Secretary may submit comments, data, and other information using any of
the methods described in the ADDRESSES section at the beginning of this
document.
Submitting comments via www.regulations.gov. The
www.regulations.gov web page will require you to provide your name and
contact information. Your contact information will be viewable to DOE
Building Technologies staff only. Your contact information will not be
publicly viewable except for your first and last names, organization
name (if any), and submitter representative name (if any). If your
comment is not processed properly because of technical difficulties,
DOE will use this information to contact you. If DOE cannot read your
comment due to technical difficulties and cannot contact you for
clarification, DOE may not be able to consider your comment.
However, your contact information will be publicly viewable if you
include it in the comment itself or in any documents attached to your
comment. Any information that you do not want to be publicly viewable
should not be included in your comment, nor in any document attached to
your comment. Otherwise, persons viewing comments will see only first
and last names, organization names, correspondence containing comments,
and any documents submitted with the comments.
Do not submit to www.regulations.gov information for which
disclosure is restricted by statute, such as trade secrets and
commercial or financial information (hereinafter referred to as
Confidential Business Information (``CBI'')). Comments submitted
through www.regulations.gov cannot be claimed as CBI. Comments received
through the website will waive any CBI claims for the information
submitted. For information on submitting CBI, see the Confidential
Business Information section.
DOE processes submissions made through www.regulations.gov before
posting. Normally, comments will be posted within a few days of being
submitted. However, if large volumes of comments are being processed
simultaneously, your comment may not be viewable for up to several
weeks. Please keep the comment tracking number that www.regulations.gov
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Submitting comments via email, hand delivery/courier, or postal
mail. Comments and documents submitted via email, hand delivery/
courier, or
[[Page 59709]]
postal mail also will be posted to www.regulations.gov. If you do not
want your personal contact information to be publicly viewable, do not
include it in your comment or any accompanying documents. Instead,
provide your contact information in a cover letter. Include your first
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Include contact information each time you submit comments, data,
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or hand delivery/courier, please provide all items on a CD, if
feasible, in which case it is not necessary to submit printed copies.
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Campaign form letters. Please submit campaign form letters by the
originating organization in batches of between 50 to 500 form letters
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Confidential Business Information. Pursuant to 10 CFR 1004.11, any
person submitting information that he or she believes to be
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and treat it according to its determination.
It is DOE's policy that all comments may be included in the public
docket, without change and as received, including any personal
information provided in the comments (except information deemed to be
exempt from public disclosure).
V. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this
notification of data availability and request for comment.
Signing Authority
This document of the Department of Energy was signed on July 18,
2024, by Jeffrey Marootian Principal Deputy Assistant Secretary for
Energy Efficiency and Renewable Energy, pursuant to delegated authority
from the Secretary of Energy. That document with the original signature
and date is maintained by DOE. For administrative purposes only, and in
compliance with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register Liaison Officer has been authorized to
sign and submit the document in electronic format for publication, as
an official document of the Department of Energy. This administrative
process in no way alters the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on July 18, 2024.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
[FR Doc. 2024-16177 Filed 7-19-24; 4:15 pm]
BILLING CODE 6450-01-P