[Federal Register: October 17, 2008 (Volume 73, Number 202)]
[Proposed Rules]
[Page 62033-62134]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17oc08-30]
[[Page 62033]]
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Part IV
Department of Energy
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10 CFR Parts 430 and 431
Energy Conservation Program: Energy Conservation Standards for Certain
Consumer Products (Dishwashers, Dehumidifiers, Electric and Gas Kitchen
Ranges and Ovens, and Microwave Ovens) and for Certain Commercial and
Industrial Equipment (Commercial Clothes Washers); Test Procedure for
Microwave Ovens; Proposed Rules
[[Page 62034]]
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DEPARTMENT OF ENERGY
10 CFR Parts 430 and 431
[Docket Number EE-2006-STD-0127]
RIN: 1904-AB49
Energy Conservation Program: Energy Conservation Standards for
Certain Consumer Products (Dishwashers, Dehumidifiers, Electric and Gas
Kitchen Ranges and Ovens, and Microwave Ovens) and for Certain
Commercial and Industrial Equipment (Commercial Clothes Washers)
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking and notice of public meeting.
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SUMMARY: The Energy Policy and Conservation Act (EPCA), as amended,
prescribes energy conservation standards for various consumer products
and commercial and industrial equipment, and requires the U.S.
Department of Energy (DOE) to determine whether amended, more
stringent, standards would be technologically feasible and economically
justified, and would save a significant amount of energy. In this
notice, DOE is proposing to amend the energy conservation standards for
residential gas kitchen ranges and ovens and microwave ovens, as well
as commercial clothes washers. DOE has tentatively determined that
energy conservation standards for residential electric kitchen ranges
and ovens are not technologically feasible or economically justified,
and, therefore, is proposing a ``no-standard'' standard for these
products. DOE had also initially considered amended energy conservation
standards for residential dishwashers and dehumidifiers in this
rulemaking; however, the Energy Independence and Security Act of 2007
(EISA 2007) subsequently prescribed standards for these products.
Therefore, DOE is not proposing standards for dishwashers and
dehumidifiers in this notice, but will instead codify the statutory
standards in a final rule. Finally, today's notice is announcing a
public meeting on the proposed standards.
DATES: DOE will accept comments, data, and information regarding this
notice of proposed rulemaking (NOPR) before and after the public
meeting, but no later than December 16, 2008. See section VII, ``Public
Participation,'' of this notice for details.
DOE will hold a public meeting on Thursday, November 13, 2008, from
9 a.m. to 4 p.m., in Washington, DC. DOE must receive requests to speak
at the public meeting before 4 p.m., Thursday, October 30, 2008. DOE
must receive a signed original and an electronic copy of statements to
be given at the public meeting before 4 p.m., Thursday, November 6,
2008.
ADDRESSES: The public meeting will be held at the U.S. Department of
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW.,
Washington, DC 20585. (Please note that foreign nationals visiting DOE
Headquarters are subject to advance security screening procedures. If
you are a foreign national and wish to participate in the workshop,
please inform DOE of this fact as soon as possible by contacting Ms.
Brenda Edwards at (202) 586-2945 so that the necessary procedures can
be completed.)
Any comments submitted must identify the NOPR for Energy
Conservation Standards for Home Appliance Products, and provide the
docket number EE-2006-STD-0127 and/or regulatory information number
(RIN) 1904-AB49. Comments may be submitted using any of the following
methods:
1. Federal eRulemaking Portal: http://www.regulations.gov. Follow
the instructions for submitting comments.
2. E-mail: home_appliance.rulemaking@ee.doe.gov. Include docket
number EE-2006-STD-0127 and/or RIN number 1904-AB49 in the subject line
of the message.
3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy,
Building Technologies Program, Mailstop EE-2J, 1000 Independence
Avenue, SW., Washington, DC, 20585-0121. Please submit one signed paper
original.
4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of
Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., Suite
600, Washington, DC 20024. Telephone: (202) 586-2945. Please submit one
signed paper original.
For detailed instructions on submitting comments and additional
information on the rulemaking process, see section VII of this document
(Public Participation).
Docket: For access to the docket to read background documents or
comments received, visit the U.S. Department of Energy, Resource Room
of the Building Technologies Program, 950 L'Enfant Plaza, SW., Suite
600, Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m.,
Monday through Friday, except Federal holidays. Please call Ms. Brenda
Edwards at the above telephone number for additional information
regarding visiting the Resource Room.
FOR FURTHER INFORMATION CONTACT: Mr. Stephen Witkowski, Project
Manager, Energy Conservation Standards for Home Appliance Products,
U.S. Department of Energy, Office of Energy Efficiency and Renewable
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue,
SW., Washington, DC 20585-0121. Telephone: (202) 586-7463. E-mail:
Stephen.Witkowski@ee.doe.gov.
Ms. Francine Pinto, Mr. Eric Stas, or Mr. Michael Kido, U.S.
Department of Energy, Office of the General Counsel, GC-72, 1000
Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202)
586-9507. E-mail: Francine.Pinto@hq.doe.gov, Eric.Stas@hq.doe.gov, or
Michael.Kido@hq.doe.gov.
Table of Contents
I. Summary of the Proposed Rule
II. Introduction
A. Consumer Overview
B. Authority
C. Background
1. Current Standards
a. Dishwashers
b. Dehumidifiers
c. Cooking Products
d. Commercial Clothes Washers
2. History of Standards Rulemaking for Residential Dishwashers,
Dehumidifiers, and Cooking Products; and Commercial Clothes Washers
III. General Discussion
A. Standby Power for Cooking Products
B. Test Procedures
1. Dishwashers and Dehumidifiers
2. Cooking Products
3. Commercial Clothes Washers
C. Technological Feasibility
1. General
a. Cooking Products
b. Commercial Clothes Washers
2. Maximum Technologically Feasible Levels
a. Cooking Products
b. Commercial Clothes Washers
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need of the Nation to Conserve Energy
2. Rebuttable Presumption
IV. Methodology and Discussion of Public Comments
A. Product Classes
1. Cooking Products
a. Standing Pilot Ignition Systems
[[Page 62035]]
b. Commercial-Style Cooking Products and Induction Technology
c. Microwave Ovens
2. Commercial Clothes Washers
B. Technology Assessment
1. Cooking Products
a. Sensors
b. Display Technologies
c. Power Supply and Control Board Options
d. Power-Down Options
2. Commercial Clothes Washers
C. Engineering Analysis
1. Efficiency Levels
a. Cooking Products
b. Commercial Clothes Washers
2. Manufacturing Costs
a. Cooking Products
b. Commercial Clothes Washers
D. Life-Cycle Cost and Payback Period Analyses
1. Product Prices
a. Cooking Products
b. Commercial Clothes Washers
2. Installation Costs
a. Cooking Products
b. Commercial Clothes Washers
3. Annual Energy Consumption
a. Cooking Products
b. Commercial Clothes Washers
4. Energy and Water Prices
a. Energy Prices
b. Water and Wastewater Prices
5. Repair and Maintenance Costs
a. Cooking Products
b. Commercial Clothes Washers
6. Product Lifetime
7. Discount Rates
a. Cooking Products
b. Commercial Clothes Washers
8. Effective Date of the Amended Standards
9. Equipment Assignment for the Base Case
a. Cooking Products
b. Commercial Clothes Washers
10. Commercial Clothes Washer Split Incentives
11. Inputs to Payback Period Analysis
12. Rebuttable-Presumption Payback Period
E. National Impact Analysis--National Energy Savings and Net
Present Value Analysis
1. General
2. Shipments
a. New Construction Shipments
b. Replacements
c. Purchase Price, Operating Cost, and Household Income Impacts
d. Fuel Switching
3. Other Inputs
a. Base-Case Forecasted Efficiencies
b. Standards-Case Forecasted Efficiencies
c. Annual Energy Consumption
d. Site-to-Source Conversion
e. Embedded Energy in Water and Wastewater Treatment and
Delivery
f. Total Installed Costs and Operating Costs
g. Effects of Standards on Energy Prices
h. Discount Rates
F. Consumer Subgroup Analysis
G. Manufacturer Impact Analysis
1. General Description
a. Phase 1 (Industry Profile)
b. Phase 2 (Industry Cash Flow Analysis)
c. Phase 3 (Subgroup Impact Analysis)
2. Government Regulatory Impact Model Analysis
a. Government Regulatory Impact Model Scenarios and Key Inputs
3. Manufacturer Interviews
a. Conventional Cooking Products
b. Microwave Ovens
c. Commercial Clothes Washers
H. Employment Impact Analysis
I. Utility Impact Analysis
J. Environmental Assessment
V. Analytical Results
A. Trial Standard Levels
1. Cooking Products
2. Commercial Clothes Washers
B. Economic Justification and Energy Savings
1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable-Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
i. Conventional Cooking Products
ii. Microwave Ovens
iii. Commercial Clothes Washers
b. Impacts on Employment
i. Conventional Cooking Products
ii. Microwave Ovens
iii. Commercial Clothes Washers
c. Impacts on Manufacturing Capacity
i. Conventional Cooking Products
ii. Microwave Ovens
iii. Commercial Clothes Washers
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value
c. Impacts on Employment
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
C. Proposed Standards
1. Overview
2. Conclusion
a. Conventional Cooking Products
b. Microwave Ovens
c. Commercial Clothes Washers
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act
1. Conventional Cooking Products
a. Reasons for the Proposed Rule
b. Objectives of, and Legal Basis for, the Proposed Rule
c. Description and Estimated Number of Small Entities Regulated
d. Description and Estimate of Compliance Requirements
e. Duplication, Overlap, and Conflict with Other Rules and
Regulations
f. Significant Alternatives to the Proposed Rule
2. Microwave Ovens
3. Commercial Clothes Washers
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Attendance at Public Meeting
B. Procedure for Submitting Requests to Speak
C. Conduct of Public Meeting
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act \1\ (EPCA or the Act), as
amended, provides that any amended energy conservation standard DOE
prescribes, including ones for cooking products \2\ and commercial
clothes washers (collectively referred to in this notice of proposed
rulemaking (NOPR) as ``the two appliance products''), shall be designed
to ``achieve the maximum improvement in energy efficiency * * * which
the Secretary determines is technologically feasible and economically
justified.'' (42 U.S.C. 6295(o)(2)(A) and 6316(a).) Furthermore, any
new or amended standard must ``result in significant conservation of
energy.'' (42 U.S.C. 6295(o)(3)(B) and 6316(a).) In accordance with
these and other statutory criteria discussed in this notice, DOE
proposes to amend the energy conservation standards for the two
appliance products and raise efficiency levels as shown in Table I.1.
The standards would apply to all products listed in Table I.1 that are
manufactured in, or imported into, the United States three years after
the publication of the final rule in the Federal Register.
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\1\ 42 U.S.C. 6291 et seq.
\2\ The term ``cooking products,'' as used in this notice,
refers to residential electric and gas kitchen ranges and ovens,
including microwave ovens.
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Table I.1--Proposed Energy Conservation Standards for Cooking Products
and Commercial Clothes Washers
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Proposed energy conservation
Product class standards
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Conventional Cooking Products:
Gas cooktops/conventional burners.. No constant burning pilot
lights.
Electric cooktops/low or high No standard.
wattage open (coil) elements.
Electric cooktops/smooth elements.. No standard.
Gas ovens/standard oven............ No constant burning pilot
lights.
Gas ovens/self-clean oven.......... No change to existing standard.
Electric ovens..................... No standard.
Microwave ovens........................ Maximum standby power = 1.0
watt.
Commercial clothes washers:
Top-loading commercial clothes 1.76 Modified Energy Factor/8.3
washers. Water Factor.
Front-loading commercial clothes 2.00 Modified Energy Factor/5.5
washers. Water Factor.
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In addition, DOE is proposing prescriptive standards that require
elimination of constant-burning pilots for gas cooktops and gas
standard ovens and standby power limits for microwave ovens.
Furthermore, DOE has tentatively concluded that standards for
conventional electric cooking products (i.e., non-microwave oven
products) and amended standards for gas self-cleaning ovens are not
technologically feasible and economically justified. Therefore, DOE is
proposing a ``no-standard'' standard for conventional electric cooking
products. In addition, since standards already exist for gas self-
cleaning ovens (i.e., a ban on standing pilot lights), DOE is not
proposing amendments to the existing standards.
DOE notes that in the November 15, 2007, advance notice of proposed
rulemaking (ANOPR; referred to as the ``November 2007 ANOPR''), DOE
announced it was considering amended standards for residential
dishwashers and dehumidifiers. 72 FR 64432. However, section 311 of the
Energy Independence and Security Act of 2007 (EISA 2007; Pub. L. 110-
140) amended EPCA to establish revised energy conservation standards
for residential dishwashers and dehumidifiers. (42 U.S.C. 6295(g)(9)
and 6295(cc)) These EISA 2007 amendments set energy efficiency
standards for these products; therefore, DOE will codify these
statutory standards for residential dishwashers and dehumidifiers in a
separate final rule.
EISA 2007, through section 310, also amended EPCA to require that
any final rule establishing or revising a standard for a covered
product, which includes residential dishwashers, dehumidifiers, ranges
and ovens, and microwave ovens, adopted after July 1, 2010, shall
incorporate standby mode and off mode energy use into a single amended
or new standard, if feasible. If not feasible, the Secretary shall
prescribe within the final rule a separate standard for standby mode
and off mode energy consumption, if justified. (42 U.S.C.
6295(gg)(3)(A)-(B)) Although EISA 2007 will ultimately require test
procedures for all covered residential products to measure standby mode
and off mode energy consumption, it set specific deadlines for
amendments to the test procedures for certain products, including the
following products relevant to this rulemaking: residential
dishwashers, ranges and ovens, microwave ovens, and dehumidifiers (all
due by March 31, 2011). (42 U.S.C. 6295(gg)(2))
DOE's preliminary analyses suggested that there could be a
significant energy savings potential associated with microwave oven
standby power, so DOE decided to accelerate its test procedure
rulemaking for microwaves. DOE is publishing a test procedure NOPR for
microwave ovens in the Federal Register. Having such a test procedure
in place is a prerequisite for implementing an energy conservation
standard that takes into account standby mode and off mode energy
consumption. For the reasons stated in this notice, DOE does not
currently have sufficient data at this time to allow it to consider a
single standard incorporating standby mode and off mode for cooking
products other than microwave ovens, so DOE is therefore proposing a
separate standby power limit for microwave ovens only. Standby and off
mode power for conventional cooking products, dishwashers, and
dehumidifiers will be considered in separate rulemakings which will
meet the March 31, 2011, EISA 2007 deadline.
DOE is not proposing energy conservation standards at this time for
standby and off mode power in dishwashers, dehumidifiers, and
commercial clothes washers (CCWs) for the following reasons: (1)
Standby mode power in dishwashers is already accounted for in the
energy conservation standards, specified in terms of annual energy
consumption, established by EISA 2007 (42 U.S.C. 6295(g)(10)(A)); (2)
DOE has insufficient information on dehumidifier usage patterns to
conduct an analysis of standby and off mode performance; and (3) EISA
2007 does not include CCWs as a covered product for the purposes of
prescribing standards for standby and off mode energy consumption. DOE
notes that EPCA directs DOE to use the residential clothes washer (RCW)
test procedure for CCWs. (42 U.S.C. 6314(a)(8)) In this test procedure,
measurements for modified energy factor (MEF) and water factor (WF) are
provided. This test procedure is also the subject of a rulemaking
proposing amendments to incorporate standby and off mode power into
energy consumption metrics, as required by EISA 2007 by June 30, 2009.
However, since the proposed amendments would create a new metric (i.e.,
integrated modified energy factor (IMEF), incorporating standby mode
and off mode power into MEF) but would retain MEF and not change its
calculation under the test procedure, there will be no impact of these
proposed amendments on CCWs.
DOE estimates that the energy conservation standards proposed today
would save a significant amount of energy-an estimated 0.75 quadrillion
British thermal units (Btu), or quads, of cumulative energy over 30
years (2012-2042). This amount is equivalent to 15.8 days of U.S.
gasoline use. Breaking these figures down by product type, the national
energy savings of the proposed standards for conventional gas cooking
products is estimated to be 0.14 quads. For microwave ovens, it is
estimated that the proposed standby power standard would result in
national energy savings of 0.45 quads. For CCWs, the national energy
savings resulting from the proposed standards is
[[Page 62037]]
estimated to be 0.15 quads.\3\ In addition, the proposed standards for
CCWs save over 190 billion gallons of cumulative water consumption over
30 years (2012-2042).
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\3\ The energy savings by product type may not sum to the total
quads due to rounding of individual values.
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The cumulative national net present value (NPV) of total consumer
costs and savings of the proposed standards from 2012 to 2042, in 2006
dollars (2006$), ranges from $2.2 billion (seven-percent discount rate)
to $5.3 billion (three-percent discount rate). Again, breaking these
figures down by product type, the NPV of the proposed standards for
conventional gas cooking products ranges from $0.2 billion (seven-
percent discount rate) to $0.6 billion (three-percent discount rate).
DOE estimates the industry net present value (INPV) of gas cooktops to
be approximately $287 million and $466 million for gas ovens in 2006$.
If DOE adopts the proposed standards, it estimates U.S. gas cooktop
manufacturers will lose between 1.74 percent and 4.12 percent of the
INPV, which is approximately $5 to $12 million. For gas ovens, DOE
estimates U.S. manufacturers will lose between 1.57 percent and 2.10
percent of the INPV, which is approximately $7 to $10 million.
For microwave ovens, the NPV of the proposed standards ranges from
$1.6 billion (seven-percent discount rate) to $3.5 billion (three-
percent discount rate). DOE estimates the INPV to be approximately
$1.45 billion in 2006$. If DOE adopts the proposed standards, it
estimates U.S. manufacturers will lose between 2.52 percent and 4.92
percent of the INPV, which is approximately $37 to $71 million.
For CCWs, the NPV of the proposed standards ranges from $0.5
billion (seven-percent discount rate) to $1.2 billion (three-percent
discount rate). This is the estimated total value of future operating-
cost savings minus the estimated increased equipment costs, discounted
to 2007 in 2006 dollars (2006$). DOE estimates the INPV to be
approximately $56 million in 2006$. If DOE adopts the proposed
standards, it expects manufacturers will lose between 26.50 percent and
31.09 percent of the INPV, which is approximately $15 million to $17
million. However, the NPV for consumers (at the seven-percent discount
rate) would exceed industry losses due to energy efficiency standards
by at least 29.4 times.
DOE believes the impacts of standards on consumers would be
positive for each type of covered product addressed in this rulemaking,
even though that standard may increase some initial costs. For example,
DOE estimates that the proposed standards for conventional gas cooking
products would increase the consumer retail price by $18 for gas
cooktops and $22 for gas standard ovens. In addition, DOE believes that
over 50 percent of consumers purchasing gas cooking products with
constant burning or standing pilot lights would need to install an
electrical outlet at a cost of $235 to accommodate a product that
requires electricity to operate. But even with these additional costs,
DOE estimates that the savings in reduced energy costs outweigh these
costs; in other words, the average life-cycle cost (LCC) savings are
positive. For microwave ovens, DOE estimates that limiting standby
power consumption to 1.0 watt (W) would decrease energy costs but
increase the consumer retail price by only $2, resulting in positive
economic impacts to consumers. Although DOE estimates that the proposed
MEF and WF standards for CCWs would increase the retail price by over
$229 per unit for top-loading washers and $21 for front-loading
washers, the operating cost savings outweigh these price increases,
resulting in positive economic impacts to CCW consumers.
DOE's analyses indicate that the energy savings resulting from the
proposed standards would have benefits to utilities and to the
environment. The energy saved is in the form of electricity and natural
gas, and DOE expects the energy savings from the proposed standards to
eliminate the need for approximately 404 megawatts (MW) of generating
capacity by 2042. Breaking this figure down by product type: the
proposed standards for conventional gas cooking products eliminate the
need for approximately 56 MW of generating capacity; the proposed
standards for microwave ovens eliminate the need for 320 MW of
generating capacity, and the proposed standards for CCWs eliminate the
need for 28 MW of generating capacity. These results reflect DOE's use
of energy price projections from the U.S. Energy Information
Administration (EIA)'s Annual Energy Outlook 2008 (AEO 2008).\4\
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\4\ DOE intends to use the most recently available version of
EIA's Annual Energy Outlook to generate the results for the final
rule. Available online at http://www.eia.doe.gov/oiaf/aeo/.
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In addition, the proposed standards would have environmental
benefits, which would be estimated to result in cumulative
(undiscounted) greenhouse gas emission reductions of 76 million tons
(Mt) of carbon dioxide (CO2) from 2012 to 2042.
Specifically, the proposed standards for conventional gas cooking
products would reduce CO2 emissions by 14.6 Mt; the proposed
standards for microwave ovens would reduce CO2 emissions by
50.5 Mt; and the proposed standards for CCWs reduce CO2
emissions by 11.5 Mt.
The standards for gas cooking products and CCWs would also result
in 10.1 kilotons (kt) of nitrogen oxides (NOX) emissions
reductions, at the sites where appliances are used, from 2012 to 2042.
In addition, gas cooking product and CCW standards would result in
power plant NOX emissions reductions of 0.5 kt to 11.9 kt
from 2012 to 2042. Moreover, the standards for microwave ovens would
result in power plant emission reductions of 2.7 kt to 66.0 kt of
NOX from 2012 to 2042, attributable to these appliances.
The standards for gas cooking products, microwave ovens, and CCWs
would also possibly result in power plant mercury (Hg) emissions
reductions. For cooking products, Hg emissions could be reduced by up
to 0.2 tons (t) from 2012 to 2042. For CCWs, up to 0.2 t of Hg
emissions reductions could be realized over 2012 to 2042. For microwave
ovens, Hg emissions could be reduced by up to 1.1 t from 2012 to 2042.
In sum, the proposed standards represent the maximum improvement in
energy and water efficiency that is technologically feasible and
economically justified. DOE found that the benefits to the Nation of
the proposed standards (energy and water savings, consumer average LCC
savings, national NPV increase, and emission reductions) outweigh the
costs (loss of INPV, and LCC increases for some consumers). DOE has
concluded that the proposed standards are economically justified and
technologically feasible, particularly since units achieving these
standard levels already are commercially available. DOE notes that it
considered higher efficiency levels as trial standard levels (TSLs),
and is still considering them in this rulemaking; however, DOE
tentatively believes that the burdens of the higher efficiency levels
(loss of INPV and LCC increases for some consumers) outweigh the
benefits (energy savings, LCC savings for some consumers, national NPV
increase, and emission reductions). After reviewing public comments on
this NOPR, DOE may ultimately decide to adopt one of its other TSLs or
another value in between.
Finally, although DOE has proposed a ``no-standard'' standard for
several of the conventional cooking product classes, Federal energy
conservation requirements, including a ``no-
[[Page 62038]]
standard'' standard, generally supersede State laws or regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE can, however, grant waivers of such preemption
for particular State laws or regulations, in accordance with the
procedures and other provisions of section 327(d) of EPCA, as amended.
(42 U.S.C. 6297(d))
II. Introduction
A. Consumer Overview
DOE is proposing energy conservation standard levels for
residential cooking products and CCWs as shown in Table I.1. The
proposed standards would apply to products manufactured or imported
three years after the date the final rule is published in the Federal
Register.\5\
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\5\ At this time, DOE anticipates that publishing a final rule
in March 2009, pursuant to the requirements of a Federal court
consent decree, which would make the amended standards effective in
March 2012.
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Residential and commercial consumers will see benefits from the
proposed standards. Although DOE expects the purchase price of the high
efficiency cooking products and CCWs to be higher (ranging from 1 to 26
percent for cooking products and 2 to 31 percent for CCWs) than the
average price of this equipment today, the energy efficiency gains will
result in lower energy costs, saving consumers $1 to $63 per year on
their energy bills, again depending on the product. When these savings
are summed over the lifetime of the product, consumers are expected to
save an average of $6 to $252, depending on the product. DOE estimates
that the payback period for the more-efficient, higher-priced product
will range from 0.3 to 9 years, depending on the product. In contrast,
residential consumers will see no impact in terms of the standard for
electric kitchen ranges and ovens, because it was determined that
amended standards were not justified under the existing statutory
criteria.
B. Authority
Title III of EPCA sets forth a variety of provisions designed to
improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309)
provides for the ``Energy Conservation Program for Consumer Products
Other Than Automobiles.'' The program covers consumer products (all of
which are referred to hereafter as ``covered products''), including
residential dishwashers, dehumidifiers, and cooking products. (42
U.S.C. 6292, 6295) Part A-1 of Title III (42 U.S.C. 6311-6317)
establishes a similar program for ``Certain Industrial Equipment,''
which deals with a variety of commercial and industrial equipment
(referred to hereafter as ``covered equipment'') including CCWs. (42
U.S.C. 6312; 6313(e)) EPCA sets both energy and water efficiency
standards for CCWs, and authorizes DOE to amend both. (42 U.S.C.
6313(e))
Specifically, for dishwashers, the National Appliance Energy
Conservation Act of 1987 (NAECA), Public Law 100-12, amended EPCA to
establish prescriptive standards, requiring that dishwashers be
equipped with an option to dry without heat, and further requiring that
DOE conduct two cycles of rulemakings to determine if more stringent
standards are justified. (42 U.S.C. 6295(g)(1) and (4)) Section
311(a)(2) of EISA 2007 subsequently established maximum energy and
water use levels for residential dishwashers manufactured on or after
January 1, 2010.\6\ (42 U.S.C. 6295(g)(10))
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\6\ Under the statute, a standard size dishwasher shall not
exceed 355 kWh/year and 6.5 gallons per cycle, and a compact size
dishwasher shall not exceed 260 kWh/year and 4.5 gallons per cycle.
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Section 135(c)(4) of the Energy Policy Act of 2005 (EPACT 2005;
Pub. L. 109-58) added dehumidifiers as products covered under EPCA and
established standards for them that became effective on October 1,
2007. (42 U.S.C. 6295(cc)) These amendments to EPCA also require that
DOE issue a final rule by October 1, 2009, to determine whether these
standards should be amended. (42 U.S.C. 6295(cc)) If amended standards
are justified, they must become effective by October 1, 2012. (Id.) In
the event that DOE fails to publish such a final rule, EPACT 2005
specifies a new set of amended standards with an effective date of
October 1, 2012. (Id.) EISA 2007 subsequently amended section 325(cc)
of EPCA by replacing the requirement for a rulemaking to amend the
dehumidifier standards with prescriptive minimum efficiency levels for
dehumidifiers manufactured on or after October 1, 2012.\7\ (EISA 2007,
section 311(a)(1); 42 U.S.C. 6295(cc))
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\7\ Under the statute, such dehumidifiers shall have an Energy
Factor (EF) that meets or exceeds the following values: (See above
table.)
------------------------------------------------------------------------
Minimum EF
Product capacity (pints/day) (liters/
kWh)
------------------------------------------------------------------------
Up to 35.00................................................ 1.35
35.01-45.00................................................ 1.50
45.01-54.00................................................ 1.60
54.01-75.00................................................ 1.70
75.00 or more.............................................. 2.5
------------------------------------------------------------------------
As with dishwashers, NAECA amended EPCA to establish prescriptive
standards for cooking products, requiring gas ranges and ovens with an
electrical supply cord that are manufactured on or after January 1,
1990 not to be equipped with a constant burning pilot, and requiring
DOE to conduct two cycles of rulemakings for ranges and ovens to
determine if the standards established should be amended. (42 U.S.C.
6295 (h)(1)-(2))
Similar to dehumidifiers, EPACT 2005 included amendments to EPCA
that added CCWs as covered equipment, and it also established standards
for such equipment that is manufactured on or after January 1, 2007.\8\
(EPACT 2005, section 136(a) and (e); 42 U.S.C. 6311(1) and 6313(e))
EPACT 2005 also requires that DOE issue a final rule by January 1,
2010, to determine whether these standards should be amended. (EPACT
2005, section 136(e); 42 U.S.C. 6313(e))
---------------------------------------------------------------------------
\8\ Under the statute, a CCW must have a modified energy factor
(MEF) of at least 1.26 and a water factor (WF) of not more than 9.5.
---------------------------------------------------------------------------
It is pursuant to the authority set forth above that DOE is
conducting the present rulemaking for cooking products and CCWs and
will codify the statutory standards for dishwashers and dehumidifiers.
The following discusses some of the key provisions of EPCA relevant to
this standards-setting rulemaking.
Under EPCA, the overall program consists of the following core
elements: (1) Testing; (2) labeling; and (3) Federal energy
conservation standards. The Federal Trade Commission (FTC) is
responsible for labeling products covered by part A, and DOE implements
the remainder of the program. Under 42 U.S.C. 6293 and 6314, EPCA
authorizes DOE, subject to certain criteria and conditions, to develop
test procedures to measure the energy efficiency, energy use, or
estimated annual operating cost of covered products and equipment. The
test procedures for the appliance products subject to today's notice
appear at Title 10 of the Code of Federal Regulations (CFR) part 430,
subpart B--dishwashers in appendix C, dehumidifiers in appendix X,
cooking products in appendix I, and CCWs in appendix J1 (the latter
pursuant to 10 CFR 431.154.)
EPCA provides criteria for prescribing new or amended standards for
covered products and equipment.\9\ As indicated
[[Page 62039]]
above, any new or amended standard for either of the two appliance
products must be designed to achieve the maximum improvement in energy
efficiency that is technologically feasible and economically justified.
(42 U.S.C. 6295(o)(2)(A)) Additionally, DOE may not prescribe a
standard for some types of products if: (1) No test procedure has been
established for that product; or (2) DOE determines by rule that the
standard is not technologically feasible or economically justified. (42
U.S.C. 6295(o)(3)(A)-(B)) The statute also provides that, in deciding
whether a standard is economically justified, DOE must, after receiving
comments on the proposed standard, determine whether the benefits of
the standard exceed its burdens by considering, to the greatest extent
practicable, the following seven factors:
---------------------------------------------------------------------------
\9\ The EPCA provisions discussed in the remainder of this
subsection directly apply to covered products, and also apply to
certain covered equipment, such as commercial clothes washers, by
virtue of 42 U.S.C. 6316(a). Note that the term ``product'' is used
generally to refer to consumer appliances, while ``equipment'' is
used generally to refer to commercial units.
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(1) The economic impact of the standard on manufacturers and
consumers of the products or equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products or equipment in the type (or class)
compared to any increase in the price, initial charges, or maintenance
expenses for the covered products that are likely to result from the
imposition of the standard;
(3) The total projected amount of energy (or, as applicable, water)
savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered
products or equipment likely to result from the imposition of the
standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i))
Furthermore, EPCA contains what is commonly known as an ``anti-
backsliding'' provision. (42 U.S.C. 6295(o)(1)) This provision
prohibits the Secretary from prescribing any amended standard that
either increases the maximum allowable energy use or decreases the
minimum required energy efficiency of a covered product or equipment.
Also, the Secretary may not prescribe an amended or a new standard if
the Secretary finds that interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States of any product type (or class)
with performance characteristics, features, sizes, capacities, and
volume that are substantially the same as those generally available in
the United States at the time of the Secretary's finding. (42 U.S.C.
6295(o)(4))
In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii)),
establishes a rebuttable presumption that a standard is economically
justified if the Secretary finds that ``the additional cost to the
consumer of purchasing a product complying with an energy conservation
standard level will be less than three times the value of the energy
(and as applicable, water) savings during the first year that the
consumer will receive as a result of the standard,'' as calculated
under the test procedure in place for that standard. This approach
provides an alternative path in establishing economic justification
under the EPCA factors. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE considered
this test, but believes that the criterion it applies (i.e., a limited
payback period) is not sufficient for determining economic
justification. Instead, DOE has considered a full range of impacts,
including those to the consumer, manufacturer, Nation, and environment.
In promulgating a standard for a type or class of covered product
that has two or more subcategories, DOE must specify a different
standard level than that which applies generally to such type or class
of products ``for any group of covered products which have the same
function or intended use, if * * * products within such group--(A)
consume a different kind of energy from that consumed by other covered
products within such type (or class); or (B) have a capacity or other
performance-related feature which other products within such type (or
class) do not have and such feature justifies a higher or lower
standard'' than applies or will apply to the other products. (42 U.S.C.
6295(q)(1)) In determining whether a performance-related feature
justifies such a different standard for a group of products, DOE must
consider ``such factors as the utility to the consumer of such a
feature'' and other factors DOE deems appropriate. Id. Any rule
prescribing such a standard must include an explanation of the basis on
which such higher or lower level was established. (42 U.S.C.
6295(q)(2))
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) DOE can, however, grant waivers
of Federal preemption for particular State laws or regulations, in
accordance with the procedures and other provisions of EPCA found in 42
U.S.C. 6297(d). Specifically, States that regulate an energy
conservation standard for a type of covered product for which there is
a Federal energy conservation standard may petition the Secretary for a
DOE rule that allows the State regulation to become effective with
respect to such covered product. (42 U.S.C. 6297(d)(1)(A)) DOE must
prescribe a rule granting the petition if the Secretary finds that the
State has established by a preponderance of the evidence that its
regulation is needed to meet ``unusual and compelling State or local
energy * * * interests.'' (42 U.S.C. 6297(d)(1)(B))
C. Background
1. Current Standards
a. Dishwashers
DOE established the current energy conservation standards for
dishwashers manufactured on or after May 14, 1994 in a final rule on
May 14, 1991 (56 FR 22250), which consist of a requirement that the
energy factor (EF) of a standard size dishwasher must not be less than
0.46 cycles per kilowatt-hour (kWh) and that the EF of a compact size
dishwasher must not be less than 0.62 cycles per kWh. (10 CFR
430.32(f))
b. Dehumidifiers
EPCA, as amended by EPACT 2005, prescribes the current energy
conservation standard for dehumidifiers, as shown in Table II.1. (42
U.S.C. 6295(cc)(1); 10 CFR 430.32(v))
Table II.1--EPACT 2005 Standards for Residential Dehumidifiers
------------------------------------------------------------------------
Standards
effective
Dehumidifier capacity October 1,
2007 EF
(liters/kWh)
------------------------------------------------------------------------
25.00 pints/day or less................................. 1.00
25.01-35.00 pints/day................................... 1.20
35.01-54.00 pints/day................................... 1.30
54.01-74.99 pints/day................................... 1.50
75.00 pints/day or more................................. 2.25
------------------------------------------------------------------------
c. Cooking Products
EPCA prescribes the current energy conservation standard for
cooking products, which consists of a requirement that gas ranges and
ovens with an electrical supply cord that are manufactured on or after
January 1, 1990, not be equipped with a constant burning pilot. (42
U.S.C. 6295(h)(1); 10 CFR 430.32(j))
d. Commercial Clothes Washers
EPCA, as amended by EPACT 2005, also prescribes standards for CCWs
[[Page 62040]]
manufactured on or after January 1, 2007. (42 U.S.C. 6313(e)) These
standards require that CCWs have an MEF of at least 1.26 and a WF of
not more than 9.5. (Id.; 10 CFR 431.156)
2. History of Standards Rulemaking for Residential Dishwashers,
Dehumidifiers, and Cooking Products; and Commercial Clothes Washers
For dishwashers, NAECA amended EPCA to establish prescriptive
standards, requiring that dishwashers be equipped with an option to dry
without heat, and further requiring that DOE conduct two cycles of
rulemakings to determine if more stringent standards are justified. (42
U.S.C. 6295(g)(1) and (4)) On May 14, 1991, DOE published a final rule
establishing the first set of performance standards for dishwashers (56
FR 22250); these new standards discussed became effective on May 14,
1994 (10 CFR 430.32(f)). DOE initiated a second standards rulemaking
for dishwashers by publishing an ANOPR on November 14, 1994 (59 FR
56423). However, as a result of the priority-setting process outlined
in its Procedures, Interpretations and Policies for Consideration of
New or Revised Energy Conservation Standards for Consumer Products (the
``Process Rule'') (61 FR 36974 (July 15, 1996); 10 CFR part 430,
subpart C, appendix A), DOE suspended the standards rulemaking for
dishwashers.
Section 135(c)(4) of EPACT 2005 added dehumidifiers as products
covered under EPCA and established standards for them that became
effective on October 1, 2007. (42 U.S.C. 6295(cc)) DOE has incorporated
these standards into its regulations (70 FR 60407, 60414 (Oct. 18,
2005); 10 CFR 430.32(v)).
The November 2007 ANOPR addressed standards for residential
dishwashers and dehumidifiers, in addition to cooking products and
CCWs. On December 19, 2007, however, Congress enacted EISA 2007, which,
among other things, established minimum efficiency levels for
dehumidifiers manufactured on or after October 1, 2012. (EISA 2007,
section 311(a)(1); 42 U.S.C. 6295(cc)) In addition, section 311(a)(2)
of EISA 2007 established maximum energy and water use levels for
residential dishwashers manufactured on or after January 1, 2010. (42
U.S.C. 6295(g)(10)) Because EISA 2007 established standards for
residential dishwashers and dehumidifiers, DOE will codify the
statutory standards for these products in a separate final rule.\10\
DOE will not entertain comment on these standard levels set under EISA
2007, because the Department does not have discretion to modify such
statutory levels. As a result, DOE will limit its analysis in the
balance of this NOPR to cooking products and commercial clothes
washers.
---------------------------------------------------------------------------
\10\ DOE intends to codify all prescriptive energy conservation
standards established under EISA 2007 for various products and
equipment into its regulations in a separate Federal Register
notice.
---------------------------------------------------------------------------
The existing prescriptive standard for cooking products, described
above, was added to EPCA by amendments contained in the NAECA. As set
forth in greater detail in the November 2007 ANOPR, these amendments
required DOE to conduct two cycles of rulemakings to determine whether
to revise the standard. DOE undertook the first cycle of these
rulemakings and issued a final rule on September 8, 1998 (63 FR 48038),
which found that no standards were justified for electric cooking
products. Partially due to the difficulty of conclusively demonstrating
that elimination of standing pilots was economically justified, DOE did
not adopt a standard for gas cooking products. 72 FR 64432, 64438 (Nov.
15, 2007). DOE is currently in the second cycle of rulemakings required
by the NAECA amendments to EPCA. (42 U.S.C. 6295(h)(2))
EPACT 2005 included amendments to EPCA that added CCWs as covered
equipment and established the current standards for such equipment.
(EPACT 2005, section 136(a) and (e); 42 U.S.C. 6311(1)(G) and 6313(e))
DOE has incorporated these standards into its regulations (70 FR 60407,
60416 (Oct. 18, 2005); 10 CFR 431.156). The EPACT 2005 amendments also
require that DOE conduct two cycles of rulemakings to determine whether
these standards should be amended. (EPACT 2005, section 136(e); 42
U.S.C. 6313(e)(2)) The first of these rules must be published by
January 1, 2010, and any amended standard in the rule would apply to
products manufactured three years after the rule is published. Id.
To initiate the current rulemaking to consider energy conservation
standards, on March 15, 2006, DOE published on its Web site a document
titled, Rulemaking Framework for Commercial Clothes Washers and
Residential Dishwashers, Dehumidifiers, and Cooking Products (Framework
Document).\11\ 71 FR 15059 (March 27, 2006). The Framework Document
described the procedural and analytical approaches that DOE anticipated
using to evaluate energy conservation standards for these products, and
identified various issues to be resolved in conducting the rulemaking.
DOE held a public meeting on April 27, 2006, to present the Framework
Document, to describe the analyses it planned to conduct during the
rulemaking, to receive comments from stakeholders, and to inform and
facilitate stakeholders' involvement in the rulemaking. DOE received 11
written comments in response to the Framework Document after the public
meeting.
---------------------------------------------------------------------------
\11\ This document is available on the DOE Web site at: http://
www.eere.energy.gov/buildings/appliance_standards/residential/
dehumidifiers.html.
---------------------------------------------------------------------------
On December 4, 2006, DOE posted two spreadsheet tools for this
rulemaking on its Web site.\12\ The first tool calculates LCC and
payback periods (PBPs) and included spreadsheets for: (1) Dishwashers;
(2) dehumidifiers; (3) cooktops; (4) ovens; (5) microwave ovens; and
(6) CCWs. The second tool--the national impact analysis (NIA)
spreadsheet--calculates the impacts on shipments and the national
energy savings (NES) and NPV at various candidate standard levels. The
NIA spreadsheets include one each for: (1) Dishwashers; (2)
dehumidifiers; (3) cooktops and ovens; (4) microwave ovens; and (5)
CCWs.
---------------------------------------------------------------------------
\12\ These spreadsheets are available on the DOE Web site at:
http://www.eere.energy.gov/buildings/appliance_standards/
residential_products.html.
---------------------------------------------------------------------------
DOE published the ANOPR for this rulemaking on November 15, 2007,
and held a public meeting on December 13, 2007, to present and seek
comment on the November 2007 ANOPR analytical methodology and results.
72 FR 64432. In the November 2007 ANOPR, DOE described and sought
further comment on the analytical framework, models, and tools (e.g.,
LCC and NIA spreadsheets) it was using to analyze the impacts of energy
conservation standards for these products. In conjunction with the
November 2007 ANOPR, DOE also posted on its Web site the complete
November 2007 ANOPR technical support document (TSD). The TSD included
the results of a number of DOE's preliminary analyses, including: (1)
The market and technology assessment; (2) screening analysis; (3)
engineering analysis; (4) energy and water use determination; (5)
markups analysis to determine equipment price; (6) LCC and PBP
analyses; (7) shipments analysis; (8) NES and national impact analyses;
and (9) manufacturer impact analysis (MIA). In the November 2007 ANOPR
and at the public meeting, DOE invited comment in particular on the
following issues concerning cooking products and CCWs: (1) Microwave
oven standby power; (2) product classes; (3) CCW horizontal-axis
designs; (4) microwave
[[Page 62041]]
oven design options; (5) technologies unable to be analyzed and
exempted product classes, including potential limitations of existing
test procedures; (6) CCW per-cycle energy consumption; (7) CCW consumer
prices; (8) repair and maintenance costs; (9) efficiency distributions
in the base case; (10) CCW shipments forecasts; (11) base-case and
standards-case forecasted efficiencies; and (12) TSLs. 72 FR 64432,
64512-14 (Nov. 15, 2007).
The November 2007 ANOPR also included background information, in
addition to that set forth above, on the history and conduct of this
rulemaking and on DOE's use in this rulemaking of its Process Rule. 72
FR 64432, 64438-39 (Nov. 15, 2007). DOE held a public meeting in
Washington, DC, on December 13, 2007, to present the methodologies and
results for the November 2007 ANOPR analyses, along with a summary of
supplemental analysis DOE conducted for microwave ovens (referred to as
the ``December 2007 public meeting''). At the December 2007 public
meeting, stakeholders commented that they had come to an agreement
regarding what they believed to be appropriate levels for energy
conservation standards for dehumidifiers and dishwashers and would
offer draft legislation that would reflect such agreement. (Association
of Home Appliance Manufacturers (AHAM), Public Meeting Transcript, No.
23.7 at pp. 20 and 24; \13\ Appliance Standards Awareness Project
(ASAP), Public Meeting Transcript, No. 23.7 at p. 24) These
stakeholders' suggested energy conservation standard levels were
subsequently incorporated into the EISA 2007 amendments to EPCA, as
discussed previously in this section.
---------------------------------------------------------------------------
\13\ A notation in the form ``AHAM, Public Meeting Transcript,
No. 23.7 at p. 20'' identifies an oral comment that DOE received
during the December 13, 2007, ANOPR public meeting and which was
recorded in the public meeting transcript in the docket for this
rulemaking (Docket No. EE-2006-STD-0127), maintained in the Resource
Room of the Building Technologies Program. This particular notation
refers to a comment (1) made by the Association of Home Appliance
Manufacturers (AHAM) during the public meeting, (2) recorded in
document number 23.7, which is the public meeting transcript that is
filed in the docket of this rulemaking, and (3) which appears on
page 20 of document number 23.7. A notation in the form ``EEI, No.
25 at pp. 2-3'' identifies a written comment (1) made by the Edison
Electric Institute (EEI), (2) recorded in document number 25 that is
filed in the docket of this rulemaking, and (3) which appears on
pages 2-3 of document number 25.
---------------------------------------------------------------------------
DOE expects to issue a final rule in this rulemaking in March 2009.
Based on this schedule, the effective date of any new energy efficiency
standards for these products would be March 2012, three years after the
final rule is published in the Federal Register.
III. General Discussion
A. Standby Power for Cooking Products
Section 310 of the EISA 2007 amends section 325 of the EPCA to
require DOE to regulate standby mode and off mode energy consumption
for all covered products, including residential ranges and ovens and
microwave ovens, as part of energy conservation standards for which a
final rule is adopted after July 10, 2010. In addition, EISA 2007
amended section 325 of EPCA to specifically require that test
procedures for ranges and ovens and microwave ovens be amended by March
31, 2011 to include measurement of standby mode and off mode energy
consumption, taking into consideration the most current versions of
International Electrotechnical Commission's (IEC) Standard 62301
Household electrical appliances--Measurement of standby power \14\ (IEC
62301) and IEC Standard 62087 Methods of measurement for the power
consumption of audio, video and related equipment (IEC 62087).\15\ (42
U.S.C. 6295(gg)) Because the final rule for this rulemaking is
scheduled to be published in the Federal Register by March 31, 2009, an
energy conservation standard for cooking products set forth by this
rulemaking is not required to incorporate standby mode and off mode
energy consumption.
---------------------------------------------------------------------------
\14\ IEC standards are available at: http://www.iec.ch.
\15\ IEC 62087 does not cover any products for this rulemaking,
and, therefore, was not considered.
---------------------------------------------------------------------------
Although DOE is also not required to incorporate standby mode and
off mode energy consumption for any cooking products at this time, in
the November 2007 ANOPR, DOE stated that it is considering including
standby power in the energy conservation standards and intends to
initiate amendment of its test procedure to measure microwave oven
standby power because: (1) Energy consumption in standby mode
represents a significant proportion of microwave oven annual energy
consumption, and (2) the range of standby power among microwave ovens
currently on the market suggests that the likely impact of a standard
would be significant in terms of energy consumption. 72 FR 64432,
64440-42 (Nov. 15, 2007). Such a test procedure change is a
prerequisite to incorporate a standby power requirement as part of the
energy conservation standard for microwave ovens.\16\ DOE invited
comments on this issue, and commenters generally supported the early
initiation of test procedure amendments to measure standby power
consumption in microwave ovens. The comments on this issue are
discussed in section III.B.2 of this notice.
---------------------------------------------------------------------------
\16\ As discussed in the November 2007 ANOPR, addressing standby
mode and off mode energy consumption is not required for this
standards rulemaking under EPCA, but DOE seeks to publish a final
rule for the test procedure amendments prior to March 31, 2009, in
order to allow the microwave oven energy conservation standards to
account for standby mode and off mode power consumption.
---------------------------------------------------------------------------
DOE also invited comment on the incorporation of standby power in
an energy conservation standard for residential cooking products.
Several organizations--ASAP, Natural Resources Defense Council (NRDC),
Northwest Power and Conservation Council (NPCC), Northeast Energy
Efficiency Partnerships (NEEP), and the American Council for an Energy-
Efficient Economy (ACEEE)--filed a single joint comment (hereafter
Joint Comment) that supported a standby power standard for residential
ovens, including microwave ovens, or, in the alternative, a
prescriptive requirement if test methods cannot be amended in time to
support this rulemaking. For the reasons just discussed, DOE is
considering incorporating standby power into the energy conservation
standard for microwave ovens. For conventional cooking products, as
will be discussed in more detail in section III.B.2, DOE does not have
data or information to analyze standby mode and off mode power
consumption. DOE will instead consider test procedure amendments for
conventional cooking products in a later rulemaking that meets the
March 31, 2011, deadline set by EISA 2007. (42 U.S.C. 6295(gg)(2)(B))
For microwave ovens, the Joint Comment stated that, while per-unit
standby power savings amount to only several W per unit, they represent
not only a large proportion of total microwave oven annual energy use
but a large national impact as well when considering the stock and
sales rate of microwave ovens. (Joint Comment, No. 29 at p. 7) DOE
recognizes the Joint Comment's support for a standby power standard,
but notes that even if the proposed standard were to be a prescriptive
standby power level, a test procedure amendment prior to the final rule
of this standards rulemaking would be required to incorporate such a
measurement.
In assessing the opportunity to reduce standby power, the Joint
Comment compared maximum microwave oven standby power in measurements
reported by DOE, AHAM, and the Australian National Appliance and
Equipment Energy Efficiency Committee (ANAEEEC). These measurements
ranged from almost 6 W to 8.4 W, with
[[Page 62042]]
a presumed standby demand of 3 W at most for minimal functionality, as
inferred from microwaves listed in the Federal Energy Management
Program (FEMP) procurement database which have both a clock display and
a cooking sensor. The Joint Comment further stated that since there are
no State or Federal standby performance or active mode performance
standards, manufacturers have had little incentive to optimize the
standby demand of microwave ovens. As an example of a product for which
standby power was raised to the highest levels of design consideration
by manufacturers, the Joint Comment stated that significant standby
power reductions were achieved at minimal or no cost for external power
supplies in response to market demands (e.g., portable electronics) and
policy demands (e.g., standards or ENERGY STAR levels). (Joint Comment,
No. 29 at pp. 5-8) AHAM, on the other hand, commented that DOE should
not promulgate a standby power standard for cooking products in
general, and in the case of microwave ovens, the contribution of
standby power to total microwave oven energy use is relatively small
and is associated with significant functionality for the consumer.
(AHAM, No. 32 at p. 2)
As part of its engineering analysis, DOE sampled 32 microwave
ovens, and AHAM provided test data for an additional 21 units submitted
by manufacturers. Each microwave oven was tested according to the
existing DOE test procedure, which measures the amount of energy
required to raise the temperature of one kilogram of water by 10
degrees Celsius under controlled conditions. The ratio of usable output
power over input power describes the EF, which is also a measure of the
cooking efficiency. The data from the DOE and AHAM cooking tests show a
cooking efficiency range from 55 percent to 62 percent. Reverse
engineering conducted by DOE attempted to identify design options
associated with this variation in cooking efficiency. Although design
options among various microwave ovens were found to be highly
standardized, DOE was unable to correlate specific design options or
other features such as cavity size or output power with cooking
efficiency. (See chapter 5 of the TSD accompanying this notice.)
DOE also observed significant variability in the cooking efficiency
measurements obtained using the DOE microwave oven test procedure for
the 53 units tested by DOE and AHAM. The data show test-to-test
variability of several EF percentage points for a given microwave oven
(i.e., where a given combination of design options could be assigned to
a number of TSLs, depending upon the test results). DOE was also unable
to ascertain why similarly designed, equipped, and constructed
microwave ovens showed varying EFs and, hence, annual energy
consumption. DOE further notes that manufacturers stated during MIA
interviews that the water used in the test procedure is not
representative of an actual food load. One manufacturer stated, for
example, that this could result in different microwave ovens being
rated at the same energy efficiency even though true cooking
performance is different.
In a review of the DOE microwave oven test procedure (which does
not currently incorporate a measure of standby mode and off mode energy
use), DOE explored whether it would be technically feasible to combine
the existing measure of energy efficiency during the cooking cycle
(per-use) with standby mode and off mode energy use (over time) to form
a single metric, as required by EISA 2007. (42 U.S.C. 6295(gg)(2)(A))
Specifically, the test procedure's existing metric for microwave oven
overall energy efficiency measures the efficiency of heating a sample
of water over a period of seconds. In contrast, standby mode and off
mode energy consumption is a measure of the amount of energy used over
a period of multiple hours while not performing the function of heating
a load. DOE found that an overall energy efficiency that combines the
two values is representative of neither the energy efficiency of the
microwave oven for a very short period of use (as is the case with the
EF) nor the efficiency of the microwave oven over an extended period of
time.
DOE notes that certain DOE test procedures for other products
combine a measure of cycle efficiency and standby energy use to derive
an overall ``energy efficiency measure,'' (e.g., gas kitchen ranges and
ovens incorporate pilot gas consumption in EF, electric ovens include
clock power in EF, and gas dryers include pilot gas consumption).
However, DOE believes that in those cases where the difference in
energy use between the primary function of those products and the
standby power is so large that the standby power has little impact on
the overall measure of energy efficiency or the combined efficiency is
based on energy use of the primary energy function and standby power
over the same period, (e.g., annual or seasonal), the combined measure
of energy efficiency is a meaningful measure. In the case of microwave
ovens, the energy consumption associated with standby mode is a
significant fraction of the overall energy use. DOE notes, for example,
that, depending on the cooking efficiency and standby power, the rank
ordering of two microwave ovens based on EF alone could reverse if
standby power were factored in, depending on the values of cooking
energy use and standby power.\17\ Therefore, given the similar
magnitudes of microwave oven annual energy consumption associated with
these two disparate and largely incompatible metrics that are measured
over very different time periods, DOE questioned whether it would be
technically feasible to incorporate EF and standby power into a
combined energy efficiency metric that produces a meaningful result.
---------------------------------------------------------------------------
\17\ For example, two units among the microwave ovens tested by
AHAM, each with 1000 W of input power, will be designated Unit A and
Unit B for the purposes of this illustration. The EF of Unit A was
measured by AHAM according to the current DOE test procedure as 55.7
percent, while the EF of Unit B was measured as 57.3 percent. The
standby power of Unit A, however, was measured as 1.7 W, compared to
the 4.4 W of standby power for Unit B. If a combined EF (``CEF'')
were to be calculated by adding the annual standby energy use to the
annual cooking energy consumption, this CEF for Unit A would be 50.5
percent, while the CEF for Unit B would be 45.0 percent, thereby
reversing the rankings of the two microwave ovens according to their
energy descriptor. The unit that was formerly considered the higher
efficiency unit would thus be rated as lower in efficiency.
---------------------------------------------------------------------------
To explore standby mode and off mode power for the purpose of
potential microwave oven energy conservation standards, DOE tested 32
sample units using the current IEC Standard 62301 standby test
procedure and recorded a standby power range of about 1.2 W to 5.8 W
(with less than 0.5 percent test-to-test deviation). DOE observed no
off mode power consumption for the microwave ovens in its test sample,
and DOE's research suggests that no other microwave ovens available in
the United States consume energy in an off mode.\18\ Thus, DOE focused
its investigations on standby mode. Data suggested correlations between
specific features and standby power, thereby
[[Page 62043]]
providing the basis for a cost-efficiency curve. However, for the
reasons stated above about combining a per-cycle efficiency with
standby power over a long period of time, as well as due to the
observed test variability in the cooking efficiency results, DOE is
concerned that an overall measure of cooking efficiency that combines
cooking and standby energy cannot produce test results that measure
energy efficiency or energy use of microwave ovens in a reasonable and
repeatable manner. An ``average'' microwave runs 8,689 hours in standby
mode per year. Based on the standby power range measured by DOE and
AHAM, standby power consumption represents a relatively large component
of total annual energy consumption. At the efficiency baseline from the
analysis conducted for the previous cooking products rulemaking, as
discussed in the 1996 Technical Support Document for Residential
Cooking Products (1996 TSD), (which was also observed in the test
sample), the observed range of annual energy consumption due to cooking
(14.2 kWh) is equivalent to approximately 2 W of standby power. (See
chapter 3 of the TSD accompanying this notice.)
---------------------------------------------------------------------------
\18\ A microwave oven is considered to be in ``off mode'' if it
is plugged in to a main power source, is not being used for an
active function such as cooking or defrosting, and is consuming
power for features other than a display, cooking sensor, controls
(including a remote control), or sensors required to reactivate it
from a low power state. For example, a microwave oven with
mechanical controls and no display or cooking sensor that consumed
power for components such as a power supply when the unit was not
activated would be considered to be in off mode. Note that DOE
believes there are no longer any such microwave ovens with
mechanical controls on the market, and, in fact, is not aware of any
microwave ovens currently available that can operate in off mode.
---------------------------------------------------------------------------
DOE also explored whether the existing test procedure's measure of
annual energy consumption could be modified to be a combined energy
efficiency descriptor for microwave ovens, despite the fact that EF is
currently listed as the energy efficiency descriptor. For the reasons
articulated here, DOE has tentatively concluded that neither approach
meets the statutory standard for a combined metric.
In light of the above, DOE believes that, although it may be
mathematically possible to combine energy consumption into a single
metric encompassing active (cooking), standby, and off modes, it is not
technically feasible to do so at this time, because of the high
variability in the current cooking efficiency measurement from which
the active mode EF and annual energy consumption are derived (as
discussed previously) and because of the significant contribution of
standby power to overall microwave oven energy use. Given DOE's recent
research, there is concern that cooking efficiency results for
microwave ovens would not be meaningful, so incorporation of such
results in a combined metric similarly would not be expected to be
meaningful. Inherent in a determination of technical feasibility under
EISA 2007 for a combined metric for active, standby, and off mode
energy consumption is an expectation that the results would be
meaningful. Accordingly, for the purposes of this notice, DOE is not
proposing to incorporate standby and off modes with active mode into a
combined metric, but is instead proposing a separate metric to measure
standby power, as provided for by EISA 2007 in cases where it is
technically infeasible to incorporate standby and off modes into a
combined energy conservation metric.\19\ (42 U.S.C. 6295(gg)(3)(B))
---------------------------------------------------------------------------
\19\ DOE notes that if a microwave oven standard is established
based on standby power alone, measurable energy savings would
certainly be achieved. If, however, standby power were to be
combined with cooking efficiency, it is conceivable that many
microwave ovens could already comply with the standard without
reducing standby power, since the annual energy consumption due to
standby power is on the same order as that associated with the
variability in EF.
---------------------------------------------------------------------------
Although it may not be technically feasible to develop a combined
metric for microwave ovens today, it may be possible to do so in the
future, provided that each is measured on a consistent basis (i.e., kWh
per year apportioned to each mode) so that the results are meaningful
and comparable. In this vein, DOE notes the need to develop a test
procedure that addresses the high-variability concerns with its current
cooking efficiency measure. DOE understands that IEC, AHAM,
manufacturers, and others are exploring whether a test procedure can be
developed that responds to the concerns DOE has raised. DOE expects to
evaluate potential future test procedures to determine whether any
address the concerns discussed above and meet the requirements of
section 325(gg) of the Act, thereby making them suitable candidates for
use in amending the DOE test procedure. If such test procedures are
developed, DOE will consider a combined measure of microwave oven
energy efficiency in a future rulemaking.
B. Test Procedures
1. Dishwashers and Dehumidifiers
Because EISA 2007 provides prescriptive energy conservation
standards for dishwashers and dehumidifiers based on existing DOE test
procedures (42 U.S.C. 6295(g)(10) and (cc)(2), respectively), DOE is
not proposing to make changes to the test procedures for these products
at this time. DOE will consider test procedure amendments to address
potential incorporation of standby mode and off mode power into the
energy efficiency metrics in a later rulemaking or rulemakings that
meet the March 31, 2011, deadline set by the EISA 2007 amendments to
EPCA. (42 U.S.C. 6295(gg)(2)(B)(vi))
2. Cooking Products
As noted in the November 2007 ANOPR, DOE indicated that it does not
intend to modify test procedures for cooking products as part of this
rulemaking, other than an amendment to consider the standby power
consumption of microwave ovens. 72 FR 64432, 64442 (Nov. 15, 2007).
The DOE test procedure for microwave ovens references IEC 705-1988
Household Microwave Ovens--Methods for Measuring Performance, and
Amendment 2-1993 (IEC 705) for methodology of measuring cooking
performance. The Joint Comment on the ANOPR urged DOE to continue to
use the existing DOE test method and the referenced IEC 705 for active
power measurement for the EF calculation because it appears to provide
greater precision of measurement than the current version of the IEC
standard, redesignated as IEC 60705-1993 Edition 3.2-2006 (IEC 60705).
(Joint Comment No. 29 at p. 9) DOE observed during its efficiency
testing of a representative sample of microwave ovens that IEC 705-1988
provides a more stable and repeatable cooking efficiency measurement
than IEC 60705. Thus, DOE will not amend the microwave oven test
procedure to reference IEC 60705 instead of IEC 705-1988. As discussed
above, DOE is not aware of any other alternative test procedures that
could be considered for incorporation by reference at this time.
As part of the DOE microwave oven standby power tests, DOE reviewed
IEC 62301 to determine whether the specified test conditions were
suitable for microwave oven tests. At the December 2007 ANOPR public
meeting, DOE contemplated incorporation by reference of IEC 62301 into
the DOE test procedure, but suggested several clarifications that would
be required to deal with instances where the IEC test conditions were
non-specific: (1) the microwave oven clock display should be set to 12
a.m. at the start of the test period; and (2) the standby power test
should be run for a period of 12 hours to obtain a true average standby
power, since clock power can vary as a function of displayed time,
depending on the specific display technology. DOE sought comment on
these potential modifications to the microwave oven test procedure, as
well as any changes to the conventional cooking product test procedures
to include standby power.
The Joint Comment stated that DOE should modify the oven, cooktop,
and microwave oven test procedures as necessary to measure the clock
face standby energy use and any other
[[Page 62044]]
standby energy use, such as control electronics and power supply
losses. In addition, the Joint Comment stated that DOE should use IEC
62301 to test standby power, with the instruction to start the test
with a clock setting of 12 a.m. and run the test for 12 hours or a
lesser period of time demonstrated mathematically to be representative
of a 12-hour period. (Joint Comment, No. 29 at pp. 6 and 9) ASAP
commented that it supports a test procedure change to address microwave
oven standby power, and that this test procedure change should not be a
hurdle to implementing a standard that addresses standby power. (ASAP,
Public Meeting Transcript, No. 23.7 at p. 72) GE Consumer and
Industrial (GE), on the other hand, commented that it does not believe
that there is justification for the development of ``necessarily
complex'' new test procedures for cooking products. (GE, No. 30 at p.
2)
DOE believes separate test procedure rulemakings for standby mode
and off mode power for microwave ovens and conventional cooking
products are warranted. To support this rulemaking, the test procedure
change to incorporate microwave oven standby mode and off mode power
has been initiated in parallel with the current rulemaking, and a final
rule for the test procedure will be published before the publication of
a final rule on energy conservation standards. For conventional cooking
products, DOE sought data and stakeholder feedback on the decision to
retain the existing test procedures in the November 2007 ANOPR (72 FR
66432, 64513 (Nov. 15, 2007)), and did not receive any inputs. DOE does
not have any data on standby power consumption in conventional cooking
products that indicate the potential for significant energy savings.
Thus, DOE will consider test procedure amendments in a later rulemaking
that meets the March 31, 2011, deadline set by the EISA 2007 amendments
to EPCA. (42 U.S.C. 6295(gg)(2)(B))
3. Commercial Clothes Washers
EPCA directs DOE to use the same test procedures for CCWs as those
established by DOE for RCWs. (42 U.S.C. 6314(a)(8)) While DOE believes
commercial laundry practices likely differ from residential
practices,\20\ DOE believes that the existing clothes washer test
procedure (at 10 CFR part 430, subpart B, appendix J) adequately
accounts for the efficiency rating of CCWs, and that DOE's methods for
characterizing energy and water use in the NOPR analyses adequately
account for the consumer usage patterns specific to CCWs. 72 FR 64432,
64442 (Nov. 15, 2007).
---------------------------------------------------------------------------
\20\ Commercial clothes washers are typically used more
frequently and filled with a larger load than residential clothes
washers.
---------------------------------------------------------------------------
Alliance Laundry Systems (Alliance) commented that, as a first-
order estimate, CCW usage patterns would be similar to those of the RCW
market. Hence, Alliance supports the continued use of the existing test
procedure as being generally representative of the multi-family and
laundromat applications of the CCW segment of the market. (Alliance,
No. 26 at p. 3)
GE commented that the RCW test procedure gives credit for features,
such as multiple water levels, which have no energy efficiency benefit
in actual CCW use and which may confuse the end customer. Therefore, GE
suggests that DOE develop a representative test procedure specifically
for CCWs. (GE, No. 30 at p. 3) Similarly, during the MIA interviews,
multiple manufacturers mentioned that the use of the RCW test procedure
provides an incentive for CCW manufacturers to incorporate design
options for which the RCW test procedure gives credit, but which are
unlikely to save energy in actual CCW use or provide additional utility
to consumers. For example, commenters stated that adaptive fill and
load selector switches are unlikely to be used by consumers who
generally pay a fixed fee per load and who are thus likely to run full-
sized loads and/or select the maximum fill setting. However, commenters
did not provide data that demonstrate differences between CCW and RCW
usage patterns or the energy implications thereof, nor did they address
the statutory requirement to utilize the RCW test procedure for CCWs.
DOE recognizes that in certain situations, the controls and/or
operation of a CCW (e.g., fill level) can be set so that the CCW will
not necessarily have the energy and water savings that might be
expected to occur for RCWs. However, DOE does not have sufficient usage
data to alter its preliminary conclusion that the existing RCW test
procedure is adequate to measure the energy consumption of CCWs.
C. Technological Feasibility
1. General
DOE considers a design option to be technologically feasible if it
is in use by the respective industry or if research has progressed to
the development of a working prototype. Therefore, in each standards
rulemaking, DOE conducts a screening analysis, based on information it
has gathered regarding existing technology options and prototype
designs. In consultation with manufacturers, design engineers, and
others, DOE develops a list of design options for consideration in the
rulemaking. Once DOE has determined that a particular design option is
technologically feasible, it further evaluates each design option in
light of the following three additional criteria: (a) Practicability to
manufacture, install, and service; (b) adverse impacts on product
utility or availability; or (c) adverse impacts on health or safety. 10
CFR part 430, subpart C, appendix A, section 4(a)(3) and (4). All
design options that pass these screening criteria are candidates for
further assessment in the engineering and subsequent analyses in the
ANOPR stage. DOE may amend the list of retained design options in the
NOPR analyses based on comments received on the ANOPR and on further
research.
All of the design options for cooking products and CCWs that DOE
identified in the November 2007 ANOPR remain and were considered in
today's proposed rule. (See the TSD accompanying this notice, chapter
4.)
a. Cooking Products
During MIA interviews, manufacturers commented that improved
contact conductance for electric open (coil) element cooktops was more
dependent on the flatness of the cookware used by the consumer rather
than the design of the heating element itself. DOE is unaware of data
substantiating these statements, and therefore chose to retain the
design option for the purposes of this NOPR.
In addition to the design options for microwave oven cooking
efficiency presented in the November 2007 ANOPR, DOE also investigated
technology options that reduce standby power. DOE identified lower-
power display technologies, improved power supplies and controllers,
and alternative cooking sensor technologies as options to reduce
standby power. DOE conducted this research when it became aware of the
likelihood of EISA 2007 being signed, which DOE understood was to
contain provisions pertaining to standby mode and off mode power
consumption. Therefore, DOE presented details of each design option to
stakeholders at the December 2007 public meeting even though the
results were not available in time for publication in the November 2007
ANOPR. DOE believes all of these options are technologically feasible,
and in the ANOPR invited comment on technology options that reduce
standby power in microwave ovens. 72 FR
[[Page 62045]]
64432, 64513 (Nov. 15, 2007). For more details of these technology
options and stakeholder comments, see section IV.B of this notice.
b. Commercial Clothes Washers
Alliance concurred with the CCW design options that DOE screened
out and requested that DOE also screen out ``added insulation'' and
``tighter tub tolerances'' from the CCW list of design options.
Alliance stated that neither of these has been shown to impact energy
consumption. (Alliance, No. 26 at p. 3) Since DOE received no data
regarding the effectiveness of these two design options, today's NOPR
retains them.
2. Maximum Technologically Feasible Levels
EPCA requires as part of an energy conservation standards
rulemaking that DOE must ``determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible'' for such product. (42 U.S.C. 6295(p)(1) and 6316(a)) Table
III.1 lists the ``max-tech'' levels that DOE determined for this
rulemaking.
Table III.1--Max-Tech Levels for Cooking Products and Commercial Clothes
Washers
------------------------------------------------------------------------
Product Max-Tech EF
------------------------------------------------------------------------
Gas Cooktops............................................... 0.42
Electric Open (Coil) Cooktops.............................. 0.769
Electric Smooth Cooktops................................... 0.753
Gas Standard Ovens......................................... 0.0583
Gas Self-Clean Ovens....................................... 0.0632
Electric Standard Ovens.................................... 0.1209
Electric Self-Clean Ovens.................................. 0.1123
Microwave Ovens............................................ 0.602
------------------------------------------------------------------------
Max-Tech
Standby
Power (W)
------------------------------------------------------------------------
Microwave Ovens............................................ 0.02 W
------------------------------------------------------------------------
Max-Tech Max-Tech WF
MEF (ft\3\/ (gal/
kWh) ft\3\)
------------------------------------------------------------------------
Top-Loading Commercial Clothes Washers........ 1.76 8.3
Front-Loading Commercial Clothes Washers...... 2.35 4.4
------------------------------------------------------------------------
a. Cooking Products
For cooking products, DOE has retained the max-tech efficiency
levels that the previous analysis outlined in the 1996 TSD defined, for
the reasons that follow. DOE does not have efficiency data for
conventional cooking products currently on the market, since
manufacturers are not required to report EF. However, as reported in
the November 2007 ANOPR, manufacturers have stated there have been no
substantive changes in technology since the 1996 analysis that would
affect max-tech efficiency levels. 72 FR 64432, 64436 and 64452 (Nov.
15, 2007).
For microwave ovens, both AHAM data and DOE supplemental testing,
as presented at the December 2007 public meeting, confirmed that the
max-tech EF level from the 1996 TSD remains the max-tech level in the
context of the current rulemaking. The max-tech microwave oven standby
power level corresponds to a unit equipped with a default automatic
power-down function that shuts off certain power-consuming components
after a specified period of user inactivity. The standby power at max-
tech was obtained from a microwave oven currently on the market in
Korea which incorporates such a feature. (See the TSD accompanying this
notice, chapter 5.)
b. Commercial Clothes Washers
For CCWs, DOE recognizes that MEF and WF pairings may not
simultaneously achieve max-tech levels. That is, a CCW with the highest
possible MEF may not achieve the lowest possible WF. Similarly, a CCW
with the lowest WF may not achieve the highest MEF. DOE considered
several models currently available to determine max-tech values that
best represent optimal performance for CCWs on the market today. DOE
did not specify max-tech levels that represent a ``hybrid'' of the
highest possible MEF and the lowest possible WF for each product class.
For more details on this selection, see section IV.C.1 of this notice.
D. Energy Savings
1. Determination of Savings
DOE used its NIA spreadsheet to estimate energy savings from
amended standards for the appliance products that are the subject of
this rulemaking. (Section IV.E of this notice and in chapter 11 of the
TSD accompanying this notice describe the NIA spreadsheet model.) DOE
forecasted energy savings over the period of analysis (beginning in
2012, the year that amended standards would go into effect, and ending
in 2042) for each TSL, relative to the base case, which represents the
forecast of energy consumption in the absence of amended energy
conservation standards. DOE quantified the energy savings attributable
to amended energy conservation standards as the difference in energy
consumption between the standards case and the base case.
The base case considers market demand for more efficient products.
For example, the market share of gas cooking appliances with standing
pilot ignition systems has been declining for several years. (See
section IV.E.3 of this notice and chapter 11 of the TSD accompanying
this notice for more details.) As kitchens are remodeled or updated,
consumers frequently take the opportunity to replace existing
appliances with new ones, often replacing older ranges, ovens, and
cooktops that incorporated standing pilots with models that are ignited
electronically. The National Electrical Code (NEC) allows gas-fired
appliances
[[Page 62046]]
to be attached to existing small appliance branch circuits, making such
retrofits during kitchen remodels relatively easy. (2008 NEC section
210.52(B)(2)) While outlets for gas-fired ovens, ranges, and cooktops
are not required by the NEC, many local and State building codes
require them in new construction and kitchen renovations, gradually
reducing the number of kitchens in which there are no such outlets.
Section IV.D.2.a describes in detail the additional installation costs
that would be incurred by consumers in the event that standards are
issued for gas cooking products that eliminate the use of standing
pilot ignition systems. The added installation costs are accounted for
in the evaluation of consumer economic impacts in the LCC and PBP
analysis and the NIA.
The NIA spreadsheet model calculates the electricity savings in
``site energy'' expressed in kWh. Site energy is the energy directly
consumed on location by an individual product. DOE reports national
energy savings on an annual basis in terms of the aggregated source
energy savings, which is the savings of energy that is used to generate
and transmit the energy consumed at the site. To convert site energy to
source energy, DOE derived conversion factors, which change with time,
from AEO 2008. (See TSD chapter 11 accompanying this notice for further
details.)
2. Significance of Savings
EPCA, as amended, prohibits DOE from adopting a standard for a
product if that standard would not result in ``significant'' energy
savings. (42 U.S.C. 6295(o)(3)(B)) While the Act does not define the
term ``significant,'' the U.S. Court of Appeals for the District of
Columbia, in Natural Resources Defense Council v. Herrington, 768 F.2d
1355, 1373 (D.C. Cir. 1985), indicated that Congress intended
``significant'' energy savings in this context to be savings that were
not ``genuinely trivial.'' The energy savings for energy conservation
standards at each of the TSLs considered in this rulemaking are
nontrivial, and, therefore, DOE considers them ``significant'' within
the meaning of 42 U.S.C. 6295(o)(3)(B).
E. Economic Justification
1. Specific Criteria
As noted earlier, EPCA provides seven factors to be evaluated in
determining whether an energy conservation standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)) The following sections discuss how
DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
To determine the quantitative impacts of a new or amended standard
on manufacturers, the economic impact analysis is based on an annual-
cash-flow approach. This includes both a short-term assessment, based
on the cost and capital requirements during the period between the
announcement of a regulation and the time when the regulation becomes
effective, and a long-term assessment. The impacts analyzed include
INPV (which values the industry on the basis of expected future cash
flows), cash flows by year, changes in revenue and income, and other
measures of impact, as appropriate. Second, DOE analyzes and reports
the impacts on different types of manufacturers, with particular
attention to impacts on small manufacturers. Third, DOE considers the
impact of standards on domestic manufacturer employment, manufacturing
capacity, plant closures, and loss of capital investment. Finally, DOE
takes into account cumulative impacts of different regulations (not
limited to DOE) on manufacturers.
For consumers, measures of economic impact include the changes in
LCC and payback period for the product at each TSL. Under EPCA, the LCC
is one of the seven factors to be considered in determining economic
justification. (42 U.S.C. 6295(o)(2)(B)(i)(II)) It is discussed in
detail in the section below.
b. Life-Cycle Costs
The LCC is the sum of the purchase price of equipment (including
the installation) and the operating expense (including energy and
maintenance expenditures), discounted over the lifetime of the
appliance or equipment.
In this rulemaking, DOE calculated both LCC and LCC savings for
various efficiency levels. For cooking products, the LCC analysis
estimated the LCC for representative equipment in housing units that
represent the segment of the U.S. housing stock that uses these
appliances. Through the use of a housing stock sample, DOE determined
for each household in the sample the energy consumption and energy
price of the cooking product. Thus, by using a representative sample of
households, the analysis captured the wide variability in energy
consumption and energy prices associated with cooking product use.
For CCWs, although DOE was unable to develop a representative
sample of the building stock that uses the appliance, it still
established the variability and uncertainty in energy and water use by
defining the uncertainty and variability in the use (cycles per day) of
the equipment. The variability in energy and water pricing were
characterized by regional differences in energy and water prices. To
account for uncertainty and variability in other inputs, such as
equipment lifetime and discount rate, DOE used a distribution of values
with probabilities attached to each value.
Therefore, for each housing unit with a cooking appliance and each
consumer with a CCW, DOE sampled the values of these inputs from the
probability distributions. As a result, the analysis produced a range
of LCCs. This approach permits DOE to identify the percentage of
consumers achieving LCC savings or attaining certain payback values due
to an increased energy conservation standard, in addition to the
average LCC savings or average payback for that standard. DOE presents
the LCC savings as a distribution, with a mean value and a range, and
for purposes of the analysis, DOE assumed that the consumer purchases
the product in 2012.
c. Energy Savings
While significant energy conservation is a separate statutory
requirement for imposing an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) DOE used
the NIA spreadsheet results in its consideration of total projected
savings.
d. Lessening of Utility or Performance of Products
In establishing classes of products, DOE considered whether the
evaluated design options would likely lessen the utility or performance
of the products under consideration in this rulemaking. (42 U.S.C.
6295(o)(2)(B)(i)(IV)) DOE determined that none of the considered TSLs
would reduce the utility or performance of the products under
consideration in the rulemaking.
For gas cooking products, the potential elimination of
standing pilot ignition systems and replacement with electronic
ignition systems retains the basic consumer utility of igniting the gas
to initiate a cooking process, while following safety requirements
specified in American National Standards Institute (ANSI) Z21.1-2005
and
[[Page 62047]]
Addenda 1-2007, Household Cooking Gas Appliances (ANSI Z21.1).\21\
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\21\ ANSI standards are available at http://www.ansi.org.
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For microwave ovens, all consumer utility features that
affect standby power, such as a clock display and a cooking sensor,
would be retained.
For CCWs, the proposed standards maintain the consumer
utility of washing clothes in a washer with either top or front access.
Alliance, Whirlpool, and AHAM commented in support of multiple
product classes for CCWs due in part to consumer utility issues,
including capacity, reliability, and access of axis. (Alliance, No. 26
at p. 1; Whirlpool, No. 28 at pp. 3-4; AHAM No. 32, at pp. 3-4) DOE
believes that all of these consumer utilities will be maintained by the
standards under consideration, as is discussed in the context of the
CCW product class definition in section IV.A.2 of this notice.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition that is
likely to result from standards. It directs the Attorney General to
determine the impact, if any, of any lessening of competition likely to
result from a proposed standard and to transmit such determination to
the Secretary, not later than 60 days after the publication of a
proposed rule, together with an analysis of the nature and extent of
such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)) DOE has
transmitted a copy of today's proposed rule to the Attorney General and
has requested that the Department of Justice (DOJ) provide its
determination on this issue.
f. Need of the Nation To Conserve Energy
The non-monetary benefits of the proposed standard are likely to be
reflected in improvements to the security and reliability of the
Nation's energy system-namely, reductions in the overall demand for
energy will result in reduced costs for maintaining reliability of the
Nation's electricity system. DOE conducts a utility impact analysis to
estimate how standards may impact the Nation's needed power generation
capacity. This analysis captures the effects of efficiency improvements
on electricity consumption by the appliance products which are the
subject of this rulemaking.
The proposed standard also is likely to result in improvements to
the environment. In quantifying these improvements, DOE has defined a
range of primary energy conversion factors and associated emission
reductions based on the estimated level of power generation displaced
by energy conservation standards. DOE reports the environmental effects
from each TSL for this equipment in the environmental assessment in the
TSD. (42. U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(a))
2. Rebuttable Presumption
As set forth under 42 U.S.C. 6295(o)(2)(B)(iii), there is a
rebuttable presumption that an energy conservation standard is
economically justified if the increased installed 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 (and water
savings in the case of a water efficiency standard). However, although
DOE examined the rebuttable-presumption criteria, it determined
economic justification for the proposed standard levels through a
detailed analysis of the economic impacts of increased efficiency as
described above, pursuant to 42 U.S.C. 6295(o)(2)(B)(i). Section
IV.D.12 of this notice addresses the rebuttable-presumption payback
calculation.
IV. Methodology and Discussion of Public Comments
DOE used spreadsheet models to estimate the impacts of the TSLs
used in weighing the benefits and burdens of amended standards for the
products that are the subject of this rulemaking. Specifically, it used
the engineering spreadsheet to develop the relationship between cost
and efficiency for these products and to calculate the simple payback
period for the purposes of addressing the rebuttable presumption that a
standard with a payback period of less than three years is economically
justified. The LCC spreadsheet calculates the consumer benefits and
payback periods for amended energy conservation standards. The NIA
spreadsheet provides shipments forecasts and then calculates NES and
NPV impacts of potential amended energy conservation standards. DOE
also assessed manufacturer impacts, largely through use of the
Government Regulatory Impact Model (GRIM).
Additionally, DOE estimated the impacts of energy conservation
standards for the appliance products on utilities and the environment.
DOE used a version of EIA's National Energy Modeling System (NEMS) for
the utility and environmental analyses. The NEMS model simulates the
energy economy of the United States and has been developed over several
years by the EIA primarily for the purpose of preparing the Annual
Energy Outlook. The NEMS produces forecasts for the United States that
are available in the public domain. The version of NEMS used for
appliance standards analysis is called NEMS-BT and is primarily based
on the AEO 2008 with minor modifications.\22\ The NEMS-BT offers a
sophisticated picture of the effect of standards, since it accounts for
the interactions between the various energy supply and demand sectors
and the economy as a whole.
---------------------------------------------------------------------------
\22\ The EIA approves the use of the name NEMS to describe only
an AEO version of the model without any modification to code or
data. Because the present analysis entails some minor code
modifications and runs the model under various policy scenarios that
deviate from AEO assumptions, the name NEMS-BT refers to the model
as used here. (``BT'' stands for DOE's Building Technologies
Program.) For more information on NEMS, refer to The National Energy
Modeling System: An Overview, DOE/EIA-0581 (98) (Feb. 1998)
(available at: http://tonto.eia.doe.gov/FTPROOT/forecasting/
058198.pdf).
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A. Product Classes
In general, when evaluating and establishing energy conservation
standards, DOE divides covered products into classes by the type of
energy used, capacity, or other performance-related features that
affect consumer utility and efficiency. (42 U.S.C. 6295(q); 6316(a))
Different energy conservation standards may apply to different product
classes. Id.
1. Cooking Products
For cooking products, DOE based its product classes on energy
source (e.g., gas or electric) and cooking method (e.g., cooktops,
ovens, and microwave ovens). DOE identified five categories of cooking
products: gas cooktops, electric cooktops, gas ovens, electric ovens,
and microwave ovens. In its regulations implementing EPCA, DOE defines
a ``conventional range'' as ``a class of kitchen ranges and ovens which
is a household cooking appliance consisting of a conventional cooking
top and one or more conventional ovens.'' 10 CFR 430.2. The November
2007 ANOPR presents DOE's reasons for not treating gas and electric
ranges as a distinct product category and for not basing its product
classes on that category. 72 FR 64432, 64443 (Nov. 15, 2007). For
example, DOE defined a single product class for gas cooktops as gas
cooktops with conventional burners.
For electric cooktops, DOE determined in the 1996 TSD that the ease
of cleaning smooth elements provides greater utility to the consumer
than coil elements, and that smooth elements typically consume more
energy than coil elements. Therefore, DOE has defined two separate
product
[[Page 62048]]
classes for open (coil) element and smooth element electric cooktops.
For electric ovens, DOE determined that the type of oven-cleaning
system is a utility feature that affects performance. DOE found that
standard ovens and ovens using a catalytic continuous-cleaning process
use roughly the same amount of energy. On the other hand, self-cleaning
ovens use a pyrolytic process that provides enhanced consumer utility
with different overall energy consumption, as compared to either
standard or catalytically lined ovens, due to the amount of energy used
during the cleaning cycle and better insulation. Thus, DOE has defined
two product classes for electric ovens: standard ovens with or without
a catalytic line and self-cleaning ovens.
DOE applied the same reasoning for gas ovens as it used for
electric ovens, defining two product classes, one for standard ovens
with or without a catalytic line and one for self-cleaning ovens.
DOE determined that microwave ovens constitute a single product
class for the purposes of this rulemaking. This product class can
encompass microwave ovens with and without browning (thermal) elements,
but does not include microwave ovens that incorporate convection
systems. For a discussion of why DOE is not considering microwave ovens
with convection capability in this rulemaking, see section IV.A.1.c of
this notice.
In sum, in this rulemaking DOE is using the following eight product
classes in analyzing and setting standards for cooking products:
Gas cooktop/conventional burners;
Electric cooktop/open (coil) elements;
Electric cooktop/smooth elements;
Gas oven/standard oven;
Gas oven/self-clean oven;
Electric oven/standard oven;
Electric oven/self-clean oven; and
Microwave oven.
For more information on the specification of product classes for
cooking products, see chapter 3 of the TSD accompanying this notice.
a. Standing Pilot Ignition Systems
DOE proposed in the November 2007 ANOPR that standing pilot
ignition systems do not provide unique utility that would warrant a
separate product class for gas cooking products incorporating them, and
requested comment on such a determination for product classes. 72 FR
66432, 64463 and 64513 (Nov. 15, 2007). The American Gas Association
(AGA) and GE commented that standing pilot ignition systems do provide
unique utility for several reasons, including: (1) The ability to
operate the range during electrical power outages, (2) providing safe
ignition where electrical supply is unavailable (such as lodges and
hunting cabins) or not located reasonably close to the range, and (3)
providing safe ignition where religious and cultural practices prohibit
the use of electronic ignition. (AGA, Public Meeting Transcript, No.
23.7 at p. 21; AGA, No. 27 at p. 2; GE, No. 30 at p. 2) AGA commented
that religious and cultural prohibitions on the use of electricity in
the United States were the reason for the original EPCA language
requiring electronic ignition only on gas cooking products with other
electrical features. (AGA, No. 27 at pp. 2, 14) AGA further stated that
this consideration was the reason for DOE's exception allowing standing
pilot lights on gravity gas-fired boilers in the EISA 2007. (AGA, No.
27 at p. 2) On the other hand, the Joint Comment stated that non-
standing pilot ignition (i.e., electronic ignition) should be a design
option and that an exemption for standing pilot ignition ranges is
inappropriate. (Joint Comment, No. 29 at p. 6)
In considering standing pilot ignition systems as either a separate
product class or a design option, DOE notes that the purpose of such
systems is to ignite the gas when burner operation is called for during
a cooking process, and either standing pilot or electronic ignition
provides this function. In addition, DOE has concluded from previous
analysis that the average consumer does not experience frequent enough
or long enough power outages to consider the ability to operate in the
event of an electric power outage a significant utility.
DOE also addressed a similar issue in the residential furnace and
boiler rulemaking, where DOE made an exception to allow standing pilot
ignition for gravity gas-fed boilers. Gravity gas-fed boilers, however,
are a type of heating equipment that represent a unique utility in that
they do not require an electric circulation motor to operate, a utility
which happens to accommodate religious and cultural practices which
prohibit electronic ignition as well. Thus, the exception is based on
continuing to allow products with certain performance characteristics
to be available to all consumers. But DOE is unable to create a similar
exception for gas cooking products because there is no unique utility
associated with standing pilot ignition.
Through market research, DOE determined that battery-powered
electronic ignition systems have been implemented in other products,
such as instantaneous gas water heaters, barbeques, furnaces, and other
appliances, and the use of such ignition systems appears acceptable
under ANSI Z21.1. Therefore, subgroups with religious and cultural
practices which prohibit the use of line electricity (i.e., electricity
from the utility grid) can still use gas cooking products without
standing pilots, assuming gas cooking products are made available with
battery-powered ignition. Furthermore, there is not expected to be any
appreciable difference in cooking performance between gas cooking
products with or without a standing pilot. Thus, DOE concludes that
standing pilot ignition systems do not provide a distinct utility and
that a separate class for standing pilot ignition systems is not
warranted under section 325(q)(1) of EPCA. (42 U.S.C. 6295(q)(1))
b. Commercial-Style Cooking Products and Induction Technology
DOE stated in the November 2007 ANOPR that it lacks efficiency data
to determine whether certain designs (e.g., commercial-style cooking
products) and certain technologies (e.g., induction cooktops) should be
excluded from the rulemaking. 72 FR 64432, 64444 and 64460 (Nov. 15,
2007). AHAM, Whirlpool, and Sub-Zero Wolf Incorporated (Wolf) supported
DOE's approach to exclude commercial-style cooking products, given the
relatively small gains in energy savings for cooking products as a
whole, the small relative size of the commercial-style products market,
and required changes to the test procedure. (AHAM, No. 32 at p. 3, 9;
Whirlpool, No. 28 at p. 6; Wolf, No. 24 at p. 2) AHAM and Wolf also
stated that induction technology should not be considered for a variety
of reasons, including (1) the lack of an applicable test procedure, (2)
the relatively small gains in energy savings for cooking products as a
whole, (3) the small relative size of the induction cooking market, and
(4) the special cookware requirements. (Wolf, No. 24 at p. 2; AHAM, No.
32 at p. 3) DOE did not receive any comments opposing this proposal.
Therefore, absent any comment opposing the proposal and in light of
the comments in support of the proposal, DOE is not considering
commercial-style cooking products and induction technology in this
rulemaking as proposed in the November 2007 ANOPR.
c. Microwave Ovens
In the November 2007 ANOPR, DOE considered a single product class
for
[[Page 62049]]
microwave ovens. The Joint Comment agreed that microwave ovens should
be represented in a single product class without consideration of
cavity size or output power rating, due to the lack of correlation
between microwave oven size and efficiency demonstrated by both the
AHAM and DOE studies. (Joint Comment, No. 29 at p. 9) AHAM opposed a
single microwave oven product class, stating that the product class
should be broken up into subcategories according to features that may
be different than when the standard was first put into effect many
years ago. (AHAM, Public Meeting Transcript, No. 23.7 at pp. 32-33)
Based on the data already supplied to DOE by AHAM, and by DOE's own
testing, no features or utilities were observed to be uniquely
correlated with efficiency such that they would warrant defining
multiple product classes for microwave ovens, according to the criteria
put forth by EPCA. (42 U.S.C. 6295(q)) Thus, for the purposes of this
rulemaking, DOE has retained a single product class for microwave
ovens.
2. Commercial Clothes Washers
In the November 2007 ANOPR, DOE stated that it planned to consider
a single product class for CCWs in accordance with the prescriptive
standards for such equipment set in EPACT 2005. 72 FR 64432, 64465
(Nov. 15, 2007). Through EPACT 2005, Congress imposed a minimum energy
efficiency threshold for all CCWs to meet.\23\ EPACT 2005 placed all
CCWs into a single product class with a single energy efficiency and
water efficiency standard for all covered equipment. Id. Accordingly,
these standards encompass CCWs with wash baskets that rotate around
either a vertical or horizontal axis.\24\
---------------------------------------------------------------------------
\23\ 42 U.S.C. 6313(e); codified at 10 CFR 431.156.
\24\ Typically, vertical-axis clothes washers are accessed from
the top (also known as ``top-loaders''), while horizontal-axis
clothes washers are accessed from the front (also known as ``front-
loaders''). However, a limited number of residential horizontal-axis
clothes washers which are accessible from the top (using a hatch in
the wash basket) are currently available, although DOE is unaware of
any such CCWs on the market. For the purposes of this analysis, the
terms ``vertical-axis'' and ``top-loading'' will be used
interchangeably, as will the terms ``horizontal-axis'' and ``front-
loading.'' Additionally, clothes washers that have a wash basket
whose axis of rotation is tilted from horizontal are considered to
be horizontal-axis machines.
---------------------------------------------------------------------------
At the same time, DOE noted in the ANOPR that it has the authority
to establish additional product classes within the CCW product category
if warranted, and requested data and information on the product class
definitions in the November 2007 ANOPR. 72 FR 64432, 64513 (Nov. 15,
2007). AHAM, Alliance, and Whirlpool supported two CCW product classes,
suggesting that DOE should set a separate standard for top-loaders and
front-loaders. (AHAM, Public Meeting Transcript, No. 23.7 at pp. 35-36
and pp. 81-82; Alliance, Public Meeting Transcript, No. 23.7 at pp. 36-
37; and Whirlpool, No. 28 at pp. 3-4)
In considering whether separate classes are warranted, DOE must
consider the utility and performance characteristics to determine
whether the relevant requirements have been met. (42 U.S.C. 6295(q);
6313(a)) Among the criteria DOE considered when examining potential
separate product classes for clothes washers was the wash basket axis
of rotation, which DOE also used for RCWs. (See 10 CFR 430.32(g))
Alliance stated that front-loading and top-loading CCWs show no
overlap in operating efficiency, in terms of MEF and WF, and that they
have unique characteristics. For example, such characteristics include
the ability of top-loaders to allow a consumer to lift the lid mid-
cycle to add an item, whereas front-loaders must drain the water in the
drum before the door can be opened. (Alliance, Public Meeting
Transcript, No. 23.7 at pp. 36-37)
DOE notes that a review of the current California Energy Commission
(CEC), Consortium for Energy Efficiency (CEE), and ENERGY STAR clothes
washer product databases shows some overlap in energy efficiency for
top-loading and front-loading CCWs. However, this overlap is not nearly
as broad as in the RCW market. DOE agrees that the efficiency levels
that can be achieved by front-loading CCWs are generally higher than
the levels that can be achieved by top-loading CCWs.
Regarding product utility, Whirlpool cited the November 2007
ANOPR's statement that ``[T]he residential clothes washer rulemaking
history clearly demonstrated that size, axis of access, and certain
technologies had consumer utility that affect performance and,
therefore, warranted separate product classes for residential
products.'' Whirlpool's point was that RCWs and CCWs are analogous
products that should be treated in a consistent fashion. (Whirlpool,
No. 28 at p. 4) ASAP, on the other hand, agreed with DOE's tentative
approach of maintaining a single product class, noting that Congress
and DOE have set standards over the last 20 years that have changed the
mix of unit characteristics available on the market. ASAP argued that
in an earlier RCW efficiency standards rulemaking, DOE had eliminated
the warm rinse cycle, a feature many consumers liked. ASAP concluded
that maintaining every characteristic on the market would restrict
DOE's ability to set any efficiency standards. (ASAP, Public Meeting
Transcript, No. 23.7 at pp. 38-40) ASAP also commented that the
consumer utility of CCWs to wash clothes is independent of whether they
are accessed from the top or the front. (ASAP, Public Meeting
Transcript, No. 23.7 at pp. 83-84)
Although DOE considered issuing a single CCW product class in the
ANOPR that would encompass both top-loading and front-loading CCWs,
further consideration of the relevant statutory provisions and the
public comments on the November 2007 ANOPR have led DOE to conclude
that EPCA does not permit adoption of a standard that would eliminate
top-loading CCWs. Accordingly, for the reasons explained below, DOE has
decided to establish two classes of CCWs based upon axis of access
(i.e., top-loading or front-loading).
When directing the Secretary to consider amendments to the energy
efficiency standards for CCWs, Congress did not mandate use of a single
class or alter other relevant provisions of the statute related to
setting classes. First, under 42 U.S.C. 6311(21), the definition of
``commercial clothes washer'' specifically includes both horizontal-
axis clothes washers (front-loading machines) and vertical-axis clothes
washers (top-loading machines). Further, the prescriptive standards for
CCWs (1.26 MEF/9.5 WF), as set forth in 42 U.S.C. 6313(e), are
achievable by both top-loading and front-loading machines. Neither
provision indicates an intention to eliminate either type of CCW
currently available.
Next, 42 U.S.C. 6295(o)(4) \25\ provides, ``The Secretary may not
prescribe an amended or new standard * * * that is likely to result in
the unavailability in the United States in any covered product type (or
class) of performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States at the time of
the Secretary's finding.'' This statutory provision demonstrates
congressional intent to forego potential energy savings under certain
enumerated circumstances. DOE has determined that this provision
applies to the present CCW rulemaking.
---------------------------------------------------------------------------
\25\ This provision is also applicable to CCWs, pursuant to 42
U.S.C. 6316(a).
---------------------------------------------------------------------------
In previous rulemakings, DOE has concluded that the method of
``loading'' clothes in washers (axis of access) is a
[[Page 62050]]
``feature'' within the meaning of 42 U.S.C. 6295(o)(4) and,
consequently, established separate product classes for top-loading and
front-loading RCWs. (56 FR 22263 (May 14, 1991)) DOE reiterated this
position in denying the California Energy Commission's (CEC) petition
for waiver from Federal preemption of its RCW regulation.\26\ (71 FR
78157 (Dec. 28, 2006)) DOE denied the CEC petition for three separate
and independent reasons, one of which was that ``interested parties
demonstrated by a preponderance of evidence that the State of
California regulation would likely result in the unavailability of a
class of residential clothes washers in California. * * * [T]he rule
would violate EPCA in another way, i.e., it would mandate the 6.0 WF
standard in 2010, which would likely result in the unavailability of
top-loader residential clothes washers.'' Id. at 78157-58. Given the
similarities in technologies and design and operating characteristics
between RCWs and CCWs, in DOE's judgment, the axis of access must be
accorded similar treatment in the context of the current CCW
rulemaking.
---------------------------------------------------------------------------
\26\ DOE's denial of the CEC petition is currently in litigation
(California Energy Comm'n v. DOE, No. 07-71576 (9th Cir. filed April
23, 2007)).
---------------------------------------------------------------------------
If DOE were to propose an amended standard for CCWs under the
statutory criteria set forth in EPCA based upon a single product class,
the result would be a standard that would effectively eliminate top-
loading CCWs from the market, because it would set an MEF for all CCWs
at a level significantly higher than the max-tech for top-loading
machines. Because such a standard would violate the statute (42 U.S.C.
6295(o)(4); 6313(a)), DOE has decided to propose separate product
classes and accompanying standards for top-loading and front-loading
CCWs in today's NOPR.
B. Technology Assessment
In the market and technology assessment DOE conducted for the
November 2007 ANOPR, DOE identified technology options available to
improve the energy efficiency of each type of covered product. (See the
TSD accompanying this notice, chapter 3.) A discussion of these options
as they relate to the product categories at issue in this rulemaking
follows.
1. Cooking Products
At the December 2007 public meeting, DOE summarized its initial
observations of technologies associated with standby power in microwave
ovens and invited comment. DOE investigated technology options that
appeared to be feasible means of decreasing standby power. Based on
observations from tests, DOE suggested that microwave oven standby
power largely depends on the display technology used, the associated
power supplies and controllers, and the presence or lack of a cooking
sensor that requires standby power.\27\ AHAM stated that functions such
as sensors, clocks, and perhaps others consume standby power but also
provide consumer utility. If a standby power standard is developed,
AHAM believes it is critical to look at these functions and identify
them properly in order to change the test procedure appropriately. AHAM
stated it would work with DOE to identify the changes and some of the
consumer utilities. (AHAM, Public Meeting Transcript, No. 23.7 at pp.
70-71)
---------------------------------------------------------------------------
\27\ Cooking sensors, which infer the cooking state of the food
load, can reduce cook times and potentially produce real-world
energy savings, although this benefit is not currently captured by
the DOE test procedure and DOE is unaware of any data quantifying
such an effect.
---------------------------------------------------------------------------
According to Whirlpool, microwave ovens use standby power primarily
for a clock and the instant-on capability. Whirlpool noted that
consumers who purchase over-the-range microwave ovens with features
such as sensing and auto-cook cycles expect a display that allows
execution of these capabilities, matches their other premium appliances
such as their ranges, and differentiates itself from the simple display
on a basic-functionality countertop microwave oven. (Whirlpool, No. 28
at pp. 1-2; Whirlpool, Public Meeting Transcript, No. 23.7 at p. 73)
The Edison Electric Institute (EEI) commented that it does not
consider cooking sensors in microwave ovens to be a part of
``standby,'' since the sensors perform useful and helpful functions to
consumers. EEI stated that DOE should test microwave ovens to see if
cooking sensors reduce overall cooking times because reduced cooking
times will likely create greater energy savings than the standby energy
consumption of the sensor. (EEI, No. 25 at pp. 2-3)
DOE will analyze any data and information provided by stakeholders
to evaluate the utility provided by specific features that contribute
to microwave oven standby power. In addition, DOE has conducted
additional research on several microwave oven technologies that
significantly affect standby power, including cooking sensors, display
technologies, and control strategies and associated control boards.
a. Cooking Sensors
Product teardowns performed by DOE during the November 2007 ANOPR
analyses revealed that the most common identifiable cooking sensors are
absolute humidity sensors. This sensor technology currently requires
standby power in the range of 1 to 2 W to keep the sensing element
heated, and also requires warm-up times in excess of two minutes if the
sensor power is switched off. Japanese microwave oven manufacturers
stated that they are unaware of any absolute humidity sensors that did
not require standby power to stay warm. Standby testing by DOE and AHAM
revealed no microwave ovens with cooking sensors that consume less than
2 W in standby mode.
EEI questioned whether cooking sensors that lack multi-minute warm-
up times exist, since microwave oven cooking times typically do not
exceed two minutes. (EEI, Public Meeting Transcript, No. 23.7 at p.
234) The Joint Comment stated that, in the unlikely event that there is
not a straightforward technical solution (e.g., a faster-stabilizing
gas-sensing medium) to existing sensor technology, DOE should look into
alternative sensing approaches to cooking status. The Joint Comment
stated that if DOE fails to find standard-type cook sensors with
shorter stabilization times or alternative sensing and control
strategies, at a minimum, DOE should evaluate other options including
(1) an auto power-down mode for cooking sensing devices that is
consumer programmable, and (2) requirements that microwave ovens be
shipped with the cooking sensor disabled. (Joint Comment, No. 29 at p.
8)
Whirlpool commented that a potential standby power standard could
eliminate cooking sensors in microwave ovens as current cooking sensors
typically require two minutes to warm up before use. According to
Whirlpool, imposing a two-minute waiting period before each microwave
oven use would negate much of its consumer utility. (Whirlpool, No. 28
at pp. 1-3)
During teardown analyses, DOE observed that microwave ovens from
one manufacturer use a piezoelectric steam sensor, which requires zero
power in standby mode. In addition, DOE has identified infrared and
weight sensors with little to no warm-up time that do not consume
standby power and that have been applied successfully in microwave
ovens currently available in the Japanese market. DOE has also
identified relative humidity sensors as a type of zero-standby sensor
that can be used in a microwave oven, but is unaware of any microwave
ovens on the market that use this type of sensor. Lastly, DOE was made
aware of an
[[Page 62051]]
absolute humidity sensor that requires no standby power, has zero
incremental cost above that of a conventional absolute humidity sensor,
and is in the process of being phased into production for a major
microwave oven supplier to the U.S. market. Based on its research and
manufacturer interviews, DOE believes that the number of different
sensor technologies available on the market that do not require standby
power suggests that the utility of a cooking sensor can be maintained
with zero standby power. Further, DOE believes all manufacturers could
transition to no-standby-power cooking sensors at a zero incremental
cost for the sensor change by the effective date of a proposed standby
power standard.
b. Display Technologies
During reverse-engineering activities conducted as part of the
November 2007 ANOPR analysis, DOE observed three different display
types used in microwave ovens: Light-emitting diode (LED) displays,
liquid crystal displays (LCD) with and without backlighting, and vacuum
fluorescent displays (VFD). (See chapter 3 of the TSD accompanying this
notice for further discussion of these technologies.) Within the 32-
unit sample that DOE examined, microwave ovens equipped with VFDs
consumed the most power, on average, followed by units featuring
backlit LCDs, LEDs, and non-backlit LCDs. DOE sought comment regarding
the consumer utility of different display technologies.
The Joint Comment stated that, unless a unique consumer utility can
be shown for VFDs, the standard level analyzed should be based on LCD
backlit or LED displays. According to the Joint Comment, LED and
organic LED (OLED) products have dramatically increasing efficiency
performance, and more color palettes are becoming available. In their
opinion, a 1.0 to 1.5 W combined allowance for clock face display and
illumination with power supply losses appears more than ample in view
of rapidly improving power supply and lighting technologies. (Joint
Comment, No. 29 at pp. 8-9)
Interviews DOE conducted with display manufacturers revealed that
VFDs can achieve higher brightness levels, wider viewing angles, and
higher contrast than backlit LCDs. Display manufacturers also stated
that LEDs have largely comparable performance to VFDs in terms of
brightness and viewing angle. A VFD manufacturer mentioned that, while
VFD technologies with efficiencies comparable to backlit LCDs do exist,
such displays are substantially more expensive than the VFDs commonly
found in microwave ovens today.
Multiple manufacturers of cooking products interviewed as part of
the MIA process mentioned the need to differentiate their cooking
appliance lines from those of their competitors with (among other
things) coordinated displays and user interfaces. Manufacturers noted
that LCD displays (backlit or not) do not work well in appliances that
get very hot, such as ovens, due to thermal limitations. Manufacturers
also opposed switching entirely to LED-based displays since it could
make it harder for them to differentiate their products, particularly
in a market as commoditized as microwave ovens. Lastly, manufacturers
noted that larger, more complex, and more colorful displays are usually
associated with premium appliances, which will have a harder time
achieving the same standby power consumption as units with smaller,
dimmer, and simpler displays.
The current rulemaking does not seek to regulate the standby power
consumption of conventional cooking appliances, and microwave ovens do
not feature high surface temperatures and can incorporate one of many
display options, as noted in the DOE sample. In addition, not all high-
end appliance manufacturers use the same display technology across all
cooking appliances that they manufacture. For example, at least one
manufacturer uses a backlit LCD in its microwave oven, with the
backlighting LEDs color-coordinated with the VFDs found in its ovens.
DOE believes that the consumer utility of a microwave oven display is
its brightness, viewing angle, and ability to display complex
characters, and that this utility can be achieved by several display
technologies. Therefore, in determining standby power levels, DOE will
consider each of these display technologies and their respective power
requirements.
c. Power Supply and Control Board Options
Another potential area for standby power improvements is the power
supplies on the control board. Multiple improvement paths with varying
risk to manufacturers are available, including the selective upgrading
of power supply components to boost efficiency, the reduction of peak
power demand through the use of lower-power components, and the
transition to switching power supplies.
Power supply topology experts that DOE consulted noted that the
quality of the transformer core material, types of diodes, capacitor
quality, and voltage regulator selection could reduce no-load standby
power for the power supply by half and boost conversion efficiency from
55 to 70 percent. Switching power supplies offer the highest conversion
efficiencies (up to 75 percent) and lowest no-load standby losses (0.2
W or less) though at a higher cost, higher part count, and greater
complexity. However, switching power supplies are as yet unproven in
long-term microwave oven applications, and the greater complexity of
these power supplies may also lower overall reliability. For more
detail, see chapter 3 of the TSD accompanying this notice.
There already are some premium microwave ovens on the U.S. market
that incorporate switching power supplies. However, due to the
incremental cost of such a power supply over a conventional power
supply and the price competition in the microwave oven market, it is
unlikely that switching power supplies will find wider application
unless low standby power budgets force manufacturers to consider them.
d. Power-Down Options
Manufacturers could also meet very low (less than 1 W) standby
power levels according to the EISA 2007 and IEC 62301 definitions of
``standby mode'' by incorporating an automatic function that turns off
most power-consuming components once a period of inactivity has
elapsed. Such a low-consumption state could be user-selectable on
demand, or could be the default condition in which the microwave oven
is shipped such that the consumer would be required to opt into
maintaining the display, cooking sensor, or other utility feature
during standby. DOE has determined that some microwave oven suppliers
to the U.S. market have already taken such approaches to meet
prescriptive standby power standards in other markets such as Japan.
Therefore, DOE analyzed how the consumer utility of a microwave oven is
influenced by this design option. A large number of microwave ovens in
the Japanese market implement this feature, according to DOE
discussions with the Japanese Electrical Manufacturers' Association.
As outlined in the cooking sensor discussion (see section IV.B.1 of
this notice), the Joint Comment stated that if DOE fails to find
suitable cooking or other sensors, at a minimum, DOE should evaluate
(1) an auto power-down mode for cooking sensing devices that is
consumer programmable and (2) requirements that microwave ovens be
shipped with the cooking sensor
[[Page 62052]]
disabled. (Joint Comment, No. 29 at p. 8)
DOE determined that control strategies are available that allow
manufacturers to make design tradeoffs between incorporating standby-
power-consuming features such as displays or cooking sensors and
including a function to turn power off to these components during
standby.
2. Commercial Clothes Washers
DOE did not receive any comments on the technology assessment for
CCWs other than those discussed previously in section III.C.1.
Therefore, DOE retained all of the CCW design options listed in the
November 2007 ANOPR for the engineering analysis. (For further
information, see chapter 3 of the TSD accompanying this notice.)
C. Engineering Analysis
The purpose of the engineering analysis is to characterize the
relationship between the efficiency (or annual energy use) and cost of
the products that are the subject of this rulemaking. DOE used this
efficiency/cost relationship as input to the payback period, LCC, and
national impact analyses. To generate manufacturing costs, DOE has
identified three basic methodologies: (1) The design-option approach,
which provides the incremental costs of adding to a baseline model's
design options that will improve its efficiency; (2) the efficiency-
level approach, which provides the incremental costs of moving to
higher energy efficiency levels, without regard to the particular
design option(s) used to achieve such increases; and (3) the cost-
assessment (or reverse-engineering) approach, which provides ``bottom-
up'' manufacturing cost assessments for achieving various levels of
increased efficiency, based on detailed data on costs for parts and
material, labor, shipping/packaging, and investment for models that
operate at particular efficiency levels.
DOE conducted the engineering analysis for this rulemaking using
different methods for each of the covered products. For cooking
products, DOE selected the design-option approach, because efficiency
ratings of products on the market are not reported; therefore, the
engineering analysis for cooking products was based upon an update to
the analysis contained in the 1996 TSD. For CCWs, published efficiency
data allowed the use of an efficiency-level approach. DOE supplemented
both approaches with data gained through reverse-engineering analysis
and primary and secondary research, as appropriate. Details of the
engineering analysis are in the TSD accompanying this notice (see
chapter 5).
1. Efficiency Levels
a. Cooking Products
For cooking products, DOE reviewed and updated the design options
and efficiency levels published in the 1996 TSD analysis, as generally
supported by stakeholders. DOE did not receive any comments regarding
omitted cooking technologies and will retain all the cooking
technologies and design options identified in the November 2007 ANOPR.
(See chapter 3 of the TSD accompanying this notice.)
Microwave Oven Cooking Efficiency. To identify microwave oven
design options, DOE performed a reverse-engineering analysis on a
representative sample of microwave ovens. DOE did not find any
additional design options beyond those identified in the November 2007
ANOPR. DOE also performed efficiency testing on the sample of microwave
ovens, which validated data submitted by AHAM (reproduced in appendix
5-A of the TSD accompanying this notice). Results from both AHAM and
DOE efficiency testing showed no identifiable correlation between
cooking efficiency and either cavity volume or rated output power.
DOE's reverse-engineering analysis included an evaluation of microwave
oven magnetrons, magnetron power supplies, and fan motors (identified
as design options in the TSD). This evaluation determined that
efficiencies for these design options have changed little since the
1996 analysis. Therefore, DOE believes that this supplementary analysis
validates the efficiency levels that were presented in the November
2007 ANOPR. For more detail, see chapter 5 of the TSD accompanying this
notice.
Microwave Oven Standby Power. DOE is considering a maximum average
standby power, in W, for microwave ovens. DOE's analysis estimates the
incremental manufacturing cost for microwave ovens with standby power
levels below the baseline standby power level of 4 W. For the purposes
of this standby power analysis, a baseline microwave oven is considered
to incorporate an absolute humidity cooking sensor.
To analyze the cost-efficiency relationship for microwave oven
standby, DOE defined standby power levels expressed as a maximum
average standby power, in W. To analyze the impacts of standards, DOE
defined the following four standby levels for analysis: The FEMP
procurement efficiency recommendation; the IEA One-Watt level; a
standby power level as a gap-fill between the FEMP Procurement
Efficiency Recommendation and IEA One-Watt Program levels; and the
current maximum microwave oven standby technology (i.e., lowest standby
power) that DOE believes is or could be commercially available when the
energy conservation standards become effective, based on a review of
microwave ovens currently on the market worldwide. Table IV.1 provides
the microwave oven standby levels and the reference source for each
level that DOE has analyzed. For more details on the determination of
standby power levels, see chapter 5 of the TSD accompanying this
notice.
Table IV.1--Standby Power Levels for Microwave Ovens
------------------------------------------------------------------------
Standby power
Standby level Standby level source (W)
------------------------------------------------------------------------
Baseline................... Baseline................... 4.0
1.......................... FEMP Procurement Efficiency 2.0
Recommendation.
2.......................... Gap Fill................... 1.5
3.......................... IEA 1-Watt Program......... 1.0
4.......................... Max-Tech................... 0.02
------------------------------------------------------------------------
The Joint Comment stated that opportunities exist for reducing
standby power without affecting consumer utility. The Joint Comment
noted that, for the microwave ovens listed in the FEMP procurement
database, 50 percent of the models with both a clock display and a
cooking sensor have a standby demand of between 2.1 and 3.0 W,
[[Page 62053]]
implying that a baseline standby demand could be reduced to 3.0 W and
probably less without threat of reduction of consumer utility. (Joint
Comment, No. 29 at pp. 6-8)
b. Commercial Clothes Washers
The efficiency levels for CCWs are defined by two factors
normalized by wash basket volume--MEF and WF. These two variables are
only directly related to each other via the average hot water usage by
a clothes washer as measured by the DOE test procedure. Other measured
parameters affect only one variable or the other. For example, cold
water consumption only affects the WF, while remaining moisture content
(RMC) only affects the MEF. (See chapter 5 of the TSD accompanying this
notice for further explanation.) Based on comments and the
determination at that time to consider a single product class for CCWs,
DOE selected potential efficiency levels for the November 2007 ANOPR
that were based on current Federal energy conservation standards,
ENERGY STAR and CEE Commercial Clothes Washer Initiative criteria, and
specifications for CCWs currently on the market. DOE sought comment on
whether efficiency level 5 (2.0 MEF/5.5 WF, which corresponds to
efficiency level 2 for front-loading CCWs in the current analysis)
should be changed to allow for manufacturer cost differentiation above
and below this level.
Alliance stated that the only reason to adjust CCW energy and water
consumption at the 2.0 MEF/5.5 WF level would be to allow inclusion of
other manufacturers (since Alliance already produces units at this
level) and to allow manufacturers to add water through additional
rinses. The latter would address rinsing issues prevalent in front-
loading machines but would consume more energy in the motor. Alliance
stated that it could support adjusting the 2.0 MEF/5.5 WF level to be
less stringent and more flexible in meeting consumer demands for
cleaning and rinsing performance, as well as to allow the inclusion of
existing manufacturer designs that would obviate the need for incurring
additional investment. (Alliance, No. 26 at p. 2) DOE notes that, based
on the entries in the CEC, CEE, and ENERGY STAR databases, CCWs from
several manufacturers can attain 2.0 MEF/5.5 WF for both institutional
and non-institutional use. For example, two other manufacturers produce
non-institutional front-loading CCWs that achieve energy and water
efficiency levels of 2.13 MEF/5.03 WF and 1.99 MEF/6.8 WF,
respectively. Alliance and one of its competitors could thus add water
to their CCW cycle, whereas the third competitor would have to reduce
water consumption to meet the 5.5 WF standard with its current model
that nearly meets the 2.0 MEF efficiency level.
Based upon the determination of two product classes for CCWs (see
section IV.A.2), DOE subsequently revised the efficiency levels
presented in the November 2007 ANOPR to characterize top-loading and
front-loading CCWs separately. Accordingly, DOE considered the
efficiency levels subsequently presented in Table IV.3, which were
derived from current Federal energy conservation standards, ENERGY STAR
and CEE Commercial Clothes Washer Initiative criteria and databases of
currently available models, and entries in the CEC database. DOE seeks
comment on these revised efficiency levels.
DOE also sought comment on the max-tech efficiency level defined
for the single product class in the November 2007 ANOPR. DOE noted that
some CCWs on the market have MEFs or WFs that exceed the CCW max-tech
efficiency level for one measure, but not both. For example, one CCW on
the market at the time of the November 2007 ANOPR (2.45 MEF/9.5 WF) had
a max-tech MEF performance but a baseline WF performance.\28\ DOE did
not receive comment on which front-loading CCWs best represent max-
tech, and why. Stakeholder comments discussed in the November 2007
ANOPR indicated that a high MEF and low WF are not necessarily
correlated, and, thus, a max-tech level based on the highest MEF and
lowest WF is not realistic. 72 FR 64432, 64465 (Nov. 15, 2008). As
discussed in section III.C.2.b, DOE agreed with these comments, and
selected top-loading and front-loading CCWs currently available on the
market that exhibit a balance of high MEF and low WF to represent max-
tech for each product class.
---------------------------------------------------------------------------
\28\ This information, available at http://www.energy.ca.gov/
appliances/appliance/excel_based_files/Clothes_Washers/, was
accessed on April 29, 2008.
---------------------------------------------------------------------------
For top-loading CCWs, no max-tech level was defined in the November
2007 ANOPR because the analysis was structured as a single product
class, and, generally, top-loading machines cannot achieve as high an
efficiency level as front-loading machines. Based on market surveys of
currently available models, DOE proposes in this notice a max-tech
level of (1.76 MEF/8.3 WF) for top-loading CCWs. For front-loading
CCWs, DOE considered the max-tech level proposed in the November 2007
ANOPR for the single product class, since all CCWs at such high
efficiencies are front-loading. However, because new model
introductions and discontinuations have occurred since the November
2007 ANOPR, DOE has determined a new max-tech level for front-loading
CCWs as well, which is higher in efficiency than the max-tech level
proposed in the November 2007 ANOPR (2.2 MEF/5.1 WF). The new max-tech
level for front-loading machines is (2.35 MEF/4.4 WF), based on a
currently available CCW. These units were selected after an extensive
market survey, and DOE's research suggests that their combination of
high MEF and low WF represent the best-in-class balance between MEF and
WF for the two product classes of CCWs. These max-tech levels were also
the basis for all MIA incremental cost data developed in DOE's
analysis. DOE seeks comment on the determination of the max-tech
efficiency levels for top-loading and front-loading CCWs.
2. Manufacturing Costs
DOE estimates a manufacturing cost for products at each efficiency
level in this rulemaking. These manufacturing costs are the basis of
inputs for a number of other analyses, including the LCC, national
impact, and the GRIM analyses.
The Joint Comment made the following three cross-cutting comments
about manufacturing costs spanning the product families that this
rulemaking could affect:
Rather than rely primarily on manufacturer average cost
data, DOE should give greatest weight in its analysis to cost data
determined through its reverse-engineering analyses, which have a
better track record of estimating actual costs.
When using manufacturer data, DOE should use the minimum
cost data submitted, rather than the average cost data. Minimum data
are appropriate because the low-cost manufacturer will determine prices
in a market at equilibrium. If one manufacturer has found a cheaper way
to make a product, others will follow if they wish to compete in the
price-sensitive portion of the marketplace.
Once a new standard is promulgated, producers have a
strong incentive to invest in new engineering solutions and production
capacity that will enable them to comply at the lowest possible cost.
(Joint Comment, No. 29 at p. 13)
DOE agrees with the first point of the Joint Comment that reverse-
engineering provides valuable information in
[[Page 62054]]
determining manufacturing cost, and DOE notes that, in addition to
considering the manufacturer-submitted cost data, it conducts reverse-
engineering analysis and teardowns to the extent practicable. DOE also
considers sales census data combined with a markup data to reflect all
the steps in the distribution chain, as well as previous TSD cost data,
updated to reflect current manufacturing costs. DOE has used all the
listed approaches as part of this rulemaking, although the precise
approach varied by product.
In response to the Joint Comment's second point, DOE does not
believe that it has been demonstrated that the low-cost manufacturer
will determine the prices in a market at equilibrium, nor that a low-
cost manufacturer will correspond to low-cost products on the market.
There may be relatively complex, low-cost machines that are not
necessarily produced by the low-cost manufacturer. There may also be
features, including quality, that are indicative of higher-cost units
that the marketplace demands. Therefore, DOE continues to use shipment-
weighted average cost data in its analyses because it believes that
such costs are the most reflective of the manufacturing costs that
industry incurs. DOE notes that many appliances with nominally similar
functions sell at a range of price points. Such differentiation may be
the result of features that may not be efficiency-related but may
provide consumer utility. Through its shipments-weighted average
costing process, DOE believes that the rulemaking will factor in
continuing product differentiation, since it best reflects the actual
state of the industry and the preferences by consumers. This shipment-
weighted approach is also consistent with the data submitted by
stakeholders, allowing direct comparisons between DOE analyses such as
the reverse engineering and the data submittals.
In considering the Joint Comment's third point, DOE recognizes that
it may well be true that a change in energy conservation standards is
an opportunity for manufacturers to make investments beyond what would
be required to meet the new standards in order to minimize the costs or
to respond to other factors. For example, a product could be re-
engineered to take out cost (e.g., reduce the number of parts); capital
investments could be made to remove labor costs (e.g., automate
production); or production could be moved to lower-cost areas. However,
these are individual company decisions, and it is impossible for DOE to
forecast and analyze such investments. DOE does not know of any data
that provide it with the capability of determining what precise course
a manufacturer will take. Furthermore, while manufacturers have been
able to take costs out of products to meet previous energy conservation
standards, there are no data to suggest that there are any further
costs to take out. Regarding capital investments, DOE assumes that the
existing manufacturing processes remain the same. If capital
investments are expected to be made, DOE requires data demonstrating
this in order to include in the MIA and the employment impact analysis.
Similarly, because the potential for moving production is unknown to
DOE, data must be provided for analysis.
Cooking Products. The Joint Comment suggested that DOE should
collect energy and cost data for ovens for individual features such as
low-power electronic controls, clock faces, and other standby load
features. If industry cannot provide compelling cost data, the Joint
Comment suggested that DOE should model it as a zero-cost design
option. (Joint Comment, No. 29 at p. 6; ASAP, Public Meeting
Transcript, No. 23.7 at p. 62) Regarding microwave oven costs,
Whirlpool supported the approach of using the Producer Price Index
(PPI) to update design options identified in the prior rulemaking, and
stated that it is unaware of meaningful new design options to recommend
to DOE. (Whirlpool, No. 28 at p. 5)
DOE contacted original equipment manufacturer (OEM) suppliers and
manufacturers to better understand the costs associated with various
microwave oven components such as displays, power supplies, and
magnetrons. Suppliers and manufacturers agreed that many lower-power,
higher-efficiency components cost more to implement. For example, a
switching power supply has more, and higher cost, components than a
standard unregulated power supply. Similarly, increases in raw material
prices have affected the cooking efficiency design options that DOE had
identified in this and past analyses. Because no industry cost data
were provided, DOE scaled the costs associated with each cooking
efficiency design option from the 1996 TSD by the PPI. Because DOE
proposes a microwave oven standby power standard, DOE developed
manufacturing costs related to improved standby performance by
estimating costs of published power supply designs and components,
referencing subject-matter experts, and interviewing manufacturers that
use such components.
Commercial Clothes Washers. For CCWs, AHAM supplied industry-
aggregated manufacturing cost data for the November 2007 ANOPR analyses
at two efficiency levels, which correspond to efficiency level 1 for
top-loading CCWs and efficiency level 2 for front-loading CCWs. DOE
updated these costs following the November 2007 ANOPR to include
additional efficiency levels for each product class, based on
manufacturer-supplied data and DOE analysis. DOE undertook a limited
reverse-engineering approach to costing out the different efficiency
points.\29\ In addition, DOE relied on interviews with manufacturers,
knowledge of the clothes washer market through previous rulemakings,
ENERGY STAR, and other activities. DOE believes that the updated cost-
efficiency curves reflect costs that clothes washer manufacturers are
likely to experience.
---------------------------------------------------------------------------
\29\ Late introductions of high-efficiency models did not allow
for extensive reverse engineering due to the rulemaking schedule.
---------------------------------------------------------------------------
The following discussion addresses specific issues raised in
response to the November 2007 ANOPR.
a. Cooking Products
Electronic Ignition Systems. In the November 2007 ANOPR, DOE
identified electronic ignition systems as a design option that can be
used instead of standing pilot lights to light gas-fired cooking
appliances. DOE estimated incremental manufacturing costs of electronic
ignition systems by scaling the manufacturing costs that were provided
in the 1996 TSD by the PPI.
DOE did not receive any comments that electronic ignition systems
were an inappropriate design option to consider for this rulemaking.
However, AGA commented that DOE underestimated the incremental
manufacturing cost of electronic ignition for gas cooking products.
According to AGA, the Harper-Wyman Co. provided an incremental retail
price of $150 for a gas range with electronic ignition relative to a
range with standing pilot ignition system in 1998 comments to DOE. This
retail price increment stands in sharp contrast to the $37 incremental
manufacturing cost estimated by DOE. (AGA, No. 27 at p. 13)
In response to AGA's comments, DOE contacted component suppliers of
gas cooking product ignition systems to validate DOE's manufacturing
cost estimates in the November 2007 ANOPR. DOE believes that the
information collected verifies that the costs in the November 2007
ANOPR represent current costs and, therefore, will continue to
characterize the incremental manufacturing costs for the non-standing
pilot ignition systems with
[[Page 62055]]
the estimates developed for the November 2007 ANOPR.
Microwave Oven Standby Power. For microwave ovens, DOE estimates a
cost-efficiency relationship (or ``curve'') for microwave oven standby
power in the form of the incremental manufacturing costs associated
with incremental reductions in baseline standby power. As part of the
November 2007 ANOPR analysis, DOE tested and tore down 32 microwave
ovens and determined that microwave oven standby power depends on,
among other factors, the display technology used, the associated power
supplies and controllers, and the presence or lack of a cooking sensor.
The results and discussion of standby testing along with standby power
data submitted by AHAM can be found in chapter 5 of the TSD
accompanying this notice. From this testing and reverse-engineering,
DOE observed correlations between specific components and technologies,
or combinations thereof, and measured standby power.
DOE estimated costs for each of component and technology by using
quotes obtained from suppliers, interviews with manufacturers,
interviews with subject matter experts, research and literature review,
and numerical modeling. DOE obtained preliminary incremental
manufacturing costs associated with the standby levels by considering
combinations of these components as well as other technology options
identified to reduce standby power. DOE also conducted manufacturer
interviews to obtain greater insight into the design strategies to
improve efficiency and the associated costs.
Table IV.2 shows microwave oven standby power preliminary cost-
efficiency results. Based upon DOE's research, interviews with subject
matter experts, and discussions with manufacturers, DOE believes that
all consumer utility (i.e., display, cooking sensor, etc.) can be
maintained by standby levels down to standby level 3 (1.0 W). At the
max-tech level, DOE would expect the implementation of an auto power-
down feature that would, among other things, shut off the display after
a period of inactivity, potentially impacting consumer utility. For the
detailed cost-efficiency analysis, including descriptions of design
options and design changes to meet standby levels, see chapter 5 of the
TSD accompanying this notice.
Table IV.2--Incremental Manufacturing Costs for Microwave Oven Standby
Power
------------------------------------------------------------------------
Incremental
Standby level cost
------------------------------------------------------------------------
Baseline............................................... NA
1...................................................... $ 0.30
2...................................................... $ 0.67
3...................................................... $ 1.47
4...................................................... $ 5.13
------------------------------------------------------------------------
DOE observed several different cooking sensor technologies in its
sample of 32 microwave ovens. Follow-on testing after the December 2007
public meeting showed that some of these sensors are zero-standby
(relative humidity) cooking sensors. One manufacturer also indicated
during its MIA interview that its supplier of cooking sensors had
developed zero-standby absolute humidity cooking sensors and that these
sensors would have the same manufacturing cost as the higher-standby
power devices they would replace. Based on the number of zero-standby
cooking sensor approaches from which manufacturers can choose, DOE
believes that all manufacturers can and likely will implement zero-
standby cooking sensors by the effective date of a standby power
standard, and maintain the consumer utility of a cooking sensor without
affecting unit cost.
DOE believes that a standard at standby levels 1 or 2 would not
affect consumer utility, because all display types could continue to be
used. For these two levels, better power supplies should allow the
continued use of any display that DOE found in its sample of 32 units.
At standby level 3 for VFDs and standby level 4 for all display
technologies, DOE analysis suggests the need for a separate controller
(auto power-down) that automatically turns off all other power-
consuming components during standby mode. Such a feature would impact
the consumer utility of having a clock display only if the consumer
could not opt out of auto power-down. For the detailed cost-efficiency
analysis, including descriptions of design options and design changes
to meet standby levels, see chapter 5 of the TSD accompanying this
notice.
b. Commercial Clothes Washers
The CCW industry currently has only three major manufacturers
(i.e., with more than one percent market share), and a limited number
of CCWs models are available for purchase. As a result, only a few
models are available for purchase at a given efficiency point, thereby
restricting the amount of data that AHAM could submit.\30\ Accordingly,
AHAM submitted two manufacturing cost estimates: (1) $74.63 at (1.42
MEF/9.5 WF), and (2) $316.35 at (2.00 MEF/5.5 WF.) These are
incremental costs over a baseline top-loading CCW. Without additional
data, and based on preliminary manufacturer inputs, DOE, in the
November 2007 ANOPR, adopted a cost-efficiency curve where all
efficiency levels at or above (1.60 MEF/8.5 WF) incorporated the same
manufacturing cost published for (2.00 MEF/5.5 WF.) DOE sought
stakeholders' comment on how to refine the cost curve to better reflect
shipment-weighted manufacturing costs by efficiency level. 72 FR 64432,
64513 (Nov. 15, 2007).
---------------------------------------------------------------------------
\30\ In order to avoid anti-competitive effects, AHAM is limited
to publishing aggregated data by efficiency levels for which at
least three AHAM members have submitted cost-efficiency data. AHAM
weights the submission by unit shipments for each manufacturer to
reflect current market conditions and to maintain confidentiality.
---------------------------------------------------------------------------
In comments on the ANOPR, Whirlpool, Alliance, and AHAM stated that
it was not reasonable to assume that all CCWs achieving (1.60MEF/8.5
WF) through (2.20 MEF/5.1 WF) would have the same costs. (Whirlpool,
No. 28 at pp. 4-5, Alliance, No. 26 at p. 2 and AHAM, No. 32 at p. 10)
For example, Whirlpool stated that step functions generally exist in
product cost as efficiency increases, and that the cost differences
between these steps are significant, whereas the cost differences
within the steps are less significant. (Whirlpool, No. 28 at pp. 4-5)
In other words, certain efficiency levels can only be reached using
certain technology options. In the case of CCWs, there is a point
beyond which standard top-loading CCWs with agitators can no longer be
used and a switch has to be made to higher-efficiency platforms.
Whereas the run up to the switch may be gradual in terms of design
changes, a switch to a higher-efficiency platform such as a front-
loading CCW usually entails a significant jump in product cost, which
appears as a step function. Whirlpool noted that DOE has identified the
steps for CCWs as traditional top-load and front-load units. According
to Whirlpool, DOE's analysis does not include the possibility of a
high-efficiency top-load CCW. Further, Whirlpool stated that, although
such a machine is not in the market today, the company's experience in
building residential high-efficiency top-load clothes washers could be
translated into the development of a high-efficiency top-load CCW. Such
a machine could likely perform at CCW efficiency levels (1.72 MEF/8.0
WF), (1.80 MEF/7.5 WF),
[[Page 62056]]
and (2.00 MEF/5.5 WF). (Whirlpool, No. 28 at pp. 4-5)
Although AHAM is unable to provide cost information at levels other
than (1.42 MEF/9.5 WF) and (2.0 MEF/5.5 WF) while maintaining the
confidentiality of its members, it recommended that DOE either approach
CCW manufacturers directly or evaluate the cost differentials between
residential front-loading units and verify with manufacturers that
application of these costs and design options are realistic for CCWs.
(AHAM, No. 32 at p. 10) In response, DOE contacted all CCW
manufacturers and constructed its own estimate of the manufacturer cost
curve by efficiency level.
Alliance produces both top-loading and front-loading CCWs. Alliance
stated that a low-cost alternative to front-loading CCWs for efficiency
levels above 1.42 MEF would use existing, non-traditional technologies
that are proprietary and have been shown not to be accepted in the
residential market, and thus would never be accepted in the commercial
market. According to Alliance, the reason for a constant incremental
CCW manufacturing cost at MEF = 1.6 and above is that Alliance cannot
afford to invest in any new technology in that range, because they
already have a washer at the higher (2.00 MEF/5.5 WF) efficiency level.
(Alliance, No. 26 at p. 2) DOE noted the new listing of a traditional
top-loading CCW in December 2007 that achieves (1.76 MEF/8.3 WF), well
beyond the limits that Alliance stated could be achieved. However,
market acceptance of the new unit is unknown and similar washers
incorporating spray rinse technology have been previously withdrawn
from the CCW market due to consumer acceptance issues.
DOE is sensitive to the unique position of the low volume
manufacturer (LVM) in the marketplace, as its low manufacturing scale
makes product development and capital expenditure investments that much
harder to justify. Unlike its diversified competitors, the LVM services
the comparatively small (i.e. 45x smaller) CCW market almost
exclusively. Whereas its competitors can develop new technologies for
use in the CCW market as well as the much larger RCW market, the LVM
has to depreciate its investments over a much smaller production range.
As a result of its concentration on commercial laundry and its low
manufacturing scale, the LVM will be disproportionately affected by any
CCW rulemaking compared to its competitors who derive less than two
percent of their clothes washer revenues from CCW sales. DOE research
to date suggests that a wholesale conversion of the LVM production
facility to a lower-cost front-loading washer is not cost-justified.
Thus, a consumer boycott of higher-efficiency but traditional top-
loading clothes washers due to wash performance issues could be just as
effective at ending top-loading CCW production as a single product
class designation requiring the use of front-loading washers. The LVM
has stated that if it were required to convert its production facility
to front-loading production that it would likely suffer material harm
and exit the clothes washer business altogether.
The Joint Comment argued that Alliance has a dominant CCW market
share and can thus make the kinds of investments that are required to
meet applicable efficiency standards. The Joint Comment also stated
that Alliance's competitors would be forced to recover their
efficiency-related investments over a smaller shipment base, and that
their investments in CCWs could not be distributed over the cost-
competitive RCW market as well. (Joint Comment, No. 29 at p. 3)
In response to these comments, DOE notes that most CCWs on the
market in the United States are based largely on RCW platforms that are
upgraded selectively. Some investments (such as the controllers) are
CCW-specific but only make up part of the total unit cost. The majority
of capital expenditures related to tooling, equipment, and other
machinery in a plant can usually be applied to the residential as well
as the commercial market. Thus, overall (RCW + CCW) manufacturing scale
has a significant impact on the cost-effectiveness of potential
upgrades. A manufacturer with a high-volume residential line can cost-
justify much more capital-intensive solutions if they are applicable in
both markets, in contrast to a low-volume manufacturer that lacks the
scale to make the investments worthwhile. Thus, a low-volume
manufacturer may be required to purchase upgrade options from third-
party vendors to upgrade their units instead of developing less
expensive, but capital-intensive, in-house solutions. In the clothes
washer market, the most direct CCW competitor has over 60 times the
overall shipment volumes of the LVM. This scale difference also relates
to purchasing power. A large, diversified appliance manufacturer can
use its production scale to achieve better prices for raw materials and
commonly purchased components like controllers, motors, belts,
switches, sensors, and wiring harnesses. Even if a large company
purchases fewer items of a certain component, its overall revenue
relationship with a supplier may still enable it to achieve better
pricing than a smaller competitor can, even if that competitor buys
certain components in higher quantities. Lastly, high-volume
manufacturers benefit from being able to source their components
through sophisticated supply chains on a worldwide basis. A low-volume
manufacturer is unlikely to be able to compete solely on manufacturing
cost.
Based on the comments, DOE reviewed the November 2007 ANOPR CCW
manufacturing cost information and interviewed CCW manufacturers
representing nearly 100 percent of U.S. sales to discuss, among other
things, the cost-efficiency curve. (See section IV.H.6.b of this notice
and appendix 5-B of the TSD for further detail.) Based on this review
and the information gathered, DOE modified the cost-efficiency curve
based on detailed CCW manufacturer feedback, aggregating the responses
by unit shipments to ensure confidentiality. Table IV.3 shows the
updated cost-efficiency data.
Table IV.3 Incremental Manufacturing Costs for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
Modified energy factor/water factor Incremental cost
Efficiency level ---------------------------------------------------------------------------
Top-loading Front-loading Top-loading Front-loading
----------------------------------------------------------------------------------------------------------------
Baseline............................ 1.26/9.5 1.72/8.0 $0.00 $0.00
1................................... 1.42/9.5 1.8/7.5 $74.63 $0.00
2................................... 1.6/8.5 2.0/5.5 $129.83 $13.67
3................................... 1.76/8.3 2.2/5.1 $144.43 $37.84
4................................... N/A 2.35/4.4 N/A $63.63
----------------------------------------------------------------------------------------------------------------
[[Page 62057]]
D. Life-Cycle Cost and Payback Period Analyses
DOE conducted LCC and PBP analyses to evaluate the economic impacts
of possible amended energy conservation standards for the two appliance
products, on individual consumers for the cooking products and
commercial consumers for CCWs. (See the TSD accompanying this notice,
chapter 8.) The LCC is the total consumer expense over the life of the
appliance, including purchase and installation expense and operating
costs (energy expenditures and maintenance costs). To compute LCCs, DOE
discounted future operating costs to the time of purchase and summed
them over the lifetime of the appliance. The PBP is the change in
purchase expense as a result of an increased efficiency standard,
divided by the change in annual operating cost that results from the
standard. Otherwise stated, the PBP is the number of years it would
take for the consumer to recover the increased costs of a higher
efficiency product through energy savings.
DOE measures the change in LCC and the change in PBP associated
with a given efficiency level relative to an estimate of base-case
appliance efficiency. The base-case estimate reflects the market in the
absence of amended mandatory energy conservation standards, including
the demand for products that exceed the current energy conservation
standards. Section IV.E.9 discusses the estimate of base-case
efficiency in detail.
For cooking products, DOE calculated the LCC and payback periods
for a nationally representative set of housing units, which were
selected from EIA's Residential Energy Consumption Survey (RECS).
Similar to the November 2007 ANOPR, today's proposed rule for
residential cooking products continues to use the 2001 RECS.\31\ EIA
had not yet released the 2005 RECS when the analysis was performed. For
each sampled household, DOE determined the energy consumption and
energy price for the cooking product. Thus, by using a representative
sample of households, the analysis captured the wide variability in
energy consumption and energy prices associated with cooking product
use. The Department determined the LCCs and payback periods for each
sampled household using the cooking product's unique energy use and
energy price, as well as other input variables. The Department
calculated the LCC associated with the baseline cooking product in each
household. To calculate the LCC savings and payback period associated
with more efficient equipment (i.e., equipment meeting higher
efficiency standards), DOE substituted the baseline unit with a more-
efficient design.
---------------------------------------------------------------------------
\31\ U.S. Department of Energy-Energy Information
Administration, Residential Energy Consumption Survey, 2001 Public
Use Data Files (2001). Available at: http://www.eia.doe.gov/emeu/
recs/recs2001/publicuse2001.html.
---------------------------------------------------------------------------
For CCWs, DOE was unable to develop a consumer sample because
neither RECS nor EIA's Commercial Building Energy Consumption Survey
\32\ (CBECS) provide the necessary data to develop one. As a result,
DOE was not able to use a consumer sample to establish the variability
in energy and water use and energy and water pricing. Instead, DOE
established the variability and uncertainty in energy and water use by
defining the uncertainty and variability in the use (cycles per day) of
the equipment. The variability in energy and water pricing were
characterized by regional differences in energy and water prices.
---------------------------------------------------------------------------
\32\ U.S. Department of Energy-Energy Information
Administration, Commercial Buiilding Energy Consumption Survey, 2003
Public Use Data Files (2003). Available at http://www.eia.doe.gov/
emeu/cbecs/cbecs2003/public_use_2003/cbecs_pudata2003.html.
---------------------------------------------------------------------------
Inputs for determining the total installed cost include equipment
prices--which account for manufacturer costs, manufacturer markups,
retailer or distributor markups, and sales taxes--and installation
costs. Inputs for determining operating expenses include annual energy
and water consumption, natural gas, electricity, and water prices,
natural gas, electricity, and water price projections, repair and
maintenance costs, equipment lifetime, discount rates, and the year
that standards take effect. To account for uncertainty and variability
in certain inputs, DOE created distributions of values with
probabilities attached to each value. As described above, DOE
characterized the variability in energy consumption and energy prices
for residential cooking products by using household samples. For CCWs,
DOE characterized the uncertainty and variability in equipment usage to
capture the variability and uncertainly in energy and water
consumption, whereas regional differences were used to capture the
variability in energy and water pricing. For the installed cost inputs
identified above, DOE characterized the sales taxes with probability
distributions. For the other operating cost inputs, it characterized
the discount rate and the equipment lifetime with distributions.
The LCC and PBP model uses a Monte Carlo simulation to incorporate
uncertainty and variability into the analysis when combined with
Crystal Ball (a commercially available software program). The Monte
Carlo simulations sampled input values randomly from the probability
distributions (and the household samples for residential cooking
products). The model calculated the LCC and PBP for each efficiency
level for 10,000 housing units per simulation run.
For both cooking products and CCWs, Table IV.4 summarizes the
approach and data that DOE used to derive the inputs to the LCC and PBP
calculations for the November 2007 ANOPR and the changes made for
today's proposed rule. The following sections discuss the inputs and
the changes.
[[Page 62058]]
---------------------------------------------------------------------------
\33\ RS Means, Plumbing Cost Data (28th Annual Edition (2005).
Available for purchase at: http://www.rsmeans.com/bookstore/.
\34\ RS Means, Mechanical Cost Data (30th Annual Edition)
(2008). Available for purchase at: http://www.rsmeans.com/
bookstore/.
\35\ Please see the following Web site for further information:
http://www.energy.ca.gov/appliances/rass/.
\36\ Please see the following Web site for further information:
http://www.fsec.ucf.edu/en/.
\37\ Please see the following Web site for further information:
http://www.mla-online.com/.
\38\ Please see the following Web site for further information:
http://www.coinlaundry.org/.
\39\ Please see the following Web site for further information:
http://www.eia.doe.gov/.
\40\ Please see the following Web site for further information:
http://www.awwa.org/Bookstore/.
\41\ Please see the following Web site for further information:
http://www.bls.gov/.
Table IV.4--Summary of Inputs and Key Assumptions in the LCC and PBP
Analyses
------------------------------------------------------------------------
2007 ANOPR Changes for the
Inputs description proposed rule
------------------------------------------------------------------------
Affecting Installed Costs
------------------------------------------------------------------------
Product Price............... Derived by No change.
multiplying
manufacturer cost
by manufacturer,
retailer (for
residential cooking
products) and
distributor (for
CCWs) markups and
sales tax, as
appropriate.
------------------------------------------------------------------------
Installation Cost........... Cooking Products: Cooking Products:
Baseline cost based Baseline cost
on RS Means updated with RS
Plumbing Cost Data, Means Mechanical
2005.\33\ Estimated Cost Data,
that 20 percent of 2008.\34\ Revised
households with gas the percent of
cooktops and households with gas
standard ovens that cooking products
do not require that would need to
electricity to install an
operate would incur electrical outlet.
added costs for the Based on
installation of an requirements in the
electrical outlet NEC, estimated that
to accommodate 10 percent of
designs that households with gas
require electricity standard ovens and
(e.g., glo-bar or 4 percent of
electronic spark households with gas
ignition). cooktops would need
Electrical outlet to install an
installation cost electrical outlet
based on the type to accommodate
of cable, tubing designs that
and wire used, require
resulting in an electricity.
average cost of Updated electrical
$76. All other outlet installation
standard levels for costs based on
all other product requirements in the
classes incur no NEC. Revised cost
additional of $235 based on
installation costs. the installation of
ground-fault
circuit-interrupter
(GFCI).
-------------------------------------------
CCWs: Baseline cost CCWs: Baseline cost
based on RS Means updated with RS
Plumbing Cost Data, Means Mechanical
2005. No additional Cost Data, 2008.
installation cost
for all standard
levels.
------------------------------------------------------------------------
Affecting Operating Costs
------------------------------------------------------------------------
Annual Energy and Water Use. Cooking Products: Cooking Products: No
Based on recent change with one
estimates from the exception--microwav
2004 California e oven standby
Residential power included.
Appliance
Saturation Survey
\35\ (RASS) and the
Florida Solar
Energy Center \36\
(FSEC). Used 2001
RECS data to
establish the
variability of
annual cooking
energy consumption.
-------------------------------------------
CCWs: Per-cycle CCWs: No change.
energy and water
use based on MEF
and WF levels.
Disaggregated into
per-cycle machine,
dryer, and water
heating energy
using data from
DOE's 2000 TSD for
residential clothes
washers. Annual
energy and water
use determined from
the annual usage
(number of use
cycles). Usage
based on several
studies including
research sponsored
by the Multi-
housing Laundry
Association \37\
(MLA) and the Coin
Laundry Association
\38\ (CLA).
Different use
cycles determined
for multi-family
and laundromat
product
applications.
-------------------------------------------
Energy and Water/Wastewater Electricity: Based Electricity: Updated
Prices. on EIA's 2005 Form using EIA's 2006
861 data. Natural Form 861 data.
Gas: Based on EIA's Natural Gas:
2005 Natural Gas Updated using EIA's
Monthly.\39\ Water/ 2006 Natural Gas
Wastewater: Based Monthly. Water/
on Raftelis Wastewater: Updated
Financial using RFC/AWWA's
Consultants (RFC) 2006 Water and
and the American Wastewater Survey.
Water Works Variability: No
Association's change.
(AWWA) 2004 Water
and Wastewater
Survey.\40\
Variability:
Regional energy
prices determined
for 13 regions;
regional water/
wastewater price
determined for four
regions.
------------------------------------------------------------------------
Energy and Water/Wastewater Energy: Forecasted Energy: Forecasts
Price Trends. with EIA's AEO updated with EIA's
2007. Water/ AEO 2008. Water/
Wastewater: Wastewater:
Forecasted with Forecasts updated
extrapolation from with BLS index
Bureau of Labor through 2007.
Statistics' (BLS)
national water
price index from
1970 through
2005.\41\
------------------------------------------------------------------------
Repair and Maintenance Costs Cooking Products: Cooking Products:
Estimated no change For gas cooktops
in costs for and standard ovens,
products more accounted for
efficient than increased costs
baseline products. associated with glo-
bar or electronic
spark ignition
systems relative to
standing pilot
ignition systems.
For all standard
levels for all
other product
classes, maintained
no change in costs
between products
more efficient than
baseline products.
-------------------------------------------
[[Page 62059]]
CCWs: Estimated no CCWs: Estimated
change in costs for annualized repair
products more costs for each
efficient than efficiency level
baseline products. based on half the
equipment lifetime
divided by the
equipment lifetime.
------------------------------------------------------------------------
Affecting Present Value of Annual Operating Cost Savings
------------------------------------------------------------------------
Product Lifetime............ Cooking Products: Cooking Products: No
Based on data from change with the
Appliance exception that
Magazine,\42\ past variability and
DOE TSDs, and the uncertainty
California characterized with
Measurement Weibull probability
Advisory Committee distributions.
(CALMAC).\43\
Variability and
uncertainty
characterized with
uniform probability
distributions.
-------------------------------------------
CCWs: Based on data CCWs: No change with
from various the exception that
sources including variability and
the CLA. Different uncertainty
lifetimes characterized with
established for Weibull probability
multi-family and distributions.
laundromat product
applications.
Variability and
uncertainty
characterized with
uniform probability
distributions.
------------------------------------------------------------------------
Discount Rates.............. Cooking Products: Cooking Products: No
Approach based on change.
the finance cost of
raising funds to
purchase appliances
either through the
financial cost of
any debt incurred
to purchase
equipment, or the
opportunity cost of
any equity used to
purchase equipment.
Primary data source
is the Federal
Reserve Board's
Survey of Consumer
Finances (SCF) for
1989, 1992, 1995,
1998, 2001, and
2004. \44\
-------------------------------------------
CCWs: Approach based CCWs: No change.
on cost of capital
of publicly traded
firms in the
sectors that
purchase CCWs.
Primary data source
is Damodaran
Online. \45\
------------------------------------------------------------------------
Affecting Installed and Operating Costs
------------------------------------------------------------------------
Effective Data of New 2012................ No change.
Standard.
------------------------------------------------------------------------
Base-Case Efficiency Gas cooktops: 7% at Gas cooktops: No
Distributions. baseline; 93% with change.
electronic spark
ignition.
-------------------------------------------
Gas standard ovens: Gas standard ovens:
18% at baseline; 18% at baseline;
82% with glo-bar 74% with glo-bar
ignition. ignition; 8% with
electronic spark
ignition.
-------------------------------------------
Microwave ovens: Microwave ovens:
100% at baseline EF 100% at baseline EF
of 0.557. Standby but accounted for
power was not product market
considered in the shares at different
analysis. standby power
levels; 46% with
standby power
consumption of
greater than 2.0 W;
35% with standby
power consumption
of greater than 1.5
W and less than or
equal to 2.0 W; 19%
with standby power
consumption of
greater than 1.0 W
and less than or
equal to 1.5 W.
-------------------------------------------
All other cooking All other cooking
products: 100% at products: No
baseline. change.
-------------------------------------------
CCWs: Analyzed as CCWs: Analyzed as
single product two product
class with 80% at classes: top-
baseline (1.26 MEF/ loading and front-
9.5 WF); 20% at loading.
2.00 MEF/5.50 WF. Distributions for
both classes based
on the number of
available models at
the efficiency
levels. Top-
Loading: 63.6% at
1.26 MEF/9.5 WF;
33.3% at 1.42 MEF/
9.5 WF; 0% at 1.60
MEF/8.5 WF; 3.0% at
1.76 MEF/8.3 WF.
Front-Loading: 7.4%
at 1.72 MEF/8.0 WF;
4.4% at 1.80 MEF/
7.5 WF; 85.3% at
2.00 MEF/5.5 WF;
1.5% at 2.20 MEF/
5.1 WF; 1.5% at
2.35 MEF/4.4 WF.
------------------------------------------------------------------------
1. Product Price
To calculate the consumer product prices, DOE multiplied the
manufacturing costs developed from the engineering analysis by the
supply-chain markups it developed (along with sales taxes). To
calculate the final, installed prices for baseline products, as well as
higher efficiency products, DOE added the consumer product prices to
the installation costs.
---------------------------------------------------------------------------
\42\ Please see the following Web site for further information:
http://www.appliancemagazine.com/.
\43\ Please see the following Web site for further information:
http://www.calmac.org/.
\44\ Please see the following Web site for further information:
http://www.federalreserve.gov.
\45\ Please see the following Web site for further information:
http://pages.stern.nyu.edu/~adamodar/.
---------------------------------------------------------------------------
a. Cooking Products
For cooking products, DOE relied on data from AHAM's 2003 Fact Book
\46\ showing that over 93 percent of residential appliances (including
cooking products) are distributed from the manufacturer directly to a
retailer. Therefore, DOE determined cooking product retail prices using
markups based solely on the premise that these appliances are sold
through a manufacturer-to-retailer distribution channel. Whirlpool
commented that DOE should not focus solely on the retail distribution
channel for its determination of retail prices. Whirlpool
[[Page 62060]]
stated that the analysis and assumptions made for the retail
distribution channel are reasonably accurate but completely ignore the
contractor distribution channel. Whirlpool claimed that the contractor
distribution channel comprises approximately 20 percent of total
industry volume (not the seven percent cited in the November 2007 ANOPR
TSD), with a greater portion of cooking products flowing through this
channel. Whirlpool said that larger new home builders and apartment
management firms use the contractor channel, and that the margins and
behavior of the parties in this channel differ from those in the retail
channel. Whirlpool recommended that future rulemakings consider the
contractor channel. (Whirlpool, No. 28 at p. 12) DOE understands that
the contractor distribution channel may distribute a significant
portion of cooking product sales. However, since DOE's analysis for
rulemakings on other residential appliances indicates that overall
markups in the contractor channel are on average similar to those in
the retailer channel, DOE believes that it can reasonably assume that
the retail prices determined from the manufacturer-to-retailer
distribution channel for this standards rulemaking provide a good
estimate for cooking product prices.
---------------------------------------------------------------------------
\46\ Available online at: http://www.aham.org.
---------------------------------------------------------------------------
b. Commercial Clothes Washers
For CCWs, DOE developed the distribution channels based on data
developed by the CEE.\47\ The CEE data indicate that the relevant
portions of the commercial, family-sized clothes washer market can be
divided into three areas: (1) Laundromats; (2) private multi-family
housing; and (3) large institutions (e.g., military barracks,
universities, housing authorities, lodging establishments, and health
care facilities). For purposes of developing the markups for CCWs, DOE
based its calculations on the distribution channel that involves only
distributors, because it believed that this channel would provide good
estimates of consumer prices for the entire market. In the November
2007 ANOPR, DOE specifically sought comment on whether determining CCW
consumer prices based solely on the distribution channel that includes
distributors will result in representative equipment prices for all CCW
consumers. AHAM, Alliance, and Whirlpool generally agreed with DOE's
approach of representing CCW equipment prices with data from the
distributor channel only. (AHAM, No. 32 at p. 11; Alliance, Public
Meeting Transcript, No. 2 at p. 132; Whirlpool, No. 28 at p. 8) DOE did
not receive any negative comments on this approach. As a result, DOE
did not change its approach for determining CCW markups for today's
proposed rule.
---------------------------------------------------------------------------
\47\ Consortium for Energy Efficiency, Commercial Family-Sized
Washers: An Initiative Description of the Consortium for Energy
Efficiency (1998). This document is available at: http://
www.cee1.org/com/cwsh/cwsh-main.php3.
---------------------------------------------------------------------------
According to the Joint Comment, for relatively small changes in a
standard level, as associated with many product rulemakings to date,
the available literature shows that products just meeting an amended
standard have often had no price change or even price declines after
the adoption of the more stringent standards. The Joint Comment cited
reports from the European Union suggesting that actual price impacts
are lower than predicted in their most recent round of standards for
several products. Possible explanations include manufacturing economies
found as a result of re-engineering of products after a standards
amendment and retailer pricing strategies that prevent pass-through of
small manufacturer cost increases to the retail customer. The Joint
Comment claimed that this issue is especially relevant to microwave
ovens, because the manufacturing cost to reduce standby power is likely
to be very low, but the principle also will be relevant for any
standard that entails a small impact on manufacturing costs. The Joint
Comment stated that DOE should review actual pricing for standards
effective in recent years to calibrate the accuracy of DOE's price
predictions. In developing such a calibration, the Joint Comment stated
that DOE must separate commodity price impacts (e.g., the cost of steel
has increased sharply since 2001) from impacts associated with a new
efficiency standard. (Joint Comment, No. 29 at pp. 9-10, 13-14) As
described in section IV.C.2, Manufacturing Costs, DOE does not find
merit to the Joint Comment's claims that the price change of meeting an
amended standard declines after the standards' adoption. DOE recognizes
that every change in minimum energy conservation standards is an
opportunity for manufacturers to make investments beyond what would be
required to meet the new standards in order to minimize the costs or to
respond to other factors. DOE's manufacturing cost estimates, MIA
interviews, and the GRIM analysis seek to gauge the most likely
industry response to proposed energy conservation standards. DOE's
analysis of responses must be based on currently available technology
that will be non-proprietary when a rulemaking becomes effective, and
thus cannot speculate on future product and market innovation. For more
details on DOE's response, see section IV.C.2.
2. Installation Cost
The installation cost is the consumer's total cost to install the
equipment, excluding the marked-up consumer equipment price. More
specifically, installation costs include labor, overhead, and any
miscellaneous materials and parts. DOE determined baseline product
installation costs for cooktops, ovens, and CCWs based on data from RS
Means. For the November 2007 ANOPR, DOE used data from the RS Means
Plumbing Cost Data, 2005 to estimate installation costs for cooking
products and CCWs.\48\ RS Means provides estimates on the labor
required to install each of above three products. For today's proposed
rule, DOE updated its baseline installation costs using RS Means
Mechanical Cost Data, 2008.\49\
---------------------------------------------------------------------------
\48\ RS Means, Plumbing Cost Data (28th Edition)(2005) p. 97.
Available for purchase at: http://www.rsmeans.com.
\49\ RS Means, Mechanical Cost Data (31st Annual Edition)
(2008). Available for purchase at: http://www.rsmeans.com.
---------------------------------------------------------------------------
a. Cooking Products
For cooking products (except gas cooktops and standard ovens), DOE
estimated that installation costs would not increase with product
efficiency. For gas cooktops and standard ovens, DOE estimated the
impact that eliminating standing pilot ignition systems would have on
the installation cost. Specifically, DOE considered the percentage of
households with gas ranges, cooktops, and ovens that would require the
installation of an electrical outlet in the kitchen to accommodate a
gas cooking product that would need electricity to operate, as well as
the cost of installing an electrical outlet.
DOE estimated for its November 2007 ANOPR that an upper bound of 20
percent of households using gas cooktops and standard ovens with
standing pilot ignition systems would require the installation of an
electrical outlet in the kitchen for a product that requires
electricity. AGA commented that the percentage of consumers that would
need to install an electrical outlet is much greater than 20 percent,
and suggested that the vast majority of pilot ignition products shipped
are for installations where rewiring would be required for a range
without pilot ignition. AGA questioned DOE's assumption that kitchens
with existing electrical outlets would not require modification or
installation of additional outlets, stating that State and
[[Page 62061]]
local building codes, most of which mandate adherence to National Fire
Protection Agency (NFPA) 70, NEC, may not be ignored by consumers who
would install a range with an electrical connection when replacing
their pilot ignition ranges. AGA stated that many homes with standing
pilot gas ranges are older and will not have outlets in close enough
proximity to the range. AGA believes that current shipments of pilot
ignition gas products are used in a segment of the replacement market
where an electrical outlet is not within six feet of the appliance, and
that these consumers will have to install an electrical outlet in the
vicinity of their range. (AGA, Public Meeting Transcript, No. 23.7 at
pp. 149-52; and AGA, No. 27 at pp. 2-3, 6-7, and 11-12)
ASAP inquired as to whether DOE's estimate that 20 percent of
households would require the installation of an electrical outlet would
be updated using more recent data. (ASAP, Public Meeting Transcript,
No. 23.7 at pp. 150-151) According to the Joint Comment, homes with no
electricity in the kitchen may exist, but they would be such a small
proportion of homes that the installation cost would be negligible in a
national LCC analysis. (Joint Comment, No. 29 at p. 5)
In response to these comments, DOE conducted an assessment of NEC
requirements over time.\50\ DOE reviewed the gas oven and gas cooktop
household samples to establish which houses may require an outlet
installation. Because RECS specifies the home's vintage (year built),
DOE was able to determine the composition of the household sample by
particular vintage groupings. DOE also determined that every household
in each sample had an electric refrigerator, so DOE concluded that
every home had at least one electrical outlet in the kitchen. However,
the NEC did not require spacing of electrical outlets every six feet
prior to 1959. As a result, DOE could not conclusively determine that
pre-1960 houses would have an outlet near the gas-fired appliance.
Thus, it assumed that pre-1960 homes, representing 57 percent of the
standard gas oven sample and 54 percent of the gas cooktop sample, may
need an additional outlet installed in the kitchen to accommodate a gas
cooking product without standing pilot ignition. Because DOE is not
aware of any data on how the use of gas cooking products equipped with
standing pilot lights is distributed across housing stock vintages, it
assumed that all of the households in each vintage could purchase a
product with standing pilot lights in the base case, but that homes
built after 1960 would not need an outlet.
---------------------------------------------------------------------------
\50\ D.A. Dini, Some History of Residential Wiring Practices,
Underwriters Laboratories, Inc. (2006). This document is available
at: http://www.nfpa.org/assets/files//PDF/Proceedings/Dini_paper_-
_History_Residential_Wiring.pdf.
---------------------------------------------------------------------------
For its November 2007 ANOPR, DOE estimated the installation cost of
an electrical outlet based on data from RS Means. The resulting
installation cost ranged from $42 to $125 and an average installation
cost of $76 was used in the analysis. AGA commented that the
installation costs used in the November 2007 ANOPR are much too low,
adding that the NEC requires a lot of work to install an outlet near a
range. AGA said that RS Means is an excellent source but has severe
limitations, especially with respect to the variety of likely retrofit
installations. Also, the RS Means data cover repair/remodeling projects
in the $10,000 to $1 million range, which do not capture the true,
consumer cost of rewiring for a gas range that requires electricity
(i.e., costs for retrofit wiring in a finished kitchen would be
significantly higher). AGA also stated that if the outlet is exposed
and available for countertop services, a ground-fault circuit-
interrupter (GFCI) is required. If the consumer wants to avoid the
installation of a GFCI, the outlet must be located behind the range and
may require the installation of an additional circuit to service the
additional load. In 1997, AGA's Building Energy and Code Committee
indicated installation costs ranging from $110 to $350 in 1997 dollars
for retrofits, depending on the region, with an average cost of $204.
In AGA's opinion, such installation estimates are more representative
than the cost used by DOE. AGA requested that DOE conduct a survey in
major metropolitan areas and include varied housing types to obtain
current installation costs. (AGA, Public Meeting Transcript, No. 23.7
at p. 22, 150; AGA, No. 27 at p. 3, pp. 12-13, and pp. 6-7) Supporting
this position, GE commented that adding a new outlet to an existing
kitchen would easily cost hundreds of dollars, whereas providing
electricity to a rural household could cost thousands. (GE, No. 30 at
p. 2)
DOE notes that the current NEC allows outlets for gas-fired
appliances to be attached to existing small appliance circuits in
kitchens. DOE revisited its installation cost estimates to address the
requirements in the NEC for installing electrical outlets. As noted
above, the NEC did not require that electrical outlets be spaced every
six feet prior to 1959. In addition, the NEC had no requirement prior
to 1962 that branch electrical circuits include a grounding conductor
or ground path to which the grounding contacts of the receptacle could
be connected. Therefore, because a GFCI outlet may need to be installed
for older housing units built prior to the modern NEC, DOE revised its
installation costs based solely on the installation of a GFCI outlet in
a finished space. DOE derived its estimates based on the grounding of
the outlet to a water pipe in the kitchen rather than back to a fuse
box or circuit breaker panel. As in the November 2007 ANOPR, DOE relied
on cost data from RS Means to estimate the installation cost. DOE
recognizes that RS Means covers large projects totaling at least
$10,000, so it added an electrician's trip charge to the installation
cost. The resulting average installation cost determined by DOE is
$235, much higher than the $76 cost it estimated for the November 2007
ANOPR.
Providing information on an alternative approach to installing an
electrical outlet near the range, the Joint Comment urged DOE to
consider the cost of adding an external, low-voltage power supply to
the range to enable spark ignition. This power supply could then be
plugged into more distant, existing outlets. The cost of such a power
supply, even considering the need to include several transformer
stages, would likely be a fraction of the cost of installing an outlet
in the house. (Joint Comment, No. 29 at p. 6) DOE did not consider
options to install a power supply in the appliance that would enable
the use of low-voltage wiring to power the gas cooking product. This
does not affect DOE's estimate that an outlet would need to be
installed, because homes built before 1960 would still require an
outlet installation to avoid the use of long extension cords to connect
the appliance to an available outlet that could be up to 20 feet away
from the cooking product.
b. Commercial Clothes Washers
DOE did not receive comments about installation costs for CCWs.
Therefore, today's proposed rule used roughly the same installation
costs as in the November 2007 ANOPR. As noted previously, the only
change implemented by DOE was to update its costs from the November
2007 ANOPR, which were based on the RS Means Plumbing Cost Data, 2005,
to those based on the RS Means Mechanical Cost Data, 2008. The
resulting installation cost that DOE estimated equaled $186. DOE
estimates that installation costs do not increase with product
efficiency.
[[Page 62062]]
3. Annual Energy Consumption
a. Cooking Products
For cooking products (except microwave ovens), DOE determined in
its November 2007 ANOPR that cooking energy consumption has declined
since the mid-1990s. DOE based its determination on results from the
2004 California Residential Appliance Saturation Survey (RASS) \51\ and
the Florida Solar Energy Center (FSEC).\52\ GE stated that its own
internal information confirms DOE's conclusions--namely, that household
cooking energy use is declining. (GE, No. 30 at p. 2) For today's
proposed rule, DOE continues to base its annual energy consumption
estimates for cooking products, other than microwave ovens, on the data
from the 2004 RASS and FSEC. As for the November 2007 ANOPR, DOE
continues to use the 2001 RECS data to establish the variability of
annual cooking energy consumption for cooktops and ovens.
---------------------------------------------------------------------------
\51\ California Energy Commission, California Statewide
Residential Appliance Saturation Survey (Prepared for the CEC by
KEMA-XNERGY, Itron, and RoperASW. Contract No. 400-04-009)(June
2004). This document is available at: http://www.energy.ca.gov/
appliances/rass/index.html.
\52\ Parker, D. S., ``Research Highlights from a Large Scale
Residential Monitoring Study in a Hot Climate,'' Proceedings of
International Symposium on Highly Efficient Use of Energy and
Reduction of its Environmental Impact (Japan Society for the
Promotion of Science Research for the Future Program, JPS-
RFTF97P01002) (Jan. 2002) pp. 108-116. (Also published as FSEC-
PF369-02, Florida Solar Energy Center.) This document is available
at: http://www.fsec.ucf.edu/en/publications/html/FSEC-PF-369-02/
index.htm.
---------------------------------------------------------------------------
For microwave ovens, DOE used the 2004 RASS for its November 2007
ANOPR to estimate the product's annual energy consumption. DOE used the
2001 RECS data to establish the variability of annual cooking energy
consumption for microwave ovens. For today's proposed rule, DOE
continues to use the above approaches. Whirlpool stated that DOE should
consider that microwave ovens use only one-quarter to one-third the
energy of conventional ovens because conventional ovens are preheated
and need to heat larger oven cavities. (Whirlpool, No. 28 at p. 5)
DOE's findings indicate that both standard and self-cleaning electric
ovens use approximately 170 kWh per year, whereas microwave ovens use
on average 131 kWh per year, or 77 percent of the annual energy
consumed by conventional ovens.
One change from the November 2007 ANOPR is inclusion of annual
energy consumption associated with standby power. To estimate the
annual energy use associated with standby power, DOE multiplied the
baseline standby power by the number of hours in a year that the oven
is in standby mode. The annual standby hours equals total hours in a
year minus the number of hours that the microwave oven is in active
operation. DOE determined the hours of active operation by dividing the
average annual energy consumption by a representative input power for
microwave ovens. Based on DOE's testing of microwave ovens reported at
the December 2007 public meeting, the average microwave output power is
1,026 W. Based on the baseline microwave EF of 0.557, the average input
power is 1,842 W. Therefore, based on an annual cooking energy
consumption of 131 kWh per year, there are 71 hours of active
operation, resulting in 8,689 hours that the appliance is in standby
mode. See chapter 6 of the TSD accompanying this notice for further
details.
b. Commercial Clothes Washers
For CCWs, DOE determined the annual energy and water consumption
for its November 2007 ANOPR by multiplying the per-cycle energy and
water use by the estimated number of cycles per year. CCW per-cycle
energy consumption has three components: (1) Water-heating energy; (2)
machine energy (the motor energy for turning an agitator or rotating a
drum); and (3) drying energy. DOE determined the per-cycle clothes-
drying energy use by first establishing the RMC based on the
relationship between RMC and the MEF, and then using the DOE test
procedure equation that determines the per-cycle energy consumption for
the removal of moisture. DOE took the per-cycle machine energy use from
its 2000 TSD for RCWs.\53\ As noted in the discussion of the CCW test
procedure (section III.B.3 of this notice,) DOE believes that the
existing RCW test procedure adequately accounts for the characteristic
energy and water use for CCWs in the NOPR analyses. As a result, DOE
also believes that the per-cycle machine energy use for RCWs would be
representative of CCW machine energy consumption. In the 2000 TSD,
machine energy was calculated to be 0.133 kWh per cycle for MEFs up to
1.40, and 0.114 kWh per cycle for MEFs greater than 1.40. With the per-
cycle clothes-drying and machine energy known, DOE determined the per-
cycle water-heating energy use by first determining the total per-cycle
energy use (the clothes container volume divided by the MEF) and then
subtracting from it the per-cycle clothes-drying and machine energy.
---------------------------------------------------------------------------
\53\ U.S. Department of Energy, Final Rule Technical Support
Document (TSD): Energy Efficiency Standards for Consumer Products:
Clothes Washers (Dec. 2000) Chapter 4, Table 4.1. This document is
available at: http://www.eere.energy.gov/buildings/appliance_
standards/residential/clothes_washers.html.
---------------------------------------------------------------------------
In the November 2007 ANOPR, DOE specifically requested comment on
whether the RCW per-cycle energy consumption values for clothes-drying
and machine use are representative of CCWs. 72 FR 64432, 64513 (Nov.
15, 2007). AHAM and Whirlpool commented generally that residential
clothes washer energy consumption is representative of the energy
consumption of CCWs. (AHAM, No. 32 at p. 10 and Whirlpool, No. 28 at
pp. 7-8) More specifically, AHAM stated that residential clothes washer
per-cycle energy consumption is representative of CCW per-cycle energy
consumption. (AHAM, No. 32 at p. 10) Whirlpool commented that the RMC
values that DOE used appear to be reasonable. (Whirlpool, No. 28 at pp.
7-8) Whirlpool added that because machine energy use is a relatively
small component of overall energy consumption,\54\ mischaracterization
of it probably would not distort the overall analysis. (Whirlpool, No.
28 at p. 7) NPCC, on the other hand, referred to studies (specifically
one commissioned by the City of Toronto) \55\ that have found that
drying times in commercial laundry do not decrease with RMC. Because
dryers do not have moisture sensors to terminate the cycle, NPCC claims
they will continue to run based on the amount of money fed into the
machine. (NPCC, Public Meeting Transcript, No. 23.7 at p. 126)
---------------------------------------------------------------------------
\54\ The DOE clothes washer test procedure calculates total per-
cycle energy consumption as the sum of: (1) The energy required to
heat the water; and (2) the electrical energy required for the
basket motor and drive system, controls, display, etc. (i.e.,
machine energy use.) In addition, the MEF includes the energy
required by a dryer to remove the RMC. Water heating energy and the
energy required to remove the RMC are significantly higher than
machine energy.
\55\ City of Toronto Works and Emergency Services and Toronto
Community Housing Corporation, Multi-Unit Residential Clothes Washer
Replacement Pilot Project 1999 (May 2003).
---------------------------------------------------------------------------
DOE recognizes that in some commercial settings, the drying cycle
time may be fixed at a longer period than what the DOE dryer test
procedure requires to achieve a ``bone dry'' state. As a result, the
actual drying energy may not decrease as the RMC in clothing loads are
lowered, which would imply that a CCW that produces a lower RMC in the
wash load could be improperly receiving credit in the calculation of
MEF. However, DOE notes that the cycle length for some
[[Page 62063]]
commercial dryers can be adjusted by the laundromat owner or route
operator to match the average RMC of the CCWs at the same location,
allowing for shorter drying cycles if the RMC is lowered. In addition,
electronic payment systems, if equipped, provide the end-user the
opportunity to select only the amount of time required to achieve the
desired dryness of the load. Even if such adjustments are not made,
customers of laundromats with fixed-cycle dryers can still benefit from
lower RMCs by either putting more clothes into the dryer than they
would have previously, or by interrupting the drying cycle when the
clothes have dried to add a new set of clothes. Lastly, some
laundromats operate ``free'' dryers (i.e., consumers just pay for the
wash cycle), which incentivize the owners to use CCWs equipped with
moisture sensors to minimize drying time and energy consumption. For
these reasons, as well as the supporting comments received from AHAM
and Whirlpool, DOE believes that the use of the existing residential
clothes washer test procedure provides a representative basis for
rating and estimating the per-cycle energy use of CCWs.
4. Energy and Water Prices
a. Energy Prices
DOE derived average electricity and natural gas prices for 13
geographic areas consisting of the nine U.S. Census divisions, with
four large States (New York, Florida, Texas, and California) treated
separately. For Census divisions containing one of these large States,
DOE calculated the regional average values minus the data for the large
State.
DOE estimated residential and commercial electricity prices for
each of the 13 geographic areas based on data from EIA Form 861, Annual
Electric Power Industry Report.\56\ DOE calculated an average
residential electricity price by first estimating an average
residential price for each utility--by dividing the residential
revenues by residential sales--and then calculating a regional average
price by weighting each utility with customers in a region by the
number of residential consumers served in that region. For the November
2007 ANOPR, DOE used EIA data from 2004. The calculation methodology
for today's proposed rule uses the most recent available data from
2006. The calculation methodology of average commercial electricity
prices is identical to that for residential prices, except that DOE
used commercial sector data.
---------------------------------------------------------------------------
\56\ Available at http://www.eia.doe.gov/cneaf/electricity/epa/
epa_sum.html.
---------------------------------------------------------------------------
DOE estimated residential and commercial natural gas prices in each
of the 13 geographic areas based on data from the EIA publication
Natural Gas Monthly.\57\ For the November 2007 ANOPR, DOE used the
complete annual data for 2005 to calculate an average summer and winter
price for each area. For today's proposed rule, DOE used more recent
2006 data from the same source. It calculated seasonal prices because,
for some end uses, seasonal variation in energy consumption is
significant. DOE defined summer as the months May through September,
with all other months defined as winter. DOE calculated an average
natural gas price by first calculating the summer and winter prices for
each State, using a simple average over the appropriate months, and
then calculating a regional price by weighting each State in a region
by its population. This method differs from the method used to
calculate electricity prices, because EIA does not provide consumer-
level or utility-level data on gas consumption and prices. The methods
for calculating average commercial and residential natural gas prices
are identical to each other except that the former relies on commercial
sector data. Upon review of natural gas prices, AGA stated that,
because DOE's analysis relied upon 2005 natural gas prices, the
analysis overstates the cost of natural gas. AGA requested that DOE
conduct a new natural gas cost survey to reflect current prices. (AGA,
No. 27 at p. 4) As described above, DOE updated the prices to use the
most recent data available from 2006. As described below, DOE uses
price projections from EIA's AEO to forecast prices for future years.
As is discussed in detail in section IV.E.3.g of this notice, for
today's proposed rule, DOE did assess the impact of new energy
conservation standards for cooking products and CCWs on forecasted
energy prices.
---------------------------------------------------------------------------
\57\ DOE-Energy Information Administration, Natural Gas Monthly.
Available at: http://www.eia.doe.gov/oil_gas/natural_gas/data_
publications/natural_gas_monthly/ngm.htm.
---------------------------------------------------------------------------
To estimate the trends in electricity and natural gas prices for
the November 2007 ANOPR, DOE used the price forecasts in EIA's AEO
2007. For today's proposed rule, DOE updated its energy price forecasts
to those in the AEO 2008.\58\ For today's proposed rule, DOE based its
results on the AEO 2008 reference case price forecasts. The spreadsheet
tools which DOE used to conduct the LCC and PBP analysis allow users to
select either the AEO's high-growth case or low-growth case price
forecasts to estimate the sensitivity of the LCC and PBP to different
energy price forecasts. To arrive at prices in future years, DOE
multiplied the average prices described above by the forecast of annual
average price changes in AEO 2008. Because AEO 2008 forecasts prices to
2030, DOE followed past guidelines provided to the FEMP by EIA and used
the average rate of change during 2020-2030 to estimate the price
trends after 2030. For the analyses to be conducted for the final rule,
DOE intends to update its energy price forecasts based on the latest
available AEO.
---------------------------------------------------------------------------
\58\ U.S. Department of Energy-Energy Information
Administration, Annual Energy Outlook 2008 with Projections to 2030
(DOE/EIA-0383) (March 2008).
---------------------------------------------------------------------------
b. Water and Wastewater Prices
DOE obtained residential and commercial water and wastewater price
data from the Water and Wastewater Rate Survey conducted by Raftelis
Financial Consultants (RFC) and the American Water Works Association
(AWWA). For the November 2007 ANOPR, DOE used the version of the survey
from 2004, but for today's proposed rule, DOE used the most recent
version (i.e., the 2006 Water and Wastewater Rate Survey.) \59\ The
survey covers approximately 300 water utilities and 200 wastewater
utilities, with each industry analyzed separately. Because a sample of
200-300 utilities is not large enough to calculate regional prices for
all U.S. Census divisions and large States, DOE calculated regional
values at the Census region level (Northeast, South, Midwest, and
West).
---------------------------------------------------------------------------
\59\ Raftelis Financial Consultants, Inc., ``2006 RFC/AWWA Water
and Wastewater Rate Survey, 2006,'' (2006). This document is
available at: http://www.raftelis.com/ratessurvey.html.
---------------------------------------------------------------------------
To estimate the future trend for water and wastewater prices, DOE
used data on the historic trend in the national water price index (U.S.
city average) provided by the Bureau of Labor Statistics (BLS).\60\ For
the November 2007 ANOPR, DOE used data covering the time period from
1970 through 2005. For today's proposed rule, DOE used updated data to
extend that time period through 2007. DOE extrapolated a future trend
based on the linear growth from 1970 to 2007.
---------------------------------------------------------------------------
\60\ Available at: http://www.bls.gov.
---------------------------------------------------------------------------
5. Repair and Maintenance Costs
Repair costs are associated with repairing or replacing components
that have failed in the appliance, whereas maintenance costs are
associated with maintaining the operation of the equipment. For the
November 2007 ANOPR, DOE assumed that small,
[[Page 62064]]
incremental changes in products related to efficiency result in either
no or only small changes in repair and maintenance costs, compared with
baseline products. However, DOE sought comment on its assumption that
increases in product energy efficiency would not have a significant
impact on the repair and maintenance costs.
a. Cooking Products
AGA noted that DOE had not included higher maintenance costs in its
LCC analysis for gas cooking products with a more complex ignition
system (i.e., non-standing pilot ignition systems). According to AGA,
this is a significant omission that DOE needs to address, especially
since AGA stated that standing pilot ignition systems are likely to be
relatively maintenance-free over the assumed product life of 19 years,
whereas electronic ignition systems are not. AGA noted that in an
analysis provided to DOE in 1998, Battelle estimated independent
failure rates for each electronic ignition system as 0.9 failures over
the life of the product. Battelle assumed that two such ignition system
failures would occur on a free-standing range and that these failures
would be non-concurrent. AGA commented that DOE needs to account for
the increased repair costs for pilot ranges equipped with electronic
controls and recommended that DOE's analysis include two electronic
ignition service calls for these products, which AGA estimated
currently costs between $125 and $300, including parts and labor, per
service call. (AGA, Public Meeting Transcript, No. 23.7 at pp. 154-155;
AGA, No. 27 at pp. 3-4 and p. 15)
DOE contacted six contractors in different States to estimate
whether repair and maintenance costs still differ between standing
pilot and non-standing pilot ignition systems. Based on the
contractors' input, DOE determined that standing pilots are less costly
to repair and maintain than either electric glo-bar/hot surface
ignition systems (used in most gas ovens) or electronic spark ignition
systems (used in gas cooktops and a small percentage of gas ovens).
Standing pilot ignition systems require repair and maintenance every 10
years to clean valves. Electric glo-bar/hot surface ignition systems
require glo-bar replacement approximately every 5 years. In the case of
electronic ignition systems, control modules tend to last 10 years. The
electrodes/igniters can fail because of hard contact from pots or pans,
although failures are rare. Based on the above findings, DOE revised
its analysis of repair and maintenance costs for gas cooking products.
For standing pilot ignition systems, DOE estimated an average cost of
$126 occurring in the tenth year of the product's life. For electric
glo-bar/hot surface ignition systems, DOE estimated an average cost of
$147 occurring every fifth year during the product's lifetime. For
electronic spark ignition systems, DOE estimated an average cost of
$178 occurring in the tenth year of the product's life. See chapter 8
of the TSD accompanying this notice for further information regarding
these estimates.
b. Commercial Clothes Washers
AHAM, Alliance, and Whirlpool commented that front-loading units
generally require more maintenance and repair than top-loading units.
(AHAM, No. 32 at pp. 4, 9, 11, Alliance, No. 26 at p. 4 and Whirlpool,
No. 28 at p. 8) Alliance stated that repair costs for front-loading
washers are significantly higher than those for top-loading units
because of their incorporation of electronic controls, variable speed
motors, door locks, and multiple shock absorbers. Alliance claimed that
more electronic circuitry and additional door lock circuitry increases
diagnostic time and, thus, increases repair costs. (Alliance, No. 26 at
p. 4) Whirlpool said that although the unit shipments of front-loading
CCWs are less than half that of top-loading machines, the in-warranty
repair costs are double that of top-loading machines, suggesting that
the repair of front-loading machines is four times as costly as that of
top-loading machines. (Whirlpool, No. 28 at p. 8) The Joint Comment, on
the other hand, stated that their organizations are not aware of any
data showing or suggesting that more-efficient products break down more
often or require more maintenance than less efficient products. (Joint
Comment, No. 29 at p. 10)
Although AHAM, Alliance, and Whirlpool claim that repair and
maintenance costs are greater for front-loading washers than top-
loading machines, no specific data were provided to identify the
magnitude of such costs. Although in-warranty repair costs may be
greater for front-loading washers as Whirlpool claims, the repair costs
are not incurred by the consumer and thus do not contribute to the LCC
of owning and operating the washer. However, DOE does recognize that a
higher incidence of in-warranty repairs is likely to be an indication
of the frequency of out-of-warranty repairs. Therefore, rather than
continue to assume that higher-efficiency CCW designs do not incur
higher repair costs, DOE included increased repair costs in today's
proposed rule based on an algorithm developed by DOE for central air
conditioners and heat pumps and which was also used for residential
furnaces boilers.\61\ This algorithm calculates annualized repair costs
by dividing half of the equipment retail price by the equipment
lifetime.
---------------------------------------------------------------------------
\61\ U.S. Department of Energy, Technical Support Document:
Energy Efficiency Standards for Consumer Products: Residential
Central Air Conditioners and Heat Pumps (May 2002) Chapter 5. This
document is available at: http://www.eere.energy.gov/buildings/
appliance_standards/residential/ac_central_1000_r.html.
---------------------------------------------------------------------------
6. Product Lifetime
For the November 2007 ANOPR, DOE used a variety of sources to
establish low, average, and high estimates for product lifetime. For
residential cooking products, DOE established average product lifetimes
of 19 years for conventional electric and gas cooking products and 9
years for microwave ovens. For CCWs, the average lifetime was 11.3
years for multi-family applications, and 7.1 years for laundromats. For
the November 2007 ANOPR, DOE primarily used the full range of lifetime
estimates to characterize the product lifetimes with uniform
probability distributions ranging from a minimum to a maximum value.
For microwave ovens, DOE used a triangular probability distribution to
characterize product lifetime.
Whirlpool commented on DOE's use of uniform probability
distributions by stating that the vast majority of statistical texts
apply a ``long-tailed'' distribution to product failure/lifetimes.
According to Whirlpool, generally, the Weibull,\62\ or at least the
Poisson distribution, is used for such purposes. Whirlpool strongly
urged DOE to correct this oversimplification. (Whirlpool, No. 28 at p.
12) Because Weibull distributions are commonly used in reliability
analyses, DOE agrees with Whirlpool and revised its characterization of
residential cooking product and CCW product lifetimes for today's
proposed rule with Weibull probability distributions. See chapter 8 of
the TSD accompanying this notice for further details on the sources
used to develop product lifetimes, as well as the use of Weibull
distributions to characterize product lifetime distributions.
---------------------------------------------------------------------------
\62\ The Weibull distribution is one of the most widely used
lifetime distributions in reliability engineering. It is a versatile
distribution that can take on the characteristics of other types of
distributions, based on the value of its shape parameter.
---------------------------------------------------------------------------
[[Page 62065]]
7. Discount Rates
a. Cooking Products
To establish discount rates for the cooking products in the
November 2007 ANOPR, DOE derived estimates of the finance cost of
purchasing these appliances. Because the purchase of equipment for new
homes entails different finance costs for consumers than the purchase
of replacement equipment, DOE used different discount rates for new
construction and replacement installations.
DOE estimated discount rates for new-housing purchases using the
effective real (after-inflation) mortgage rate for homebuyers. This
rate corresponds to the interest rate after deduction of mortgage
interest for income tax purposes and after adjusting for inflation. DOE
used the Federal Reserve Board's Survey of Consumer Finances (SCF) for
1989, 1992, 1995, 1998, and 2001 for mortgage interest rates.\63\ After
adjusting for inflation and interest tax deduction, effective real
interest rates on mortgages across the six surveys averaged 3.2
percent. For replacement purchases, DOE's approach for deriving
discount rates involved identifying all possible debt or asset classes
that might be used to purchase replacement equipment, including
household assets that might be affected indirectly. DOE estimated the
average shares of the various debt and equity classes in the average
U.S. household equity and debt portfolios using data from the SCFs from
1989 to 2004. DOE used the mean share of each class across the six
sample years as a basis for estimating the effective financing rate for
replacement equipment. DOE estimated interest or return rates
associated with each type of equity and debt using SCF data and other
sources. The mean real effective rate across the classes of household
debt and equity, weighted by the shares of each class, is 5.6 percent.
See chapter 8 of the TSD accompanying this notice for further details
on the development of discount rates for cooking products.
---------------------------------------------------------------------------
\63\ The Federal Reserve Board, 1989, 1992, 1995, 1998, 2001,
2004 Survey of Consumer Finances (1989, 1992, 1995, 1998, 2001,
2004). These documents are available at: http://
www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
---------------------------------------------------------------------------
The Joint Comment stated that if DOE continues to use a weighted-
average cost of capital approach, the agency should make sure its
calculations are up to date and consider consumers who use credit cards
as month-to-month free loans by paying their bills on time. (Joint
Comment, No. 29 at p. 13) As noted above, in developing its discount
rates for residential consumers, DOE used data from the SCF. Data from
the 2007 SCF survey were not available for this rulemaking. However,
because the rates for various forms of credit carried by households in
these years were established over a range of time, DOE believes they
are representative of rates that may be in effect in 2013. The SCF data
do not allow consideration of the special situations cited by the
stakeholders, and DOE is not aware of any other nationally
representative data source that provides interest rates from a
statistically valid sample. Therefore, DOE continued to use the above
approach and results for today's proposed rule.
b. Commercial Clothes Washers
For CCWs, DOE derived the discount rate for its November 2007 ANOPR
from the cost of capital of publicly traded firms in the sectors that
purchase CCWs. DOE estimated the cost of capital of these firms as the
weighted average of the cost of equity financing and the cost of debt
financing. DOE identified the following sectors purchasing CCWs: (1)
Educational services; (2) hotels; (3) real estate investment trusts;
and (4) personal services. DOE estimated the cost of equity using the
capital asset pricing model (CAPM). The cost of debt financing is the
interest rate paid on money borrowed by a company. DOE estimated the
weighted-average cost of capital (WACC) using the respective shares of
equity and debt financing for each sector that purchases CCWs. It
calculated the real WACC by adjusting the cost of capital by the
expected rate of inflation. To obtain an average discount rate value,
DOE used additional data on the number of CCWs in use in various
sectors. DOE estimated the average discount rate for companies that
purchase CCWs at 5.7 percent. DOE received no comments on its
development of discount rates for CCWs and continued to use the same
approach for today's proposed rule.
8. Effective Date of the Amended Standards
The effective date is the future date when parties subject to the
requirements of a new standard must begin compliance. Consistent with
DOE's semi-annual implementation report for energy conservation
standards activities submitted to Congress pursuant to section 141 of
EPACT 2005, a final rule for all of the appliance products considered
for this rulemaking is scheduled to be completed by March 2009. Any new
energy efficiency standards for these products become effective three
years after the final rule is published in the Federal Register (i.e.,
March 2012). DOE calculated the LCC for the appliance consumers as if
they would purchase a new piece of equipment in the year the standard
takes effect.
9. Equipment Assignment for the Base Case
For the LCC analysis for its November 2007 ANOPR, DOE analyzed
candidate standard levels relative to a baseline efficiency level.
However, some consumers already purchase products with efficiencies
greater than the baseline product levels. Thus, to accurately estimate
the percentage of consumers that would be affected by a particular
standard level, DOE's analysis considered the full breadth of product
efficiencies that consumers already purchase under the base case (i.e.,
the case without new energy efficiency standards). DOE refers to this
distribution of product efficiencies as base-case efficiency
distributions.
a. Cooking Products
DOE's approach for conducting the LCC analysis for cooking products
relied on developing samples of households that use each of the
products. Using the current distribution of product efficiencies, DOE
assigned a specific product efficiency to each sample household.
Because DOE performed the LCC calculations on a household-by-household
basis, it based the LCC for a particular standard level on the
efficiency of the product in the given household. For example, if a
household was assigned a product efficiency that is greater than or
equal to the efficiency of the standard level under consideration, the
LCC calculation would show that this household is not impacted by an
increase in product efficiency that is equal to the standard level.
DOE currently does not regulate cooking product efficiency with an
energy efficiency descriptor, so little is known about the distribution
of product efficiencies that consumers currently purchase. Thus, for
all electric cooking products (other than microwave ovens) and gas
self-cleaning ovens, DOE estimated that 100 percent of the market is at
the baseline efficiency levels. For gas cooktops and gas standard
ovens, data are available that allowed DOE to estimate the percentage
of gas cooktops and gas standard ovens still sold with standing pilot
lights.
DOE sought stakeholder feedback on its methodology and data sources
for estimating base-case efficiency distributions. Whirlpool commented
that DOE's distributions for the November 2007 ANOPR for all cooking
products (except for gas standard ovens)
[[Page 62066]]
were reasonably accurate. (Whirlpool, No. 28 at pp. 8-9) DOE continued
to use these base-case efficiency distributions for today's proposed
rule. For gas standard ovens, Whirlpool stated that the percentage of
the market at the baseline level should be half of what DOE estimated.
(Id.) DOE developed the market share of gas standard ovens with
standing pilots on actual shipments data, the most recent being data
from the Appliance Recycling Information Center (ARIC) for 1997, 2000,
and 2004. Without actual shipments data from Whirlpool, DOE believes it
has no basis to change its estimated market share of gas standard ovens
with standing pilots.
For the November 2007 ANOPR, DOE allocated the entire market share
of products without standard pilots to standard level 1 (products with
glo-bar ignition). Based on information collected during the course of
DOE's contacts with contractors to establish the repair and maintenance
costs of gas cooking product ignition systems, DOE now estimates that
10 percent of products without standing pilots use spark ignition
systems.
Table IV.5 shows the market shares of the efficiency levels in the
base case (i.e., in the absence of new energy conservation standards)
for gas cooktops and gas standard ovens. In the table, candidate
standard level 1 represents products without standing pilot light
ignition systems.
Table IV.5--Gas Cooktops and Gas Standard Ovens: Base Case Market Shares
----------------------------------------------------------------------------------------------------------------
Gas cooktops Gas standard ovens
----------------------------------------------------------------------------------------------------------------
Market
Standard level EF share Standard level EF Market share
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
Baseline........................ 0.156 6.8 Baseline.......... 0.0298 17.6
1............................... 0.399 93.2 1*................ 0.0536 74.2
2............................... 0.420 0 2................. 0.0566 0
3................. 0.0572 0
4................. 0.0593 0
5................. 0.0596 0
6................. 0.0600 0
1a*............... 0.0583 8.2
----------------------------------------------------------------------------------------------------------------
* For gas standard ovens, candidate standard levels 1 and 1a correspond to designs that are used for the same
purpose--to eliminate the need for a standing pilot--but the technologies for each design are different.
Candidate standard level 1 is a hot surface ignition device, whereas candidate standard level 1a is a spark
ignition device. Candidate standard level 1a is presented at the end of the table because candidate standard
levels 2 through 6 are derived from candidate standard level 1.
DOE's regulations do not currently contain standards for microwave
ovens, so very little is known about the distribution of product
efficiencies that consumers currently purchase. For its November 2007
ANOPR, DOE estimated that 100 percent of the microwave oven market was
at the baseline efficiency level. This baseline efficiency level was
described only in terms of the EF, because DOE did not consider standby
power consumption for microwave ovens in its November 2007 ANOPR. As
discussed previously in section IV.D, DOE established four standby
power levels for consideration in today's proposed rule. Because DOE
tentatively determined that it is technically infeasible to combine EF
and standby power into a single efficiency metric, it continues to
address the four cooking efficiency levels considered in the November
2007 ANOPR, independent of standby power consumption. (See section
III.A. for a complete discussion on the technical infeasibility of
combining EF and standby power into a single metric.) Table IV.6 shows
the EF levels and their market shares in the base case. 72 FR 64432,
64488 (Nov. 15, 2007).
Table IV.6--Microwave Ovens: Base Case Market Shares for EF
------------------------------------------------------------------------
Market share
Standard level EF (percent)
------------------------------------------------------------------------
Baseline................................ 0.557 100
1a...................................... 0.586 0.0
2a...................................... 0.588 0.0
3a...................................... 0.597 0.0
4a...................................... 0.602 0.0
------------------------------------------------------------------------
With regard to standby power, during the course of DOE's
investigation of microwave oven standby power consumption, DOE and AHAM
tested a combined total of 52 units (see section III.A.). Based on
these tests, DOE determined the percentage at each of the standby power
levels identified in section IV.C.1. Because no other data were
available, DOE used the test data from the combined sample to develop
the market shares of standby power consumption in the base case. DOE
seeks comment on whether the market share data in Table IV.7 are
representative of the microwave oven market as a whole.
Table IV.7--Microwave Ovens: Base Case Market Shares for Standby Power
------------------------------------------------------------------------
Standby power Market share
Standard level (watts) (percent)
------------------------------------------------------------------------
Baseline................................ 4.0 46.2
[[Page 62067]]
1b...................................... 2.0 34.6
2b...................................... 1.5 19.2
3b...................................... 1.0 0.0
4b...................................... 0.02 0.0
------------------------------------------------------------------------
b. Commercial Clothes Washers
For the November 2007 ANOPR, DOE derived its base-case market share
data for CCWs based on shipment-weighted efficiency data provided by
AHAM and assuming that CCWs were to be analyzed as a single product
class. DOE sought stakeholder feedback on its methodology and data
sources. Whirlpool commented that the distributions used by DOE for
CCWs are reasonably accurate. (Whirlpool, No. 28 at p. 9)
As discussed previously in section IV.A.2., DOE has now decided to
analyze CCWs with two product classes for today's proposed rule--top-
loading washers and front-loading washers. DOE used the number of
available models within each product class to establish the base-case
effciency distributions. Table IV.8 presents the market shares of the
efficiency levels in the base case for CCWs. See chapter 8 of the TSD
accompanying this notice for further details on the development of CCW
base-case market shares.
Table IV.8--Commercial Clothes Washers: Base Case Market Shares
--------------------------------------------------------------------------------------------------------------------------------------------------------
Top-loading Front-loading
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market
Standard level MEF WF Market share Standard level MEF WF share
(percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.................................. 1.26 9.50 63.6 Baseline..................... 1.72 8.00 7.4
1......................................... 1.42 9.50 33.3 1............................ 1.80 7.50 4.4
2......................................... 1.60 8.50 0.0 2............................ 2.00 5.50 85.3
3......................................... 1.76 8.30 3.0 3............................ 2.20 5.10 1.5
4............................ 2.34 4.40 1.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
10. Commercial Clothes Washer Split Incentive
Under a split incentive situation, the party purchasing more
efficient and presumably more expensive equipment may not realize the
operating cost savings from that equipment, because another party
(e.g., a landlord) may pay the utility bill. In the November 2007
ANOPR, DOE did not explicitly consider the potential of split
incentives in the CCW market, because it believed that the probability
of such incentives was very low.
Whirlpool disagreed with DOE's dismissal of the potential for split
incentives in the CCW market. Whirlpool stated that those who own CCWs
(usually route operators) do not incur the operating costs (as do,
generally, laundromats and owners of multi-family dwellings). Route
operators generally have contracts that run from 5 to 10 years, which
limits their ability to pass on the higher costs of higher-efficiency
units. (Whirlpool, No. 28 at pp. 12-13) Alliance noted that multi-
housing property owners typically lease CCWs, and the route operator
owns the machine. (Alliance, Public Meeting Transcript, No. 23.7 at p.
85)
To evaluate the ability of CCW owners to pass on the costs of more
expensive CCWs in the form of higher lease costs, DOE examined the SEC
filings of two of the largest route operators, Coinmach Service
Corporation (Coinmach) and Mac-Gray Corporation (Mac-Gray). DOE found
that the lease agreements for those two operators allow for flexibility
in their contracting. Coinmach stated the following in a June 2000 10-K
Securities and Exchange Commission (SEC) filing: ``The Company's
[Coinmach] leases typically include provisions that allow for
unrestricted price increases, a right of first refusal (an opportunity
to match competitive bids at the expiration of the lease term) and
termination rights if the Company does not receive minimum net revenues
from a lease. The Company has some flexibility in negotiating its
leases and, subject to local and regional competitive factors, may vary
the terms and conditions of a lease, including commission rates and
advance location payments.'' \64\ The 2006 Mac-Gray 10-K SEC filing
suggests that lease agreements are relatively short term, i.e., under
five years rather than the 5 to 10 years identified by Whirlpool: ``As
of December 31, 2006, approximately 90% of our [Mac-Gray] installed
machine base was located in laundry facilities subject to long-term
leases, which have a weighted average remaining term of approximately
five years . . . Approximately 10% to 15% of such laundry room leases
are up for renewal each year.'' \65\ This lease turnover rate suggests
that route operators should be able to time equipment replacement and/
or upgrades with lease renewals. This in turn allows route operators to
renegotiate lease terms to compensate them for the higher capital
expenditures associated with more-efficient laundry equipment while
splitting the economic benefits of such CCWs with the building owner(s)
as part of the lease.
---------------------------------------------------------------------------
\64\ This document is available at: http://sec.edgar-online.com/
2000/06/29/16/0000902561-00-000328/Section2.asp.
\65\ This document is available at: http://www.secinfo.com/
d11MXs.ujBa.htm#1j71.
---------------------------------------------------------------------------
Based on this information, DOE believes that few route operators
would allow themselves to be held to a lease agreement that would
prevent them from recovering the cost of more efficient CCW equipment.
Therefore, DOE concludes that new CCW efficiency standards are unlikely
to lead to split incentives in the CCW market.
11. Inputs to Payback Period Analysis
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more
[[Page 62068]]
efficient equipment through energy (and water) cost savings, compared
to baseline equipment. The simple payback period does not account for
changes in operating expense over time or the time value of money.
Payback periods are expressed in years. Payback periods greater than
the life of the product mean that the increased total installed cost is
not recovered in reduced operating expenses.
The inputs to the PBP calculation are the total installed cost of
the equipment to the customer for each efficiency level and the annual
(first-year) operating expenditures for each efficiency level. The PBP
calculation uses the same inputs as the LCC analysis, except that
energy (and water) price trends and discount rates are not needed.
12. Rebuttable-Presumption Payback Period
DOE performs a PBP analysis to determine whether the three-year
rebuttable presumption of economic justification applies (in essence,
whether the purchaser will recover the higher installed cost of more-
efficient equipment through lowered operating costs within three
years). For each TSL, DOE determined the value of the first year's
energy savings by calculating the quantity of those savings in
accordance with DOE's test procedure, and multiplying that amount by
the average energy price forecast for the year in which a new standard
is expected to take effect--in this case, 2012. Section V.B.1.c. of
this notice and chapter 8 of the TSD accompanying this notice present
the rebuttable-presumption PBP results. DOE did not receive any
comments on its analysis of the three-year rebuttable presumption of
economic justification.
E. National Impact Analysis--National Energy Savings and Net Present
Value Analysis
1. General
DOE's NIA assesses the national energy savings, as well as the NPV
of total customer costs and savings expected to result from new
standards at specific efficiency levels.
DOE used the NIA spreadsheet to perform calculations of energy
savings and NPV, using the annual energy consumption and total
installed cost data used in the LCC analysis. DOE forecasted the energy
savings, energy cost savings, equipment costs, and NPV for each product
class from 2012 through 2042. The forecasts provided annual and
cumulative values for all four output parameters. In addition, DOE
incorporated into its NIA spreadsheet the capability to analyze
sensitivities to forecasted energy prices and product efficiency
trends.
Table IV.9 summarizes the approach and data DOE used to derive the
inputs to the NES and NPV analyses for the November 2007 ANOPR and the
changes made in the analyses of the proposed rule. A discussion of the
inputs and the changes follows below. (See chapter 11 of the TSD
accompanying this notice for further details.)
Table IV.9--Approach and Data Used To Derive the Inputs to the National
Energy Savings and Net Present Value Analyses
------------------------------------------------------------------------
2007 ANOPR Changes for the
Inputs description proposed rule
------------------------------------------------------------------------
Shipments................... Annual shipments See Table IV.10.
from Shipments
Model.
Effective Date of Standard.. 2012................ No change.
Base-Case Forecasted Shipment-weighted No change.
Efficiencies. efficiency (SWEF)
determined in the
year 2005. SWEF
held constant over
forecast period of
2005-2042.
Standards-Case Forecasted Cooking Products: Cooking Products: No
Efficiencies. ``Roll-up'' change.
scenario used for
determining SWEF in
the year 2012 for
each standards
case. SWEF held
constant over
forecast period of
2012-2042.
-------------------------------------------
CCWs: Analyzed as a CCWs: Analyzed as
single product two product
class. Roll-up classes. For each
scenario used for product class, roll-
determining SWEF in up scenario used
the year 2012 for for determining
each standards SWEF in the year
case. SWEF held 2012 for each
constant over standards case.
forecast period of SWEF held constant
2012-2042. over forecast
period of 2012-
2042.
Annual Energy Consumption Annual weighted- No change.
per Unit. average values as a
function of SWEF.
Total Installed Cost per Annual weighted- No change.
Unit. average values as a
function of SWEF.
Energy and Water Cost per Annual weighted- No change.
Unit. average values a
function of the
annual energy
consumption per
unit and energy
(and water) prices.
Repair Cost and Maintenance Cooking Products: No Cooking Products:
Cost per Unit. changes in repair Incorporated
and maintenance changes in repair
costs due to costs for non-
standards. standing pilot
ignition systems.
-------------------------------------------
CCWs: No changes in CCWs: Incorporated
repair and changes in repair
maintenance costs costs as a function
due to standards. of efficiency.
Escalation of Energy and Energy Prices: AEO Energy Prices:
Water Prices. 2007 forecasts (to Updated to AEO 2008
2030) and forecasts.
extrapolation to
2042.
-------------------------------------------
Water Prices: Linear Water Prices:
extrapolation of Updated to include
1970-2005 historical trend
historical trends through 2007.
in national water
price index.
Energy Site-to-Source Conversion varies No change.
Conversion. yearly and is
generated by DOE/
EIA's NEMS* program
(a time-series
conversion factor;
includes electric
generation,
transmission, and
distribution
losses).
Effect of Standards on Not considered...... Determined but found
Energy Prices. not to be
significant.
Discount Rate............... Three and seven No change.
percent real.
[[Page 62069]]
Present Year................ Future expenses are No change.
discounted to year
2007.
------------------------------------------------------------------------
2. Shipments
An important element in the estimate of the future impact of a
standard is product shipments. The shipments portion of the NIA
Spreadsheet is a Shipments Model that uses historical data as a basis
for projecting future shipments of the appliance products that are the
subject of this rulemaking. In projecting shipments, DOE accounted for
three market segments: (1) New construction; (2) existing buildings
(i.e., replacing failed equipment); and (3) early replacements (for
cooking products) and retired units not replaced (i.e., non-
replacements for CCWs). DOE used the early replacement and non-
replacement market segments to calibrate the Shipments Model to
historical shipments data. For purposes of estimating the impacts of
prospective standards on product shipments (i.e., forecasting
standards-case shipments) DOE accounted for the combined effects of
changes in purchase price, annual operating cost, and household income
on the consumer purchase decision.
Table IV.10 summarizes the approach and data DOE used to derive the
inputs to the shipments analysis for the November 2007 ANOPR, and the
changes it made for today's proposed rule. The most significant change
pertains to CCWs. For the November 2007 ANOPR, DOE analyzed CCWs as a
single product class. For reasons described in section IV.A.2, DOE has
decided to analyze CCWs as two product classes--top-loading and front-
loading washers. The general approach for forecasting CCW shipments for
today's proposed rule remains unchanged from the 2007 ANOPR. That is,
all CCW shipments (i.e., shipments for both product classes) were
estimated for the new construction, replacement and non-replacement
markets. The difference for today's proposed rule is that after
establishing forecasted product shipments for all CCWs, DOE allocated
shipments to each of the two product classes based on the market share
of each class. Based on data provided by AHAM for the 2007 ANOPR, DOE
estimated that top-loading washers comprise 80 percent of the market
while front-loading washers comprise 20 percent. DOE estimated that the
product class market shares would remain unchanged over the time period
2005-2042. A discussion of the inputs and the changes follows below.
Table IV.10--Approach and Data Used To Derive the Inputs to the
Shipments Analysis
------------------------------------------------------------------------
2007 ANOPR Changes for the
Inputs description proposed rule
------------------------------------------------------------------------
Number of Product Classes... Cooking Products: Cooking Products: No
Seven classes for change.
conventional (i.e.,
non-microwave oven
cooking products;
one class for
microwave ovens.
-------------------------------------------
CCWs: Single product CCWs: Two product
class. classes: top-
loading washers and
front-loading
washers. Shipments
forecasts
established for all
CCWs and then
disaggregated into
the two product
classes based on
the market share of
top- and front-
loading washers.
Market share data
provided by AHAM;
80% top-loading and
20% front-loading.
Product class
market shares held
constant over time
period of 2005-
2042.
New Construction Shipments.. Cooking Products: Cooking Products: No
Determined by change in approach.
multiplying housing Housing forecasts
forecasts by updated with EIA
forecasted AEO 2008
saturation of projections.
cooking products
for new housing.
Housing forecasts
based on AEO 2007
projections. New
housing product
saturations based
on EIA's RECS.
Forecasted
saturations
maintained at 2001
levels.
-------------------------------------------
CCWs: Determined by CCWs: Multi-housing
multiplying multi- forecasts updated
housing forecasts with AEO 2008
by forecasted projections.
saturation of CCWs Verified frozen
for new multi- saturations with
housing. Multi- data from the U.S.
housing forecasts Census Bureau's
based on AEO 2007 American Housing
projections. New Survey (AHS) for
multi-housing 1997-2005.
product saturations
calibrated against
data from the
Consortium for
Energy Efficiency
(CEE). Forecasted
saturations
maintained (frozen)
at 1999 levels.
Replacements................ Cooking Products: Cooking Products: No
Determined by change in approach.
tracking total Retirement
product stock by functions revised
vintage and to be based on
establishing the Weibull lifetime
failure of the distributions.
stock using
retirement
functions from the
LCC and PBP
analysis.
Retirement
functions were
based on uniform
lifetime
distributions.
-------------------------------------------
CCWs: Determined by CCWs: No change in
tracking total approach.
product stock by Retirement
vintage and functions revised
establishing the to be based on
failure of the Weibull lifetime
stock using distributions.
retirement
functions from the
LCC and PBP
analysis.
Retirement
functions were
based on uniform
lifetime
distributions.
[[Page 62070]]
Early Replacements (cooking Used to calibrate No change.
products only). Shipments Model to
historical
shipments data. Two
percent of the
surviving stock per
year is retired
early.
Retired Units not Replaced Used to calibrate Froze the percentage
(i.e., non-replacements) Shipments Model to of non-replacements
(CCWs only). historical at 15 percent for
shipments data. the period 2006-
Starting in 1999 2042. Revision was
and extending to made to account for
2005, estimated the increased
that 3 to 35% of saturation rate of
retired units were in-unit washers in
not replaced. the multi-family
Gradually reduced stock between 1997
the percentage of and 2005 timeframe
non-replacements to shown by the AHS.
zero between 2006
and 2013.
Historical Shipments........ Cooking Products: Cooking Products: No
Data sources change.
include AHAM data
submittal, AHAM
Fact Book, and
Appliance Magazine.
-------------------------------------------
CCWs: Data sources CCWs: No change.
include AHAM data
submittal,
Appliance Magazine,
and U.S. Bureau of
Economic Analysis'
quantity index data
for commercial
laundry.
Purchase Price, Operating Developed the No change.
Cost, and Household Income ``relative price''
impacts due to efficiency elasticity which
standards. accounts for the
purchase price and
the present value
of operating cost
savings divided by
household income.
Used purchase price
and efficiency data
specific to
residential
refrigerators,
clothes washers,
and dishwashers
between 1980 and
2002 to determine a
``relative price''
elasticity of
demand, of -0.34.
Fuel Switching.............. Cooking Products: Cooking Products: No
Not considered. change.
-------------------------------------------
CCWs: Not applicable CCWs: Not
applicable.
------------------------------------------------------------------------
a. New Construction Shipments
To determine new construction shipments, DOE used forecasts of
housing starts coupled with the product market saturation data for new
housing. For new housing completions and mobile home placements, DOE
used actual data through 2005, and adopted the projections from EIA's
AEO 2007 for 2006-2030 for the November 2007 ANOPR.\66\ DOE updated its
housing projections for today's proposed rule using AEO 2008. DOE used
the 2001 RECS to establish cooking product market saturations for new
housing. For CCWs, DOE relied on new construction market saturation
data from CEE.\67\
---------------------------------------------------------------------------
\66\ U.S. Department of Energy-Energy Information
Administration, Annual Energy Outlook 2007 with Projections to 2030
(Feb. 2007) (DOE/EIA-0383 (2007)). This document is available at:
http://www.eia.doe.gov/oiaf/aeo/index.html.
\67\ Consortium for Energy Efficiency, Commercial Family-Sized
Washers: An Initiative Description of the Consortium for Energy
Efficiency (1998). This document is available at: http://
www.ceel.org/com/cwsh/cwsh-main.php3.
---------------------------------------------------------------------------
b. Replacements
DOE estimated replacements using product retirement functions that
it developed from product lifetimes. For the November 2007 ANOPR, DOE
based the retirement function on a uniform probability distribution for
the product lifetime. As discussed in section IV.E.6 of this notice,
DOE updated its product lifetime distributions for the LCC analysis
using Weibull distributions. As a result, DOE also updated its
retirement functions for the Shipments Model based on Weibull
distributions.
Cooking Products. To calibrate each Shipments Model against
historical shipments, DOE established the early replacement market
segment for cooking products. DOE determined for its November 2007
ANOPR that two percent of the surviving stock was replaced early. This
finding was retained for today's proposed rule.
Commercial Clothes Washers. For the November 2007 ANOPR, DOE
determined that from 1988 to 1998, annual shipments of clothes washers
stayed roughly in the range of 200,000 to 230,000 units per year. But
data provided by AHAM show a drop in shipments to approximately 180,000
units in 2005. To calibrate its Shipments Model for the November 2007
ANOPR, DOE attributed this drop to non-replacements (i.e., a portion of
CCWs that were retired from service from 1999 to 2005 were not
replaced). Since DOE found no evidence that such non-replacement would
continue over time, it projected that overall shipments would recover
and gradually increase after the drop witnessed between 1999 and 2005
as stocks of existing machines are retired. DOE specifically sought
feedback in the November 2007 ANOPR on its assumptions regarding the
shipments forecasts for CCWs.
AHAM, Alliance, Whirlpool, Southern Company (SC) and Miele argued
that CCW shipments are likely to decrease further in the future. (AHAM,
No. 32 at pp. 4, 11-12; Alliance, No. 26 at p. 5; Whirlpool, No. 28 at
pp. 9-10; SCG, Public Meeting Transcript, No. 23.7 at pp. 179-180; and
Miele, Public Meeting Transcript, No. 23.7 at pp. 110-111) AHAM
disagreed with DOE's forecast of CCW shipments, arguing that future
shipments will remain unchanged from historical values, if not somewhat
reduced. AHAM stated that both the number of replacement units and the
number of new common-area laundry units are decreasing. AHAM cited a
study \68\ by the National Multi-Housing Council indicating that growth
in multi-family housing is being driven in large part by high-end
apartment complexes, which often include in-apartment amenities such as
clothes washers and dryers, and cited data from the U.S. Census
Bureau's American Housing Survey (AHS) showing growth in in-unit
clothes washers (for rental units). The switch to in-unit laundry
appliances in rental units results in a reduction of shared laundry
areas, implying a corresponding reduction in CCW shipments. (AHAM, No.
32 at pp. 4, 11-12)
---------------------------------------------------------------------------
\68\ J. Goodman, The Upscale Apartment Market: Trends and
Prospects (National Multi-Housing Council) (2001).
---------------------------------------------------------------------------
Alliance agreed that CCWs are increasingly competing with in-unit
laundry products in multi-family housing. It cited information from the
Multi-housing Laundry Association (MLA) stating that most recent multi-
family new construction in California and Nevada accommodates in-unit
washers and many existing properties of 100 or more units are
converting to in-
[[Page 62071]]
unit washers. Alliance supported AHAM's conclusions about CCW shipments
and urged DOE to revise its shipments forecast to approximate the
recent downward trend in CCW shipments, or, at the very least, keep CCW
shipments constant. (ALS, No. 26 at p. 5) Whirlpool stated that CCW
shipments are not increasing, and argued that an assumption of flat
demand would be more realistic, adding that an alternative of declining
demand should be explored to estimate the sensitivity of this
assumption for overall energy savings. (Whirlpool, No. 28 at pp. 9-10)
SC and Miele also stated that there is a trend toward multi-family
residences using in-unit washers as opposed to common area laundry
facilities. (SC, Public Meeting Transcript, No. 23.7 at pp. 179-180;
Miele, Public Meeting Transcript, No. 23.7 at pp. 110-111)
The Joint Comment disagreed with the claims by AHAM, Whirlpool, and
Alliance. The Joint Comment argued that Alliance cited no decline in
CCW shipments when reporting to the SEC on ``trends and
characteristics'' in the North American market for its commercial
laundry products. Rather, the Joint Comment stated that Alliance cited
population growth as a ``steady driver'' for CCW shipments (i.e.,
suggesting that the DOE projection appears reasonable). (Joint Comment,
No. 29 at p. 5)
DOE appreciates the evidence that AHAM and Alliance have provided
to illustrate the movement in multi-family buildings away from common-
area laundry facilities to in-unit washers and dryers. To reevaluate
its November 2007 ANOPR shipments forecast, DOE verified AHAM's
conclusion regarding the AHS data, namely, that the stock of in-unit
washers in the multi-family stock has increased 16 percent between 1997
and 2005. DOE also found that from 1997 to 2005, the AHS shows that the
saturation of in-unit washers in new multi-family construction has
stayed relatively constant, varying only slightly between 76 and 80
percent. The implication is that CCW saturations in new multi-family
construction also remained constant between 1997 and 2005. This
suggests that the growth in in-unit washer saturations in the multi-
family stock over the last 10 years was likely caused by conversions of
rental property to condominiums, resulting in the gradual phase-out or
non-replacement of failed CCWs in common-area laundry facilities. Based
on this apparent trend, DOE revised its November 2007 ANOPR estimate
that CCW non-replacements would gradually phase-out by 2013. For
today's proposed rule, DOE used the average percent of non-replacements
over the period between 1999 and 2005 (18 percent) and maintained it
over the entire forecast period of 2006 to 2042. The effect of
maintaining non-replacements at 18 percent results in CCW shipments
forecasts staying relatively flat between 2006 and 2042. This is in
contrast to the annual growth rate of two percent determined for the
November 2007 ANOPR.
c. Purchase Price, Operating Cost, and Household Income Impacts
To estimate the combined effects on product shipments from
increases in equipment purchase price and decreases in equipment
operating costs due to new efficiency standards for the November 2007
ANOPR, DOE conducted a literature review and a statistical analysis on
a limited set of appliance price, efficiency, and shipments data. As
the November 2007 ANOPR describes, DOE used purchase price and
efficiency data specific to residential refrigerators, clothes washers,
and dishwashers between 1980 and 2002 to conduct simple regression
analyses. DOE's analysis suggests that the relative price elasticity of
demand, averaged over the three appliances, is -0.34. Because DOE's
forecast of shipments and national impacts due to standards spans over
30 years, DOE considered how the relative price elasticity is affected
once a new standard takes effect. After the purchase price change,
price elasticity becomes more inelastic over the years until it reaches
a terminal value--usually around the tenth year after the price change.
DOE incorporated a relative price elasticity change that resulted in a
terminal value of approximately one-third of the short-run elasticity
(-0.34). In other words, DOE determined that consumer purchase
decisions, in time, become less sensitive to the initial change in the
product's relative price. DOE received no comments on its analysis to
estimate the combined effects of increases in product purchase price
and decreases in operating costs and, therefore, retained the analysis
and the results for today's proposed rule.
Because the combined market of electric and gas cooking products is
completely saturated, DOE assumed in the November 2007 ANOPR that
electric and gas cooking product standard levels would neither affect
base-case shipments nor cause shifts in electric and gas cooking
product market shares for cooking products other than microwave ovens.
Thus, DOE's Shipments Model for electric and gas cooking products
(i.e., conventional cooking products) does not incorporate use of a
relative price elasticity.
d. Fuel Switching
AGA commented that it is likely that consumers will switch from gas
to electric cooking products in the event that standing pilot ignition
systems are eliminated. According to AGA, consumers who face rewiring
costs when replacing a gas cooking product are likely to consider
purchasing and rewiring for an all-electric cooking product. Therefore,
AGA commented that DOE needs to analyze the likelihood of such fuel
switching, including assessing the full fuel-cycle energy consumption
and emission implications, and evaluating the tradeoffs between the
costs of the wiring jobs and the first costs of competing gas and
electric products. (AGA, No. 27 at p. 3)
As section IV.E.2 of this notice describes, DOE estimated a cost of
$235 for installing an electrical outlet to accommodate a gas cooking
product that needs electricity to operate. If a consumer were to switch
from a gas cooking product to an electrical appliance due to the
prospect of this installation cost, an outlet would still be needed to
accommodate the electrical appliance. Based on the RS Means Mechanical
Cost Data, 2008, the cost of installing only an outlet suitable for an
electrical cooking appliance, which requires a 50-amp, 240-volt
receptacle, is $305.\69\ Due to the amperage and voltage requirements
of the receptacle as well as the age of the household in which the
outlet would be installed (pre-1960), a separate branch circuit coming
off the fuse box or circuit breaker panel would be necessary to
accommodate the electrical cooking appliance. Also, because of the
additional amperage required by the electrical cooking appliance, it is
highly likely that the fuse box or circuit breaker panel would need to
be upgraded. Based on material costs from the Craftsman 2008 Repair &
Remodeling Estimator \70\ and labor costs for the RS Means, Mechanical
Cost Data, 2008, DOE estimated an installation cost of $1247 for
installing a branch circuit and upgrading a breaker panel from 50 amps
to 100 amps. Combined with the $305 installation cost of the
receptacle, the total installation cost to accommodate an electrical
cooking appliance is
[[Page 62072]]
estimated to be $1562 or over six times the cost of installing a
standard 120-volt outlet for a gas cooking product. Therefore, there is
no financial incentive for a consumer to switch from gas cooking to
electric cooking. Thus, DOE believes the probability of fuel switching
is so low that DOE is not considering it in today's proposed rule. See
chapter 11 of the TSD accompanying this notice for further details.
---------------------------------------------------------------------------
\69\ RS Means, Mechanical Cost Data (30th Annual Edition) (2008)
Op. cit.
\70\ Craftsman Book Company, 2008 National Repair & Remodeling
Estimator (2008). Available for purchase at: http://craftsman-
book.com/products/index.php?main_page=cbc_product_book_
info&products_id=400.
---------------------------------------------------------------------------
3. Other Inputs
The following is a discussion of the other inputs to the NIA and
any revisions DOE made to those inputs for today's proposed rule.
a. Base-Case Forecasted Efficiencies
A key input to DOE's estimates of NES and NPV are the energy
efficiencies that DOE forecasts over time for the base case (without
new standards) and each of the standards cases. The forecasted
efficiencies represent the annual shipment-weighted energy efficiency
(SWEF) of the products under consideration over the forecast period
(i.e., from the estimated effective date of a new standard to 30 years
after the standard becomes effective). Because key inputs to the
calculation of the NES and NPV depend on the estimated efficiencies,
they are of great importance to the analysis. In the case of the NES,
the per-unit annual energy (and water) consumption is a direct function
of product efficiency. Regarding the NPV, two inputs (the per-unit
total installed cost and the per-unit annual operating cost), depend on
efficiency. The per-unit total installed cost is a direct function of
efficiency. Because it is a direct function of the per-unit energy (and
water) consumption, the per-unit annual operating cost depends
indirectly on product efficiency.
As section IV.D.9 of this notice discusses, DOE based its
development of the product efficiencies in the base case on the
assignment of equipment efficiencies in 2005. In other words, DOE
determined the distribution of product efficiencies currently in the
marketplace to develop a SWEF for 2005. Using the SWEF as a starting
point, DOE developed base-case forecasted efficiencies based on
estimates of future efficiency growth. From 2005 to 2012 (2012 being
the estimated effective date of a new standard), DOE estimated for the
November 2007 ANOPR that there would be no growth in SWEF (i.e., no
change in the distribution of product efficiencies). Because there are
no historical data to indicate how product efficiencies have changed
over time, DOE estimated that forecasted efficiencies would remain
frozen at the 2012 efficiency level until the end of the forecast
period (i.e., 2042, or 30 years after the effective date). DOE did
forecast the market share of gas standard ranges equipped with standing
pilot lights to estimate the impact of eliminating standing pilot
lights for gas cooktops and gas standard ovens. Although DOE recognizes
the possibility that product efficiencies may change over time (e.g.,
due to voluntary efficiency programs such as ENERGY STAR), without
historical information, DOE had no basis for speculating how these
product efficiencies may change.
AHAM commented that DOE's approach to estimating forecasted base-
case efficiencies was realistic. (AHAM, No. 32 at p. 12) For cooking
products, Whirlpool also agreed with DOE's approach because these
products are not incentivized by transformation programs such as ENERGY
STAR. Whirlpool stated that because a new standard was established for
CCWs in 2007, a change from that level is unlikely before 2012 due to
product development cycles. Whirlpool would not speculate on changes in
efficiency between 2012 and 2042; however, Whirlpool disagreed with
DOE's assumption of no change. Whirlpool added that voluntary market
transformation programs, such as ENERGY STAR, have a proven track
record of saving energy without standards, and one could reasonably
assume that such programs will have at least the same impact going
forward as they have had historically. (Whirlpool, No. 28 at p. 10)
For today's proposed rule, DOE maintained its approach of freezing
forecasted efficiencies at the efficiency level estimated for 2012 for
both residential cooking products and CCWs. For cooking products, the
two stakeholders that did comment (AHAM and Whirlpool, as discussed
above) agreed with DOE's approach. Due to Whirlpool's concerns
regarding CCWs, DOE's Building Technologies Program contacted the
ENERGY STAR program within DOE to determine what actions are being
undertaken to promote the adoption of more-efficient CCWs. CCWs have
been a product covered under the ENERGY STAR program since 2000. But
the program has not been able to monitor sales on ENERGY STAR-qualified
products because manufacturers are not required to submit relevant data
to ENERGY STAR. Also, because CCWs are not sold through a distribution
channel involving appliance retailers, DOE believes that any market
share estimates developed would be dubious. Without reliable data from
which to estimate the impact of ENERGY STAR on CCW market efficiency,
DOE has decided to retain its frozen efficiency forecasts for today's
proposed rule. This is a conservative estimate that will be taken into
consideration when DOE weighs the benefits and burdens of TSLs.
b. Standards-Case Forecasted Efficiencies
For its determination of standards-case forecasted efficiencies,
DOE used a ``roll-up'' scenario in the November 2007 ANOPR to establish
the SWEF for 2012, the year that standards would become effective. DOE
stated its expectation that product efficiencies in the base case,
which did not meet the standard level under consideration, would roll-
up to meet the new standard level. Also, DOE assumed that all product
efficiencies in the base case that were above the standard level under
consideration would not be affected (i.e., would not require or
experience efficiency improvements as a result of a new energy
efficiency standard). DOE made the same estimates regarding forecasted
standards-case efficiencies as for the base case, namely, that
forecasted efficiencies remained frozen at the 2012 efficiency level
until the end of the forecast period, because DOE had no data to
reasonably estimate how such efficiency levels might change over the
next 30 years. By maintaining the same growth rate for forecasted
efficiencies in the standards case as in the base case (i.e., zero or
frozen growth), DOE retained a constant efficiency difference or gap
between the two cases over the length of the forecast period. Although
frozen trends may not reflect what happens to base-case and standards-
case product efficiencies in the future, DOE nevertheless believes that
maintaining a frozen efficiency difference between the base case and
standards case provides a reasonable estimate of the impact that
standards have on product efficiency. In other words, because the
determination of national energy savings and national economic impacts
are more reliant on the impact that standards have on product
efficiency, it is more important to accurately estimate the product
efficiency gap between the standards case and base case, rather than to
accurately estimate the actual product efficiencies in the standards-
case and base-case efficiency trends. To further explore this point, in
the November 2007 ANOPR, DOE specifically sought feedback on its
estimates of forecasted standards-case efficiencies and its view of how
standards affect product
[[Page 62073]]
efficiency distributions in the year that standards take effect.
The Joint Comment on the ANOPR stated that DOE's roll-up assumption
is inadequate for estimating impacts, especially for lower and mid-
range candidate standard levels. According to the Joint Comment, new
distributions of efficiency performance occur largely because ENERGY
STAR has offered market distinction for higher efficiency products,
while utilities and other efficiency program administrators have
offered incentives for beyond-standards levels of performance. The
Joint Comment argued that this process will become more important in
the future, not less; this means consumers are buying an increasing
number of products at levels significantly more efficient than Federal
standards. For prior rulemakings, the Joint Comment argued that DOE has
also evaluated a ``shift'' scenario, which models savings if the
distribution of efficiencies were to remain the same as the current
distribution, but simply shift above a given new standard level. The
Joint Comment stated that modeling both roll-up and shift scenarios
would enable DOE and stakeholders to better evaluate the impacts of a
given standard level. (Joint Comment, No. 29 at pp. 4-5) Counter to the
Joint Comment, both AHAM and Whirlpool concurred with DOE's use of a
roll-up assumption for estimating the impact of standards on product
efficiencies. (AHAM, No. 32 at p. 12; Whirlpool, No. 28 at p. 10)
As noted in Whirlpool's comments, there are no market
transformation programs such as ENERGY STAR for cooking products.
Therefore, without the lure of a market transformation program like
ENERGY STAR to promote the use of more-efficient cooking products
beyond a particular standard level, DOE believes it is reasonable to
estimate the impact of standards on the SWEF with only a roll-up
scenario.
As described above, CCWs are under the ENERGY STAR program, but
there are no data on the impact that the program has had on market
efficiency. In the case of top-loading washers, the base-case
efficiency distribution specifies all but three percent of the top-
loading CCW market at either the baseline or 1.42 MEF/9.5 WF efficiency
levels. Because the technological changes required to achieve higher
efficiency levels are not currently being utilized in top-loading CCW
designs, DOE estimates that standards would be unlikely to shift the
top-loading CCW market to levels beyond minimum required efficiencies.
In the case of front-loading washers, over 80 percent of the front-
loading CCW market is already at an efficiency level of 2.00 MEF/5.5
WF, which is nearly at the max-tech level of 2.35 MEF/4.4 WF.
Therefore, the effects from a shift scenario for front-loading washers
would not be significantly different than the effects from a roll-up
scenario. That is, the increased energy and water savings resulting
from moving the market to the max-tech level would be offset by the
increased equipment and repair costs from that level. Because of the
reasons stated above, for today's proposed rule, DOE has analyzed only
a roll-up scenario to establish the SWEF for top-loading and front-
loading washers after new CCW standards would become effective.
c. Annual Energy Consumption
The inputs for determining NES are annual energy (and water)
consumption per unit, shipments, equipment stock, national annual
energy consumption, and site-to-source conversion factors. Because the
annual energy (and water) consumption per unit depend directly on
efficiency, DOE used the SWEFs associated with the base case and each
standards case, in combination with the annual energy (and water use)
data, to estimate the shipment-weighted average annual per-unit energy
(and water) consumption under the base case and standards cases. The
national energy consumption is the product of the annual energy
consumption per unit and the number of units of each vintage. This
calculation accounts for differences in unit energy consumption from
year to year.
The NIA uses forecasted shipments for the base case and all
standards cases. As noted above in section IV.E.2.c, DOE used a
relative price elasticity to estimate standards-case shipments for
microwave ovens and CCWs, but not conventional cooking products. The
increased total installed cost of more-efficient equipment causes some
customers to forego equipment purchases. Consequently, shipments
forecasted under the standards cases are lower than under the base
case. To avoid the inclusion of savings from displaced shipments of
microwave ovens, DOE used the standards-case shipments projection and
the standards-case stock to calculate the annual energy consumption in
the base case. However, for CCWs, DOE assumed any drop in shipments
caused by standards would result in the purchase of used machines. As a
result, the standards-case forecast explicitly accounted for the energy
and water consumption of not only new standard-compliant CCWs but used
equipment coming into the market due to the drop in new product
shipments as well. Therefore, DOE maintained the use of the base-case
shipments to determine the annual energy consumption in the base case.
DOE's November 2007 ANOPR analysis estimated that 0.23 quads of
national energy savings would be associated with the elimination of
standing pilot ignition systems in gas cooking products and the
anticipated substitution of electric spark ignition for gas standard
ovens. AGA asserted that the maximum energy savings would be less (0.06
quads over 30 years) and contended that the amount of energy saved from
eliminating standing pilot ignition systems is not significant enough
to warrant setting a standard that eliminates them. (AGA, No. 27 at pp.
2 and pp. 13-14)
EEI compared the energy savings of eliminating standing gas pilots
to the potential energy savings from a microwave oven standby power
standard. According to EEI, DOE's analysis shows that gas standby
energy use in gas cooking products is a much more significant energy
and cost issue than microwave oven standby energy use, and DOE should
prioritize its methods and analysis to reduce standby gas energy usage.
(EEI, No. 25 at pp. 2-3)
DOE recognizes both AGA's and EEI's comments, but their input
focused on how the agency should interpret the results of its energy
savings analyses, rather than altering DOE's methodology for estimating
the national energy savings due to the elimination of standing pilots.
As the November 2007 ANOPR noted, DOE's method accounted for the market
share of gas cooking products with standing pilots. Based on historical
trends in the shipments data, DOE forecasted a continual decline in the
market share of gas cooking products with standing pilots. As described
in section IV.D.9.a, DOE estimated that 17.6 percent of standard gas
oven shipments and 6.8 percent of gas cooktop shipments would be
equipped with standing pilots in 2012. The above percentages are based
on all gas standard oven and cooktop shipments (i.e., shipments from
both stand-alone or built-in products as well as kitchen ranges).
Because DOE estimated that kitchen ranges are the only gas products
that still come equipped with standing pilots, only standard ovens and
cooktops in kitchen ranges comprise the percent of all standard ovens
and cooktops that are still equipped with standing pilots. DOE
estimated that approximately 14 percent of gas ranges in 2012 were
equipped with standing pilots. Overall, a smaller percentage of gas
cooktops are equipped
[[Page 62074]]
with standing pilots (6.8 percent) than standard gas ovens (17.6
percent) because there are far more stand-alone cooktop shipments than
built-in standard oven shipments. DOE estimated a total market share of
less than five percent by 2042 for gas cooking products with standing
pilots. See chapter 11 of the TSD accompanying this notice for further
details. By forecasting a declining market share of gas cooking
products with standing pilots, DOE believes it accurately estimated the
national energy savings due to energy efficiency standards that
eliminate standing pilots. National energy savings results are
presented below in section V.B.3.a.
d. Site-to-Source Conversion
Since it is necessary to estimate the national energy savings
expected from appliance standards, DOE uses a multiplicative factor to
convert site energy consumption (at the home or commercial building)
into primary or source energy consumption (the energy required to
deliver the site energy). In the November 2007 ANOPR, DOE used annual
site-to-source conversion factors based on the version of NEMS that
corresponds to AEO 2006. For today's NOPR, DOE updated its conversion
factors based on AEO 2008.\71\ These conversion factors account for
natural gas losses from pipeline leakage and natural gas used for
pumping energy and transportation fuel. For electricity, the conversion
factors vary over time due to projected changes in generation sources
(i.e., the power plant types projected to provide electricity to the
country). Since the EIA's AEO does not provide energy forecasts that go
beyond 2030, DOE used conversion factors that remain constant at the
2030 values throughout the remainder of the forecast.
---------------------------------------------------------------------------
\71\ For the standards rulemakings, DOE will generally use the
same economic growth and development assumptions that underlie the
most current AEO published by EIA. For its determination of site-to-
source conversion factors, DOE used the version of NEMS
corresponding to AEO 2006 for the ANOPR due to the unavailability of
the AEO 2007 version at the time DOE conducted the NIA. For its
analyses for the NOPR and final rule, DOE is committed to using the
latest available version of NEMS.
---------------------------------------------------------------------------
e. Embedded Energy in Water and Wastewater Treatment and Delivery
In the November 2007 ANOPR, DOE did not include the energy required
for water treatment and delivery for the reasons that follow. EPCA
defines ``energy use'' to be ``the quantity of energy directly consumed
by a consumer product at point of use, determined in accordance with
test procedures under section 6293 of [42 U.S.C.].'' (42 U.S.C.
6291(4)) (emphasis added) Based on the definition of ``energy use,''
DOE does not believe it has the authority to consider embedded energy
(i.e., the energy required for water treatment and delivery) in the
analysis. Furthermore, even if DOE had the authority, it does not
believe adequate analytical tools exist to conduct such an
evaluation.\72\
---------------------------------------------------------------------------
\72\ An analytical tool equivalent to EIA's NEMS would be needed
to properly account for embedded energy impacts on a national scale,
including the embedded energy due to water and wastewater savings.
This new version of NEMS would need to analyze spending and energy
use in dozens, if not hundreds, of economic sectors. This version of
NEMS also would need to account for shifts in spending in these
various sectors to account for the marginal embedded energy
differences among these sectors. 72 FR 64432, 64498-99 (Nov. 15,
2007). DOE does not have access to such a tool or other means to
accurately estimate the source energy savings impacts of decreased
water or wastewater consumption and expenditures.
---------------------------------------------------------------------------
f. Total Installed Costs and Operating Costs
The total annual installed cost increase is equal to the annual
change in the per-unit total installed cost (i.e., the difference
between base case and standards case) multiplied by the shipments
forecasted in the standards case. DOE did not change its approach for
calculating total annual installed cost increases for today's proposed
rule.
The annual operating cost savings per unit includes changes in
energy, water, repair, and maintenance costs. DOE forecasted energy
prices for the November 2007 ANOPR based on AEO 2007 and updated the
energy prices for today's proposed rule using forecasts from AEO 2008.
In the November 2007 ANOPR analysis, DOE believed there would be no
increase in maintenance and repair costs due to standards. But as
section IV.D.5 of this notice discusses, based upon public comments,
DOE has accounted for the added repair and maintenance costs associated
with non-standing pilot ignition systems for today's proposed rule. DOE
has also included increases in repair and maintenance costs for more-
efficient CCWs.
g. Effects of Standards on Energy Prices
In the November 2007 ANOPR, DOE did not consider the potential
impact of energy efficiency standards on energy prices. However, DOE
did publish a final rule for residential furnaces and boilers rule in
November 2007 that assessed the consumer benefits, in the form of
reduced natural gas prices, from a 90-percent annual fuel utilization
efficiency (AFUE) or higher standard for non-weatherized gas furnaces.
72 FR 65136, 65152 (Nov. 19, 2007). The Joint Comment stated that
because DOE conducted such an analysis for the furnace and boiler
standards rulemaking, it must also evaluate gas and electricity price
impacts in the context of the residential cooking product and CCW
rulemaking. The Joint Comment further stated that DOE should consider
the impact of standards on gas and electricity prices as a factor for
economic justification, arguing that ``NAECA authorizes the Secretary
to account for other, non-enumerated factors that he determines are
relevant (42 U.S.C. 6297(o)).'' \73\ (Joint Comment, No. 29 at p. 12)
---------------------------------------------------------------------------
\73\ DOE notes that the Joint Comment cites to a statutory
section that does not exist (i.e., 42 U.S.C. 6297(o). Instead, the
Joint Comment presumably intended to cite 42 U.S.C.
6295(o)(2)(B)(i)(VII), which stands for the proposition presented.
---------------------------------------------------------------------------
In response, DOE did conduct an analysis using a version of the
2008 NEMS-BT, modified to account for energy savings associated with
possible standards. The analysis estimated that gas and electric demand
reductions resulting from max-tech standards for residential cooking
products and CCWs had no detectable change on the U.S. average wellhead
natural gas price or the average user price of electricity. Therefore,
DOE concludes that residential cooking product and CCW standards will
not provide additional consumer benefits over those determined in the
NIA. See chapter 11 of the TSD accompanying this notice for more
details.
h. Discount Rates
DOE multiplies monetary values in future years by the discount
factor to determine the present value. The Joint Comment stated that
societal discount rates are the subject of extensive academic research
and that the weight of academic opinion is that the appropriate
societal discount rate is three percent or less. (Joint Comment, No. 29
at p. 12) DOE estimated national impacts using both a three-percent and
a seven-percent real discount rate as the average real rate of return
on private investment in the U.S. economy. DOE uses these discount
rates in accordance with guidance provided by the Office of Management
and Budget (OMB) to Federal agencies on the development of regulatory
analysis (OMB Circular A-4 (Sept. 17, 2003), section E, ``Identifying
and Measuring Benefits and Costs'').
Chapters 10 and 11 of the TSD accompanying this notice provide
additional detail on the shipments and national impacts analyses for
the two
[[Page 62075]]
appliance products subject to further analyses as part of this
rulemaking.
F. Consumer Subgroup Analysis
In analyzing the potential impact of new or amended standards on
individual and commercial consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a national standard level.
DOE used RECS data to analyze the potential effect of standards for
residential cooking products on two consumer subgroups of interest: (1)
Households with low income levels, and (2) households occupied by
seniors. In addition, DOE received public comments that identified
other specific consumer subgroups that could potentially be affected by
the elimination of standing pilot ignition systems. According to AGA,
Amish communities, which do not allow the use of electricity, have gas
products that use either propane or natural gas. AGA stated that
religious and cultural prohibitions regarding electricity use by
certain groups in the U.S. are well understood and that this was the
reason for the original EPCA language requiring electronic ignition
only on gas cooking products with other electrical features. In
addition, AGA claimed that this consideration was the reason for the
exception to not ban standing pilot lights on gravity gas-fired boilers
(which have no electrical supply) in EISA 2007. (AGA, No. 27 at p. 2)
However, EEI argued that the Amish communities as a subgroup are
extremely small, so it would be very difficult for DOE to analyze this
subset. (EEI, Public Meeting Transcript, No. 23.7 at pp. 198-99) EEI
estimated that 50,000 families (0.04 percent of U.S. households) do not
use electricity in their homes and may use natural gas, propane,
kerosene, or wood for cooking purposes. (EEI, No. 5 at pp. 3-4)
DOE reviewed the U.S. Census Bureau's 2005 AHS and found that
approximately 13,000 households, representing 0.01 percent of the total
U.S. household population, use gas cooking products and are without
electricity. Although it is unknown whether this subset of the U.S.
household population includes Amish households, DOE does not doubt that
Amish households would be affected by the elimination of standing
pilots. DOE has contacted the Mennonite Information Center, the Young
Center at Elizabethtown College, and businesses that sell gas
appliances to the Amish community in Lancaster County, Pennsylvania and
verified that Amish households do use gas-only cooking products. But,
as section IV.A.1 discusses, DOE market research shows that battery-
powered electronic ignition systems have been implemented in other
products, such as instantaneous gas water heaters, barbeques, furnaces,
and other appliances, and the use of such products is not expressly
prohibited by applicable safety standards such as ANSI Z21.1.
Therefore, DOE believes that households that use gas for cooking and
are without electricity will have technological options that would
enable them to continue to use gas cooking if standing pilot ignition
systems are eliminated. Because the subgroup consisting of households
without electricity will still have technological options for
continuing to use gas cooking products even if standing pilots are
eliminated, DOE believes that this subgroup will not be adversely
impacted by an efficiency standard requiring the elimination of
standing pilots.
Another consumer subgroup stakeholders identified is low-income
households. GE stated that eliminating gas pilot ranges would cause
hardship for most households using these products, since the majority
of these products are used in Federally sponsored and municipally
sponsored low-income and low-cost housing. GE argued that requiring
these households to wire themselves to accommodate a gas range with
electronic ignition would be cost prohibitive. (GE, No. 30 at pp. 2-4)
EEI commented that DOE may want to identify the percentage of low-
income consumers that use equipment with standing pilots. (EEI, No. 5
at p. 4) DOE was not able to verify GE's claim (submitted without data)
that the majority of gas pilot ranges are used in Federally sponsored
and municipally sponsored low-income housing, because, for example, the
RECS data that DOE uses for its consumer subgroup analysis lack
sufficient detail.
DOE analyzed the potential effects of CCW standards on two
subgroups: (1) Consumers not served by municipal water and sewer
providers, and (2) small businesses. For consumers not served by water
and sewer, DOE analyzed the potential impacts of standards by
conducting the analysis with well and septic system prices, rather than
water and wastewater prices based on RFC/AWWA data. For small CCW
businesses, DOE analyzed the potential impacts of standards by
conducting the analysis with different discount rates, because small
businesses do not have the same access to capital as larger businesses.
DOE estimated that for businesses purchasing CCWs, the average discount
rate for small companies is 3.5 percent higher than the industry
average. Due to the higher costs of conducting business, as evidenced
by their higher discount rates, the benefits of CCW standards for small
businesses will be less than the general population of CCW owners.
More details on the subgroup analysis and the results can be found
in chapter 12 of the TSD accompanying this notice.
G. Manufacturer Impact Analysis
1. General Description
In determining whether a standard for either of the two appliance
products subject to further analyses as part of this rulemaking is
economically justified, the Secretary of Energy is required to consider
``the economic impact of the standard on the manufacturers and on the
consumers of the products subject to such standard.'' (42 U.S.C.
6295(o)(2)(B)(i)(I) and 6316(a)) The statute also calls for an
assessment of the impact of any lessening of competition as determined
by the Attorney General. (42 U.S.C. 6295 (o)(2)(B)(i)(V) and 6316(a))
DOE conducted the MIA to estimate the financial impact of higher
efficiency standards on manufacturers of the two appliance products,
and to assess the impact of such standards on employment and
manufacturing capacity.
The MIA has both quantitative and qualitative aspects. The
quantitative part of the MIA relies on the GRIM, an industry cash-flow
model customized for this rulemaking. The GRIM inputs characterize the
industry cost structure, shipments, and revenues. This includes
information from many of the analyses described above, such as
manufacturing costs and prices from the engineering analysis and
shipments forecasts. The key GRIM output is the INPV, which estimates
the value of the industry on the basis of cash flows, expenditures, and
investment requirements as a function of TSLs. Different sets of
assumptions (scenarios) will produce different results. The qualitative
part of the MIA addresses factors such as product characteristics,
characteristics of particular firms, and market and product trends, and
includes an assessment of the impacts of standards on subgroups of
manufacturers. The complete MIA is outlined in chapter 13 of the TSD
accompanying this notice.
In the Framework Document for this proceeding, notice of which was
published in the Federal Register on March 27, 2006, DOE outlined the
procedural and analytical approaches to be used in the MIA. (71 FR
15059) In the
[[Page 62076]]
November 2007 ANOPR for this rulemaking, DOE reported some preliminary
MIA information and data in section II.K. 72 FR 64432, 64505-07 (Nov.
15, 2007). In response to these preliminary data, the November 2007
ANOPR, and DOE statements at the December public meeting, DOE received
specific comments on the MIA, which are addressed in this section. In
previous energy conservation standards rulemakings, DOE did not report
any MIA results during the ANOPR phase of the rulemaking. However,
under a new MIA format announced through a report issued to Congress on
January 31, 2006, ``Energy Conservation Standards Activities'' \74\ (as
required by section 141 of EPACT 2005), DOE now reports preliminary MIA
information at the ANOPR stage, as was done in the November 2007 ANOPR.
---------------------------------------------------------------------------
\74\ Available at: http://www1.eere.energy.gov/buildings/
appliance_standards/schedule_setting.html.
---------------------------------------------------------------------------
DOE conducted the MIA for cooking products and CCWs in three
phases. Phase 1 (Industry Profile) characterized the industry using
data on market share, sales volumes and trends, pricing, employment,
and financial structure. Phase 2 (Industry Cash Flow) focused on each
industry as a whole. In this phase, DOE used the GRIM to prepare an
industry cash-flow analysis. Using publicly available information
developed in Phase 1, DOE adapted the GRIM's generic structure to
perform an analysis of cooking product and CCW energy conservation
standards. In Phase 3 (Subgroup Impact Analysis), DOE conducted
interviews with manufacturers representing the majority of domestic
cooking product and CCW sales. This group included large and small
manufacturers, thereby providing a representative cross-section of the
two industries.
During these interviews, DOE discussed engineering, manufacturing,
procurement, and financial topics specific to each company and obtained
each manufacturer's view of the industry as a whole. The interviews
provided valuable information that DOE used to evaluate the impacts of
an amended energy conservation standard on manufacturers' cash flows,
manufacturing capacities, and employment levels. DOE identified
subgroups of manufacturers during interviews with manufacturers of
cooking products and CCWs. The manufacturer subgroups are described in
section IV.G.1.c. of this notice.
a. Phase 1 (Industry Profile)
In Phase 1 of the MIA, DOE prepared a profile of the cooking
products and CCW industries based on the market and technology
assessment prepared for this rulemaking. Before initiating the detailed
impact studies, DOE collected information on the present and past
structure and market characteristics of the cooking products and CCW
industries. The information DOE collected included market share,
equipment shipments, markups, and cost structure for various
manufacturers. The industry profile includes: (1) Further detail on
product characteristics; (2) estimated manufacturer market shares; (3)
the financial situation of manufacturers; and (4) trends in the number
of firms, the market, and product characteristics of the cooking
products and CCW industries.
The industry profile included a top-down cost analysis of cooking
products and CCW manufacturers that DOE used to derive cost and
preliminary financial inputs for the GRIM (e.g., revenues; material,
labor, overhead, and depreciation expenses; selling, general, and
administrative expenses (SG&A); and research and development (R&D)
expenses). DOE also used public sources of information to further
calibrate its initial characterization of each industry, including SEC
10-K reports, Standard & Poor's (S&P) stock reports,\75\ and corporate
annual reports. DOE supplemented this public information with data
released by privately held companies.
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\75\ Available at: http://www2.standardandpoors.com/.
---------------------------------------------------------------------------
b. Phase 2 (Industry Cash-Flow Analysis)
Phase 2 of the MIA focused on the financial impacts of new energy
conservation standards on the industry as a whole. Higher energy
conservation standards can affect a manufacturer's cash flow in three
distinct ways, resulting in: (1) A need for increased investment; (2)
higher production costs per unit; and (3) altered revenue by virtue of
higher per-unit prices and changes in sales volumes. To quantify these
impacts in Phase 2 of the MIA, DOE performed three separate cash-flow
analyses, using the GRIM: One for the conventional cooking products
industry, one for microwave ovens, and one for CCWs. In performing
these analyses, DOE used the financial values derived during Phase 1
and the shipment scenarios used in the NIA.
c. Phase 3 (Subgroup Impact Analysis)
Using average cost assumptions to develop an industry cash-flow
estimate is not adequate for assessing differential impacts among
subgroups of manufacturers. For example, small or niche manufacturers,
or manufacturers whose cost structure differs significantly from the
industry average, could be more negatively affected. DOE used the
results of the industry characterization analysis from Phase 1 to group
manufacturers that exhibit similar characteristics. In the Framework
Document and November 2007 ANOPR, DOE invited stakeholders to comment
on the manufacturing subgroups that it should analyze for the MIA.
Cooking Products Subgroup: Small manufacturers of cooking products
with standing pilot lights. DOE identified three manufacturers of gas-
fired ovens, ranges, and cooktops with standing pilot lights. Two of
the three manufacturers are classified as small businesses by the Small
Business Administration (SBA). DOE categorized the two small businesses
into their own subgroup as a result of their size and their
concentration in the residential cooking industry. Both manufacturers
produce gas-fired appliances with standing pilot ignition systems and
derive over 25 percent of their total revenue from gas-fired appliances
with standing pilot ignition systems. Both small manufacturers produce
only residential cooking appliances and have annual sales in the $50-60
million range, whereas the third is a large, diversified appliance
manufacturer. The two small cooking businesses are privately held, and
each employs less than 300 employees.\76\ DOE contacted both small
cooking product businesses it identified to discuss differential
impacts due to the elimination of standing pilot lights. DOE also
interviewed the large manufacturer of gas-fired ovens, ranges, and
cooktops with standing pilot lights.
---------------------------------------------------------------------------
\76\ The SBA classifies a residential cooking appliance
manufacturer as a small business if it has less than 750 employees.
Refer to: http://www.sba.gov/idc/groups/public/documents/sba_
homepage/serv_sstd_tablepdf.pdf.
---------------------------------------------------------------------------
Commercial Clothes Washers Subgroup. DOE identified three
manufacturers that represent nearly 100 percent of CCW shipments. For
CCWs, DOE categorized one manufacturer as its own subgroup because of
its focus on the commercial laundry business. Due to the low shipment
volumes in the CCW market and the much lower revenues of this
manufacturer compared to its competitors, DOE identified this
manufacturer as a ``Low-Volume Manufacturer'' (LVM) for its MIA
[[Page 62077]]
subgroup analysis. In 2006, the LVM derived 87 percent of its clothes
washer revenues from CCW sales, while CCW sales for each of its two
main competitors represent less than one percent of their individual
total clothes washer sales. Thus, the LVM fits the description of a
niche manufacturer, even though in 2006 it had over $330 million in
revenue and 1,500 employees. As discussed above, its two main
competitors in the CCW market are diversified appliance manufacturers
that each earns at least 50 times more revenue than the LVM on an
annual basis. The LVM has successfully maintained its significant CCW
market share despite its much smaller overall revenue base. DOE
estimates that the LVM currently accounts for approximately 45 percent
of CCW shipments. DOE described the differential cost impacts of new
energy conservation standards on the LVM in the engineering analysis
contained in the November 2007 ANOPR. (See Chapter 5 and Appendix 5-A
of the TSD accompanying the November 2007 ANOPR.) The LVM does not
qualify as a small business since it has over 1,000 employees.\77\
---------------------------------------------------------------------------
\77\ The SBA classifies a commercial laundry equipment
manufacturer as a small business if it has less than 500 employees.
Refer to: http://www.sba.gov/idc/groups/public/documents/sba_
homepage/serv_sstd_tablepdf.pdf.
---------------------------------------------------------------------------
Compared to their larger competitors, both small cooking products
businesses are highly concentrated in residential cooking appliance
manufacturing, and the CCW LVM is highly concentrated in commercial
laundry. Unlike their larger competitors, they operate at a much
smaller scale and do not manufacture products across a broad range of
industries. Thus, the potential impacts of this rulemaking on the small
cooking products businesses and the CCW LVM could be disproportionate
compared to the impacts on their large, diversified competitors. As a
result, DOE performed an in-depth analysis of the issues facing the
small cooking products businesses and the CCW LVM. (See chapter 13 and
appendix 13-A of the TSD accompanying this notice.) The following
paragraphs describe in detail the steps DOE took in developing the
information for the MIA.
2. Government Regulatory Impact Model Analysis
As mentioned above, DOE uses the GRIM to quantify anticipated
changes in cash flow that may result in a higher or lower industry
value, which arise from potential energy conservation standards. The
GRIM analysis uses a standard, annual cash-flow analysis that
incorporates manufacturer prices, manufacturing costs, shipments, and
industry financial information as inputs and models changes in costs,
distribution of shipments, investments, and associated margins that
would result from new regulatory conditions (in this case, standard
levels). The GRIM spreadsheet uses a number of inputs to arrive at a
series of annual cash flows, beginning with the base year of the
analysis (2007) and continuing to 2042. DOE calculated INPVs by summing
the stream of annual discounted cash flows during this period.
DOE used the GRIM to calculate cash flows using standard accounting
principles and to compare changes in INPV between a base case and
different TSLs (the standards cases). Essentially, the difference in
INPV between the base case and a standards case represents the
financial impact of the new energy conservation standards on
manufacturers. DOE collected this information from several sources,
including publicly available data and interviews with a number of
manufacturers. See chapter 13 of the TSD accompanying this notice for
details.
a. Government Regulatory Impact Model Scenarios and Key Inputs
Base-Case Shipments Forecast. The GRIM estimates manufacturer
revenues based on total unit shipment forecasts and the distribution of
these values by efficiency level. Changes in the efficiency mix at each
standard level affect manufacturer finances. For this analysis, the
GRIM used the NIA shipments forecasts from 2007 to 2042. In the
shipments analysis, DOE also estimated the distribution of efficiencies
in the base case for all product classes. In interviews, manufacturers
of all product classes generally agreed with the NIA total shipment
results.
Standards-Case Shipments Forecast. For each standards case, DOE
considers that shipments at efficiencies below the projected minimum
standard levels would roll up to those efficiency levels in response to
an increase in energy conservation standards. This scenario assumes
that demand for high-efficiency equipment is a function of price,
independent of the standard level. See chapter 13 of the TSD
accompanying this notice for additional details.
For CCWs, DOE uses a shipment scenario that considers the impacts
of changes in relative prices on consumer demand for each product to
bound the impacts of standards on manufacturers. As described in the
discussion of purchase price, operating cost, and household income
impacts found in the shipments model in chapter 10 of the TSD
accompanying this notice, this shipment scenario estimates how the
combined effects of increases in purchase price and decreases in
operating costs due to new energy conservation standards affect
shipments. In the ``price elasticity of demand'' shipment scenario, the
effects from the increase in product purchase prices offset the effects
from decreased operating costs, resulting in a net decrease in
shipments.
Base-Case and New Energy Conservation Standards Markup Scenarios.
In the GRIM, markups are applied to the manufacturer production costs
(MPCs) to calculate manufacturing selling price. After discussions with
manufacturers, DOE analyzed two distinct markup scenarios: (1) A
preservation of gross margin \78\ (percentage) scenario; and (2) a
preservation of gross margin (in absolute dollars) scenario.
---------------------------------------------------------------------------
\78\ ``Gross margin'' is defined as revenues minus cost of goods
sold. On a unit basis, gross margin is selling price minus
manufacturer production cost. In the GRIMs, markups determine the
gross margin because various markups are applied to the manufacturer
production costs to reach manufacturer selling price.
---------------------------------------------------------------------------
DOE modeled the preservation of gross margin percentage scenario in
all three GRIMs. Under this scenario, DOE applied a single uniform
``gross margin percentage'' markup across all efficiency levels. As
production cost increases with efficiency, this scenario implies that
the absolute dollar markup will increase. DOE calculated that the non-
production cost markup (which consists of SG&A expenses, R&D expenses,
interest, and profit) is 1.26. This markup is consistent with the one
DOE used in the engineering analysis and GRIM analysis for the base
case. In their interviews, all manufacturers believe it is optimistic
to assume that, as their production costs increase in response to an
energy conservation standard, they would be able to maintain the same
gross margin percentage markup. Therefore, DOE believes that this
scenario represents a high bound to industry profitability under an
energy conservation standard.
During interviews, multiple manufacturers of microwave ovens and
conventional cooking products stated that they have not been able to
fully recover the increased costs from increased raw material prices.
Instead, manufacturers were only able to recover part of the total
increase in production cost. Several manufacturers suggested that a
similar situation would happen as a result of new energy conservation
standards. In the ``preservation of gross
[[Page 62078]]
margin (absolute dollars)'' scenario, gross margin is defined as
``revenues less cost of goods sold.'' The implicit assumption behind
this markup scenario is that the industry will lower its markups in
response to the standards to maintain only its gross margin (in
absolute dollars). This means the percentage difference between MPC and
selling price will decrease in the standards case compared to the base
case and the gross margin percentage will be lower. The industry would
do so by passing through its increased production costs to customers,
while increased R&D and selling, general, and administrative expenses
directly lower profit. DOE implemented this scenario in the microwave
oven and conventional cooking products GRIMs by lowering the production
cost markups for each TSL to yield approximately the same gross margin
in dollars in the standards cases in the year standard are effective
(2012) as is yielded in the base case. This scenario is less optimistic
than the preservation of gross margin percentage scenario.
Product and Capital Conversion Costs. Energy conservation standards
typically cause manufacturers to incur one-time conversion costs to
bring their production facilities and product designs into compliance
with the new standards. For the purpose of the MIA, DOE classified
these one-time conversion costs into two major groups: (1) Product
conversion and (2) capital conversion costs. Product conversion
expenses are one-time investments in research, development, testing,
and marketing, focused on making product designs comply with the new
energy conservation standard. Capital conversion expenditures are one-
time investments in property, plant, and equipment to adapt or change
existing production facilities so that new product designs can be
fabricated and assembled.
DOE assessed the R&D expenditures manufacturers would be required
to make at each TSL. For microwave ovens (EF standards) and
conventional cooking products, DOE obtained financial information
through manufacturer interviews and aggregated the data to prevent
disclosure of proprietary or confidential information. For all product
classes at each TSL, DOE considered these manufacturer responses. DOE
estimated average industry product conversion expenditures by weighting
these data by market share and, finally, extrapolated each
manufacturer's R&D expenditures for each product. Where manufacturers
did not comment, DOE used the conversion expenditures estimated in the
1996 TSD, updated by current production volumes and the PPI.\79\ For
CCW and standby power standards for microwave ovens, DOE used
manufacturer interviews to determine the cost of upgrading a product
platform. DOE used interviews and product catalogs to estimate the
number of product platforms that needed to be upgraded at each TSL to
obtain its estimates for the conversion costs of the entire industry.
---------------------------------------------------------------------------
\79\ Available at: http://www.bls.gov/PPI/.
---------------------------------------------------------------------------
DOE also evaluated the level of capital conversion costs
manufacturers would incur in order to comply with amended energy
conservation standards. For conventional cooking products, DOE
initially revised the conversion capital expenditure figures in the
1996 TSD with current manufacturing volume projections and 2007 PPI
figures.\80\ During interviews, DOE asked manufacturers to comment on
the figures, which DOE subsequently revised based on these responses.
For microwave ovens and CCWs, DOE prepared preliminary estimates of the
capital investments required at each TSL, which is affected in part by
the ability to use existing plants, warehouses, tooling, and equipment.
From the interviews and information in product catalogs, DOE was able
to estimate what portion of existing manufacturing assets would need to
be replaced and/or reconfigured, and what additional manufacturing
assets would be required to manufacture the higher-efficiency products.
In most cases, DOE projects that if standard levels were increased, the
proportion of existing assets that manufacturers would have to replace
would also increase. Additional information on the estimated product
conversion and capital conversion costs is set forth in chapter 13 of
the TSD accompanying this notice.
---------------------------------------------------------------------------
\80\ Available at: http://www.bls.gov.
---------------------------------------------------------------------------
3. Manufacturer Interviews
As noted above, as part of the MIA, DOE discussed potential impacts
of standards with multiple manufacturers. As section IV.G.1 of this
notice describes, DOE conducted MIA interviews on multiple occasions
with the three manufacturers representing nearly 100 percent of
domestic CCW sales. These interviews were in addition to those DOE
conducted as part of the engineering analysis. After the December 2007
public meeting, DOE also interviewed multiple cooking product
manufacturers about microwave ovens, as well as conventional gas and
electric cooking products. Data from the analysis indicated that the
combined market share of these manufacturers represents 25 to 82
percent of unit shipments, depending on the specific cooking product
category. For certain issues relating to standby power, DOE also
interviewed subject-matter experts. All interviews provided information
that DOE used to evaluate the impacts of potential new energy
conservation standards on manufacturers' cash flows, manufacturing
capacities, and employment levels.
Most of the information received from these meetings is protected
by non-disclosure agreements and resides with DOE's contractors. Before
each telephone interview or site visit, DOE provided company
representatives with an interview guide that included the topics for
which DOE sought input. As the November 2007 ANOPR describes, the MIA
interview topics included key issues relevant to the rulemaking,
including: (1) Product mix; (2) profitability; (3) conversion costs;
(4) manufacturing capacity and employment levels; (5) market share and
industry consolidation; (6) product utility and innovation; and (7)
cumulative burden issues. Appendix 13-B of the TSD accompanying this
notice provides copies of the discussion guides.
a. Conventional Cooking Products
During the manufacturer interviews in the November 2007 ANOPR
phase, conventional cooking product manufacturers raised three key
issues: (1) Continuing intense price competition and an inability to
pass on cost increases, (2) financial and consumer utility impacts of
standby power standards, and (3) consumer utility and economic/industry
impacts of eliminating standing pilot ignition systems for gas-fired
appliances. DOE requested additional information on these key issues
during manufacturer interviews during the NOPR phase. Additional topics
raised by manufacturers of conventional cooking products during the
NOPR-phase interviews included: (1) The validity, cost-effectiveness,
and potential efficiency improvements of design options; (2) the
disproportionate effect of energy efficiency standards on manufacturer
and consumer subgroups; (3) factors that affect the INPV; and (4) the
expected financial and consumer utility impacts of potential standby
power standards.
Multiple manufacturers cited price competition and the inability to
pass on increased costs to consumers as their primary concern. DOE
sought comment from appliance manufacturers on the potential consumer
utility impacts as a
[[Page 62079]]
result of standby power standards for conventional cooking products. In
addition, a low standby power standard could result in a lack of
product differentiation, harming manufacturers' profitability.
DOE sought comment regarding the potential elimination of standing
pilot ignition systems from gas-fired cooking products, with
replacement by electronic ignition systems using a spark or glo-bar
igniter. (See chapter 5 of the TSD accompanying this notice for a
further description.) Manufacturers of gas cooking products with
standing pilot lights stated that there are several issues regarding
the potential elimination of standing pilot lights, including: (1) The
consumer utility of standing pilot ignition systems for customers
without line power (for religious, economic, or other reasons); (2)
likely retrofitting of standing pilot-equipped equipment with non-
certified ignition devices, which may be unsafe; (3) the retrofit costs
are higher than DOE projects for consumers without an electrical outlet
nearby; and (4) competitive impacts on the industry. Furthermore,
interviews highlighted that two small businesses will be impacted
disproportionately from elimination of pilot lights and could be harmed
materially. Both small cooking appliance manufacturers stated that the
elimination of the standing pilot option for their gas ranges would
likely cause substantial harm, since standing pilot-equipped products
represent more than 25 percent of their total revenues. DOE agrees that
because the small businesses focus solely on the manufacture of
residential cooking products, these two manufacturers could be affected
to a greater extent than their larger competitors by a potential energy
conservation standard that eliminates standing pilots.
For conventional cooking products, DOE interviewed manufacturers
about the design options that were presented in the November 2007
ANOPR, which were based on those identified in the 1996 TSD. All
manufacturers stated that their current cooking product designs are
optimized for cost and performance, and thus any design options not
already incorporated were deemed unlikely to save any significant
energy. According to manufacturers, new design options would also
result in significant upfront price increases and/or consumer utility
issues because even purchased part substitutions result in substantial
costs due to reliability, safety, and other necessary testing. During
the MIA, DOE also sought to verify consumer subgroup(s) that could be
disproportionately affected by this rulemaking. One manufacturer noted
that some religious groups generally prohibit the use of line-powered
appliances and that previous rulemakings (such as furnaces and boilers
\81\) have included special provisions for such consumer sub-
categories. See section IV.F of this notice for further discussion of
the consumer subgroup analysis conducted for the NOPR.
---------------------------------------------------------------------------
\81\ Refer to: http://www.eere.energy.gov/buildings/appliance_
standards/residential/furnaces_boilers.html.
---------------------------------------------------------------------------
DOE solicited comments from manufacturers about the likely impact
on profitability, unit shipments, markups, and other factors that
determine the INPV. Multiple manufacturers stated that energy
conservation standards have the potential to significantly harm
profitability because high-end cooking products typically have higher
profit margins than entry-level appliances. Also, features that
differentiate high-end appliances from lower-end appliances may be
eliminated or become commonplace as a result of energy efficiency
standards. Several manufacturers stated it is impossible to pass along
cost increases to customers because of the competitive nature of the
industry. Any cost increase due to standards set by DOE would thus
automatically lower profit margins. One manufacturer expects greater
foreign competition if standards force design options currently found
only on high-end cooking products downward in the market, because the
required redesign would eliminate the competitive advantage of domestic
firms. DOE research suggests that the markups for low- and high-end
cooking products differ (i.e., margins on high-end products tend to be
higher than the margins on low-end products).
b. Microwave Ovens
During interviews in the November 2007 ANOPR phase with microwave
oven manufacturers, DOE identified two key issues: (1) Continuing
intense price competition and an inability to pass on cost increases,
and (2) financial and consumer utility impacts of standby power
standards. Additional topics raised by microwave oven manufacturers
during the NOPR-phase interviews included: (1) The validity and cost-
effectiveness of design options, (2) factors that determine the INPV;
and (3) microwave oven test procedure issues.
All manufacturers noted that most microwave oven manufacturing has
moved overseas due to intense price competition and commoditization of
this product category. Two manufacturers stated that they still wholly
manufacture or assemble microwave ovens from components domestically,
though the market share of these shipments is low compared to total
industry shipments. All manufacturers stated the difficulty of passing
any price increases (due to raw material costs, for example) on to
consumers and they expect any energy conservation standard to further
cut into manufacturer profits.
DOE sought comment on the various pathways that manufacturers could
elect to pursue to meet proposed standby power consumption limits.
Multiple pathways exist, based on the selection of the (1) display
technology, (2) power supply/control boards, (3) cooking sensors, and
(4) the possible incorporation of algorithms to automatically reduce
standby power after a period of inactivity (the max-tech option).
All microwave oven manufacturers that DOE interviewed noted that
the choice of display technology is an important differentiator in the
marketplace. DOE research suggests that, if constantly active, VFD
displays of the type commonly found in microwave ovens are unlikely to
meet a standby power standard of 1.5 W or lower. Thus, in their opinion
such a standby standard could lead to the loss of consumer utility.
Noting manufacturer concerns about reduced utility resulting from
standby power requirements, DOE researched this issue in detail.
Microwave ovens with all other display types found in the DOE sample
are projected to be able to meet a 1.0 W standby level as long as other
standby power-consuming components are carefully specified. DOE
consulted power supply design subject matter experts before conducting
interviews with manufacturers. The subject matter experts noted that
the no-load standby loads imposed by the power supplies in the DOE
microwave oven test sample could be reduced with improved materials or
by a topology change to a switching power supply (which has more parts,
a higher cost, and potentially lower reliability). One manufacturer
stated that it already makes microwave ovens that use switching power
supplies for the U.S. market. The manufacturer noted that such a power
supply change reduced the standby power of that manufacturer's product
from approximately 3 W to 1-2 W. All manufacturers agreed that
substantial investments in product development
[[Page 62080]]
would likely result from standby power standards.
All microwave oven manufacturers believe that a cooking sensor
provides significant product differentiation. One manufacturer noted
that it will transition this year to an absolute humidity sensor with
zero standby power and zero incremental cost above that of a
conventional absolute humidity sensor. For further information
regarding microwave ovens, sensors, and standby power requirements, see
section IV.B.1.a of this notice and chapter 5 of the TSD accompanying
this notice.
In some countries, such as Japan, many microwave ovens power down
automatically after a period of inactivity. Based on DOE criteria, such
microwave ovens achieve max-tech standby power, since they consume
minimally more power than microwave ovens with electromechanical timers
while allowing the use of a cooking sensor. All manufacturers that DOE
interviewed oppose the max-tech standby level (0.02 W), claiming that
such a standard would effectively force manufacturers to switch off the
displays on their microwave ovens after a period of inactivity. Not
only would this require a completely revised control circuit (with
additional cost, uncertain reliability, additional testing, and other
implications), but it would also reduce the ability of manufacturers to
differentiate their products in the marketplace. All manufacturers
stated that consumers expect that a microwave oven equipped with a
display should show clock time while in standby mode.
DOE identified two domestic microwave oven manufacturing
facilities. DOE solicited comments from all microwave oven
manufacturers regarding current industry conditions and likely
responses to potential energy conservation standards. One manufacturer
stated that any incremental cost could lead to plant closures and a
shift to production facilities where the labor costs are lower.
All manufacturers oppose a standby level that would effectively
limit their ability to differentiate high- versus low-end products in
the market. During interviews, manufacturers were asked to comment on
the minimum standby limit that would allow such differentiation. The
minimum standby limit varied by manufacturer and ranged from 1.5 W to 4
W.
c. Commercial Clothes Washers
The key issues for CCW manufacturers remain unchanged from the
November 2007 ANOPR analysis. During the NOPR MIA interviews, all CCW
manufacturers stated they continue to support multiple CCW product
classes and worry that high efficiency standards will significantly
depress CCW unit shipments by encouraging the re-manufacture of old
equipment and shifting the market further to in-unit laundry. Since its
clothes washer revenue is so dependent on CCW sales, the LVM predicts
that it will be impacted disproportionately by any CCW standard. The
NOPR MIA interviews also focused on validating the November 2007 ANOPR
CCW cost-efficiency curve. Based on conversations with all major CCW
manufacturers and the determination of two CCW product classes, DOE is
proposing two revised curves. For more details on the updated cost-
efficiency curve, see section IV.C.2.b of this notice.
CCW manufacturers identified five key issues in the ANOPR
interviews: (1) The risk of eliminating top-loading washers from the
market; (2) reduced product shipments due to a shift from central
laundry facilities to in-unit residential laundry and prolonging the
life of existing equipment; (3) reduced cleaning performance of certain
energy-saving design options; (4) the possible relocation of production
facilities outside the country; and (5) the potential for industry
consolidation and/or the elimination of the LVM. (See chapter 13 of the
TSD accompanying this notice for more details.) DOE addressed each of
these key issues again during manufacturer interviews in the NOPR
phase. Additional topics DOE discussed with CCW manufacturers during
the NOPR-phase interviews included: (1) Higher efficiency top-loading
CCWs; (2) CCW performance metrics; (3) equipment reliability; and (4)
test procedure issues.
All manufacturers stated both publicly and privately that they
support two CCW product classes, with separate efficiency standards for
front-loading and top-loading CCWs. All CCW manufacturers stated that
they expect a single efficiency standard to result in the elimination
of top-loading CCWs with a traditional agitator. According to multiple
manufacturers, the higher TSLs are technically feasible with non-
agitator top-loading platforms that are based on existing RCW designs.
Whirlpool stated that it could develop such a washer, though the
company did not disclose the cost. (Whirlpool, No. 28 at p. 5) However,
multiple manufacturers consider these non-agitator top-loading CCWs
unacceptable for the CCW market due to consumer utility issues. They
believe that such CCWs cannot properly accommodate overloading and that
consumer dissatisfaction could arise from poor wash quality.
Manufacturers believe elimination of agitator top-loading washers
could also harm laundromats and route operators who own and operate
CCWs. Existing inventories of replacement parts for top-loading washers
could become obsolete as top-loading machines are replaced by front-
loading models, potentially representing significant stranded capital.
DOE sought comment from manufacturers regarding the possible
impacts on CCW shipments due to proposed efficiency standards. All
manufacturers agreed that the CCW market is at best flat, and possibly
in decline. Manufacturers stated that: (1) Higher CCW costs could
hasten the trend in multi-home housing from centralized CCW facilities
to in-unit laundry; and (2) route operators and other CCW owners are
expected to aggressively repair and remanufacture existing top-loading
units rather than replace them with incompatible models. Manufacturers
also expressed concern about the potential of energy efficiency
standards to decrease shipments due to the higher initial costs of
front-loading CCWs. Manufacturers stated that top-loading CCWs are
currently significantly lower in price, are more reliable, and have
lower spare parts costs than front-loading CCWs. Because multi-housing
units typically face fixed capital budgets, those units could purchase
fewer CCWs if standards increase purchase prices. Since total industry
CCW annual shipments are approximately 200,000, all manufacturers
contacted were skeptical that engineering resources and capital would
be used to design new, lower-cost front-loading machines or expand
existing production lines. During the ANOPR interviews, manufacturers
stated that all top-loading CCW manufacturing facilities are domestic,
whereas a significant number of front-loading shipments are sourced
from abroad. Thus, any forced investments or decrease in top-loading
shipments will disproportionately affect U.S. manufacturing sites.
As noted above, three domestic manufacturers comprise nearly 100
percent of the CCW market. Two of them are large, diversified appliance
manufacturers, whereas the LVM focuses exclusively on laundry products
(and has an approximately 45 percent market share.) Because the LVM
derives 87 percent of its clothes washer revenue from CCW sales, the
impact of any CCW efficiency standards will affect the LVM more than
its competitors, which derive
[[Page 62081]]
about one percent of their clothes washer revenue from CCW sales. The
LVM has also stated that any standard that eliminates its current top-
loading CCW platform, though not necessarily forcing the company out of
business entirely, would materially harm the company and likely force
it out of the clothes washer market altogether. For a detailed
discussion of the LVM MIA issues, see the TSD accompanying this notice,
chapter 13 and appendix 13-A.
H. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a proposed standard. Employment impacts include
direct and indirect impacts. Direct employment impacts are any changes
in the number of employees for manufacturers of the appliance products
that are the subject of this rulemaking, their suppliers, and related
service firms. Indirect employment impacts are employment changes in
the larger economy that occur due to the shift in expenditures and
capital investment caused by the purchase and operation of more-
efficient appliances. The MIA addresses the portion of direct
employment impacts that concern manufacturers of the two appliance
products that are subject to further analysis in this rulemaking, as
well as the direct impacts on the suppliers of these manufacturers and
related service firms.
Indirect employment impacts from standards consist of the net jobs
created or eliminated in the national economy, other than in the
manufacturing sector being regulated, due to: (1) Reduced spending by
end users on energy (electricity, gas (including liquefied petroleum
gas), and oil); (2) reduced spending on new energy supply by the
utility industry; (3) increased spending on the purchase price of new
products; and (4) the effects of those three factors throughout the
economy. DOE expects the net monetary savings from standards to be
redirected to other forms of economic activity. DOE also expects these
shifts in spending and economic activity to affect the demand for labor
in the short term, as explained below.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sectoral
employment statistics developed by the BLS. The BLS regularly publishes
its estimates of the number of jobs per million dollars of economic
activity in different sectors of the economy, as well as the jobs
created elsewhere in the economy by this same economic activity. Data
from BLS indicate that expenditures in the utility sector generally
create fewer jobs (both directly and indirectly) than expenditures in
other sectors of the economy. There are many reasons for these
differences, including wage differences and the fact that the utility
sector is more capital intensive and less labor intensive than other
sectors. (See Bureau of Economic Analysis, Regional Multipliers: A User
Handbook for the Regional Input-Output Modeling System (RIMS II),
Washington, DC, U.S. Department of Commerce (1992).) Efficiency
standards have the effect of reducing consumer utility bills. Because
reduced consumer expenditures for energy likely lead to increased
expenditures in other sectors of the economy, the general effect of
efficiency standards is to shift economic activity from a less labor-
intensive sector (i.e., the utility sector) to more labor-intensive
sectors (e.g., the retail and manufacturing sectors). Thus, based on
the BLS data alone, DOE believes net national employment will increase
due to shifts in economic activity resulting from standards for cooking
products and CCWs.
In developing this proposed rule, DOE estimated indirect national
employment impacts using an input/output model of the U.S. economy
called Impact of Sector Energy Technologies (ImSET). ImSET is a
spreadsheet model of the U.S. economy that focuses on 188 sectors most
relevant to industrial, commercial, and residential building energy
use.\82\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model, which has been designed to
estimate the national employment and income effects of energy-saving
technologies that are deployed by DOE's Office of Energy Efficiency and
Renewable Energy. Compared with the previous versions of the model used
in earlier rulemakings, this version allows for more complete and
automated analysis of the essential features of energy efficiency
investments in buildings, industry, transportation, and the electric
power sectors. The ImSET software includes a computer-based I-O model
with structural coefficients to characterize economic flows among the
188 sectors. ImSET's national economic I-O structure is based on the
1997 U.S. benchmark table (Lawson, et al. 2002),\83\ specially
aggregated to 188 sectors. DOE estimated changes in expenditures using
the NIA spreadsheet. Using ImSET, DOE then estimated the net national,
indirect-employment impacts on employment by sector of potential new
efficiency standards for cooking products and CCWs.
---------------------------------------------------------------------------
\82\ Roop, J. M., M. J. Scott, and R. W. Schultz, ImSET: Impact
of Sector Energy Technologies, (PNNL-15273 Pacific Northwest
National Laboratory) (2005). Available at: http://www.pnl.gov/main/
publications/external/technical_reports/PNNL-15273.pdf.
\83\ Lawson, Ann M., Kurt S. Bersani, Mahnaz Fahim-Nader, and
Jiemin Guo, ``Benchmark Input-Output Accounts of the U.S. Economy,
1997,'' Survey of Current Business (Dec. 2002) pp. 19-117.
---------------------------------------------------------------------------
While both ImSET and the direct use of BLS employment data suggest
the proposed standards could increase the net demand for labor in the
economy, the gains would most likely be very small relative to total
national employment. Therefore, DOE concludes only that the proposed
standards are likely to produce employment benefits that are sufficient
to fully offset any adverse impacts on employment in the manufacturing
or energy industries related to cooking products and CCWs. (See the TSD
accompanying this notice, chapter 15.)
I. Utility Impact Analysis
The utility impact analysis estimates the change in the forecasted
power generation capacity for the Nation, which would be expected to
result from adoption of new standards. This analysis separately
determines the changes to supply and demand as a result of natural gas,
fuel oil, liquefied petroleum gas, or electricity residential
consumption savings due to the standard. DOE calculated this change
using the NEMS-BT computer model. NEMS-BT models certain policy
scenarios such as the effect of reduced energy consumption per TSL by
fuel type. The analysis output provides a forecast for the needed
generation capacities at each TSL. The estimated net benefit of the
standard is the difference between the forecasted generation capacities
by NEMS-BT and the AEO 2008 Reference Case.
DOE obtained the energy savings inputs associated with electricity
and natural gas consumption savings from the NIA. These inputs reflect
the effects of efficiency improvement on residential cooking product
and CCW energy consumption, both fuel (natural gas) and electricity.
Chapter 14 of the TSD accompanying this notice presents results of the
utility impact analysis.
EEI stated that DOE should show the change in natural gas
production (i.e., infrastructure) as well as electric generation
capacity as a result of standards. (EEI, No. 25 at p. 4) Historically,
DOE's approach for the utility impact analysis has only evaluated the
impact on natural gas consumption and utility sales. The evaluation of
impacts on the natural gas infrastructure that may result from declines
in the sales of natural gas is not
[[Page 62082]]
possible with the NEMS-BT analysis methodology. Therefore, DOE did not
perform this type of evaluation in the utility impact analysis for the
residential cooking product and CCW rulemaking. It is unlikely such
impacts would be significant for the gas utility industry, however,
given that the annual change in natural gas supply resulting from the
standards is in the range of 1-18 trillion Btu (compared to an annual
national gas supply of 19.04 quadrillion Btu.\84\)
---------------------------------------------------------------------------
\84\ Department of Energy--Energy Information Administration,
Annual Energy Outlook 2008 with Projections to 2030 (DOE/EIA-0383)
(June 2008) Table A1. Available at: http://www.eia.doe.gov/oiaf/aeo/
pdf/0383(2008).pdf.
---------------------------------------------------------------------------
In its November 2007 ANOPR, DOE stated that it did not plan to
estimate impacts on water and wastewater utilities for its proposed
rule, because the water and wastewater utility sector is more
complicated than either the electric utility or gas utility sectors,
with a high degree of geographic variability produced by a large
diversity of water resource availability, institutional history, and
regulatory context. 72 FR 64432, 64508 (Nov. 15, 2007). Further, DOE
was not aware of any national data or nationally based tool that would
allow it to calculate the impacts on water and wastewater utilities or
water and wastewater infrastructure requirements. The Joint Comment and
numerous water organizations stated that DOE should analyze the impacts
on water and wastewater utilities. The Joint Comment added that because
there are widespread problems in water and wastewater infrastructure
financing, DOE should commit to conducting such an analysis. The
commenters cite the Environmental Protection Agency's (EPA's) 2002
report, The Clean Water and Drinking Water Infrastructure Gap Analysis
(EPA-816-R-02-020), as evidence of the infrastructure problem. (Joint
Comment, No. 29 at p. 4; AWE, AR, AMWA, CUWCC, and TBW, No. 34 at p. 1)
In response to public comments, DOE nevertheless conducted a review
of governmental and non-governmental analytical tools that might prove
suitable for calculating the impacts of CCW standards on water and
wastewater utilities or water and wastewater infrastructure
requirements. Specifically, the EPA, the U.S. Geological Survey (USGS),
and DOE are conducting or initiating national activities to study water
and wastewater issues, including those pertaining to water and
wastewater utilities. These tools are discussed below.
The EPA's WaterSense program \85\ provides information to enhance
the market for water-efficient products, programs, and practices. EPA
developed the National Water Saving (NWS) spreadsheet tool to estimate
water savings attributable to WaterSense activities. The model examines
the effects of WaterSense by tracking the shipments of products that
WaterSense designates as water-efficient. It estimates savings based on
an accounting analysis of water-using equipment and building stock.\86\
Since this tool only permits calculation of water savings, however, it
would not add any capabilities that DOE does not already have
---------------------------------------------------------------------------
\85\ The WaterSense program provides the public with information
regarding water efficient products, including available consumer
products and general information related to water efficiency. Refer
to: http://www.epa.gov/watersense/.
\86\ McNeil, Michael, Camilla Dunham Whitehead, Virginie
Letschert, and Mirka della Cava, WaterSense[supreg] Program:
Methodology for National Water Savings Analysis Model Indoor
Residential Water Use (LBNL) (Feb. 2008).
---------------------------------------------------------------------------
With respect to non-governmental efforts, the California Urban
Water Conservation Council (CUWCC) and the Pacific Institute have
developed two tools for California water utilities. Avoided Cost Due to
Water Efficiency and Conservation \87\ assists California water
utilities in calculating avoided costs and developing methods to
quantify the environmental benefits and costs associated with
implementing water efficiency programs. The Water to Air Model \88\
helps California water managers quantify the energy and air quality
dimensions of water management decisions. Neither of these models would
allow estimation of impacts of water savings on water utility
infrastructure requirements, however.
---------------------------------------------------------------------------
\87\ This model is available at: http://www.cuwcc.com/technical/
action.lasso?-database=cuwcc_catalog&-layout=CDML&-
response=detailed_results.html&-recordID=34196&-search.
\88\ This model is available at: http://www.pacinst.org/
resources/water_to_air_models/index.htm.
---------------------------------------------------------------------------
In sum, none of these activities has yet produced the necessary
data or tools to permit DOE to conduct a water utility impact analysis
of the type requested by commenters.
Although DOE cannot yet determine water and wastewater utility
impacts at the national level, both the LCC analysis and the NIA do
include the economic savings from decreased water and wastewater
charges. Such economic savings should include the economic value of any
energy savings that may be included in the provision of consumer water
and wastewater services.
J. Environmental Assessment
DOE has prepared a draft Environmental Assessment (EA) pursuant to
the National Environmental Policy Act and the requirements of 42 U.S.C.
6295(o)(2)(B)(i)(VI) and 6316(a), to determine the environmental
impacts of the proposed standards. Specifically, DOE estimated the
reduction in power sector emissions of CO2 using the NEMS-BT
computer model. DOE calculated a range of estimates for reduction in
oxides of nitrogen (NOX) emissions and mercury (Hg)
emissions using power sector emission rates. However, the Environmental
Assessment (see chapter 16 of the TSD accompanying this notice) does
not include the estimated reduction in power sector emissions of
SO2, because DOE has determined that due to the presence of
national caps on SO2 emissions as addressed below, any such
reduction resulting from an energy conservation standard would not
affect the overall level of SO2 emissions in the United
States. Because the operation of gas cooking products and CCWs requires
use of fossil fuels and results in emissions of CO2 and
NOX, DOE also accounted for the reduction in CO2
and NOX emissions from standards at the sites where these
appliances are used.
The NEMS-BT is run similarly to the AEO 2008 NEMS, except that
cooking product and CCW energy use is reduced by the amount of energy
saved (by fuel type) due to the TSLs. DOE obtained the inputs of
national energy savings from the NIA spreadsheet model. For the
environmental assessment, the output is the forecasted physical
emissions. The net benefit of the standard is the difference between
emissions estimated by NEMS-BT and the AEO 2008 Reference Case. The
NEMS-BT tracks CO2 emissions using a detailed module that
provides results with broad coverage of all sectors and inclusion of
interactive effects. For the final rule, DOE intends to revise the
emissions analysis using the AEO 2009 NEMS model using the process
outlined above.
The Clean Air Act Amendments of 1990 set an emissions cap on
SO2 for all power generation. The attainment of this target,
however, is flexible among generators and is enforced through the use
of emissions allowances and tradable permits. Because SO2
emissions allowances have value, they will almost certainly be used by
generators, although not necessarily immediately or in the same year
with and without a standard in place. In other words, with or without a
standard, total cumulative SO2 emissions will always be at
or near
[[Continued on page 62083]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 62083-62132]] Energy Conservation Program: Energy Conservation Standards for
Certain Consumer Products (Dishwashers, Dehumidifiers, Electric and Gas
Kitchen Ranges and Ovens, and Microwave Ovens) and for Certain
Commercial and Industrial Equipment (Commercial Clothes Washers[[Page 62083]]
[[Continued from page 62082]]
[[Page 62083]]
the ceiling, while there may be some timing differences between year-
by-year forecast. Thus, it is unlikely that there will be an
SO2 environmental benefit from electricity savings as long
as there is enforcement of the emissions ceilings.
Although there may not be an actual reduction in SO2
emissions from electricity savings, there still may be an economic
benefit from reduced demand for SO2 emission allowances.
Electricity savings decrease the generation of SO2 emissions
from power production, which can decrease the need to purchase or
generate SO2 emissions allowance credits, and decrease the
costs of complying with regulatory caps on emissions.
Like SO2, future emissions of NOX and Hg
would have been subject to emissions caps under the Clean Air
Interstate Act (CAIR) and Clean Air Mercury Rule (CAMR). As discussed
later in section V.B.6, these rules have been vacated by a Federal
court. But the NEMS-BT model used for today's proposed rule assumed
that both NOX and Hg emissions would be subject to CAIR and
CAMR emission caps. In the case of NOX emissions, CAIR would
have permanently capped emissions in 28 eastern States and the District
of Columbia. Because the NEMS-BT modeling assumed NOX
emissions would be subject to CAIR, DOE established a range of
NOX reductions based on the use of a NOX low and
high emission rates (in metric kilotons (kt) of NOX emitted
per terawatt-hours (TWh) of electricity generated) derived from the AEO
2008. To estimate the reduction in NOX emissions, DOE
multiplied these emission rates by the reduction in electricity
generation due to the standards considered. For mercury, because the
emissions caps specified by CAMR would have applied to the entire
country, DOE was unable to use the NEMS-BT model to estimate the
physical quantity changes in mercury emissions due to energy
conservation standards. To estimate mercury emission reductions due to
standards, DOE used an Hg emission rate (in metric tons of Hg per
energy produced) based on the AEO 2008. Because virtually all mercury
emitted from electricity generation is from coal-fired power plants,
DOE based the emission rate on the metric tons of mercury emitted per
TWh of coal-generated electricity. To estimate the reduction in mercury
emissions, DOE multiplied the emission rate by the reduction in coal-
generated electricity associated with standards considered.
In comments on the ANOPR, Earth Justice (EJ) stated that DOE must
evaluate the economic benefits of the standards' effects on allowance
prices, that the exclusion of these benefits from DOE's analysis is
arbitrary, and that this exclusion serves only to artificially depress
the economic value of stronger efficiency standards. (EJ, No. 31 at pp.
1-2) DOE believes that the impact of any one standard on the allowance
credit price is likely small and highly uncertain. However, DOE has
attempted to monetize the potential benefit from SO2
emission reductions resulting from cooking product and CCW standards.
The potential impact on SO2 allowance prices are discussed
in section V.B.6. Because the CAIR and CAMR rules have been vacated by
the courts, NOX and Hg allowances are no longer relevant,
and therefore, DOE did not estimate the potential impact of standards
on NOX and Hg allowance prices in today's proposed rule.
DOE also received comments from stakeholders on the valuation of
CO2 emissions savings that result from standards. The Joint
Comment stated that by not placing an economic value on the benefits
from reduced CO2 emissions, DOE makes it difficult to weigh
these benefits in comparison to other benefits and costs resulting from
a given standard level. Implicitly, the Joint Comment argued that DOE
is arbitrarily valuing pollution reductions at $0, so the best way to
avoid this mistake would be to estimate an economic value for pollutant
reductions. According to the Joint Comment, voluminous work, both from
academia and the business world, exists on the range of potential
carbon prices under various regulatory scenarios. (Joint Comment, No.
29 at pp. 10-11) EJ stated that failure to assign an economic value to
CO2 emissions is tantamount to valuing those emissions at
zero, an approach that the United States Court of Appeals for the Ninth
Circuit recently held in Center for Biological Diversity v. NHTSA, 508
F.3d 508, 535 (9th Cir. 2007), is arbitrary and capricious. Therefore,
EJ reasoned that exclusion of CO2 emissions reduction
benefits from DOE's analysis on the basis of uncertainty about their
precise measure would be arbitrary and capricious, arguing that there
is considerable agreement that the monetized value of avoided
CO2 is significantly higher than zero. (EJ, No. 31 at p. 2)
DOE has made several additions to its monetization of environmental
emissions reductions in today's proposed rule, which are discussed in
Section V.B.6, but has chosen to continue to report these benefits
separately from the net benefits of energy savings. Nothing in EPCA,
nor in the National Environmental Policy Act, requires that the
economic value of emissions reduction be incorporated in the net
present value analysis of the value of energy savings. Unlike energy
savings, the economic value of emissions reduction is not priced in the
marketplace.
EEI stated that in its analysis of CO2, SO2,
mercury, and NOX emissions from electric power generation,
DOE should account for the rise in renewable portfolio standards and
the possibility of an upcoming CO2 cap and trade program,
both of which would reduce the amount of CO2 produced per
kWh electricity generated. (EEI, No. 25 at p. 4) DOE's estimates of
these emissions are based on output from the AEO 2008 version of NEMS.
The emissions projections reflect EIA's best judgment about market
factors and policies that affect utility choice of power plants for
electricity generation. EIA generally includes only those policies that
are already enacted. As the enactment of a CO2 cap and trade
program is uncertain at this point, DOE believes it would be
inappropriate to speculate on the nature and timing of such a policy
for the purposes of this rulemaking.
DOE also estimated the impacts on emissions at the sites where the
appliance products are installed. In addition to electricity, the
operation of gas cooking products and CCWs requires use of fossil fuels
and results in emissions of CO2 and NOX at the
sites where the appliances are used. NEMS-BT provides no means for
estimating such emissions. Therefore, DOE calculated separate estimates
of the effect of the proposed standards on site emissions of
CO2 and NOX, based on emissions factors derived
from the literature. Natural gas was the only fossil fuel accounted for
by DOE in its analysis of standards for cooking products and CCWs.
Because natural gas combustion does not yield SO2 emissions,
DOE did not report the effect of the proposed standards on site
emissions of SO2. DOE reports the estimates of
CO2 and NOX site emission savings in its
environmental assessment.
EJ stated that DOE has presented no reasoned explanation--nor does
one exist--of why environmental benefits that accrue in the future
should be devalued. EJ stated that DOE's intention to discount
emissions reductions only underscores that emissions reductions are
susceptible to evaluation in economic as well as purely environmental
terms. If DOE intends to apply strictly monetary concepts like discount
rates to its valuation of emissions reductions, then it must
incorporate those reductions into its cost/benefit analysis by
calculating their
[[Page 62084]]
monetary value. (EJ, No. 31 at pp. 2-3) DOE believes that discounted
environmental benefits represent a policy perspective wherein benefits
farther in the future are less significant than energy savings closer
to the present. DOE continues to provide discounted environmental
benefits for today's proposed rule.
In its November 2007 ANOPR, DOE stated it would conduct a separate
analysis of wastewater discharge impacts as part of the environmental
assessment for water-consuming appliances. For today's proposed rule,
DOE conducted this analysis for CCWs based on estimates of CCW water
use and the typical amount of water retention in a clothes load after a
wash cycle. Based on the RMC of the clothes after a wash cycle, DOE
estimated that approximately two percent of CCW water use is retained
in the clothes load at the baseline efficiency level. The RMC decreases
as a function of increasing CCW efficiency, thereby decreasing the
amount of water retention in the clothes. But the amount of water use
decreases with CCW efficiency as well. Because the rate of water use
savings grows at approximately double the rate of water retention, the
increased amount of water retained in the clothes as a percentage of
the water use savings drops from approximately two percent to one
percent over the range of CCW efficiencies considered. Therefore,
assuming that water not retained in the clothes load is discharged into
the wastewater stream, wastewater discharge savings range from 98 to 99
percent of the water use savings at the baseline and max-tech levels,
respectively. Section V.B.6 reports the estimated wastewater discharge
savings.
V. Analytical Results
A. Trial Standard Levels
DOE analyzed the benefits and burdens of a number of TSLs for the
appliance products that are the subject of today's proposed rule. Trial
standard levels are based on efficiency levels explored in the ANOPR
and were selected upon consideration of economic factors and current
market conditions. The basis for the TSL selection is described for
each of the appliance products below. Tables V.1, V.2, V.3, and V.4
present the TSLs and the corresponding product class efficiencies for
conventional cooking products, microwave ovens (two tables), and CCWs,
respectively.
1. Cooking Products
Table V.1 shows the TSLs for conventional cooking products. As
discussed in section III.C.1, DOE conducts a screening analysis to
determine the design options that are technologically feasible and can
be considered as measures to improve product efficiency. However, as
discussed in the November 2007 ANOPR as well as chapters 3 and 4 of the
TSD accompanying this notice, there are few design options available
for improving the efficiency of these cooking products due to physical
limitations on energy transfer to the food load. This is particularly
the case for all cooktop and self-cleaning oven product classes. For
electric cooktops, DOE was able to identify only a single design change
for analysis. For gas cooktops and electric self-cleaning ovens, DOE
was able to identify two design options for analysis. And for gas self-
cleaning ovens, DOE was able to identify three design options for
analysis. Although DOE considered several design options for standard
ovens, with the exception of eliminating standing pilots for gas
standard ovens, none significantly increased product efficiency.
Specifically, eliminating standing pilots reduces overall gas
consumption by over 50 percent while all other design options reduce
gas consumption by approximately two percent. Therefore, DOE gave
further consideration to only four TSLs for conventional cooking
products.
TSL 1 represents the elimination of standing pilot ignition systems
from gas cooking products. All other product classes are unaffected by
TSL 1, including gas self-cleaning ovens, which are not allowed to use
standing pilot ignition systems because they already use electricity
and come equipped with power cords to enable the self-cleaning cycle.
Under TSL 1, DOE's current prescriptive standard of disallowing the use
of standing pilot ignition systems in gas cooking pilots equipped with
power cords would be extended to all gas cooking products, regardless
of whether the appliance is equipped with a power cord. Also, under TSL
1, there would be no need for DOE to regulate the EF of any of the
conventional cooking product classes because only standing pilot
ignition systems are being affected.
TSL 2 for conventional cooking products consists of the candidate
standard levels from each of the product classes that provide a
majority of consumers (who are impacted by the standard) with an
economic benefit. Based on this criterion, only electric coil cooktops
and electric standard ovens have candidate standard levels that differ
from those in TSL 1. In other words, for the remaining five product
classes (electric smooth cooktops, electric self-cleaning ovens, and
all gas cooking product classes), analytical results indicate there is
no candidate standard level that provides an economic benefit to a
majority of consumers.
TSL 3 for conventional cooking products consists of the same
candidate standard levels as TSL 2, with the exception of the gas self-
cleaning oven product class. For gas self-cleaning ovens, the design
option that provides, on average, a small level of economic benefit to
consumers is included.
TSL 4 is the maximum technologically feasible level.
Table V.1--Trial Standard Levels for Conventional Cooking Products
----------------------------------------------------------------------------------------------------------------
TSLs (EF)
Product Classes ------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4
----------------------------------------------------------------------------------------------------------------
Electric Coil Cooktops........... No Standard 0.769.............. 0.769.............. 0.769
(Baseline).
Electric Smooth Cooktops......... No Standard No Standard No Standard 0.753
(Baseline). (Baseline). (Baseline).
Gas Cooktops..................... No Pilot........... No Pilot........... No Pilot........... 0.420
Electric Standard Ovens.......... No Standard 0.1163............. 0.1163............. 0.1209
(Baseline).
Electric Self-Cleaning Ovens..... No Standard No Standard No Standard 0.1123
(Baseline). (Baseline). (Baseline).
Gas Standard Ovens............... No Pilot........... No Pilot........... No Pilot........... 0.0600
Gas Self-Cleaning Ovens.......... No Change to No Change to 0.0625............. 0.0632
Existing Standard Existing Standard
(Baseline). (Baseline).
----------------------------------------------------------------------------------------------------------------
[[Page 62085]]
As discussed previously in section III.A, DOE has concluded that it
is currently technically infeasible to combine cooking efficiency (or
EF) into a new efficiency metric with standby power consumption in
microwave ovens. As a result, DOE considered two sets of TSLs-one set
comprised solely of EF levels (TSLs 1a-4a) and a second set comprised
solely of standby power levels (TSLs 1b-4b).
Table V.2 shows the TSLs for the regulation of cooking efficiency
or EF. TSLs 1a though 4a correspond to candidate standard levels 1a
through 4a, respectively, and affect only the EF. For TSLs 1a through
4a, no standard to limit standby power is specified. TSL 4a corresponds
to the maximum feasible EF level. None of these first four TSLs have an
LCC lower than the baseline level or an NPV that provides a net
economic benefit to the Nation.
Table V.2--Trial Standard Levels for Microwave Oven Energy Factor
----------------------------------------------------------------------------------------------------------------
TSLs
-------------------------------------------------------------------
TSL 1a TSL 2a TSL 3a TSL 4a
----------------------------------------------------------------------------------------------------------------
EF.......................................... 0.586 0.588 0.597 0.602
----------------------------------------------------------------------------------------------------------------
Table V.3 shows the TSLs for the regulation of standby power. TSLs
1b through 4b correspond to candidate standard levels 1b through 4b,
respectively, and affect only standby power. For TSLs 1b through 4b, no
standard on EF is specified. All four of these TSLs yield LCC savings
relative to the baseline level and provide a net economic benefit to
the Nation. TSL 3b corresponds to the maximum feasible level for the
regulation of standby power, which does not affect the appliance's
capability to continually display the time. TSL 4b corresponds to the
maximum technologically feasible level for the regulation of standby
power, and it also represents the level with the minimum LCC as well as
the maximum NPV. However, TSL 4b results in the inability of the
appliance to continually display the time.
Table V.3-- Trial Standard Levels for Microwave Oven Standby Power
----------------------------------------------------------------------------------------------------------------
TSLs
-------------------------------------------------------------------
TSL 1b TSL 2b TSL 3b TSL 4b
----------------------------------------------------------------------------------------------------------------
Standby Power (W)........................... 2.0 1.5 1.0 0.02
----------------------------------------------------------------------------------------------------------------
2. Commercial Clothes Washers
Table V.4 shows the TSLs for CCWs. TSLs consist of a combination of
MEF and WF for each product class. In all, DOE has considered five
TSLs. TSL 1 corresponds to the first candidate standard level from each
product class and represents the efficiency level for each class with
the least significant design change. For TSL 2, the candidate standard
levels for each class are simply incremented to the second candidate
standard level and represent the next technological design change for
each class. TSL 3 represents the third candidate standard level for
top-loading washers (the maximum efficiency level for this class) while
keeping front-loading washers at its second candidate standard level.
For TSL 3, front-loading washers were held to the second candidate
standard level in order to minimize the equipment price difference
between the two product classes. For TSL 4, top-loading washers are
retained at their maximum efficiency level while front-loading washers
are incremented to their third candidate standard level. Finally, TSL 5
corresponds to the maximum technologically feasible level for each
product class. In progressing from TSL 1 to TSL 5, the LCC savings,
NES, and NPV all increase. TSL 5 represents the level with the minimum
LCC and maximum NES and NPV.
Table V.4--Trial Standard Levels for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Top-Loading:
MEF......................... 1.42 1.60 1.76 1.76 1.76
WF.......................... 9.5 8.5 8.3 8.3 8.3
Front-Loading:
MEF......................... 1.80 2.00 2.00 2.20 2.35
WF.......................... 7.5 5.5 5.5 5.1 4.4
----------------------------------------------------------------------------------------------------------------
B. Economic Justification and Energy Savings
1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
To evaluate the net economic impact of standards on consumers, DOE
conducted LCC and PBP analyses for each TSL. In general, higher-
efficiency products would affect consumers in two ways: (1) annual
operating expense would decrease; and (2) purchase price would
increase. Section IV.D of this notice discusses the inputs DOE used for
calculating the LCC and PBP.
The key outputs of the LCC analysis are a mean LCC savings relative
to the baseline product design, as well as a probability distribution
or likelihood of LCC reduction or increase, for each TSL and product
class. The LCC analysis also estimates the fraction of product
consumers for which the LCC will decrease (net benefit), increase (net
cost), or exhibit no change (no impact) relative to the base-case
equipment forecast. No impacts occur when the
[[Page 62086]]
equipment efficiencies of the base-case forecast already equal or
exceed the considered TSL efficiency.
Tables V.5 through V.17 show the mean LCC savings and the percent
of households with a net cost, no impact, and a net benefit (i.e.,
positive savings) at each TSL for each product class. The average LCC
and its components (the average installed price and the average
operating cost) are also presented for each TSL. The tables also show
the median and average payback period at each TSL.
Cooking Products. Tables V.5, V.6, and V.7 show the LCC and PBP
results for cooktops. For example, in the case of gas cooktops, TSL 1
(pilotless ignition with an efficiency of 0.399 EF) shows an average
LCC savings of $13 for the average household. Note that for TSL 1, 93.5
percent of the housing units in 2012 already purchased a gas cooktop
with pilotless ignition in the base case and, thus, have zero savings
due to the standard. If one compares the LCC of the average household
at the baseline level at 0.106 EF ($822) to TSL 1 at 0.399 EF ($559),
then the difference in the LCCs of the average household is $263.
However, since the base case includes a significant number of
households that are not impacted by the standard, the average savings
over all of the households is actually $13, not $263. DOE determined
the median and average values of the PBPs shown below by excluding the
percentage of households not impacted by the standard. For example, in
the case of TSL 1 for gas cooktops, 93.5 percent of the households did
not factor into the calculation of the median and average PBP.
Table V.5--Electric Coil Cooktops: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.737 $272 $173 $445 .......... .......... .......... .......... .......... ..........
-----------------------------------------------------------------------
1............................... 0.737 272 173 445 No change from baseline
-----------------------------------------------------------------------
2, 3, 4......................... 0.769 276 166 441 $4 29.5 0.0 70.6 7.3 18.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.6--Electric Smooth Cooktops: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.742 $309 $173 $482 .......... .......... .......... .......... .......... ..........
-----------------------------------------------------------------------
1, 2, 3......................... 0.742 309 173 482 No change from baseline
-----------------------------------------------------------------------
4............................... 0.753 550 170 720 -$238 100.0 0.0 0.0 1,512 3,745
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.7--Gas Cooktops: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.106 $310 $512 $822 .......... .......... .......... .......... .......... ..........
1, 2, 3......................... 0.399 332 227 559 $13 0.2 93.5 6.3 4.5 3.5
4............................... 0.420 361 222 583 -$11 93.9 0.0 6.1 77 271
--------------------------------------------------------------------------------------------------------------------------------------------------------
Similarly, Tables V.8 through V.11 show the LCC and PBP results for
ovens (other than microwave ovens.) For example, in the case of gas
standard ovens, TSL 1 (pilotless spark ignition with an efficiency of
0.0583 EF) shows an average LCC savings of $6. If one compares the LCC
of the base case at 0.0298 EF ($803) to the standards case at 0.0583 EF
($714), then the difference in the LCCs is $89. However, the base case
includes a significant number of households that are either at the
baseline level or have ovens equipped with pilotless glo-bar ignition
(82.3 percent of households). Because the base case includes a
significant number of households that are not impacted by the standard,
the average savings over all of the households is actually $6, not
$289. DOE determined the median and average values of the PBPs shown
below by excluding the percentage of households not impacted by the
standard. For example, in the case of TSL 1 for gas standard ovens,
82.3 percent of the households did not factor into the calculation of
the median and average PBP. Also, the large difference in the average
and median values for TSL 4 for all ovens is due to households with
excessively long PBPs in the distribution of results. The Monte Carlo
simulation for TSL 4 yielded a few results with PBPs in excess of
thousands of years. A limited number of
[[Page 62087]]
excessively long PBPs produce an average PBP that is very long.
Therefore, in these cases, the median PBP is a more representative
value to gauge the length of the PBP.
Table V.8--Electric Standard Ovens: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.1066 $414 $218 $631 .......... .......... .......... .......... .......... ..........
-----------------------------------------------------------------------
1............................... 0.1066 414 218 631 No change from baseline
-----------------------------------------------------------------------
2, 3............................ 0.1163 421 201 622 $9 43.9 0.0 56.1 8.0 310
4............................... 0.1209 489 194 683 -$52 95.2 0.0 4.8 61 2,337
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.9--Electric Self-Cleaning Ovens: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.1099 $485 $230 $715 .......... .......... .......... .......... .......... ..........
-----------------------------------------------------------------------
1, 2, 3......................... 0.1099 485 230 715 No change from baseline
-----------------------------------------------------------------------
4............................... 0.1123 548 226 774 -$143 78.9 0.0 21.1 240 1263
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.10--Gas Standard Ovens: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.0298 $430 $373 $803 .......... .......... .......... .......... .......... ..........
1, 2, 3......................... 0.0583 464 250 714 $6 6.5 82.3 11.2 9.4 7.3
4............................... 0.0600 507 469 975 -$86 95.0 0.0 5.0 27 473
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.11--Gas Self-Cleaning Ovens: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.0540 $550 $594 $1,144 .......... .......... .......... .......... .......... ..........
-----------------------------------------------------------------------
1, 2............................ 0.0540 550 594 1,144 No change from baseline
-----------------------------------------------------------------------
3............................... 0.0625 566 577 1,143 $1 58.9 0.0 41.1 11 164
4............................... 0.0632 574 576 1,150 -$6 68.8 0.0 31.2 16 279
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tables V.12 and V.13 show the LCC and PBP results for microwave
ovens. Two sets of results are presented--one for the TSLs that pertain
to EF and another for the TSLs that pertain to standby power. For the
TSLs pertaining to standby power, TSL 2b (1.5 W standby power) shows an
average LCC savings of $13. Note that for TSL 2b, 19.1 percent of the
housing units in 2012 have already purchased a microwave oven at this
level and, thus, have zero savings due to the standard. If one compares
the LCC of the baseline at 0.557 EF and 4 W standby power ($348) to TSL
2b ($333), then the difference in the LCCs is $15. However, since the
base case includes a significant number of households that are not
impacted by the standard, the average savings over all the households
is actually $13, not $15. DOE determined the median and average values
of the PBPs shown below by
[[Page 62088]]
excluding the percentage of households not impacted by the standard.
For example, in the case of TSL 2b, 19.1 percent of the households did
not factor into the calculation of the median and average PBP.
Table V.12--Microwave Ovens: Life-Cycle Cost and Payback Period Results for EF
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 0.557 $220 $128 $348 .......... .......... .......... .......... .......... ..........
1a.............................. 0.586 232 123 356 -$3 42.0 53.7 4.3 29 69
2a.............................. 0.588 246 123 369 -10 45.2 53.7 1.1 57 133
3a.............................. 0.597 267 122 389 -19 45.9 53.7 0.4 81 190
4a.............................. 0.602 294 121 415 -31 46.2 53.7 0.1 115 268
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.13--Microwave Ovens: Life-Cycle Cost and Payback Period Results for Standby Power
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period
------------------------------------------------------------------------------------ (years)
Households with -----------------------
TSL EF Average Average ------------------------------------
installed operating Average Average Net
price cost LCC savings Net cost No impact benefit Median Average
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 4.0 $220 $128 $348 .......... .......... .......... .......... .......... ..........
1b.............................. 2.0 220 115 335 6 0.0 53.7 46.3 0.3 0.3
2b.............................. 1.5 221 112 333 13 0.0 19.1 80.9 0.6 0.8
3b.............................. 1.0 222 102 331 18 0.0 0.0 100.0 1.5 1.6
4b.............................. 0.02 228 102 330 19 0.0 0.0 100.0 3.1 3.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Clothes Washers. Tables V.14 and V.15 show the LCC and
PBP results for both CCW product applications for the top-loading
product class while Tables V.16 and V.17 show the LCC and PPB results
for the front-loading product class. For example, in the case of the
multi-family application for front-loading washers (Table V.16), TSL 2
(2.00 MEF/5.50 WF) shows an average LCC savings of $52. Note that for
TSL 2, 88.3 percent of consumers in 2012 are assumed to already be
using a CCW in the base case at TSL 2 and, thus, have zero savings due
to the standard. If one compares the LCC of the baseline at 1.72 MEF/
8.00 WF ($3980) to TSL 2 ($3489), then the difference in the LCCs is
$491. However, since the base case includes a significant number of
consumers that are not impacted by the standard, the average savings
over all of the consumers is actually $52, not $491. DOE determined the
median and average values of the PBPs shown below by excluding the
percentage of households not impacted by the standard. For example, in
the case of TSL 2 for front-loading washers in a multi-family
application, 88.3 percent of the consumers did not factor into the
calculation of the median and average PBP.
Table V.14--Commercial Clothes Washers, Top-Loading, Multi-Family Application: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.26/9.50 $734 $3,034 $3,768 .......... .......... .......... .......... .......... ..........
1............................... 1.42/9.50 852 2,934 3,786 -$11.6 45.0 35.7 19.3 10.7 15.6
2............................... 1.60/8.50 940 2,675 3,615 154.5 15.4 2.8 81.7 4.5 5.5
3, 4, 5......................... 1.76/8.30 963 2,560 3,524 243.7 10.0 2.8 87.2 3.8 4.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.15--Commercial Clothes Washers, Top-Loading, Laundromat Application: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.26/9.50 $734 $3,191 $3,925 .......... .......... .......... .......... .......... ..........
1............................... 1.42/9.50 852 3,103 3,955 -$19.6 53.4 35.7 10.9 7.4 8.5
[[Page 62089]]
2............................... 1.60/8.50 940 2,823 3,763 166.4 3.6 2.8 93.6 2.8 3.0
3, 4, 5......................... 1.76/8.30 963 2,712 3,675 252.3 1.1 2.8 96.1 2.4 2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.16--Commercial Clothes Washers, Front-Loading, Multi-Family Application: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.72/8.00 $1,316 $2,664 $3,980 .......... .......... .......... .......... .......... ..........
1............................... 1.80/7.50 1,316 2,664 3,860 $8.7 0.0 92.7 7.3 0.0 0.0
2, 3............................ 2.00/5.50 1,338 2,544 3,489 51.8 0.0 88.3 11.7 0.4 0.5
4............................... 2.20/5.10 1,376 2,151 3,404 134.4 2.3 2.8 94.9 2.8 3.1
5............................... 2.35/4.40 1,417 2,027 3,302 234.1 1.5 1.5 97.0 2.8 3.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.17--Commercial Clothes Washers, Front-Loading, Laundromat Application: Life-Cycle Cost and Payback Period Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.72/8.00 $1,316 $1,885 $4,135 .......... .......... .......... .......... .......... ..........
1............................... 1.80/7.50 1,316 2,818 4,005 $9.5 0.0 92.7 7.3 0.0 0.0
2, 3............................ 2.00/5.50 1,338 2,688 3,587 58.0 0.0 88.3 11.7 0.3 0.3
4............................... 2.20/5.10 1,376 2,249 3,502 140.1 0.0 2.8 97.2 1.7 1.8
5............................... 2.35/4.40 1,417 2,126 3,390 250.4 0.0 1.5 98.5 1.6 1.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
b. Consumer Subgroup Analysis
Using the LCC spreadsheet model, DOE determined the impact of the
standards on the following consumer subgroups: (1) low-income
households and senior-only households for conventional cooking products
and microwave ovens, and (2) small business owners and consumers
without municipal water and sewer for CCWs.
Cooking Products. For conventional cooking products and microwave
ovens, the results for low-income and senior-only households indicate
that the LCC impacts on these subgroups and the payback periods are
similar to the LCC impacts and payback periods on the full sample of
residential consumers. Thus, the proposed standards would have an
impact on low-income households and senior-only households that would
be similar to their impact on the general population of residential
consumers. (See the TSD accompanying this notice, chapter 12.)
Commercial Clothes Washers. For CCWs, the results for consumers
without municipal water and sewer indicate that the LCC impacts and
payback periods for this subgroup are similar to the LCC impacts and
payback periods on the full sample of CCW consumers. But for small
business owners, the LCC impacts and payback periods are different than
for the general population. For the top-loading product class, Tables
V.18 and V.19 show the LCC impacts and payback periods for small multi-
family property owners and small laundromats, respectively, while
Tables V.20 and V.21 show the same but for the front-loading product
class. For all TSLs for both product classes (with exception of TSL 1
for top-loading washers), both sets of small business owners, on
average, realize LCC savings similar to the general population. The
difference between the small business population and the general
population occurs in the percentage of each population that realizes
LCC savings from standards. With the exception of TSL 1 for top-loading
washers, an overwhelming majority of the small business and general
populations benefit from standards at each TSL. But for both product
classes, a larger percentage of the general population benefits from
standards than small business owners. This occurs because small
businesses do not have the same access to capital as larger businesses.
As a result, smaller businesses have a higher average discount rate
than the industry average. Because of the higher discount rates,
smaller businesses do not value future operating costs savings from
more efficient CCWs as much as the general population. But to
emphasize, in spite of the higher discount rates, a majority of small
businesses still benefit from higher CCW standards at all TSLs, with
the exception of TSL 1 for the top-loading product class.
[[Page 62090]]
Table V.18--Commercial Clothes Washers, Top-Loading, Multi-Family Application: Life-Cycle Cost and Payback Period Results for Small Business Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.26/9.50 $734 $2,463 $3,197 .......... .......... .......... .......... .......... ..........
1............................... 1.42/9.50 852 2,382 3,234 -$23.2 51.3 35.8 12.9 10.7 15.7
2............................... 1.60/8.50 940 2,172 3,112 95.0 23.1 3.1 73.8 4.5 5.5
3, 4, 5......................... 1.72/8.00 963 2,079 3,042 163.1 15.7 3.1 81.2 3.8 4.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.19--Commercial Clothes Washers, Top-Loading, Laundromat Application: Life-Cycle Cost and Payback Period Results for Small Business Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.26/9.50 $734 $2,765 $3,499 .......... .......... .......... .......... .......... ..........
1............................... 1.42/9.50 852 2,689 3,541 -$26.9 59.4 35.8 4.8 7.4 8.5
2............................... 1.60/8.50 940 2,447 3,387 122.5 7.0 3.1 89.9 2.8 3.0
3, 4, 5......................... 1.72/8.00 963 2,350 3,313 194.0 2.9 3.1 94.0 2.4 2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.20--Commercial Clothes Washers, Front-Loading, Multi-Family Application: Life-Cycle Cost and Payback Period Results for Small Business Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.72/8.00 $1,316 $2,164 $3,480 .......... .......... .......... .......... .......... ..........
1............................... 1.80/7.50 1,316 2,164 3,383 $6.9 0.0 92.9 7.1 0.0 0.0
2, 3............................ 2.00/5.50 1,338 2,067 3,086 41.5 0.0 88.3 11.7 0.4 0.5
4............................... 2.20/5.10 1,376 1,748 3,024 101.5 6.7 2.9 90.4 2.8 3.1
5............................... 2.35/4.40 1,417 1,648 2,950 174.7 5.6 1.4 93.1 2.8 3.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.21--Commercial Clothes Washers, Front-Loading, Laundromat Application: Life-Cycle Cost and Payback Period Results for Small Business Owners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost Life-cycle cost savings Payback period (years)
-----------------------------------------------------------------------------------------------------------
Households with
TSL MEF/WF Average Average ------------------------------------
installed operating Average Average Net Median Average
price cost LCC savings Net cost No impact benefit
(percent) (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ 1.72/0 $1,316 $1,533 $3,759 .......... .......... .......... .......... .......... ..........
1............................... 1.80/7.50 1,316 2,443 3,646 $8.0 0.0 92.9 7.1 0.0 0.0
2, 3............................ 2.00/5.50 1,338 2,330 3,287 50.0 0.0 88.3 11.7 0.3 0.3
4............................... 2.20/5.10 1,376 1,949 3,219 116.2 0.0 2.9 97.1 1.7 1.8
5............................... 2.35/4.40 1,417 1,843 3,128 206.2 0.0 1.4 98.6 1.6 1.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
c. Rebuttable-Presumption Payback
As discussed above, EPCA establishes a rebuttable presumption that,
in essence, 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)) DOE
calculated a rebuttable-presumption payback period for each TSL to
determine whether DOE could presume that a standard at that level is
economically justified. Tables V.22 through V.25 show the rebuttable-
presumption payback periods for conventional cooking products,
microwave ovens, and CCWs, respectively. Because only a single, average
value is necessary for establishing the rebuttable-presumption payback
period, rather than using distributions for input values, DOE used
discrete values. As required by EPCA, DOE based the calculation on the
assumptions in the DOE test procedures
[[Page 62091]]
for the appliance products. (42 U.S.C. 6295(o)(2)(B)(iii)) As a result,
DOE calculated a single rebuttable-presumption payback value, and not a
distribution of payback periods, for each TSL.
Table V.22--Rebuttable-Presumption Payback Periods for Conventional Cooking Products
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payback period (years)
------------------------------------------------------------------------------------------------------------------
TSL Electric
Electric coil smooth Gas cooktops Electric Electric self- Gas standard Gas self-clean
cooktops cooktops standard ovens clean ovens ovens ovens
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................................... NA NA 3.2 NA NA 7.3 NA
2.................................... 3.2 NA 3.2 2.6 NA 7.3 NA
3.................................... 3.2 NA 3.2 2.6 NA 7.3 6.5
4.................................... 3.2 664 14 20 95 23 9.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.23--Rebuttable-Presumption Payback Periods for Microwave Oven
Energy Factor
------------------------------------------------------------------------
Payback period
TSL (years)
------------------------------------------------------------------------
1a.................................................. 16
2a.................................................. 32
3a.................................................. 45
4a.................................................. 64
------------------------------------------------------------------------
Table V.24--Rebuttable-Presumption Payback Periods for Microwave Oven
Standby Power
------------------------------------------------------------------------
Payback period
TSL (years)
------------------------------------------------------------------------
1b.................................................. 0.2
2b.................................................. 0.4
3b.................................................. 0.8
4b.................................................. 2.1
------------------------------------------------------------------------
Table V.25--Rebuttable-Presumption Payback Periods for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
Payback period (years)
------------------------------------------------------------------
Top-Loading Front-loading
TSL ------------------------------------------------------------------
Multi-family Laundromat Multi-family Laundromat
application application application application
----------------------------------------------------------------------------------------------------------------
1............................................ 303 \a\[infin] 0 0
2............................................ 23.4 201 1.3 1.5
3............................................ 17.4 62 1.3 1.5
4............................................ 17.4 62 7.6 12.6
5............................................ 17.4 62 8.9 15.0
----------------------------------------------------------------------------------------------------------------
\a\ Infinity.
With the exception of TSLs 2 and 3 for electric standard ovens and
TSLs 1b to 4b for microwave ovens, and TSLs 1 to 3 for front-loading
CCWs, the TSLs in the above tables do not have rebuttable-presumption
payback periods of less than three years. DOE can use the rebuttable-
presumption payback period as an alternative path for establishing
economic justification under the EPCA factors. But DOE believes that
the rebuttable-presumption payback period criterion (i.e., a limited
payback period) is not sufficient for determining economic
justification. Instead, DOE has considered a full range of impacts,
including those to consumers, manufacturers, the Nation, and the
environment. Section V.C provides a complete discussion of how DOE
considered the range of impacts to select its proposed standards.
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of new energy
conservation standards on cooking product and CCW manufacturers. (See
the TSD accompanying this notice, chapter 13.)
a. Industry Cash-Flow Analysis Results
DOE used the INPV in the MIA to compare the financial impacts of
different TSLs on cooking product and CCW manufacturers. The INPV is
the sum of all net cash flows discounted at the industry's cost of
capital (discount rate.) Because the INPV applies only to the
industries, the INPV is different from the NPV that DOE used to assess
the cumulative benefit or cost of standards to consumers on a national
basis. The GRIM estimated cash flows between 2007 and 2042 and found
them to be consistent with the cash flows predicted in the national
impact analysis.
DOE used the GRIM to compare the INPV of the base case (no new
energy conservation standards) to that of each TSL. To evaluate the
range of cash-flow impacts on the industries, DOE constructed different
scenarios for each industry using different assumptions for
[[Page 62092]]
markups and shipments that correspond to the range of product-specific
anticipated market responses. Each scenario results in a unique set of
cash flows and corresponding industry value at each TSL. These steps
allowed DOE to compare the potential impacts on industries as a
function of TSLs in the GRIMs. The difference in INPV between the base
case and the standards case is an estimate of the economic impacts that
implementing that standard level would have on the entire industry.
i. Conventional Cooking Products
Based on conversations with manufacturers, the primary sources of
uncertainty relating to the post-standards industry value for
conventional cooking products are the post-standards markups and their
associated profit margins.
To assess the lower end of the range of potential impacts for the
conventional cooking products industry, DOE considered a scenario in
which the industry gross margin percentage in the base case is
preserved in the standards case (i.e., the markup is held constant for
all products at all TSLs). Thus, a manufacturer is able to fully pass
on any additional costs due to standards and maintain the percentage
margin between COGS and manufacturing selling price. Thus, if unit
sales remain constant, the gross margin in absolute dollars will
increase after a standard comes into effect.
To assess the higher end of the range of potential impacts for the
conventional cooking products industry, DOE considered the scenario
reflecting the preservation of industry gross margin in absolute
dollars. Under this scenario, DOE assumed that the industry cannot pass
on all additional costs due to efficiency-related changes (i.e., the
markup decreases for all TSLs in the standards case.) Thus, the
absolute gross margin is held constant. This means that the percentage
difference between manufacturer production cost and selling price will
decrease in the standards case compared to the base case and that the
gross margin percentage will be lower. As a result, the industry will
make the same gross margin in absolute dollars post-standard in a
scenario with constant shipments but the industry will also have a
lower INPV since the gross margin percentage is eroding. Table V.26
through Table V.33 show the MIA results for each TSL using both markup
scenarios described above for conventional cooking products, including
electrical and gas cooktops and ovens.
Table V.26--Manufacturer Impact Analysis for Electric Cooktops Under the Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 357 357 355 355 434
Change in INPV............................ (2006 $ millions)........... .............. 0 (2) (2) 77
(%)......................... .............. 0.00% -0.56% -0.56% 21.62%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 9.6 9.6 21.8
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.0 0.0 73.1
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 0.0 9.6 9.6 94.9
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.27--Manufacturer Impact Analysis for Electric Cooktops Under the Preservation of Gross Margin Absolute Dollars Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin absolute dollars markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 357 357 346 346 (26)
Change in INPV............................ (2006 $ millions)........... .............. 0 (11) (11) (383)
(%)......................... .............. 0.00% -3.18% -3.18% -107.19%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 9.6 9.6 21.8
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.0 0.0 73.1
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 0.0 9.6 9.6 94.9
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 62093]]
Table V.28--Manufacturer Impact Analysis for Gas Cooktops Under the Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 287 282 282 282 315
Change in INPV............................ (2006 $ millions)........... .............. (5) (5) (5) 28
(%)......................... .............. -1.74% -1.74% -1.74% 9.83%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 9.4 9.4 9.4 20.8
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 2.2 2.2 2.2 3.3
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 11.5 11.5 11.5 24.1
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.29--Manufacturer Impact Analysis for Gas Cooktops Under the Preservation of Gross Margin Absolute Dollars Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin absolute dollars markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 287 275 275 275 146
Change in INPV............................ (2006 $ millions)........... .............. (12) (12) (12) (141)
(%)......................... .............. -4.12% -4.12% -4.12% -49.12%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 9.4 9.4 9.4 20.8
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 2.2 2.2 2.2 3.3
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 11.5 11.5 11.5 24.1
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.30--Manufacturer Impact Analysis for Electric Ovens Under the Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 793 793 785 785 782
Change in INPV............................ (2006 $ millions)........... .............. 0 (8) (8) (10)
(%)......................... .............. 0.00% -0.99% -0.99% -1.27%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 20.8 20.8 67.6
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.8 0.8 179.8
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 0.0 21.6 21.6 247.5
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 62094]]
Table V.31--Manufacturer Impact Analysis for Electric Ovens Under the Preservation of Gross Margin Absolute Dollars Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin absolute dollars markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 793 793 773 773 324
Change in INPV............................ (2006 $ millions)........... .............. 0 (19) (19) (469)
(%)......................... .............. 0.00% -2.43% -2.43% -59.16%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 20.8 20.8 67.6
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.8 0.8 179.8
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 0.0 21.6 21.6 247.5
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.32 Manufacturer Impact Analysis for Gas Ovens Under the Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 466 459 459 460 420
Change in INPV............................ (2006 $ millions)........... .............. (7) (7) (6) (47)
(%)......................... .............. -1.57% -1.57% -1.38% -10.04%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 9.4 9.4 18.7 100.3
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 1.8 1.8 7.6 72.0
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 11.1 11.1 26.4 172.3
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.33--Manufacturer Impact Analysis for Gas Ovens Under the Preservation of Gross Margin Absolute Dollars Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin (absolute dollars) markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 466 457 457 426 285
Change in INPV............................ (2006 $ millions)........... .............. (10) (10) (41) (181)
(%)......................... .............. -2.10% -2.10% -8.68% -38.80%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 9.4 9.4 18.7 100.3
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 1.8 1.8 7.6 72.0
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 11.1 11.1 26.4 172.3
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Electric Cooktops. At TSL 1, the impact on INPV and cash flow for
electric cooktops is zero. At this level, DOE assumed both electric
coil and smooth cooktops would have the same efficiency level as the
baseline. Therefore, no impacts are reported at TSL 1.
At TSL 2 and TSL 3, the impact on INPV and cash flow varies
depending on manufacturers' ability to maintain gross margins as a
percentage of revenues constant as the manufacturing product cost (MPC)
increases as a result of standards. DOE estimated the impacts in INPV
at TSL 2 and TSL 3 to range from -$2 million to -$11 million, or a
change in INPV of -0.56 percent to -3.18 percent. At this level, the
industry cash flow would decrease by
[[Page 62095]]
approximately 12 percent, to $18.3 million, compared to the base-case
value of $20.8 million in the year leading up to the standards. DOE
does not expect significant impacts at TSL 2 and TSL 3 because the
investments needed to conform to the standards are relatively small
compared to overall SG&A and R&D annual costs. In addition, product
price increases would benefit manufacturers if they can fully pass
along MPC increases to customers. However, overall INPV would decline
in all scenarios at these standard levels because, according to
manufacturers, the research and engineering costs needed to achieve
these levels would exceed the relatively small capital expenditures and
incremental costs at this standard level.
At TSL 4, the impact on INPV and cash flow will vary significantly
depending on the manufacturers' ability to maintain a constant gross
margin percentage as MPCs increase due to standards. DOE estimated the
impacts in INPV to range from approximately positive $77 million to -
$383 million, or a change in INPV of 21.62 percent to -107.19 percent.
At this level, the industry cash flow decreases by approximately 168
percent, to -$14.1 million, compared to the base-case value of $20.8
million in the year leading up to the standards. At this TSL, if
manufacturers are able to maintain their gross margin as a percentage
of revenues, the impacts of higher manufacturing costs would be negated
by the increases in total revenues. However, if manufacturers can only
maintain their absolute dollar gross margin, then the impacts at TSL 4
would completely erode manufacturers' profits. According to
manufacturers, the energy savings at this level are not economically
justified because both consumers and manufacturers will experience
negative impacts. Consumers would experience significantly higher
prices, while manufacturers will experience decreased profits, lower
revenues, and much higher R&D costs.
Gas Cooktops. At TSL 1, TSL 2, and TSL 3, the impact on INPV and
cash flow varies depending on manufacturers' ability to fully maintain
their gross margins as the MPCs increase as a result of the standards.
These TSLs are equivalent to the elimination of standing pilot lights.
DOE estimated the impacts in INPV at TSL 1, TSL 2, and TSL 3 to range
from -$5 million up to -$12 million, or a change in INPV of -1.74
percent up to -4.12 percent. At this level, the industry cash flow
decreases by approximately 19 percent, to $14.3 million, compared to
the base case value of $17.6 million in the year leading up to the
standards. Since more than 90 percent of the equipment being sold is
already at or above this level (i.e., most products do not have
standing pilot lights), those manufacturers that do not fall below the
efficiency levels specified by TSL 1, TSL 2, and TSL 3 will not have to
make additional modifications to their product lines to conform to the
amended energy conservation standards. DOE expects the lower end of the
impacts to be reached, which indicates that industry revenues and costs
will not be significantly negatively impacted as long as manufacturers
can maintain their gross margin as a percentage of revenues. Analysis
shows that although the elimination of standing pilot lights may not
significantly impact large manufacturers, small manufacturers that rely
on revenues from these products will be significantly impacted. In MIA
interviews, all manufacturers of standing pilot-equipped gas appliances
expressed concern about the potential elimination of standing pilots.
Two small businesses, which both focus solely on cooking appliances,
produce standing pilot-equipped products which comprise nearly half of
their total annual gas product shipments and which they consider to be
a differentiator from their larger, more-diversified competitors. While
all manufacturers of gas cooking appliances affected by today's rule
also make comparable cooking appliances with electronic ignition
systems, these two small businesses are likely to be disproportionally
impacted by a ban on standing pilot ignition systems. DOE contacted
both manufacturers multiple times to better understand the potential
business impact of a standing pilot ban and believes that, while
standing pilot ignition systems are a differentiator, gas cooking
products made by these manufacturers are primarily differentiated by
non-standard unit widths and other features. Thus, while the potential
elimination of standing pilot lights would lead to some decrease in
differentiation, the main differentiators, notably non-standard unit
sizes, will remain. DOE's discussion of the impacts on the small
manufacturers is treated in the regulatory flexibility section of
today's notice (see section VI. B.)
At TSL 4, the analysis shows that the impact on INPV and cash flow
continues to vary significantly depending on the manufacturers' ability
to pass on increases in MPCs to the customer. DOE estimated the impacts
in INPV at TSL 4 to range from approximately positive $28 million to -
$141 million, or a change in INPV of positive 9.83 percent to -49.12
percent. At this level, the industry cash flow decreases by
approximately 38 percent, to $10.9 million, compared to the base case
value of $17.6 million in the year leading up to the standards. At this
level, the component switch also carries substantial redesign costs.
Sealed burners affect the design of the entire cooktop, thereby making
product conversion and capital conversion costs much greater than a
simpler component switch. At this TSL, if manufacturers can maintain
their gross margin as a percentage of revenues, the impacts of higher
manufacturing costs would be negated by the increases in total
revenues. However, if manufacturers can only maintain their absolute
dollar gross margin, then the impacts of TSL 4 would significantly
erode manufacturers' profits.
Electric Ovens. At TSL 1, the projected impact on INPV and cash
flow for electric ovens is zero. At this level, DOE assumed both
electric standard and self-cleaning ovens would have the same
efficiency level as the baseline. Therefore, DOE reported no impacts at
TSL 1.
At TSL 2 and TSL 3, the impact on INPV and cash flow varies
depending on manufacturers' ability to maintain gross margin as a
percentage of revenues as the MPCs increase as a result of standards.
DOE estimated the impacts in INPV at TSL 2 and TSL 3 to range from -$8
million to -$19 million, or a change in INPV of approximately -.99
percent to -2.43 percent. At these levels, the industry cash flow would
decrease by approximately 12 percent, to $40.4 million, compared to the
base-case value of $46.1 million in the year leading up to the
standards. DOE does not expect significant impacts at TSL 2 and TSL 3
because the investments needed to conform to the standards are
relatively small in comparison to overall SG&A and R&D annual costs. In
addition, product cost increases would benefit manufacturers if they
can fully pass along MPC increases to customers.
At TSL 4, the analysis shows that impacts on INPV and cash flow
would vary significantly depending on the manufacturers' ability to
maintain gross margin as MPCs increase due to standards. DOE estimated
the impacts in INPV to range from approximately -$10 million to -$469
million, or a change in INPV of -1.27 percent to -59.16 percent. At
this level, the industry cash flow would decrease by approximately 194
percent, to -$43.3 million, compared to the base-case value of $46.1
million in the year leading up to the standards. At this
[[Page 62096]]
level, the increase in efficiency also carries substantial redesign
costs. Forced convection and reducing conduction losses affect the
design of the entire cavity, thereby making product conversion and
capital conversion costs much greater than a simpler component switch.
In addition, if manufacturers can maintain their gross margin as a
percentage of revenues, the impacts of higher manufacturing costs would
be relatively small. However, if manufacturers can only maintain their
absolute dollar gross margin, then the impacts of TSL 4 would decrease
the INPV of the industry by close to half.
Gas Ovens. At TSL 1 and TSL 2, the impact on INPV and cash flow
varies depending on manufacturers' ability to fully maintain their
gross margins as the MPC increases as a result of standards. These TSLs
are equivalent to the elimination of standing pilot lights from gas
cooking products. DOE estimated the impacts in INPV at TSL 1 and TSL 2
to range from a -$7 million up to -$10 million, or a change in INPV of
-1.57 percent up to -2.10 percent. At this level, the industry cash
flow decreases by approximately 11 percent, to $25.6 million, compared
to the base case value of $28.8 million in the year leading up to the
standards. Since more than 80 percent of the equipment being sold is
already at or above this level (i.e., most products do not have
standing pilot lights), those manufacturers that do not fall below the
efficiency levels specified by TSL 1 and TSL 2 would not have to make
additional modifications to their product lines to conform to the
amended energy conservation standards. DOE expects the lower end of the
impacts to be reached, which indicates that industry revenues and costs
are not significantly negatively impacted as long as manufacturers can
maintain their gross margin as a percentage of revenues. The analysis
shows that although the elimination of standing pilot lights may not
significantly impact large manufacturers, small manufacturers that rely
on revenues from these products would be impacted significantly. DOE's
discussion of the impacts on the small manufacturers is explained in
further detail in the regulatory flexibility section of today's notice
(see section VI. B.)
At TSL 3, the impact on INPV and cash flow continues to vary
depending on the manufacturers' ability to pass on increases in MPCs to
the customer. DOE estimated the impacts in INPV at TSL 3 to range from
approximately -$6 million to -$41 million, or a change in INPV of -1.38
percent to -8.68 percent. At this level, the analysis shows that the
industry cash flow decreases by approximately 27 percent, to $20.9
million, compared to the base case value of $28.8 million in the year
leading up to the standards.
At TSL 4, the impact on INPV and cash flow varies significantly
depending on the manufacturers' ability to pass on increases in MPCs to
the customer. DOE estimated the impacts in INPV at TSL 4 to range from
approximately -$47 million to -$181 million, or a change in INPV of -
10.04 percent to -38.80 percent. At this level, the analysis shows that
the industry cash flow decreases by approximately 190 percent, to -
$26.0 million, compared to the base case value of $28.8 million in the
year leading up to the standards. At this TSL, if manufacturers can
maintain their gross margin as a percentage of revenues, the projected
increase in total revenues negates the impacts of higher manufacturing
costs. However, if manufacturers can only maintain their absolute
dollar gross margin, then the impacts of TSL 4 would significantly
erode manufacturers' profits.
ii. Microwave Ovens
To assess the lower end of the range of potential impacts for the
microwave oven industry, DOE considered the scenario reflecting the
preservation of gross margin percentage. As production cost increases
with efficiency, this scenario implies manufacturers will be able to
maintain gross margins as a percentage of revenues. To assess the
higher end of the range of potential impacts for the microwave oven
industry, DOE considered the scenario reflecting preservation of gross
margin in absolute dollars. Under this scenario, DOE assumed that the
industry can maintain its gross margins in absolute dollars after the
standard effective date. The industry would do so by passing through
its increased costs to customers without increasing its gross margin in
absolute dollars. Table V.34 and Table V.35 show MIA results related to
the energy factor for each TSL using both markup scenarios described
above for microwave oven manufacturers.
Table V.34--Manufacturer Impact Analysis for Microwave Ovens Under the Preservation of Gross Margin Percentage Markup Scenario (Energy Factor)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1a 2a 3a 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 1,450 1,494 1,567 1,687 1,717
Change in INPV............................ (2006 $ millions)........... .............. 44 117 237 267
(%)......................... .............. 3.04% 8.09% 16.34% 18.44%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 60.0 75.0 90.0 225.0
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.0 0.0 75.0
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 60.0 75.0 90.0 300.0
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 62097]]
Table V.35--Manufacturer Impact Analysis for Microwave Ovens Under the Preservation of Gross Margin Absolute Dollars Markup Scenario (Energy Factor)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
TSL
Units Base case ---------------------------------------------------------------
1a 2a 3a 4a
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... (2006 $ millions)........... 1,450 1,250 1,064 775 284
Change in INPV............................ (2006 $ millions)........... .............. (199) (386) (675) (1,165)
(%)......................... .............. -13.74% -26.62% -46.56% -80.39%
Amended Energy Conservation Standards (2006 $ millions)........... .............. 60.0 75.0 90.0 225.0
Product Conversion Expenses.
Amended Energy Conservation Standards (2006 $ millions)........... .............. 0.0 0.0 0.0 75.0
Capital
Investments...............................
-------------------------------------------------------------------------------------------------------------
Total Investment (2006 $ millions)........... .............. 60.0 75.0 90.0 300.0
Required..............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1a represents an improvement in cooking efficiency from the
baseline level of 0.557 EF to 0.586 EF. At TSL 1a, the impact on INPV
and cash flow varies greatly depending on the manufacturers and their
ability to pass on increases in MPCs to the customer. DOE estimated the
impacts in INPV at TSL 1a to range from less than $44 million to -$199
million, or a change in INPV of 3.04 percent to -13.74 percent. At this
level, the industry cash flow decreases by approximately 18 percent, to
$71.7 million, compared to the base-case value of $87.3 million in the
year leading up to the standards.
TSL 2a represents an improvement in cooking efficiency from the
baseline level of 0.557 EF to 0.588 EF. At TSL 2a, the impact on INPV
and cash flow would be similar to TSL 1a and depend on whether
manufacturers can fully recover the increases in MPCs from the
customer. DOE estimated the impacts in INPV at TSL 2a to range from
$117 million to -$386 million, or a change in INPV of 8.09 percent to -
26.62 percent. At this level, the industry cash flow decreases by
approximately 22 percent, to $67.9 million, compared to the base-case
value of $87.3 million in the year leading up to the standards.
TSL 3a represents an improvement in cooking efficiency from the
baseline level of 0.557 EF to 0.597 EF. At TSL 3a, the impact on INPV
and cash flow continues to vary depending on the manufacturers and
their ability to pass on increases in MPCs to the customer. DOE
estimated the impacts in INPV at TSL 3a to range from approximately
$237 million to -$675 million, or a change in INPV of 16.34 percent to
-46.56 percent. At this level, the industry cash flow decreases by
approximately 27 percent, to $64.0 million, compared to the base-case
value of $87.3 million in the year leading up to the standards.
TSL 4a represents an improvement in cooking efficiency from the
baseline level of 0.557 EF to 0.602 EF. At TSL 4a, DOE estimated the
impacts in INPV to range from approximately $267 million to -$1,165
million, or a change in INPV of 18.44 percent to -80.39 percent. At
this level, the industry cash flow decreases by approximately 101
percent, to -$1.0 million, compared to the base-case value of $87.3
million in the year leading up to the standards. At higher TSLs,
manufacturers have a harder time fully passing on larger increases in
MPCs to the customer.
Due to the similarities in design requirements to meet each TSL,
the results for each TSL are dependent on the ability of manufacturers
to pass along increases in manufacturer production costs and the
additional conversion costs. The engineering analysis assumes that each
TSL adds an additional component switch-out. For example, to reach TSL
2, manufacturers must switch the fan in addition to switching the power
supply required to meet TSL 1. The high conversion costs associated
with these switches drive INPV negative if incremental costs are only
partially passed along to consumers. If the incremental costs are fully
passed along to consumers, which manufacturers stated was unlikely due
to fierce competition in the industry, the higher purchase prices are
enough to overcome the high conversion and capital conversion costs,
thereby making INPV positive. The magnitude of the positive cash flow
impact under the preservation of gross margin percentage scenario and
the negative cash flow impact under the preservation of gross margin
(absolute dollars) scenario depends on the incremental cost of
standards-compliant products. The higher the relative cost, the larger
the impact on operating revenue and cash flow in the years following
the effective date of the standard. Since higher TSLs correspond to
higher relative costs, the impacts of the markup scenarios are greater
at higher TSLs.
Table V.36 and Table V.37--show the standby power MIA results for
each TSL using both markup scenarios described above for microwave
ovens manufacturers.
Table V.36--Manufacturer Impact Analysis for Microwave Ovens Under the Preservation of Gross Margin Percentage Markup Scenario (Standby Power)
-------------------------------------------------------------------------------------