[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Proposed Rules]
[Pages 26020-26075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-12410]
[[Page 26019]]
-----------------------------------------------------------------------
Part IV
Department of Energy
-----------------------------------------------------------------------
10 CFR Part 431
Energy Conservation Program: Energy Conservation Standards for
Refrigerated Bottled or Canned Beverage Vending Machines; Proposed Rule
Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Proposed
Rules
[[Page 26020]]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket No. EERE-2006-STD-0125]
RIN 1904-AB58
Energy Conservation Program: Energy Conservation Standards for
Refrigerated Bottled or Canned Beverage Vending Machines
AGENCY: Office of Energy Efficiency and Renewable Energy, U.S.
Department of Energy.
ACTION: Notice of proposed rulemaking and notice of public meeting.
-----------------------------------------------------------------------
SUMMARY: The Energy Policy and Conservation Act prescribes energy
conservation standards for certain commercial and industrial equipment
and requires the U.S. Department of Energy (DOE) to administer an
energy conservation program for this equipment. In this notice, DOE is
proposing new energy conservation standards for refrigerated bottled or
canned beverage vending machines. DOE is also announcing a public
meeting on its proposed standards.
DATES: DOE will hold a public meeting on Wednesday, June 17, 2009 from
9 a.m. to 4 p.m. in Washington, DC. DOE must receive requests to speak
at the public meeting no later than 4 p.m. Wednesday, June 3, 2009. DOE
must receive a signed original and an electronic copy of statements to
be given at the public meeting no later than 4 p.m. Wednesday, June 10,
2009.
DOE will accept comments, data, and information regarding the
notice of proposed rulemaking (NOPR) before and after the public
meeting, but no later than July 28, 2009. See section VII, ``Public
Participation,'' of this NOPR for details. Hada Flowers
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 20585-0121. Please note that foreign nationals visiting
DOE Headquarters are subject to advance security screening procedures,
requiring a 30-day advance notice. If you are a foreign national and
wish to participate in the public meeting, please inform DOE 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 beverage vending
machines, and provide docket number EERE-2006-STD-0125 and/or RIN
number 1904-AB58. Comments may be submitted using any of the following
methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected]. Include
docket number EERE-2006-STD-0125 and/or RIN 1904-AB58 in the subject
line of the message.
Postal Mail: Ms. Brenda Edwards, U.S. Department of
Energy, Building Technologies Program, Mailstop EE-2J, 1000
Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202)
586-2945. Please submit one signed original paper copy.
Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department
of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 6th
Floor, Washington, DC 20024. Please submit one signed original paper
copy.
For detailed instructions on submitting comments and additional
information on the rulemaking process, see section VII, ``Public
Participation,'' of this document.
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., 6th
Floor, 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. Please note: DOE's Freedom of
Information Reading Room (Room 1E-190 at the Forrestal Building) no
longer houses rulemaking materials.
FOR FURTHER INFORMATION CONTACT: Mr. Charles Llenza, U.S. Department of
Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue,
SW., Washington, DC 20585-0121, (202) 586-2192,
[email protected] or Ms. Francine Pinto, Esq., U.S. Department
of Energy, Office of General Counsel, GC-72, 1000 Independence Avenue,
SW., Washington, DC 20585-0121, (202) 586-9507,
[email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
II. Introduction
A. Overview
B. Authority
C. Background
1. History of Standards Rulemaking for Beverage Vending Machines
2. Miscellaneous Rulemaking Issues
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
C. Energy Savings
1. Determination of Savings
2. Significance of Savings
D. Economic Justification
1. Specific Criteria
2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
A. Market and Technology Assessment
1. Definition of Beverage Vending Machine
2. Equipment Classes
B. Engineering Analysis
1. Approach
2. Equipment Analyzed in the Engineering Analysis
3. Analytical Models
4. Engineering Analysis Results
C. Markups to Determine Equipment Price
D. Energy Use Characterization
E. Life-Cycle Cost and Payback Period Analyses
1. Manufacturer Selling Price
2. Increase in Selling Price
3. Markups
4. Installation Costs
5. Energy Consumption
6. Electricity Prices
7. Electricity Price Trends
8. Repair Costs
9. Maintenance Costs
10. Lifetime
11. Discount Rate
12. Payback Period
F. Shipments Analysis
G. National Impact Analysis
1. Base Case and Standards Case Forecasted Efficiencies
2. Annual Energy Consumption, Total Installed Cost, Maintenance
Cost, and Repair Costs
3. Escalation of Electricity Prices
4. Electricity Site-to-Source Conversion
H. Life-Cycle Cost Subgroup Analysis
I. Manufacturer Impact Analysis
1. Overview
2. Discussion of Comments
3. Government Regulatory Impact Model Analysis
4. Manufacturer Interviews
5. Government Regulatory Impact Model Key Inputs and Scenarios
J. Utility Impact Analysis
K. Employment Impact Analysis
L. Environmental Assessment
M. Monetizing Carbon Dioxide and Other Emissions Impacts
V. Analytical Results
A. Trial Standard Levels
B. Economic Impacts on Commercial Customers
1. Economic Impacts on Commercial Customers
2. Economic Impacts on Manufacturers
3. National Impact Analysis
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
C. Proposed Standard
1. Class A Equipment
2. Class B Equipment
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
[[Page 26021]]
B. Review Under the Regulatory Flexibility Act/Initial
Regulatory Flexibility Analysis
1. Reasons for the Proposed Rule
2. Objectives of and Legal Basis for the Proposed Rule
3. Description and Estimated Number of Small Entities Regulated
4. Description and Estimate of Compliance Requirements
5. Duplication, Overlap, and Conflict with Other Rules and
Regulations
6. Significant Alternatives to the Rule
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
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act (EPCA), as amended,
specifies that any new or amended energy conservation standard the U.S.
Department of Energy (DOE) prescribes for the equipment covered by this
notice 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
(v)) Further, the new or amended standard must ``result in significant
conservation of energy.'' (42 U.S.C. 6295(o)(3)(B) and (v)) In
accordance with these and other statutory criteria discussed in this
notice, DOE proposes to adopt new energy conservation standards for
refrigerated bottled or canned beverage vending machines, hereafter
referred to as ``beverage vending machines.'' The proposed standards,
shown in Table I-1, would apply to all beverage vending machines
manufactured 3 years after publication of the final rule establishing
the energy conservation standards and offered for sale in the United
States. (42 U.S.C. 6295(v)(4))\1\
---------------------------------------------------------------------------
\1\ This provision was redesignated by EISA, section 316(d)(1),
as 42 U.S.C. 6295(v)(3).
Table I-1--Proposed Standard Levels
------------------------------------------------------------------------
Proposed standard level** Maximum Daily
Equipment class* Energy Consumption (MDEC) kWh/day
------------------------------------------------------------------------
A 0.055 x V + 2.56[dagger]
B 0.073 x V + 3.16[dagger][dagger]
------------------------------------------------------------------------
* See section IV.A.2 of this notice for a discussion of equipment
classes.
** ``V'' is the refrigerated volume (ft\3\) of the refrigerated bottled
or canned beverage vending machine, as measured by the American
National Standards Institute (ANSI)/Association of Home Appliance
Manufacturers (AHAM) HRF-1-2004, ``Energy, Performance and Capacity of
Household Refrigerators, Refrigerator-Freezers and Freezers.''
[dagger] Trial Standard Level (TSL) 6.
[dagger][dagger] TSL 3.
DOE's analyses indicate that the proposed energy conservation
standards, trial standard level (TSL) 6 for Class A equipment and TSL 3
for Class B equipment would save a significant amount of energy--an
estimated 0.098 quadrillion British thermal units (Btu), or quads, of
cumulative energy over 30 years (2012 to 2042). See section V.A for a
detailed description of TSLs. The economic impacts on commercial
customers (i.e., the average life-cycle cost (LCC) savings) are
positive for both equipment classes.
The cumulative national net present value (NPV) of the proposed
standards from 2012 to 2042 ranges from $0.105 billion (at a 7-percent
discount rate) to $0.273 billion (at a 3-percent discount rate) in
2008$. This is the estimated total value of future operating cost
savings minus the estimated increased equipment costs, discounted to
2008$. The benefits and costs of the standards can also be expressed in
terms of annualized 2008$ values over the forecast period 2012 through
2042. Using a 7-percent discount rate for the annualized cost analysis,
the cost of the standards is estimated to be $11.1 million per year in
increased equipment and installation costs, while the annualized
benefits are expected to be $20.5 million per year in reduced equipment
operating costs. Using a 3-percent discount rate, the annualized cost
of the standards is expected to be $9.4 million per year, while the
annualized benefits of the standards are expected to be $21.4 million
per year. (See section V.B.3 for additional details.) If DOE adopts the
proposed standards, it expects manufacturers will lose 22.9 to 25.3
percent of the industry net present value (INPV), which is
approximately $13.2 to $14.6 million.
DOE estimates that the proposed standards will have environmental
benefits leading to reductions in greenhouse gas emissions (i.e.,
cumulative (undiscounted) emission reductions) of 5.14 million tons
(Mt) of carbon dioxide (CO2) from 2012 to 2042.\2\ Most of
the energy saved is electricity. In addition, DOE expects the energy
savings from the proposed standards to eliminate the need for
approximately 46 megawatts (MW) of electric generating capacity by
2042. These results reflect DOE's use of energy price projections from
the U.S. Energy Information Administration (EIA)'s Annual Energy
Outlook 2009 (AEO2009).\3\ DOE also estimated that the net present
value benefits of the proposed standards from reducing CO2
emissions would range from $0 to $49.6 million using a 7-percent
discount rate and $0 to $96.4 million using a 3-percent discount rate,
although the method for developing these estimates is now under review.
The net present value benefits of the proposed standards from reducing
oxides of nitrogen (NOX) emissions would range from $109,000
to $1.13 million using a 7-percent discount rate and from $187,000 to
$1.93 million using a 3-percent discount rate. Finally, the net present
value benefits of the proposed standards from reducing Hg emissions
would range from $0 to $1.0 million using a 7-percent discount rate and
$0 to $1.73 million using a 3-percent discount rate.
---------------------------------------------------------------------------
\2\ Additionally, the standards would result in emissions
reductions for nitrogen oxides (NOX) or generate a
similar amount of NOX emissions allowance credits in
areas where such emissions are subject to regulatory or voluntary
emissions caps.
\3\ DOE intends to use EIA's AEO2009 to generate the results for
the final rule. The AEO2009 Early Release contains reference case
energy price forecasts, which shows higher commercial electricity
prices at the national level compared with the AEO2008 on a real
(inflation adjusted) basis. If these early release energy prices
remain unchanged in the final release, then incorporation of the
AEO2008 forecasts would likely result in reduced payback periods,
greater life-cycle cost savings, and greater national net present
value for the proposed standards.
---------------------------------------------------------------------------
DOE proposes that the standards in today's NOPR for Class A and
Class B beverage vending machines represent the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. DOE proposes that the benefits to the Nation of the proposed
standards (energy savings, commercial customer average LCC savings,
national NPV increase, and emission reductions) outweigh the costs
(loss of manufacturer INPV). Furthermore, DOE proposes that the
proposed standards are technologically feasible because the
technologies required to achieve these levels already exist.
DOE requests comment and further data or information on whether the
[[Page 26022]]
energy savings and related benefits of TSL 6 outweigh the costs,
including potential manufacturer impacts. DOE seeks comment on the
magnitude of the estimated decline in INPV at TSL 6, and what impact
this level could have on industry parties, including small businesses.
DOE is particularly interested in receiving comments, views, and
further data or information from interested parties concerning: (1) Why
the private market has not been able to capture the energy benefits
proposed in TSL 6; (2) whether and to what extent parties estimate they
will be able to transfer costs of implementing TSL 6 on to consumers;
(3) whether and to what extent parties estimate distributional chain
intermediaries (such as wholesalers or bottlers) will be able to absorb
TSL 6 implementation costs and in turn transfer these costs to on-site
consumers, who ultimately benefit from the energy gains associated with
the proposed standard.
II. Introduction
A. Overview
DOE proposes to set energy conservation standards for beverage
vending machines at the levels shown in Table I-1. The proposed
standards would apply to equipment manufactured 3 years after
publication of the final rule establishing the energy conservation
standards and offered for sale in the United States. DOE has
tentatively found that the standards would save a significant amount of
energy (see section III.C.2) and result in a cleaner environment. In
the 30-year period after the new standards become effective, the Nation
would tentatively save 0.098 quads (sum of 0.088 quads for Class A
machines and 0.010 quads for Class B machines) of primary energy. These
energy savings also would tentatively result in significantly reduced
emissions of air pollutants and greenhouse gases associated with
electricity production by avoiding the emission of 5.14 Mt of
CO2, up to 0.69 kt of NOX, and up to 0.085 tons
of Hg. In addition, DOE expects the standards to prevent the
construction of 0.046 new 1,000 MW power plants by 2042. In total, DOE
tentatively estimates the total net present value to the Nation of
these standards to be $0.105 billion (sum of a positive net present
value of $0.105 billion for Class A machines and zero [less than $0.5
million] for Class B machines) from 2012 to 2042 in 2008$.
Commercial customers would see benefits from the proposed
standards. Although DOE expects the installed cost of the higher
efficiency beverage vending machine to be approximately 4.8 percent
higher than the average price of machines available today, when
weighted by shipments across equipment classes, the energy efficiency
gains would result in lower energy costs, saving customers about 19.8
percent per year on their energy bills. Based on DOE's LCC analysis for
equipment with known shipments, DOE tentatively estimates that the mean
payback period for higher efficiency beverage vending machines would be
between 3.8 and 6.0 years depending on equipment class. In addition,
when the net results of these equipment price increases and energy cost
savings are summed over the lifetime of the higher efficiency
equipment, customers could save approximately $49 to $316 (depending on
equipment class) compared to their expenditures on today's baseline
beverage vending machine.
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 amendments to EPCA contained in the Energy
Policy Act of 2005 (EPACT 2005), Public Law 109-58, include new or
amended energy conservation standards and test procedures for some of
these products, and direct DOE to undertake rulemakings to promulgate
such requirements. In particular, section 135(c)(4) of EPACT 2005
amends EPCA to direct DOE to prescribe energy conservation standards
for beverage vending machines. (42 U.S.C. 6295(v))
Because of its placement in Part A of Title III of EPCA, the
rulemaking for beverage vending machine energy conservation standards
is bound by the requirements of 42 U.S.C. 6295. However, since beverage
vending machines are commercial equipment, DOE intends to place the new
requirements for beverage vending machines in Title 10 of the Code of
Federal Regulations (CFR), Part 431 (``Energy Efficiency Program for
Certain Commercial and Industrial Equipment''), which is consistent
with DOE's previous action to incorporate the EPACT 2005 requirements
for commercial equipment. The location of the provisions within the CFR
does not affect either their substance or applicable procedure, so DOE
is placing them in the appropriate CFR part based on their nature or
type and will refer to beverage vending machines as ``equipment''
throughout the notice.\4\ The test procedures for beverage vending
machines appear at Title 10 CFR 431.293 and 431.294.
---------------------------------------------------------------------------
\4\ Because of their placement into 10 CFR 431, beverage vending
machines will be referred to as ``equipment'' throughout this
notice.
---------------------------------------------------------------------------
EPCA provides criteria for prescribing new or amended standards for
covered equipment. As indicated above, any new or amended standard for
beverage vending machines 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) and (v)) But EPCA
precludes DOE from adopting any standard that would not result in
significant conservation of energy. (42 U.S.C. 6295(o)(3) and (v))
Moreover, DOE may not prescribe a standard for certain equipment if no
test procedure has been established for that equipment. (42 U.S.C.
6295(o)(3) and (v)) EPCA also provides that, in deciding whether a
standard is economically justified, DOE must determine whether the
benefits of the standard exceed its burdens after receiving comments on
the proposed standard. (42 U.S.C. 6295(o)(2)(B)(i) and (v)) To the
greatest extent practicable, DOE must consider the following seven
factors:
1. The economic impact of the standard on manufacturers and
consumers of the equipment subject to the standard;
2. The savings in operating costs throughout the estimated
average life of the covered equipment in the type (or class)
compared to any increase in the price, or in the initial charges
for, or maintenance expenses of, the equipment likely to result from
the imposition of the standard;
3. The total projected amount of energy savings likely to result
directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the
covered 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 conservation; and
7. Other factors the Secretary considers relevant.
Id.
Further, the Secretary may not prescribe an amended or new standard
if interested parties have established by a preponderance of the
evidence that the standard is likely to result in the unavailability in
the United States of any equipment type (or class) with performance
characteristics (including reliability), features, sizes, capacities,
and volumes that are substantially the same as those generally
available in the United States. (42 U.S.C. 6295(o)(4) and
[[Page 26023]]
(v)) In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii) and
6316(a)), establishes a rebuttable presumption that any standard for
covered products 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. See section III.D.2.
C. Background
1. History of Standards Rulemaking for Beverage Vending Machines
On August 8, 2005, section 135(c)(4) of EPACT 2005 amended section
325 of EPCA, in part, to direct DOE to issue energy conservation
standards for the equipment covered by this rulemaking, which would
apply to equipment manufactured 3 years after publication of the final
rule establishing the energy conservation standards. (42 U.S.C.
6295(v)(1), (2) and (3) \5\) The energy use of this equipment has never
been regulated at the Federal level.
---------------------------------------------------------------------------
\5\ The relevant statutory provisions were renumbered pursuant
to section 316 of the Energy Independence and Security Act of 2007,
Public Law 110-140.
---------------------------------------------------------------------------
Section 135(a)(3) of EPACT 2005 also amended section 321 of EPCA,
in part, by adding definitions for terms relevant to this equipment.
(42 U.S.C. 6291(40)) EPCA defines ``refrigerated bottled or canned
beverage vending machine'' as ``a commercial refrigerator that cools
bottled or canned beverages and dispenses the bottled or canned
beverages on payment.'' (42 U.S.C. 6291(40)) Section 136(a)(3) of EPACT
2005 amended section 340 of EPCA in part by adding a definition for
``commercial refrigerator, freezer, and refrigerator-freezer.'' \6\
---------------------------------------------------------------------------
\6\ This definition reads as follows:
``(9)(A) The term `commercial refrigerator, freezer, and
refrigerator-freezer' means refrigeration equipment that--
(i) Is not a consumer product (as defined in section 321 [of
EPCA; 42 U.S.C. 6291(1)]);
(ii) Is not designed and marketed exclusively for medical,
scientific, or research purposes;
(iii) Operates at a chilled, frozen, combination chilled and
frozen, or variable temperature;
(iv) Displays or stores merchandise and other perishable
materials horizontally, semivertically, or vertically;
(v) Has transparent or solid doors, sliding or hinged doors, a
combination of hinged, sliding, transparent, or solid doors, or no
doors;
(vi) Is designed for pull-down temperature applications or
holding temperature applications; and
(vii) Is connected to a self-contained condensing unit or to a
remote condensing unit.'' (42 U.S.C. 6311(9)(A))
---------------------------------------------------------------------------
During the course of this rulemaking, Congress passed the Energy
Independence Security Act of 2007 (EISA 2007), which the President
signed on December 19, 2007 (Pub. L. 110-140). Section 310(3) of EISA
2007 amended section 325 of EPCA in part by adding subsection 325(gg)
(42 U.S.C. 6295(gg)). This subsection requires any new or amended
energy conservation standards adopted after July 1, 2010, to
incorporate ``standby mode and off mode energy use.'' (42 U.S.C.
6295(gg)(3)(A)) Because any standards associated with this rulemaking
are required by August 2009, the energy use calculations will not
include ``standby mode and off mode energy use.'' To include standby
mode and off mode energy use requirements for this rulemaking would
take considerable analytical effort and would likely require changes to
the test procedure. Given the statutory deadline, DOE has decided to
address this requirement when the energy conservation standards for
beverage vending machines are reviewed in August 2015. At that time,
DOE will consider the need for possible amendment in accordance with 42
U.S.C. 6295(m).
As an initial step to comply with EPCA's mandate to issue standards
for beverage vending machines and to commence this rulemaking, on June
28, 2006, DOE published a notice of a public meeting and of the
availability of its framework document for this rulemaking. 71 FR
36715. The framework document described the procedural and analytical
approaches that DOE anticipated using to evaluate energy conservation
standards for beverage vending machines and identified various issues
to be resolved in conducting the rulemaking. DOE held a public meeting
on July 11, 2006, to present the contents of the framework document,
describe the analyses it planned to conduct during the rulemaking,
obtain public comment on these subjects, and inform and facilitate
interested parties' involvement in the rulemaking. DOE also gave
interested parties an opportunity after the public meeting to submit
written statements in response to the framework document.
On June 16, 2008, DOE published an advance notice of proposed
rulemaking (ANOPR) concerning energy conservation standards for
beverage vending machines. 72 FR 34094. In the ANOPR, DOE described and
sought comment on its proposed equipment classes for this rulemaking
and on the analytical framework, models, and tools (e.g., LCC and
national energy savings (NES) spreadsheets) that DOE used to analyze
the impacts of energy conservation standards for beverage vending
machines. In conjunction with the ANOPR, DOE also published on its Web
site the complete ANOPR technical support document (TSD),\7\ which
included the results of DOE's preliminary (1) Engineering analysis, (2)
markups analysis to determine equipment price, (3) energy use
characterization, (4) LCC and payback period (PBP) analyses, (5) NES
and national impact analyses (NIA), and (6) manufacturer impact
analysis (MIA). In the ANOPR, DOE requested comment on these results
and on a range of other issues including equipment classes, operating
hours of compressors and lighting, refurbishment cycles, LCC baseline
levels, base and standards case forecasts, differential impacts of new
standards on future shipments by equipment class, selection of
candidate standard levels, and the approach to characterizing energy
conservation standards for beverage vending machines.
---------------------------------------------------------------------------
\7\ See http://www1.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines_tsd.html.
---------------------------------------------------------------------------
DOE held a public meeting in Washington, DC, on June 26, 2008, to
present the methodology and results of the ANOPR analyses and solicit
oral and written comments. Public comments focused on DOE's assumptions
and approach and are addressed in detail in this NOPR.
2. Miscellaneous Rulemaking Issues
a. Consensus Agreement
After the ANOPR, Dixie-Narco stated that it would like the National
Automatic Merchandising Association (NAMA) to facilitate and submit a
consensus recommendation on behalf of the industry no later than
December 15, 2008. Dixie-Narco stated that it would also like the new
standards to take effect no later than January 1, 2010. (Dixie-Narco,
No. 36 at p. 3) \8\
---------------------------------------------------------------------------
\8\ A notation in the form ``Dixie-Narco, No. 36 at p. 3''
identifies a written comment that DOE has received and has included
in the docket of this rulemaking. This particular notation refers to
(1) A comment submitted by Dixie-Narco, (2) in document number 36 in
the docket of this rulemaking, and (3) appearing on page 3 of
document number 36.
---------------------------------------------------------------------------
DOE supports efforts by interested parties to work together to
develop and present to DOE recommendations on equipment categories and
standard levels. Such recommendations are welcome throughout the
standards rulemaking process. However, DOE did
[[Page 26024]]
not receive any consensus recommendations before publication of this
NOPR. While DOE still encourages a consensus recommendation and will
attempt to incorporate it into this rulemaking, any recommendation
submitted to DOE during the NOPR comment period will be considered as a
public comment.
b. Design Requirements
At the ANOPR public meeting, the Northwest Power and Conservation
Council (NPCC) stated that under EISA, the Federal Government can
regulate more than one characteristic of equipment, perhaps as a
performance standard as well as a prescriptive standard. (NPCC, Public
Meeting Transcript, No. 29 at p. 83) \9\
---------------------------------------------------------------------------
\9\ A notation in the form ``NPCC, Public Meeting Transcript,
No. 29 at p. 83'' identifies an oral comment that DOE received
during the June 26, 2008, ANOPR Public Meeting. This comment was
recorded in the public meeting transcript in the docket for this
rulemaking (Docket No. EERE-2006-STD-0125). This particular notation
refers to a comment (1) Made during the public meeting by NPCC; (2)
recorded in document number 29, which is the public meeting
transcript filed in the docket of this rulemaking; and (3) appearing
on page 83 of document number 29.
---------------------------------------------------------------------------
EPCA provides that an ``energy conservation standard'' must be
either (A) ``a * * * level of energy efficiency'' or ``a * * * maximum
quantity of energy use,'' or (B) for certain specified equipment, ``a
design requirement.'' (42 U.S.C. 6291(6)) Thus, an ``energy
conservation standard'' cannot consist of both a design requirement and
a level of efficiency or energy use. Id.\10\ Moreover, item (A) above
indicates that a single energy conservation standard cannot have
measures of both energy efficiency and energy use. Furthermore, EPCA
specifically requires DOE to base its test procedure for this equipment
on American National Standards Institute (ANSI)/American Society of
Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard
32.1-2004, ``Methods of Testing for Rating Vending Machines for
Bottled, Canned or Other Sealed Beverages.'' (42 U.S.C. 6293(b)(15))
The test methods in ANSI/ASHRAE Standard 32.1-2004 consist of means to
measure energy consumption, not energy efficiency.
---------------------------------------------------------------------------
\10\ Beverage vending machines are not one of the specified
equipment for which EPCA allows a standard to consist of a design
requirement. (42 U.S.C. 6291(6)(B), 6292(a))
---------------------------------------------------------------------------
For the reasons stated above, DOE does not intend to develop
efficiency standards or design requirements for this equipment.
Instead, DOE intends to develop standards for maximum levels of energy
use for beverage vending machines, and manufacturers could meet these
standards with their own design methods.
c. Combination Vending Machines
Combination vending machines have a refrigerated volume for the
purpose of cooling and vending ``beverages in a sealed container,'' and
are therefore covered by this rule. However, beverage vending is not
their sole function. Combination machines also have non-refrigerated
volumes for the purpose of vending other, non-``sealed beverage''
merchandise. In the ANOPR, DOE addressed several comments from
interested parties regarding combination vending machines.
Specifically, these parties were concerned that regulating vending
machines that contain both refrigerated and non-refrigerated products
could result in confusion about what this rulemaking covers, or could
result in manufacturers taking advantage of loopholes to produce
equipment that does not meet the standards. In response, DOE stated
that that the language used in EPCA to define beverage vending machines
is broad enough to include any vending machine, including a combination
machine, as long as some portion of that machine cools bottled or
canned beverages and dispenses them upon payment. (42 U.S.C. 6291(40))
DOE interprets this language to cover any vending machine that can
dispense at least one type of refrigerated bottled or canned beverage,
regardless of the other types of vended products (some of which may not
be refrigerated). 73 FR 34105-06.
III. General Discussion
A. Test Procedures
On December 8, 2006, DOE published a final rule in the Federal
Register that incorporated by reference ANSI/ASHRAE Standard 32.1-2004,
with two modifications, as the DOE test procedure for this equipment.
(71 FR 71340, 71375; 10 CFR 431.294) The first modification specified
that in section 6.2, Voltage and Frequency, equipment with dual
nameplate voltages must be tested at the lower of the two voltages
only. 71 FR 71340, 71355 The second modification specified that (1) any
measurement of ``vendible capacity'' of refrigerated bottled or canned
beverage vending machines must be in accordance with the second
paragraph of section 5 of ANSI/ASHRAE Standard 32.1-2004, Vending
Machine Capacity; and (2) any measurement of ``refrigerated volume'' of
refrigerated bottled or canned beverage vending machines must be in
accordance with the methodology specified in section 5.2, Total
Refrigerated Volume (excluding subsections 5.2.2.2 through 5.2.2.4) of
ANSI/Association of Home Appliance Manufacturers (AHAM) HRF-1-2004,
``Energy, Performance and Capacity of Household Refrigerators,
Refrigerator-Freezers and Freezers.'' Id.
B. Technological Feasibility
1. General
DOE considers design options technologically feasible if they exist
in the marketplace or if research has progressed to the development of
a working prototype. ``Technologies incorporated in commercially
available equipment or in working prototypes will be considered
technologically feasible.'' 10 CFR part 430, subpart C, appendix A,
section 4(a)(4)(i)
In each standards rulemaking, DOE conducts a screening analysis
based on information it has gathered regarding all current technology
options and prototype designs. In consultation with interested parties,
DOE develops a list of design options for consideration in the
rulemaking. All technologically feasible design options are candidates
in this initial assessment. Early in the process, DOE eliminates from
consideration any design option (a) that is not technologically
feasible; (b) that is not practicable to manufacture, install, or
service; (c) that will have adverse impacts on equipment utility or
availability; or (d) for which there are health or safety concerns that
cannot be resolved. Chapter 4 of the TSD accompanying this notice
contains a description of the screening analysis for this rulemaking.
In the ANOPR, DOE eliminated seven of the technologies considered
in the market and technology assessment. Higher efficiency evaporator
and condenser fan blades, low-pressure differential evaporators, and
defrost mechanisms were eliminated because they are not expected to
improve energy efficiency. (73 FR 34108-09) Thermoacoustic
refrigeration, magnetic refrigeration, electro-hydrodynamic heat
exchangers, and copper rotor motors were eliminated because they are in
the research stage. Therefore, they would not be practicable to
manufacture, install, or service on the scale necessary to serve the
relevant market at the time of the effective date of the standard.
Because these technologies are in the research stage, there are also no
working prototypes that allow DOE to assess whether they would have any
adverse impacts on utility to significant subgroups of customers,
result in the unavailability of any types of equipment, or present any
significant
[[Page 26025]]
adverse impacts on health or safety. (73 FR 34109) DOE believes that
all the efficiency levels discussed in today's notice are
technologically feasible because there is equipment on the market or
there are working prototypes at all of the efficiency levels analyzed.
Chapter 4 of the TSD includes a discussion of the technological
feasibility of the design options considered in the screening analysis.
2. Maximum Technologically Feasible Levels
In considering whether to adopt new standards for a type or class
of beverage vending machines, DOE must ``determine the maximum
improvement in energy efficiency or maximum reduction in energy use
that is technologically feasible'' for such equipment. (42 U.S.C.
6295(p)(1) and (v)) If the standards are not designed to achieve such
efficiency or use, the Secretary shall state the reasons for this in
the proposed rule. Id. The values in Table III-1 represent the energy
use levels that would achieve the maximum reductions in energy use that
are technologically feasible at this time for beverage vending
machines. DOE identified these maximum technologically feasible (``max-
tech'') levels for the equipment classes analyzed as part of the
engineering analysis (chapter 5 of the TSD). For both equipment
classes, DOE applied the most efficient design options available for
energy-consuming components.
Table III-1--Max-Tech Energy Use Levels
------------------------------------------------------------------------
Equipment class Max-tech level kWh/day
------------------------------------------------------------------------
A MDEC = 0.045 x V + 2.42
B MDEC = 0.068 x V + 2.63
------------------------------------------------------------------------
``V'' is the refrigerated volume of the refrigerated bottled or canned
beverage vending machine, as measured by ANSI/AHAM HRF-1-2004,
``Energy, Performance and Capacity of Household Refrigerators,
Refrigerator-Freezers and Freezers.''
C. Energy Savings
1. Determination of Savings
DOE used the NES spreadsheet to estimate energy savings. The
spreadsheet forecasts energy savings over the period of analysis for
TSLs relative to the base case. DOE quantified the energy savings
attributable to an energy conservation standard as the difference in
energy consumption between the trial standards case and the base case.
The base case represents the forecast of energy consumption in the
absence of new mandatory efficiency standards. The NES spreadsheet
model is described in section IV.G of this notice and in chapter 11 of
the TSD accompanying this notice.
The NES spreadsheet model calculates the energy savings in site
energy or kilowatt hours (kWh). Site energy is the energy directly
consumed at building sites by beverage vending machines. DOE expresses
national energy savings in terms of the source energy savings, which
are the energy savings used to generate and transmit the energy
consumed at the site. Chapter 11 of the TSD contains a table of factors
used to convert kWh to Btu. DOE derives these conversion factors, which
change with time, from EIA's AEO2009.
2. Significance of Savings
EPCA prohibits DOE from adopting a standard that would not result
in significant additional energy savings. (42 U.S.C. 6295(o)(3)(B) and
(v)) While the term ``significant'' is not defined in the Act, the U.S.
Court of Appeals in Natural Resources Defense Council v. Herrington,
768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended
significant energy savings to be savings that were not ``genuinely
trivial.'' The estimated energy savings for the trial standard levels
considered in this rulemaking range from 0.001 to 0.107 quadrillion Btu
(quads); therefore, DOE considers them significant within the meaning
of section 325 of the Act.
D. 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. The following sections discuss how DOE has addressed each
factor thus far in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i) and
(v))
a. Economic Impact on Manufacturers and Commercial Customers
DOE uses an annual cash-flow approach in determining the
quantitative impacts of a new or amended standard on manufacturers.
This includes both a short-term assessment based on the cost and
capital requirements between the announcement of a regulation and when
the regulation comes into effect, and a long-term assessment. Impacts
analyzed include INPV, cash flows by year, and changes in revenue and
income. Next, DOE analyzes and reports the impacts on different types
of manufacturers, paying particular attention to impacts on small
manufacturers. DOE then considers the impact of standards on domestic
manufacturer employment, manufacturing capacity, plant closures, and
loss of capital investment. Finally, DOE takes into account the
cumulative impact of regulations on manufacturers. For a more detailed
discussion of the MIA, see chapter 13 of the TSD.
For customers, measures of economic impact are generally the
changes in installed price and annual operating costs (i.e., the LCC).
Chapter 8 of the TSD presents the LCC of the equipment at each TSL. The
LCC is one of the seven factors to be considered in determining the
economic justification for a new or amended standard. (42 U.S.C.
6295(o)(2)(B)(i)(II) and (v))
b. Life-Cycle Costs
The LCC is the total customer expense for a piece of equipment over
the life of the equipment (i.e., purchase price plus maintenance and
operating costs). The LCC analysis compares the life-cycle costs of
equipment designed to meet new or amended energy conservation standards
with the life-cycle cost of the equipment likely to be installed in the
absence of such standards. DOE determines these costs by considering
(1) total installed price to the purchaser (including manufacturer
selling price (MSP), sales taxes, distribution channel markups as shown
in Table IV-3, and installation cost), (2) the operating expenses of
the equipment (energy cost and maintenance and repair cost), (3)
equipment lifetime, and (4) a discount rate that reflects the real cost
of capital and puts the LCC in present value terms.
Recognizing that each type of commercial customer who uses a
beverage vending machine is unique, DOE analyzed variability and
uncertainty by performing the LCC and PBP calculations for seven types
of businesses. Six of these typically purchase and install beverage
vending machines in their buildings: office/healthcare (including a
large number of firms engaged in financial and other services, medical
and dental offices, and nursing homes); retail (including all types of
retail stores and food and beverage service facilities); schools
(including colleges, universities and large groups of housing
facilities owned by State governments, such as prisons); manufacturing
facilities and military bases (typically large utility customers that
pay industrial rates for their electricity consumption); and ``other''
(including warehouses, hotels/motels, and assembly buildings). The
seventh business type, which is the most common purchaser of the
equipment, is a local bottler or vending machine operator that
typically has the machine
[[Page 26026]]
installed in one of the other six business types, provides vending
services, and splits the coin box receipts through a contractual
arrangement with the site owner. For a more detailed discussion of the
LCC analysis, see chapter 8 of the TSD.
c. Energy Savings
While significant energy conservation is a separate statutory
requirement for imposing an energy conservation standard, EPCA requires
DOE to consider the total projected energy savings that are expected to
result directly from the standard in determining the economic
justification of such a standard. (42 U.S.C. 6295(o) (2)(B)(i)(III),
and (3), and (v)) DOE used the NES spreadsheet results in its
consideration of total projected savings. Section IV.G.1 of this notice
discusses the savings figures.
d. Lessening of Utility or Performance of Equipment
In establishing equipment classes, evaluating design options, and
assessing the impact of potential standard levels, DOE tried to avoid
having new standards for beverage vending machines lessen the utility
or performance of the equipment under consideration in this rulemaking.
(42 U.S.C. 6295(o)(2)(B)(i)(IV) and (v)) None of the proposed trial
standard levels considered in this rulemaking involves changes in
equipment design or unusual installation requirements that would reduce
the utility or performance of the equipment. See chapter 4 and chapter
16 of the TSD for more detail.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition likely to
result from standards. It directs the Attorney General to determine in
writing the impact, if any, of any lessening of competition likely to
result from imposition of a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V) and (ii), and (v)) DOE has transmitted a written
request to the Attorney General soliciting a written determination on
this issue.
f. Need of the Nation To Conserve Energy
The non-monetary benefits of the proposed standards are likely to
be reflected in improvements to the security and reliability of the
Nation's energy system, and in reduced reliance on foreign sources of
energy. Reductions in the overall demand for energy will reduce the
Nation's reliance on foreign sources of energy and increase reliability
of the Nation's electricity system. DOE conducted a utility impact
analysis to show the reduction in installed generation capacity.
Reduced power demand (including peak power demand) generally improves
the security and reliability of the energy system.
The proposed standards are 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 generation that energy conservation standards displaced.
DOE reports the environmental effects from each trial standard level
for this equipment in the draft environmental assessment in chapter 16
of the TSD. (42 U.S.C. 6295(o)(2)(B)(i)(VI) and (v))
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and
(v)) Under this provision, DOE considered LCC impacts on identifiable
groups of customers, such as customers of different business types who
may be disproportionately affected by any national energy conservation
standard. In particular, DOE examined the LCC impact on small
businesses (i.e., those with low annual income) that may not be able to
afford a significant increase in the purchase price (``first cost'') of
beverage vending machines. Some of these customers may retain equipment
past its useful life. Large increases in first cost also could preclude
the purchase and use of equipment altogether.
2. Rebuttable Presumption
Section 325(o)(2)(B)(iii) of EPCA states that there is a rebuttable
presumption that an energy conservation standard is economically
justified if the additional cost to the consumer of a product that
meets the standard level is less than three times the value of the
first-year energy (and, as applicable, water) savings resulting from
the standard, as calculated under the applicable DOE test procedure.
(42 U.S.C. 6295(o)(2)(B)(iii)) DOE's LCC and PBP analyses generate
values that indicate the cost-effectiveness of products meeting
potential energy conservation standards. These values include, but are
not limited to, the 3-year payback period contemplated under the
rebuttable presumption test discussed above. (See chapter 8 of the TSD
that accompanies this notice.) However, DOE routinely conducts a full
economic analysis that considers the full range of impacts, including
those to the consumer, manufacturer, Nation, and environment, as
required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this full
analysis serve as the basis for DOE to definitively determine the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification).
IV. Methodology and Discussion of Comments
DOE used two spreadsheet tools to determine the impact of energy
conservation standards on the Nation. The first spreadsheet calculates
LCCs and PBPs of potential new energy conservation standards. The
second spreadsheet provides shipments forecasts and then calculates NES
and NPV impacts of potential new energy conservation standards. DOE
also assessed manufacturer impacts, largely through use of the
Government Regulatory Impact Model (GRIM).
Additionally, DOE estimated the impacts that energy conservation
standards for beverage vending machines have 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 EIA primarily to prepare the Annual
Energy Outlook (AEO). NEMS produces a widely known baseline forecast
for the Nation through 2025 and is available on the DOE Web site.\11\
The version of NEMS used for efficiency standards analysis is called
NEMS-BT \12\ and is based on the AEO2008 version with minor
modifications. NEMS offers a sophisticated picture of the effect of
standards, since it measures the interactions between the various
energy supply and demand sectors and the economy as a whole.
---------------------------------------------------------------------------
\11\ http://www.eia.doe.gov/oiaf/aeo/overview.
\12\ EIA approves 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 used here. For
more information on NEMS, refer to The National Energy Modeling
System: An Overview 1998. DOE/EIA-0581 (98), February 1998. BT is
DOE's Building Technologies Program. NEMS-BT was formerly called
NEMS-BRS.
---------------------------------------------------------------------------
A. Market and Technology Assessment
When beginning an energy conservation standards rulemaking,
[[Page 26027]]
DOE develops information that provides an overall picture of the market
for the equipment concerned, including the purpose of the equipment,
the industry structure, and market characteristics. This activity
includes both quantitative and qualitative assessments based primarily
on publicly available information. The subjects addressed in the market
and technology assessment for this rulemaking include equipment
classes, manufacturers, quantities, and types of equipment sold and
offered for sale; retail market trends; and regulatory and non-
regulatory programs. See chapter 3 of the TSD for further discussion of
the market and technology assessment.
1. Definition of Beverage Vending Machine
EPCA defines the term ``refrigerated bottled or canned beverage
vending machine'' as ``a commercial refrigerator that cools bottled or
canned beverages and dispenses the bottled or canned beverages on
payment.'' (42 U.S.C. 6291(40)) Thus, coverage of equipment under EPCA
as a beverage vending machine in part depends on whether it cools and
dispenses ``bottled beverages'' and/or ``canned beverages.'' Based on
comments on the framework document, DOE tentatively decided to consider
a broader definition for the terms ``bottled'' and ``canned'' as they
apply to beverage vending machines. Such a definition would avoid
unnecessary complications regarding the material composition of the
container and eliminate the need to determine whether a particular
container is a bottle or a can. A bottle or can in this context refers
to ``a sealed container for beverages,'' so a bottled or canned
beverage is ``a beverage in a sealed container.'' In the ANOPR, DOE
sought comment on this broader definition and on whether it is
consistent with the intent of EPCA. DOE did not receive any comments on
this definition. Therefore, DOE is proposing to define a bottled or
canned beverage as ``a beverage in a sealed container.''
2. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
generally divides covered equipment into equipment classes by the type
of energy used, capacity, or other performance-related features that
affect efficiency and factors such as the utility of such feature(s).
(42 U.S.C. 6295(q)) DOE routinely establishes different energy
conservation standards for different equipment classes based on these
criteria.
Certain characteristics of beverage vending machines have the
potential to affect their energy use and efficiency. Accordingly, these
characteristics could be the basis for separate equipment classes for
these machines. DOE determined that the most significant criterion
affecting beverage vending machine energy use is the method used to
cool beverages. DOE divided covered equipment into two equipment
classes, Class A and Class B. DOE defines these terms as follows:
Class A means a refrigerated bottled or canned beverage
vending machine that is fully cooled.
Class B means any refrigerated bottled or canned beverage
vending machine not considered to be Class A.
The Class A beverage vending machine equipment class comprises
machines that cool product throughout the entire refrigerated volume.
Class A machines generally use ``shelf-style'' vending mechanisms and a
transparent (glass or polymer) front. Because the next-to-be-vended
product is visible to the customer and any product can be selected by
the customer off the shelf, all bottled or canned beverage containers
are necessarily enclosed within the refrigerated volume.
In Class B beverage vending machines, cold, refrigerated air is
directed at a fraction (or zone) of the refrigerated volume. This
cooling method is used to assure that the next-to-be-vended product
will be the coolest product in the machine. These machines typically
have an opaque front and use a ``stack-style'' vending mechanism.
B. Engineering Analysis
The engineering analysis develops cost-efficiency relationships to
show the manufacturing costs of achieving increased efficiency. DOE has
identified the following three methodologies to generate the
manufacturing costs needed for the engineering analysis: (1) The
design-option approach, which calculates the incremental costs of
adding design options to a baseline model that will improve its
efficiency; (2) the efficiency-level approach, which provides the
relative costs of achieving increases in energy efficiency levels
without regard to the particular design options 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
cost data for parts and material, labor, shipping/packaging, and
investment for models that operate at particular efficiency levels.
1. Approach
In this rulemaking, DOE is adopting a design-option approach, which
calculates the incremental costs of adding specific design options to a
baseline model. DOE decided on this approach after receiving no
response to its ANOPR request for the manufacturer data needed to
execute an efficiency-level, approach-based analysis. The design-option
approach allows DOE to make its engineering analysis methodologies,
assumptions, and results publicly available, allowing advocates,
manufacturers, and other interested parties the opportunity to review
and comment on this information. Using the design-option approach,
cost-efficiency relationship estimates are based on manufacturer or
component supplier data or derived from engineering computer simulation
models. Chapter 5 of the TSD contains a detailed description of the
equipment classes analyzed and analytical models used to conduct the
beverage vending machine engineering analysis based on the design-
option approach.
2. Equipment Analyzed in the Engineering Analysis
DOE analyzed three beverage vending machines of different sizes for
both equipment classes to assess how energy use varies with size. DOE
chose a small, medium, and large machine for Class A and Class B
beverage vending machines, based on current market offerings. See
chapter 3 of the TSD for a detailed description of the Class A and
Class B equipment classes.
In the ANOPR, DOE responded to several comments and presented a
detailed discussion of its equipment class selection methodology. 73 FR
34103. For the NOPR, DOE increased the physical case dimensions based
on a reevaluation of equipment currently on the market, even though the
equipment classification methodology has not changed since the ANOPR.
The case dimension increases affected the engineering parameters that
are a function of case dimension, including wall area, vendible
capacity, and refrigerated volume. The changes to refrigerated volume
and assumed vendible capacity are summarized in Table IV-1. All changes
are described in detail in chapter 5 of the TSD.
[[Page 26028]]
Table IV-1--Configurations of the Beverage Vending Machines Analyzed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------------------------------------
Small Medium Large Small Medium Large
--------------------------------------------------------------------------------------------------------------------------------------------------------
Vendible Capacity number of cans........................ 300 400 500 450 650 800
Refrigerated Volume ft\3\............................... 17 22 34 17 22 26
--------------------------------------------------------------------------------------------------------------------------------------------------------
3. Analytical Models
DOE's design-option-based engineering analysis relies on four
analytical models to develop the relationship between cost and
increased efficiency: the cost model, baseline model, design-options
analysis, and energy consumption model. The cost model estimates the
core case cost of a beverage vending machine for each equipment class.
The core case cost is the fully absorbed production cost of components
that do not consume energy. The baseline model, which defines baseline
specifications and incorporates energy consuming components for each
equipment class, estimates the energy-consumption and cost of the
typical equipment (i.e., units of typical efficiency) on the market
today. The design-options analysis develops cost-efficiency input data
for a list of potential energy-saving technologies that can be
integrated into the baseline model to increase efficiency. The energy
consumption model calculates the daily energy consumption (DEC) of
beverage vending machines at the various performance levels achieved by
implementing these design options. Chapter 5 of the TSD includes a
detailed description of each analytical model and its role in
calculating the cost-efficiency data results of the engineering
analysis.
a. Cost Model
DOE used a cost model to estimate the core case cost (i.e., the
fully absorbed production cost of the structure, walls, doors, shelving
and fascia of the case, but not the cost of any energy-using
components) of beverage vending machines. This model was adapted from a
cost model developed for DOE's rulemaking on commercial refrigeration
equipment.\13\ The approach for commercial refrigeration equipment
involved disassembling a self-contained refrigerator, analyzing the
materials and manufacturing processes for each component, and
developing a parametric spreadsheet to model the cost to fabricate (or
purchase) each component and the cost of assembly. Because of the
similarities in manufacturing processes between self-contained
commercial refrigeration equipment and beverage vending machines, DOE
was able to adapt the commercial refrigeration equipment cost model for
beverage vending machines by maintaining many of the assumptions about
materials and manufacturing processes but modifying the dimensions and
types of components specific to beverage vending machines. To confirm
the accuracy of the cost model, DOE obtained input from interested
parties on beverage vending machine production cost estimates and on
other assumptions DOE used in the model. Chapter 5 of the TSD provides
details of the cost model.
---------------------------------------------------------------------------
\13\ See http://www.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html for further
detail on and validation of the commercial refrigeration equipment
cost model.
---------------------------------------------------------------------------
Following the ANOPR, DOE received no comments regarding its cost
model; therefore, no significant changes were made to the methodology
used in the NOPR analysis. Since the ANOPR, all dollar amounts have
been updated to 2008$ using the producer price index.
b. Baseline Models
As mentioned above, the engineering analysis calculates the
incremental costs for equipment with efficiency levels above a baseline
model in each equipment class. DOE defined baseline specifications for
each equipment class, including dimensions, numbers of components,
operating temperatures, nominal power ratings, and other features
needed to calculate energy consumption. The baseline specifications
define the energy consumption and cost of the typical equipment (i.e.,
units of typical efficiency) on the market today, namely beverage
vending machines meeting the ENERGY STAR Tier 1 efficiency level. (See
chapter 3 of the TSD for further details on the ENERGY STAR criteria.)
DOE established baseline specifications for each equipment class
modeled in the engineering analysis by reviewing available manufacturer
data, selecting several representative units based on that data, and
then aggregating the physical characteristics of the selected units.
This process created a representative unit for each equipment class
with average characteristics for physical parameters (e.g., volume,
wall area), and typical performance for energy-consuming components
(e.g., fans, lighting). See chapter 5 of the TSD for these
specifications.
DOE received one comment regarding the baseline refrigerant. In the
ANOPR, DOE stated that hydrofluorocarbon (HFC) refrigerants would be
the basis of its analyses because of the phaseout of
hydrochlorofluorocarbons (HCFCs) in 2010,\14\ and the volatility and
availability issues associated with hydrocarbon (HC) refrigerants and
CO2. Coca-Cola commented that it is phasing out HFCs and
that it should not have any refrigeration equipment with HFC
refrigerants by 2012. (Coca-Cola, Public Meeting Transcript, No. 29 at
pp. 179-180) The Joint Comment stated that while manufacturers and
customers are interested in alternatives to HFC refrigerants, it
considers the use of HFC refrigerants a good default assumption with
respect to costs and performance. (Joint Comment, No. 34 at p. 2)
---------------------------------------------------------------------------
\14\ EPA is phasing out the production and importation of
certain HCFC refrigerants (i.e., HCFC-142b and HCFC-22) in new
equipment in the United States by January 1, 2010. EPA is phasing
out the production and importation of all HCFC refrigerants in new
equipment in the United States by January 1, 2015. (42 U.S.C.
7671(d))
---------------------------------------------------------------------------
While DOE acknowledges the use of some alternative refrigerants
(i.e., HCs and CO2) elsewhere in the world, the majority of
the U.S. beverage vending machine industry uses HFC refrigerants. Since
the analysis should be based on the refrigerant most widely used in
beverage vending machines, DOE will continue to use HFC refrigerants as
the basis for its technical analysis in this rulemaking.
c. Design Options
In the market and technology assessment for the ANOPR, DOE defined
an initial list of technologies that could reduce the energy
consumption of beverage vending machines. In the screening analysis for
the ANOPR, DOE screened out four of these technologies based on four
screening criteria: technological feasibility; practicability to
manufacture, install and service; impacts on equipment utility or
availability; and impacts on health or
[[Page 26029]]
safety. 73 FR 34108-09. The remaining technologies became inputs to the
ANOPR engineering analysis as design options.
For the NOPR, DOE did not receive any comments suggesting revisions
to the list of ANOPR design options. Therefore, the design option
inputs remain the same for the NOPR engineering analysis. However, the
Joint Comment stated that DOE must document that the energy savings
potential of light-emitting diode (LED) lighting has received adequate
consideration (Joint Comment, No. 34 at p. 2).
DOE's consideration of LED lighting technology is documented in the
Engineering Analysis Spreadsheet and chapter 5 of the TSD. Since the
issuance of the ANOPR, DOE has carefully reviewed the LED technology
design option and revised the cost and energy usage data for the NOPR.
The LED price and energy use updates are adapted from the commercial
refrigeration rulemaking.\15\ These changes are based on conversations
with LED manufacturers and information gathered on existing LED systems
for beverage vending machines. As a result of these conversations, DOE
better understands how LED lighting can be configured to replace
fluorescent systems in order to save energy without sacrificing
utility. In certain applications, the focused light from LED systems
delivers the same amount of light to the space being illuminated as
fluorescent systems and allows for a reduction in the wattage consumed.
As a result, overall energy consumption for lighting decreases.
Implemented across the installed base of beverage vending machines, LED
systems could result in considerable energy savings. Estimates of these
savings can be found in chapter 5 of the TSD.
---------------------------------------------------------------------------
\15\ See http://www.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html for further
detail on and validation of the commercial refrigeration equipment
LED price and usage data.
---------------------------------------------------------------------------
d. Energy Consumption Model
The energy consumption model estimates the DEC of beverage vending
machines at various performance levels using a design-option approach.
The model is specific to the categories of equipment covered under this
rulemaking, but is sufficiently generalized to model the energy
consumption of both covered equipment classes. For a given equipment
class, the model estimates the DEC for the baseline and the energy
consumption of several levels of performance above the baseline. The
model is used to calculate each performance level separately.
In developing the energy consumption model, DOE made certain
assumptions, including general assumptions about the analytical
methodology and specific assumptions regarding load components and
design options. DOE based its energy consumption estimates on new
equipment tested in a controlled-environment chamber under the
procedures and conditions specified in ANSI/ASHRAE Standard 32.1-2004,
``Methods of Testing for Bottled, Canned, and Other Sealed Beverages.''
\16\ Manufacturers of beverage vending machines must certify that their
equipment complies with Federal standards using this test method, which
specifies a certain ambient temperature, humidity, and other
requirements. One relevant specification that is absent from ANSI/
ASHRAE Standard 32.1-2004 is the operating hours of the display case
lighting during a 24-hour period. DOE assumes the operating time to be
24 hours (i.e., that display case lighting is on throughout the 24-hour
period) when conducting the analyses for this rulemaking. Chapter 5 of
the TSD details these and other beverage vending machine
considerations.
---------------------------------------------------------------------------
\16\ These test procedures are incorporated by reference at 10
CFR 431.294.
---------------------------------------------------------------------------
The energy consumption model calculates DEC from two major
components: (1) Component energy consumption, and (2) compressor energy
consumption (expressed as kWh/day). Component energy consumption is a
sum of the direct electrical energy consumption of fan motors,
lighting, vend mechanisms, control systems, and coin and bill
validators. Compressor energy consumption is calculated from the total
refrigeration load, expressed as Btu/h, and a compressor model based on
the 10-coefficient compressor model in American Refrigeration Institute
(ARI) Standard 540-2004, ``Performance Rating of Positive Displacement
Refrigerant Compressors and Compressor Units.'' The total refrigeration
load is a sum of the component heat load and non-electric load. The
component heat load is a sum of the heat emitted by evaporator fan
motors and lighting affecting refrigerated space. (Condenser fan motors
are outside the refrigerated space of a beverage vending machine and do
not contribute to the component heat load.) The non-electric load is
the sum of: the heat contributed by radiation through glass doors in
Class A machines; heat conducted through walls and doors; and sensible
and latent loads from warm, moist air infiltration through vend doors
and cracks. Chapter 5 of the TSD provides details on component energy
consumption, compressor energy consumption, and heat load models.
During the framework public meeting, DOE asked for comments on
which normalization metric, vendible capacity, or refrigerated volume
would be most appropriate for setting standards for beverage vending
machines. Based on public comments, DOE decided to use refrigerated
volume in the ANOPR. 73 FR 34105. Following the ANOPR, a comment
submitted by the American Council for an Energy-Efficient Economy
(ACEEE), Appliance Standards Awareness Project (ASAP), Natural
Resources Defense Council (NRDC), and NPCC (hereafter ``Joint
Comment'') stated that using internal refrigerated volume instead of a
12-ounce can count for rating beverage vending machines is appropriate.
(Joint Comment, No. 34 at p. 3).
4. Engineering Analysis Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of DEC (in kWh) versus MSP
(in dollars). DOE developed six curves representing the two equipment
classes and three representative sizes analyzed in each equipment
class. The methodology for developing the curves started with
determining the energy consumption for baseline equipment and the full
cost of production for this equipment. Above the baseline, DOE
implemented design options using the ratio of cost to savings, and
implemented only one design option at each engineering level analyzed.
Design options were implemented until all available technologies were
employed (i.e., at a max-tech level). Table IV-2 shows the engineering
analysis results. See TSD chapter 5 for additional detail on the
engineering analysis and TSD appendix B for complete cost-efficiency
results.
BILLING CODE 6450-01-P
[[Page 26030]]
[GRAPHIC] [TIFF OMITTED] TP29MY09.004
In addition to the design-option efficiency levels above, DOE
calculated intermediate efficiency levels to bridge large performance
level gaps created by certain design options. For instance, in a
representative, medium-sized Class A machine, the LED design option
leads to a considerable decrease in energy consumption between
efficiency levels 5 and 6. Intermediate efficiency levels are necessary
to create an even distribution of performance levels that are
achievable without using a specified combination of design options.
Chapter 5 of the TSD discusses these intermediate efficiency levels and
the methodology behind their selection in more detail.
C. Markups To Determine Equipment Price
This section explains how DOE developed the distribution channel
(supply chain) markups to determine installed costs for beverage
vending machines (chapter 6 of the TSD). DOE used the supply chain
markups it developed (including sales taxes and installation costs),
along with the MSPs developed from the engineering analysis, to arrive
at the final installed equipment prices for baseline and higher-
efficiency beverage vending machines. As explained in the ANOPR, 73 FR
34113, DOE defined three distribution channels for beverage vending
machines to describe how the equipment passes from the manufacturer to
the customer. For the ANOPR analysis, DOE estimated market shares of 68
percent, 27 percent, and 5 percent for the manufacturer/beverage
bottler (distribution channel 1), manufacturer/wholesaler/
operator (distribution channel 2), and manufacturer/
wholesaler/site owner (distribution channel 3) channels,
respectively, for all beverage vending machines, based on market
estimates from consultants. That is, 68 percent of all sales were
estimated to pass from the manufacturer directly to a bottler; 27
percent were estimated to pass from the manufacturer through a
wholesaler to a beverage machine operator; and 5 percent were estimated
to pass from the manufacturer through a wholesaler to the owner of the
premises where the machine operated. In the latter case, the owner of
the premises also owned the beverage vending machine. 73 FR 34113.
Regarding distribution channels for vending machines and the
calculation of the overall cost markups, Royal Vendors commented that
distribution channel 1 (direct sales to major bottlers) will
be around 85 percent to 90 percent (Royal Vendors, No. 29 at p. 39).
Dixie-Narco stated its sales percentages through the three distribution
channels would be 85 percent, 12 percent and 3 percent, respectively.
(Dixie-Narco, No. 29 at p. 40) Both comments gave increased importance
to direct sales to major bottlers and deemphasized sales through
wholesalers to vending operators and site owners. NPCC asked if the
markups would be lower if DOE increased the market share of channel
1 from 68 percent to 80 or 85 percent. (NPCC, No. 29 at p. 52)
For the NOPR, DOE updated its assumptions regarding the percentage
breakdown of market distribution through the different channels to
determine customer markups for purchasing beverage vending machines.
These updates were to increase the fraction of the market through
distribution channel 1 to 85 percent and reduce the fraction
of the market distribution through other channels in line with
manufacturer comments. Table IV-3 provides the revised estimated
distribution channel shares (in percentage of total sales) through each
of the three distribution channels.
[[Page 26031]]
[GRAPHIC] [TIFF OMITTED] TP29MY09.005
For each step in the distribution channels presented above, DOE
estimated a baseline markup and an incremental markup, which are
additional amounts added when equipment is sold and installed. A
baseline markup is applied for the purchase of baseline equipment. An
incremental markup is applied to the incremental increase in MSP for
the purchase of higher efficiency equipment.
DOE developed markups for each step of a given distribution channel
based on available financial data as described in the ANOPR analysis.
73 FR 34113-14. DOE continued to use the same sources of data for the
NOPR analysis, but updated the input assumptions to the most recent
data where possible.
Average overall markups in each distribution channel can be
calculated using estimates of the shipments of beverage vending
machines by distribution of State population. Since markups are not
uniform among wholesalers, DOE used the Excel spreadsheet-based Crystal
Ball program, which employs Monte Carlo analysis, to reflect this
uncertainty in the LCC analysis. Table IV-4 and Table IV-5 show overall
baseline and incremental markups for sales within each distribution
channel. Chapter 6 of the TSD provides additional detail on markups.
Table IV-4--Overall Average Baseline Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
Overall
Manufacturer Wholesaler/ weighted
direct Distributor average
----------------------------------------------------------------------------------------------------------------
Markup.......................................................... 1.000 1.460 1.069
Sales Tax....................................................... 1.070 1.070 1.070
Overall Markup.................................................. 1.070 1.562 1.144
----------------------------------------------------------------------------------------------------------------
Table IV-5--Overall Average Incremental Markups by Distribution Channel Including Sales Tax
----------------------------------------------------------------------------------------------------------------
Overall
Manufacturer Wholesaler/ weighted
direct Distributor average
----------------------------------------------------------------------------------------------------------------
Markup.......................................................... 1.000 1.200 1.030
Sales Tax....................................................... 1.070 1.070 1.070
Overall Markup.................................................. 1.070 1.284 1.102
----------------------------------------------------------------------------------------------------------------
D. Energy Use Characterization
The energy use characterization estimates the annual energy
consumption of beverage vending machines. This estimate is used in the
subsequent LCC and PBP analyses (chapter 8 of the TSD) and NIA (chapter
11 of the TSD). DOE estimated the energy use for machines in the two
equipment classes analyzed \17\ in the engineering analysis (chapter 5
of the TSD) based on the DOE test procedure.\18\ DOE assumed all Class
A machines to be installed indoors and subject to a constant air
temperature of 75 [deg]F and relative humidity of 45 percent, matching
test conditions in the DOE test procedure. 73 FR 34114-15. Based on
market data and discussions with several beverage vending machine
distributors, DOE assumed that 25 percent of Class B machines are
placed outdoors and the remaining 75 percent are installed indoors. DOE
sought but did not receive comment on this distribution. Thus, DOE
maintained the distribution for the NOPR analysis of Class B machines.
---------------------------------------------------------------------------
\17\ Class A and Class B vending machines are described in
section II.A.2 of the ANOPR. 73 FR 34103-34104.
\18\ DOE incorporated ANSI/ASHRAE Standard 32.1-2004 by
reference, with two modifications, as the DOE test procedure for the
beverage vending machines. 71 FR 71340, 71375 (Dec. 8, 2006); 10 CFR
431.294.
---------------------------------------------------------------------------
In response to the ANOPR, the Edison Electric Institute (EEI)
commented that it would be helpful for interested parties if DOE would
provide the annual energy usage of Class B machines located outdoors
versus machines located indoors (EEI, No. 37 at p. 2). EEI also
commented that it would be helpful if DOE collected data on peak kW
demands for machines located both indoors and outdoors. Such data would
help determine if the new energy conservation standards will have any
impact on the peak kW demands based on DEC, especially for equipment
located outdoors on hot summer days (EEI, No. 37 at p. 2). EEI further
commented that DOE should calculate energy savings separately for
indoor and outdoor machines based on actual estimated ambient
conditions for the machines (test procedure for indoor machines,
climate data for outdoor machines). Also, for outdoor machines, DOE
should estimate a percentage of machines that will be affected by solar
heat gain because of southern or western exposures (EEI, No. 37 at p.
4).
In response to the EEI request, DOE is including the annual energy
usage of Class B machines located outdoors versus machines located
indoors in the TSD of today's NOPR. However, DOE does not plan to
obtain peak demand data for indoor and outdoor machines. During the
ANOPR public meeting, DOE presented the statement that 100 percent of
Class A machines were intended to be installed indoors and that, based
on
[[Page 26032]]
inquiries to distributors, 75 percent of Class B machines appeared to
be installed indoors (DOE, No. 29 at pp. 53-54). Interested parties
discussed the implications of that assumption, but made no challenge to
the assumption itself. Therefore, the vast majority of all beverage
vending machines appear to be in conditioned environments. As a result,
DOE does not believe that outdoor beverage vending machines will have a
significant impact on peak loads for utilities.
During the ANOPR public meeting, participants discussed the impact
of refurbished machines, their energy use profile, and energy
efficiency upgrades to existing machines based on accounting demands
(Coca-Cola, No. 29 at pp. 88-89). Dixie-Narco commented that it has
kits listed on the U.S. Environmental Protection Agency (EPA) Web site
that upgrade existing machines to meet ENERGY STAR Tier 2 (Dixie-Narco,
No. 29 at pp. 90-91).
DOE acknowledges this information, but it does not have the
authority to regulate refurbished vending machines. DOE has carefully
considered its authority to establish energy conservation standards for
rebuilt and refurbished beverage vending machines in light of these
comments, and has tentatively concluded that its authority does not
extend to rebuilt and refurbished equipment.
Throughout the history of the energy conservation standards
program, DOE has not regulated used consumer products or commercial
equipment that has been refurbished, rebuilt, or undergone major
repairs, since EPCA only covers new covered equipment distributed in
commerce.\19\ DOE concludes that rebuilt or refurbished beverage
vending machines are not new covered equipment under EPCA and,
therefore, are not subject to DOE's energy conservation standards or
test procedures.
---------------------------------------------------------------------------
\19\ As an example, this position was taken and discussed in the
distribution transformers final rule, 72 FR 58203.
---------------------------------------------------------------------------
Regarding the energy consumption model, Coca-Cola commented that
moisture removal could account for nearly 12 percent of vending machine
energy consumption in a reload situation, which is an intermittent
occurrence. (Coca-Cola, No. 29 at p. 32 and No. 29 at p. 65) DOE
accounts for the effect of ambient humidity changes on the hourly
energy consumption calculation through use of weather files. However,
DOE has not modeled a product reload situation because it is an
intermittent occurrence and DOE has no information about total reload
times or schedules in actual use. A reload of product is not part of
the daily energy consumption test required by ASHRAE Standard 32.1-
2004, which DOE used as the basis for the energy consumption
calculations.
Several commenters discussed the use of lighting controls and their
impact on beverage vending machine energy use. Several manufacturers
and other interested parties commented that having lighting and/or
occupancy controls will help reduce energy consumption, especially when
these machines go into ``sleep mode.'' (Coca-Cola, No. 29 at p. 78;
Dixie-Narco, No. 29 at pp. 69-71; EEI, No. 37 at p. 3; Dixie-Narco, No.
36 at pp. 1, 2; PepsiCo, No. 29 at pp. 20-21; and Naval Facilities
Engineering Service Center (NFESC), No. 41 at p. 1). PepsiCo stated
that it is difficult to determine an average lighting operation time,
but that turning the lights off should be encouraged. (PepsiCo, Public
Meeting Transcript, No. 29 at p. 74) Coca-Cola stated that beverage
vending machines may not incorporate lighting in the near future.
(Coca-Cola, Public Meeting Transcript, No. 29 at p. 78) Royal Vendors
stated that although automated refrigeration and lighting controls may
become more popular, the current methodology is reasonable and
consistent for the purposes of this analysis.
Having lighting controls and setting them properly at the factory
does reduce beverage vending machine energy consumption when the
machine goes into sleep mode. However, DOE does not have the authority
to mandate lighting controls and/or occupancy sensors as a design
requirement simultaneously with an energy conservation standard due to
the definition of ``energy conservation standard'' in 42 U.S.C.
6291(6). See section II.C.2.c for further detail. Also, the current DOE
test procedure does not provide a mechanism to account for the
reduction in DEC resulting from lighting controls and/or occupancy
sensors in the machines. However, EPCA as amended by EISA 2007 states
that ``at least once every 7 years, the Secretary shall review test
procedures for all covered products * * *.'' 42 U.S.C. 6293(b)(1)(A).
DOE may consider incorporating a mechanism to account for the reduction
in DEC resulting from lighting controls and/or occupancy sensors during
its review of the test procedure for beverage vending machines. DOE has
not included the impact of these lighting controls as part of the
engineering or energy use characterization analyses for this rulemaking
and is retaining the assumption of a 24-hour lighting operation period.
NFESC commented that the DOE analysis should not neglect the added
electricity load on air-conditioned buildings. (NFESC, No. 41 at p. 3)
Specifically, the comment stated that the appropriate question to ask
is whether the added electricity required (as building cooling load)
represents a significant percentage of the electricity required to
operate the beverage vending machine. NEFSC calculations indicated that
the added building cooling load electric demand represents an annual
addition most probably on the order of 15% to the basic load imposed by
operating the vending machine.
DOE acknowledges that it did not account for the additional cooling
load imposed by the BVM on the whole building cooling load, and
correspondingly, any space cooling energy benefits that come from the
reduction of the BVM's electrical load. DOE accepts that such a cooling
energy use reduction will likely occur. At the same time, any reduction
in BVM energy use will also result in an increase in heating energy use
within the buildings. This impact on building heating and cooling loads
would only occur for those BVMs located indoors. The relative cooling-
energy-use benefit to heating-energy-use penalty is a function of the
climate location, building type and size, and the placement of the BVMs
within the building. The BVM could be located in uncooled portions of
an industrial building, in the entering vestibules in a grocery store
or in a supermarket, or in the core of an office building. The relative
monetary benefits are also a function of the relative heating and
cooling fuel costs. The quantification of the relative benefits impact
would have required an extensive whole-building heating and cooling
energy use analysis. Such studies of the impacts coming from lighting
energy use within buildings have been done in the past. However,
lighting tends to have a load profile that correlates with the cooling
energy use in buildings. This is less true for BVMs since they operate
on a 24-hour basis. Considering both the cooling benefits and the
heating penalties from reductions in BVM energy use, DOE believes, that
the 15% figure suggested by the NFESC comment overstates the likely
benefits. Therefore, DOE determined that an extensive whole-building
analysis was not warranted.
As discussed in the engineering analysis above, DOE analyzed the
three typical sizes (small, medium, and large vendible capacities),
each with a
[[Page 26033]]
different refrigerated volume as measured by ANSI/AHAM HRF-1-2004 and
shown in Table IV-1.
DOE used the same methodology to calculate the annual energy
consumption for Class A and Class B vending machines as described in
the ANOPR analysis. 73 FR 34115-16. For Class A vending machines, DOE
calculated the annual energy consumption as the product of the average
DEC (from the DOE test procedure indoor test condition of 75 [deg]F, 45
percent relative humidity), times 365 days per year, which did not vary
by State. For Class B vending machines, DOE used a weighted average
between the annual average energy consumption for an outdoor machine
and an indoor machine. To calculate a weighted energy use of all Class
B machines, DOE added aggregated State-by-State results using data from
each of the 237 Typical Meteorological Year 2 (TMY2) weather stations
to the annual energy consumption of the remaining 75 percent of Class B
machines located indoors.
DOE developed the annual energy consumption for each equipment
class at each efficiency level for every State as inputs to the LCC and
PBP analyses. Chapter 7 of the TSD shows the annual average energy
consumption estimates by equipment class and efficiency level.
E. Life-Cycle Cost and Payback Period Analyses
In response to the requirements of section 325(o)(2)(B)(i) of EPCA
(42 U.S.C. 6295(o)(2)(B)(i)), DOE conducted LCC and PBP analyses to
evaluate the economic impacts of possible new beverage vending machine
standards on individual customers. This section describes the analyses
and the spreadsheet model DOE used. TSD chapter 8 provides details of
the model and of all inputs to the LCC and PBP analyses.
The effects of standards on individual commercial customers include
changes in operating expenses (usually lower) and total installed price
(usually higher). The LCC is the total cost for a unit of beverage
vending machines, over the life of the equipment, including purchase
and installation expense and operating costs (energy expenditures and
maintenance). To compute the LCC, DOE summed the installed cost of the
equipment and its lifetime operating costs discounted to the time of
purchase. The PBP is the change in purchase expense due to a given
energy conservation standard divided by the change in first-year
operating costs resulting from the standard. Otherwise stated, the PBP
is the number of years it would take for the customer to recover the
increased costs of a more efficient product through energy savings. DOE
measures the changes in LCC and PBP associated with a given energy use
standard level relative to a base case forecast of equipment energy
use. The base case forecast reflects the market absent mandatory energy
conservation standards. DOE believes LCC is a better indicator of
economic impacts on consumers.
DOE also analyzed the effect of changes in operating expenses and
installed price by calculating the PBP of potential standards relative
to a base case. The PBP estimates the amount of time it would take the
commercial customer to recover the anticipated, incrementally higher
purchase expense of more energy efficient equipment through lower
operating costs. The data inputs to the PBP calculation are the
purchase expense (otherwise known as the total installed cost or first
cost) and the annual operating costs for each selected design. The
inputs to the equipment purchase expense were the equipment purchase
price and installation price, with appropriate markups. The inputs to
the operating costs were the annual energy consumption, electricity
price, and repair and maintenance costs. The PBP calculation uses the
same inputs as the LCC analysis but, since it is a simple payback, the
operating cost is for the year the standards take effect, assumed to be
2012. For each efficiency level analyzed, the LCC analysis required
input data for the total installed price of the equipment, operating
cost, and discount rate.
DOE calculated the LCC for all customers as if each would purchase
a new beverage vending machine in the year the standards take effect
for newly manufactured equipment. Section 135(c)(4) of EPACT 2005
amended EPCA to add new subsections 325(v)(2), (3), and (4) (42 U.S.C.
6295(v)(1), (2), and (3)), which directs the Secretary to issue a final
rule for refrigerated bottled or canned beverage vending machines no
later than August 8, 2009. The energy conservation standard levels in
the rule apply to all equipment manufactured 3 years after publication
of the final rule. Consistent with EPCA, DOE used these dates in the
NOPR analyses.
At the ANOPR public meeting, Dixie-Narco suggested that the
industry has made great strides in partnership with the bottlers to
reduce the energy consumption by over 50 percent in the last 5 years
for both Class A and Class B beverage vending machines. Dixie-Narco
stated that a vast majority of the machines will meet ENERGY STAR
levels when the new DOE standards go into effect in 2012. (Dixie-Narco,
No. 29 at pp. 17-19) The Joint Comment stated that provided DOE can
confirm industry's assertion that the market has already shifted to
ENERGY STAR Tier 2, DOE should take that level as the baseline rather
than ENERGY STAR Tier 1. (Joint Comment, No. 34 at p. 3)
DOE does not agree that it should use ENERGY STAR Tier 2 as the
baseline for the present analysis, because not all new products are
expected to meet the Tier 2 level by 2012. (PepsiCo, No. 29 at p. 152),
though most are expected to meet Tier 2 even without a minimum standard
at Tier 2 (Dixie Narco, No. 29 at pp. 150-151; Coca-Cola, No. 29 at p.
149; PepsiCo, No. 29 at p. 149). In other rules, DOE has consistently
based the baseline levels for the LCC analysis on products available in
the marketplace. DOE used a distribution of efficiency levels based on
its assessment of the future market for beverage vending machines when
establishing the base case for the NIA. This distribution in the 2012
baseline market includes 10 percent of shipments at approximately the
ENERGY STAR Tier 1 efficiency level and 90 percent of shipments at
approximately the ENERGY STAR Tier 2 efficiency level. Thus, the
baseline market includes efficiency levels at and above the LCC
baseline efficiency, which is approximately ENERGY STAR Tier 1.
Regarding equipment lifetime, Dixie-Narco stated that it believes
that the life expectancy of beverage vending machines will be 10 to 12
years by 2012. (Dixie-Narco, No. 29 at pp. 17-19) Coca-Cola commented
that the lifetime has gone down from 13 years to about 10 years, and
that the machine typically undergoes one refurbishment cycle during its
life. Coca-Cola uses a financial model to replace or upgrade components
or subsystems that need to be changed, which may or may not result in a
change in energy profile. (Coca-Cola, No. 29 at pp. 86-87) Coca-Cola
further commented that the lifetimes of legacy machines may be extended
because of refurbishment and that it upgrades the energy efficiency of
existing machines based on account needs and account demands. (Coca-
Cola, No. 29 at pp. 88-89) Dixie-Narco stated that it currently has
kits listed on the EPA Web site to upgrade existing machines to meet
ENERGY STAR Tier 2 level. (Dixie-Narco, No. 29 at pp. 90-91)
Based on the information provided by the manufacturers in this
discussion, DOE has changed the input assumptions for the life-cycle
cost analysis and the shipment analysis model to reflect the
[[Page 26034]]
revised equipment life estimates to 10 years with one refurbishment
cycle. The DOE analysis of proposed standard levels does not account
for future, unknown energy impacts from refurbishments that may or may
not occur during the 10-year equipment life or that provide energy
benefits in conjunction with life extension. See chapter 8 of the TSD
for further information.
Regarding the electricity prices and forecasts DOE used in the LCC
analysis, EEI asked if DOE used Manufacturing Energy Consumption Survey
(MECS) data for the beverage vending machines installed in the
manufacturing sector. (EEI, No. 29 at p. 104) EEI recommended that DOE
use EIA data for industrial electricity prices, as a large number of
beverage vending machines are located in industrial facilities.
During the ANOPR public meeting, EEI asked if DOE considered
separately the summer and winter energy usage of some of the outdoor
machines, as summer use may be greater and at a higher commercial rate
than winter use in certain climates. (EEI, No. 29 at p. 106) In its
written comment, EEI recommended that DOE use seasonal rates and MECS
data. (EEI, No. 37 at p. 3)
DOE used the EIA industrial electricity prices for averaging State-
by-State electricity prices for the percentage of machines located in
industrial, manufacturing, and government facilities for the ANOPR and
NOPR analyses. DOE did not use seasonal variation in commercial
electricity rates in its LCC analysis because seasonal variation in
electricity rates differs throughout the country and even by utility,
significantly complicating the analysis. The impact of higher energy
consumption on the relatively small fraction of beverage vending
machines located outdoors in the summer compared to winter was deemed
to be of little impact on Class B equipment and of no impact on Class A
equipment.
Regarding electricity price forecasts, the Joint Comment suggested
that DOE use the most recent EIA AEO high price case for energy price
forecasts \20\ and include the cost and value of peak electricity
demand in the analysis. (Joint Comment, No. 34 at p. 3) ACEEE asked DOE
to review EIA AEO price applicability and offered to provide a list of
alternative price forecasts. (ACEEE, No. 29 at pp. 107-108)
---------------------------------------------------------------------------
\20\ EIA high and low price cases are based on EIA's assumed
average world price for oil and the adjustments of the economy and
the energy sector to that key assumption. In the high price case in
AEO2008, the average electricity price in 2030 was about 2.2 percent
higher than in the reference case. Since the supplemental tables for
the AEO 2009 were not yet available, DOE used the ratio of high and
low price cases from AEO2008 to scale the AEO2009 reference case.
See chapter 8 of the TSD for additional information.
---------------------------------------------------------------------------
DOE updated its NOPR analysis to use the AEO2009 reference case
scenario for the base electricity price and electricity price forecasts
into the future. The NOPR provides a sensitivity analysis based on the
AEO high and low price scenarios. DOE continued to use the AEO
forecasts, as it has done for other rules, and did not explore
alternative electricity price forecasts. DOE believes that analyzing
the results using the high-price and low-price scenarios provides
sufficient insight into the likely range of electricity price impacts.
DOE has no evidence that alternative scenarios are better predictors of
future electricity costs.
Regarding future climate change legislation and its impact on the
price of electricity, the Joint Comment suggested including the value
of carbon emissions in the LCC and NPV analyses. (Joint Comment, No. 34
at p. 3)
The intent of Federal carbon control legislation, and the ensuing
cost of carbon mitigation to electricity generators, is as yet too
uncertain to incorporate into the energy price forecasts that DOE uses.
The costs of carbon mitigation to electricity generators resulting from
the regional programs are also very uncertain over the forecast period
for this rulemaking. Even so, EIA did include the effect of the
Northeast Regional Greenhouse Gas Initiative (RGGI) in its AEO2009
Early Release energy price forecasts. Western Climate Initiative (WCI)
did not provide sufficient detail for EIA to model the impact of the
WCI on energy price forecasts. Therefore, the energy price forecasts
used in today's final rule do include the impact of one of the two
regional cap-and-trade programs to the extent possible. In addition,
the Nation will benefit from reduction of carbon emissions as part of a
national impact. Because of the range of possible values of emissions
reductions, DOE shows them separately in order to take the impact into
consideration. Putting the values into the overall NPV calculation will
bury the effects. DOE believes it is important for the decision maker
to be fully aware of the economic impacts of a proposed energy
conservation standard. For these reasons, DOE will continue to report
the results of the monetization of the value of carbon emissions in the
Environmental Assessment (section V.B.6).
In the discussion of discount rates, Royal Vendors commented that
Coca-Cola and PepsiCo purchase approximately 90 percent of all beverage
vending machines. (Royal Vendors, No. 32 at p. 1) Royal Vendors and
Dixie-Narco made similar remarks about the size of the market purchases
by these two entities in a discussion of distribution channels. (Royal
Vendors and Dixie-Narco, Public Meeting Transcript, No. 29 at pp. 39-
40) In accordance with the comments regarding distribution channels,
DOE modified the mix of commercial customers so that bottlers represent
85 percent of commercial customers. DOE also used the same 85 percent
weight of bottlers to develop the discount rate distribution among
beverage vending machine purchasers.
During the ANOPR public meeting, Coca-Cola commented that beverage
vending machine maintenance costs are approximately $90 per year,
energy upgrade costs vary based on the kit used, and a remanufacturing
cycle costs around $500 to $600. (Coca-Cola, No. 29 at pp. 113-116) DOE
received no other comments on this issue.
DOE has updated its maintenance cost assumptions to more closely
reflect Coca-Cola's comments. This resulted in a minor decrease in
assumed annual maintenance cost from $165 in the ANOPR analysis to $154
in the NOPR analysis.
Also during the ANOPR public meeting, participants discussed how
the energy cost benefits should be reflected in the LCC analysis. Coca-
Cola stated that energy subsidy contracts are pre-negotiated as part of
the location contract based on considerations such as volume of
throughput and length of the contract. (Coca-Cola, No. 29 at pp. 125-
126) Any kind of energy subsidy machine owners pay to locate their
machines on-site is pre-negotiated as part of the location contract.
Also, energy cost reductions due to the use of higher efficiency
equipment would be reflected in a reduced subsidy paid to the site.
However, no market data have been provided to DOE that would allow
computation of the actual allocation of energy cost benefits for the
site owner and the vending machine owner. To account for such energy
cost benefits for purposes of computing life cycle cost and payback
period, DOE assumes that operating cost savings due to energy cost
savings are transferred to the owner/operator of the beverage vending
machine through the location contract. This is analytically equivalent
to assuming that energy subsidies are reduced by the amount of the
energy cost reductions.
Table IV-6 summarizes the inputs and key assumptions DOE used to
calculate the economic impacts of
[[Page 26035]]
various energy consumption levels on customers. Equipment price (which
includes Manufacturer's Selling Price, markups, and sales taxes),
installation price, and baseline and higher efficiency all affect the
installed cost of the equipment. Annual equipment energy consumption,
electricity prices, electricity price trends, and repair and
maintenance costs affect the operating cost. The effective date of the
standard, discount rate, and lifetime of equipment all affect the
calculation of the present value of annual operating cost savings from
a proposed standard. Table IV-6 also shows how DOE modified these
inputs and key assumptions for the NOPR analysis.
Table IV--6 Summary of Inputs and Key Assumptions Used in the LCC and
PBP Analyses
------------------------------------------------------------------------
Input ANOPR description Changes for NOPR
------------------------------------------------------------------------
Baseline Efficiency Level....... Energy savings No changes.
(changes in
equipment energy
consumption) and
energy cost
savings are
compared to a pre-
selected baseline
efficiency level
(in this case
Level 1).
Baseline MSP and
equipment energy
consumption
depend on the
baseline
efficiency level.
Higher Efficiency Levels........ A certain number No changes.
of higher
efficiency levels
are pre-selected
up to the max-
tech level for
LCC and PBP
analyses. These
higher efficiency
levels affect MSP
and equipment
energy
consumption.
Baseline Manufacturer Selling Price charged by No changes.
Price. manufacturer to
either a
wholesaler or
large customer
for baseline
equipment.
Standard-Level Manufacturer Incremental change No changes.
Selling Price Increases. in manufacturer
selling price for
equipment at each
of the higher
efficiency levels.
Markups and Sales Tax........... Associated with Distribution of
converting the sales among
manufacturer market channels
selling price to changed based on
a customer price comments on the
(chapter 6 of ANOPR. Sales tax
TSD). rates updated to
January 2009.
Installation Price.............. Cost to the Installation price
customer of updated to 2008$.
installing the
equipment
including labor,
overhead, and any
miscellaneous
materials and
parts. The total
installed cost
equals the
customer
equipment price
plus the
installation
price.
Equipment Energy Consumption.... Site energy use Updated to reflect
associated with results of the
the use of energy analysis.
beverage vending
machines, which
includes only the
use of
electricity by
the equipment
itself.
Electricity Prices.............. Average commercial Average commercial
electricity price electricity price
($/kWh) in each ($/kWh) in each
State and for State and for
seven classes of seven classes of
commercial and commercial and
industrial industrial
customers, as customers, as
determined from determined from
EIA data for 2003 EIA data for
converted to 2003, updated to
2007$. 2008 prices.
Electricity Price Trends........ Reflects the Reflects the
AEO2007 reference AEO2009 reference
case forecast case to forecast
future future
electricity electricity
prices. prices.
Maintenance Costs............... Labor and material Updated basic
costs associated maintenance cost
with maintaining to 2008$. Based
the beverage on industry
vending machines comment on the
(e.g., cleaning ANOPR, included
heat exchanger an updated
coils, checking annualized cost
refrigerant of one
charge levels, refurbishment/
lamp replacement) remanufacturing
included cycle.
annualized costs
of two
refurbishment
cycles.
Repair Costs.................... Labor and material Updated costs to
costs associated 2008$.
with repairing or
replacing
components that
have failed.
Equipment Lifetime.............. Age at which the Based on industry
beverage vending comment on the
machine is ANOPR, reduced
retired from average service
service life to 10 years,
(estimated to be with 15 years as
14 years). a maximum.
Discount Rate................... Rate at which Updated discount
future costs are rates for all
discounted to classes of
establish their purchasers based
present value to on weighted
beverage vending average cost of
machine capital figures
purchasers. from 2008.
Rebound Effect.................. Rebound effect was No change.
not taken into
account in the
LCC analysis.
Analysis Period................. The time span over No change.
which DOE
calculated the
LCC (i.e., 2012-
2042).
------------------------------------------------------------------------
The following sections contain brief discussions of the methods
underlying each input and key assumption in the LCC analysis.
1. Manufacturer Selling Price
The ``baseline MSP'' is the price manufacturers charge to either a
wholesaler/distributor or very large customer for beverage vending
machines meeting baseline efficiency levels. DOE developed the baseline
MSPs using a cost model (detailed in chapter 5 of the TSD). DOE used
the
[[Page 26036]]
efficiency level closest to ENERGY STAR Tier 1 as the baseline in the
NOPR analysis. The baseline efficiency level represents the least
efficient equipment likely to be sold in 2012.
DOE developed MSPs for the two equipment classes consisting of
three possible equipment sizes. Not all covered equipment sizes have
shipments of more than a few percent of the total.\21\ (See chapter 10
of the TSD.) DOE estimated the MSPs for Class A and Class B equipment
at the three representative rated volumes between the baseline
efficiency level and up to seven more efficient levels. See chapter 5
of the TSD for details.
---------------------------------------------------------------------------
\21\ Comments received at the ANOPR stage from interested
parties indicated that small volume machines were never more than
about 10 percent of the total (Royal Vendors, No. 29, p. 141); that
small machines are financially unattractive (Coca-Cola, No. 29, p.
141); and that shipments range from 10 percent medium to 100 percent
medium machines, depending on the manufacturer, with the rest being
large (Royal Vendors, No. 29, pp. 141-142).
---------------------------------------------------------------------------
2. Increase in Selling Price
The standard level MSP increase is the change in MSP associated
with producing equipment at lower energy consumption levels to meet
higher standards. DOE developed MSP increases associated with
decreasing equipment energy consumption (or higher efficiency) levels
in the engineering analysis. See chapter 5 of the TSD for details. DOE
developed MSP increases as a function of equipment energy consumption
for each equipment class.
3. Markups
As discussed earlier, overall markups are based on one of three
distribution channels for beverage vending machines. The distribution
channels defined in the ANOPR were also used for the NOPR analysis, but
DOE modified the relative fractions of shipments through each
distribution channel based on input from interested parties. Based on
input received by DOE, site owners purchase approximately 5 percent of
equipment from wholesaler/distributors, vending machine operators
purchase 10 percent of equipment from wholesaler/distributors, and
beverage bottler/distributors purchase 85 percent of equipment directly
from manufacturers. See chapter 10 of the TSD for details.
4. Installation Costs
DOE derived installation costs for beverage vending machines from
the U.S. Bureau of Labor Statistics (BLS) data.\22\ BLS provides median
wage rates for installation, maintenance, and repair occupations that
reflect the labor rates for each State. These data allow DOE to compute
State labor cost indices relative to the national average for these
occupations. DOE incorporated these cost indices into the analysis to
capture variations in installation cost by location. DOE calculated the
installation cost by multiplying the number of person-hours by the
corresponding labor rate as reported by Foster-Miller, Inc.\23\ Foster-
Miller data are more specific to the beverage vending machine industry
and service calls, and were used whenever possible. DOE decided that
the installation costs (including overhead and profit) represent the
total installation costs for baseline equipment. Because data were not
available to indicate how installation costs vary by class or
efficiency, DOE considered installation costs to be fixed and
independent of equipment cost or efficiency. Although the LCC
spreadsheet allows for alternative scenarios, DOE did not find a
compelling reason to change its basic premise for the NOPR analysis.
See chapter 8 of the TSD for details.
---------------------------------------------------------------------------
\22\ Bureau of Labor Statistics, Occupational Employment and
Wage Estimates (May 2007). Available at http://www.bls.gov/oes/oes_dl.htm.
\23\ Foster-Miller, Inc. ``Vending Machine Service Call
Reduction Using the VendingMiser.'' Report BAY-01197. Foster-Miller,
Inc., Waltham, MA. February 18,2002.
---------------------------------------------------------------------------
As described earlier, the total installed cost is the sum of the
equipment purchase price and installation price. DOE derived the
customer equipment purchase price for any given efficiency level by
multiplying the baseline MSP by the baseline markup and adding to it
the product of the incremental MSP and incremental markup. Because
MSPs, markups, and sales taxes can differ depending on location, the
resulting total installed cost for a particular efficiency level will
not be a single-point value, but a distribution of values. DOE used a
Monte-Carlo analysis \24\ to determine this distribution of values. See
chapter 8 of the TSD for details.
---------------------------------------------------------------------------
\24\ The Monte-Carlo analysis is a numerical simulation approach
using random values from known statistical distributions.
---------------------------------------------------------------------------
5. Energy Consumption
DOE based its estimate of the annual electricity consumption of
beverage vending machines on the energy use characterization described
in section IV.D. DOE did not change the ANOPR methodology. See chapters
7 and 8 of the TSD for details.
6. Electricity Prices
Electricity prices are necessary to convert the electric energy
savings into energy cost savings. Because of the wide variation in
electricity consumption patterns, wholesale costs, and retail rates
across the country, it is important to consider regional differences in
electricity prices. DOE divided the continental United States into the
50 States and the District of Columbia. DOE used reported average
effective commercial electricity prices which are the average
commercial prices in each state, multiplied times a factor that adjusts
the price to account for the fact that different types of commercial
customers historically have higher or lower prices than average. (See
chapter 8 of the TSD for details.) Effective commercial prices were
estimated for four of the six building types. Lower industrial
electricity prices were assumed to apply to the manufacturing plants
and Federal facilities. State level commercial and industrial prices
were collected from the EIA publication, ``State Energy Consumption,
Price, and Expenditure Estimates (SEDS).'' \25\ The latest available
prices from this source are for 2008. See chapter 8 of the TSD for
details.
---------------------------------------------------------------------------
\25\ http://www.eia.doe.gov/emeu/states/_seds.html.
---------------------------------------------------------------------------
Different kinds of businesses use electricity in different amounts
at different times of the day, week, and year, and therefore face
different effective prices. To make this adjustment, DOE used the 2003
CBECS data set to identify the average prices that the four kinds of
commercial businesses in this analysis pay compared with the average
prices all commercial customers pay. (DOE assumed manufacturing and
Federal facilities pay the average industrial price.) Once the building
type prices are adjusted, the resulting estimated prices paid become
the electricity prices used in the analysis. To obtain a weighted
average national price, the prices paid by each building in each state
are weighted by the estimated sales of beverage vending machines in
each state to each prototype building type (U.S. Census Bureau 2002,
2004a-2004c). The state/building type weights are the probabilities
that a given beverage vending machine shipped will be operated within a
given price. For evaluation purposes, the prices and weights can be
depicted as a cumulative probability distribution. The effective prices
range from approximately 5 cents per kWh to approximately 30 cents per
kWh. This approach includes regional
[[Page 26037]]
variations in energy prices and provides for estimated electricity
prices suitable for the target market, yet reduces the overall
complexity of the analysis. Chapter 8 of the TSD describes the
development and use of State-average electricity prices by building
type in more detail.
7. Electricity Price Trends
The electricity price trend provides the relative change in
electricity prices until 2030. Estimating future electricity prices is
difficult, especially considering that many States are attempting to
restructure the electricity supply industry. DOE uses the most recent
AEO reference case to forecast energy prices for standards rulemakings.
DOE applied the AEO2009 reference case as the default scenario and
extrapolated the trend in values from 2020 to 2030 of the forecast to
establish prices for 2030 to 2042. This method of extrapolation is in
line with methods the EIA uses to forecast fuel prices for the Federal
Energy Management Program (FEMP). DOE intends to update its analysis
for the final rule to reflect the AEO2009 electricity price forecasts
when final versions are available.
8. Repair Costs
The repair cost is the cost to the customer of replacing or
repairing beverage vending machine components that have failed. DOE
based the annualized repair cost for baseline efficiency equipment on
the report ``Vending Machine Service Call Reduction Using the
VendingMiser,'' \26\ and adjusted the cost to 2008 prices. Because data
were not available to indicate how repair costs vary with equipment
efficiency, DOE considered two scenarios: (1) repair costs that varied
in direct proportion with the manufacturer price of the equipment, and
(2) repair costs that did not increase with efficiency.
---------------------------------------------------------------------------
\26\ Foster-Miller, Inc. ``Vending Machine Service Call
Reduction Using the VendingMiser.'' Report BAY-01197. Foster-Miller,
Inc. Waltham, MA. February 18, 2002.
---------------------------------------------------------------------------
DOE used the first scenario as the default annualized repair cost
scenario in the LCC and PBP analyses. Spreadsheets can be used to
calculate LCC and PBP based on the second scenario as well. See chapter
8 of the TSD for details.
9. Maintenance Costs
DOE estimated annualized maintenance costs for beverage vending
machines from data provided by Coca-Cola at the ANOPR public meeting.
Coca-Cola estimated that average equipment maintenance costs are $98.20
(2008$) for preventive maintenance for both beverage vending machine
classes. In addition to routine maintenance, industry contacts stated
that most beverage vending machines are fully refurbished every 5 years
at an average cost of approximately $550. DOE calculated the annual
cost of refurbishment by assuming one refurbishment (in year five), and
then annualizing the present value of the cost using the discount rate
that applied to the business type owning the beverage vending machine.
DOE added the two maintenance cost components to produce an overall
annual maintenance cost of approximately $154 (2008$). Because data are
not available on how maintenance costs vary with equipment efficiency,
DOE held maintenance costs constant even as equipment efficiency
increased. See chapter 8 of the TSD for details.
10. Lifetime
DOE defined lifetime as the age when a beverage vending machine
unit is retired from service. DOE based the lifetime on comments it
received during the ANOPR. DOE concluded that a typical lifetime is 10
years and a maximum lifetime is 15 years. Beverage vending machine
equipment is typically replaced when buildings are renovated about
every 10 years, which is before the equipment would have physically
worn out. As a result, there is a used-equipment market for these
products. Because the salvage value to the original purchaser is very
low, DOE did not take this value into account in the LCC analysis.
Chapter 3 of the TSD contains a discussion of equipment life.
11. Discount Rate
The discount rate is the rate at which future expenditures are
discounted to establish their present value. DOE derived discount rates
for the LCC analysis by estimating the cost of capital for companies
that purchase beverage vending machines. The cost of capital is
commonly used to estimate the present value of cash flows to be derived
from a typical company project or investment. For most companies, the
cost of capital is the weighted average of the cost to the company of
equity and debt financing. DOE estimated the cost of equity financing
with the Capital Asset Pricing Model (CAPM), which is among the most
widely used models to estimate such costs. CAPM considers the cost of
equity to be proportional to the amount of systematic risk for a
company. The cost of equity financing tends to be high when a company
faces a large degree of systematic risk and low when the company faces
a small degree of systematic risk.\27\
---------------------------------------------------------------------------
\27\ Aswath Damodaran, Leonard N. Stern School of Business, New
York University. Available at http://www.stern.nyu.edu/~adamodar/
New--Home--Page/data.html. Accessed December 15, 2008. See also the
Investopedia Web site definition of Beta, the measure of such
volatility: http://www.investopedia.com/terms/b/beta.asp. Accessed
April 1, 2009.
---------------------------------------------------------------------------
To estimate the weighted average cost of capital (WACC; defined as
the weighted average cost of debt and equity financing) of purchasers,
DOE used a sample of companies involved in the six ownership
categories, according to their type of activity. DOE sought financial
information for all firms in the full sample involved in the seven
types of businesses drawn from a database of 7,460 U.S. companies on
the Damodaran Online Web site.\28\ In cases where one or more of the
variables needed to estimate the discount rate was missing or could not
be obtained, DOE discarded the firm from the analysis. Overall, it
discarded about 36 percent of the firms in the full database for this
reason, resulting in a final count of 4,139 firms. This WACC approach
for determining discount rates accounts for the current tax status of
individual firms on an overall corporate basis. DOE did not evaluate
the marginal effects of increased costs, and thus depreciation due to
more expensive equipment, on the overall tax status. See chapter 8 of
the TSD for details.
---------------------------------------------------------------------------
\28\ Aswath Damodaran, Leonard N. Stern School of Business, New
York University. Available at http://www.stern.nyu.edu/~adamodar/
New--Home--Page/data.html. Accessed December 15, 2008.
---------------------------------------------------------------------------
DOE used the final sample of 4,139 companies to represent beverage
vending machine purchasers. For each company in the sample, DOE derived
the cost of debt, percent debt financing, and systematic company risk
from information on the Damodaran Online Web site. Damodaran estimated
the cost of debt financing from the long-term government bond rate
(4.39 percent) and the standard deviation of the stock price. DOE then
determined the weighted average values for the cost of debt, range of
values, and standard deviation of WACC for each category of the sample
companies. Deducting expected inflation from the cost of capital
provided estimates of real discount rate by ownership category.
The above methodology yielded the following average after-tax
discount rates, weighted by the percentage shares of total purchases of
beverage vending machines: (1) 5.54 percent for bottlers and
distributors, (2) 6.25 percent for manufacturing facilities, (3) 4.81
percent for office and health care businesses, (4)
[[Page 26038]]
6.00 percent for retail stores, (5) 2.35 percent for schools and
colleges, (6) 3.03 percent for military bases, and (7) 5.23 percent for
all other types of businesses.\29\ See chapter 8 of the TSD for
details.
---------------------------------------------------------------------------
\29\ These discount rates are what private companies pay as
beverage vending machine purchasers. Government agencies use 3-
percent and 7-percent discount rates for economic calculations.
---------------------------------------------------------------------------
12. Payback Period
The PBP is the amount of time it takes the customer to recover the
incrementally higher purchase cost of more energy efficient equipment
as a result of lower operating costs. Numerically, the PBP is the ratio
of the increase in purchase cost (i.e., from a less efficient design to
a more efficient design) to the decrease in annual operating
expenditures. This type of calculation is known as a ``simple'' PBP
because it does not take into account changes in operating cost over
time or the time value of money; that is, the calculation is done at an
effective discount rate of 0 percent.
The equation for PBP is
PBP = [Delta]IC/[Delta]OC
Where:
PBP = payback period in years,
[Delta]IC = difference in the total installed cost between the more
efficient standard level equipment (energy consumption levels 2, 3,
etc.) and the baseline (energy consumption level 1) equipment, and
[Delta]OC = difference in annual operating costs.
The data inputs to the PBP analysis are the total installed cost of
the equipment to the customer for each energy consumption level and the
annual (first-year) operating costs for each energy consumption level.
The inputs to the total installed cost are the equipment price and
installation cost. The inputs to the operating costs are the annual
energy cost, annual repair cost, and annual maintenance cost. The PBP
uses the same inputs as the LCC analysis, except that electricity price
trends and discount rates are not required. Since the PBP is a
``simple'' (undiscounted) payback, the required electricity cost is
only for the year in which new energy conservation standards take
effect--in this case, 2012. The electricity price used in the PBP
calculation of electricity cost was the price projected for 2012,
expressed in 2008$, but not discounted to 2008. Discount rates are not
used in the PBP calculation.
As discussed in section III.D.2, section 325(o)(2)(B)(iii) of EPCA
states that there is a rebuttable presumption that an energy
conservation standard is economically justified if the additional cost
to the consumer of a product that meets the standard level is less than
three times the value of the first-year energy (and, as applicable,
water) savings resulting from the standard, as calculated under the
applicable DOE test procedure. However, as stated in section III.D.2,
DOE does not rely on the rebuttable presumption payback criteria when
examining potential standard levels, but does consider it as part of a
full analysis that includes all seven relevant statutory criteria under
42 U.S.C. 6295(o)(2)(B)(i).
F. Shipments Analysis
DOE developed forecasts of the number of units shipped for the base
case and standards cases and included those forecasts in the NES
spreadsheet. The shipments portion of the spreadsheet forecasts
shipments of beverage vending machines from 2012 to 2042. DOE developed
shipments forecasts for the two equipment classes by accounting for the
shipments replacing the existing stock of beverage vending machines in
new commercial floor spaces and old equipment removed through
demolitions. Chapter 10 of the TSD provides additional details on
shipments forecasts.
The shipments analysis is a description of beverage vending machine
stock flows as a function of year and age. The shipment analysis treats
each of the two classes of equipment independently, such that future
shipments in any one class are unaffected by shipments in the other
equipment class. In addition, the relative fraction of shipments in
each equipment class compared to all beverage vending machine shipments
is assumed to be constant over time. DOE recognizes that a business or
a beverage vending machine owner can choose to use different classes of
beverage vending machines to sell the same product if the equipment is
in the required temperature range and is suitable for the environment
in which the equipment will be placed. The decision to adopt one
equipment class over another within the same temperature range will
depend on first costs, operating costs, machine location (e.g.,
outdoors versus indoors), and the perceived ability to merchandise
product.
DOE received many comments on the shipment analysis and assumptions
in the ANOPR. Many comments addressed the declining size of the
beverage vending machine market. Royal Vendors estimate that the
current beverage vending machine stock is about 2.3 or 2.5 million
units. Further, Royal Vendors commented that the population of machines
is decreasing and that replacements purchased are less than ``normal
shrinkage.'' (Royal Vendors, No. 32 at p. 1) Dixie-Narco stated that a
significant number of machines are being pulled out of the marketplace,
partly because of the number of locations (particularly schools) that
no longer allow vending machines. (Dixie-Narco, No. 29 at p. 44) Coca-
Cola said that it has removed between 200,000 and 250,000 beverage
vending machines since 2006 and that future shipments will only be
replacements. (Coca-Cola, No. 29 at p. 140) PepsiCo agreed that the
number of machines is decreasing and it doesn't see this trend
reversing anytime soon. (PepsiCo, No. 29 at pp. 43-44) It attributed
this, in part, to the ``very high cost'' of vandalism. NAMA also noted
that there has been a decline in beverage vending machine sales over
the last 5 or 6 years. NAMA attributed this to the removal of vending
machines from school districts. (NAMA, No. 29 at pp. 48-49) The Joint
Comment recommended that DOE conduct an independent annual sales
forecast of equipment, stating that it was not clear why school
district soda bans would result in the removal of vending machines
rather than replacing sodas with healthier beverages in existing
machines. (Joint Comment, No. 34 at p. 2) EEI suggested that DOE obtain
data to monitor the downward trend in shipments and incorporate any
observed reductions of the market into the analysis. (EEI, No. 37 at p.
2) EPA offered to share aggregated shipment data of ENERGY STAR
qualified equipment with DOE. (EPA, No. 29 at p. 48)
DOE also received input on sales of new and replacement equipment.
Royal Vendors stated that the overall current stock is approximately 90
percent Class B machines and 10 percent Class A machines, of which it
builds large and medium Class A machines. However, trends are changing.
In the future, the overall stock will more closely resemble ratios of
60/40 or 50/50 between Class A and Class B machines. (Royal Vendors,
No. 29 at p. 139 and No. 29 at pp. 163-167). This data was also
confirmed by data from The Cadmus Group (2006).\30\
---------------------------------------------------------------------------
\30\ Cadmus Group. 2006. ``Saving Energy in Vending Machines:
Opportunities for the Regional Technical Forum.'' Presentation for
the Northwest Power Conservation Council. Available at http://www.nwcouncil.org/energy/rtf/meetings/2006/2006_09. Accessed on
January 5, 2009.
---------------------------------------------------------------------------
DOE has updated its shipments model for the NPV analysis to reflect
the comments it received. The model now reflects that there is zero
growth in the number of vending machines and that new machines will
only replace old and
[[Page 26039]]
retired machines. DOE also updated its shipments analysis model to
reflect more closely comments on the breakdown of shipments between
equipment classes as well as the different sizes.
Dixie-Narco commented that it currently has kits listed on the EPA
Web site to upgrade existing machines to meet ENERGY STAR Tier 2.
(Dixie-Narco, No. 29 at pp. 90-91) DOE accepts the comment and has
assumed that a high percentage of the machines shipped in 2012 in the
base case shipment forecast will meet ENERGY STAR Tier 2 levels even
without energy conservation standards.
The results of the shipments analysis are driven primarily by
historical shipments data for the two equipment classes of beverage
vending machines under consideration. The model estimates that, in each
year, the existing stock of beverage vending machines either ages by
one year or is worn out and replaced. In addition, new equipment can be
shipped into new commercial building floor space and old equipment can
be removed through demolitions. DOE chose to analyze all efficiency
levels analyzed in the LCC in the NIA. DOE determined shipments
forecasts for all levels analyzed in the NIA and NPV analysis.
Because several different types of businesses own beverage vending
machines and use them in a variety of locations, machines are divided
into several market segments. Table IV-7 gives the business locations
and the approximate size of the market segments from 2002 to 2005.
Table IV--7 Market Segments for the Beverage Vending Machines (2004-
2007)
------------------------------------------------------------------------
Percent of
machines
------------------------------------------------------------------------
Business Location:
Manufacturing............................................ 36.2
Offices.................................................. 19.5
Retail................................................... 8.0
Schools/Colleges......................................... 13.0
Health Care.............................................. 6.2
Hotels/Motels............................................ 3.6
Restaurants/Bars/Clubs................................... 0.7
Correctional Facilities.................................. 2.1
Military Bases........................................... 3.0
Other.................................................... 7.8
------------------------------------------------------------------------
Total................................................ 100.0
Ownership:
Bottlers and Vendors..................................... 95.0
Business Owned........................................... 5.0
--Manufacturing.......................................... 1.5
--Offices and Health Care................................ 1.4
--Retail/Restaurants/Bars/Clubs.......................... 0.8
--Schools, Colleges, and Public Facilities (including 0.8
Correctional)...........................................
--Military Bases......................................... 0.4
--Other (including hotels/motels)........................ 0.1
--Site Owned............................................. 5.0
------------------------------------------------------------------------
Total................................................ 100.0
------------------------------------------------------------------------
Table IV-8 shows the forecasted shipments of the three typical
sizes of beverage vending machines for Class A and Class B units for
selected years and cumulatively between 2012 and 2042. As equipment
purchase price increases with higher efficiency levels, a drop in
shipments could occur relative to the base case. On the other hand, as
annual energy consumption is reduced, equipment sales could increase
due to more frequent installations and use of beverage vending machines
by retailers. DOE has no information to calibrate either relationship.
Therefore, although the spreadsheet allows for changes in projected
shipments in response to efficiency increases or energy consumption
decreases, DOE presumed for the NOPR analysis that shipments would not
change in response to the changing TSLs. Table IV-8 also shows the
cumulative shipments for the 31-year period between 2012 and 2042 for
all beverage vending machines. Comments from the ANOPR public meeting
indicated that there has been a substantial decrease in shipments since
2000 and that future shipments are not expected to increase for the
foreseeable future. These shipments are entirely for replacements, but
the stock of beverage vending machines has also been declining at a
significant rate. DOE has estimated a current level of shipments of
about 90,000 units per year. This rate is consistent with observed
declines in stock, expected retirement rates based on stated stock
lifetimes, and extra removals due to vandalism and other causes, as
stated by interested parties. Consistent with public comment, these
shipment rates (which equals replacements) are assumed to be constant
through 2042, which results in a continuing decline in the stock of
beverage vending machines from recent levels of about 2.4 million units
to a level of about 944,000 units by 2020, at which point the stock
stabilizes. Chapter 10 of the TSD provides additional details on the
shipments analysis.
Table IV--8 Forecasted Shipments for Beverage Vending Machines (Baseline Efficiency, Level 1) for Selected Years
[Thousands of units shipped]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Thousands of units shipped
--------------------------------------------------------------------------------------------
Equip. class Size Cumulative
2012 2015 2020 2025 2030 2035 2040 2042 shipments*
2012-2042
--------------------------------------------------------------------------------------------------------------------------------------------------------
A.................................. L..................... 12.4 12.4 12.4 12.4 12.4 12.4 12.4 12.4 383.6
A.................................. M..................... 37.1 37.1 37.1 37.1 37.1 37.1 37.1 37.1 1,150.9
A.................................. S..................... ........ ........ ........ ........ ........ ........ ........ ........ ...........
B.................................. L..................... 10.1 10.1 10.1 10.1 10.1 10.1 10.1 10.1 313.9
B.................................. M..................... 30.4 30.4 30.4 30.4 30.4 30.4 30.4 30.4 941.6
B.................................. S..................... ........ ........ ........ ........ ........ ........ ........ ........ ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The cumulative shipments do not equal the totals across each row because all years from 2012 to 2042 are included in the calculation.
G. National Impact Analysis
The NIA assesses future NES and the national economic impacts of
different efficiency levels of beverage vending machines. The analysis
measures economic impacts using the NPV metric (i.e., future amounts
discounted to the present) of total commercial customer costs and
savings expected to result from new standards at specific efficiency
levels. For the NOPR analysis,
[[Page 26040]]
DOE used the same spreadsheet model used in the ANOPR to calculate the
energy savings and the national economic costs and savings from new
standards, but with updates to specific input data.
Unlike the LCC analysis, the NES spreadsheet does not use
distributions for inputs or outputs. DOE examined sensitivities by
applying different scenarios. DOE used the NES spreadsheet to calculate
national energy savings and NPV using the annual energy consumption and
total installed cost data from the LCC analysis and estimates of
national shipments for the two equipment classes. DOE forecasted the
energy savings, energy cost savings, equipment costs, and NPV of
benefits for both beverage vending machine classes from 2012 to 2057.
The forecasts provided annual and cumulative values for all four output
parameters.
DOE calculated the NES by subtracting energy use under a standards
scenario from energy use in a base case (no new standards) scenario.
Energy use is reduced when a unit of beverage vending machine in the
base case efficiency distribution is replaced by a more efficient unit.
Energy savings from this replacement for each equipment class are the
same national average values as calculated in the LCC and PBP
spreadsheet on a per-unit basis. Table IV-9 shows key inputs to the
NIA. In the NIA analysis for the NOPR, DOE did not include a rebound
effect. As the ANOPR discussed, a rebound effect occurs when a piece of
equipment that is made more efficient is used more intensively, so that
the expected energy savings from the efficiency improvement do not
fully materialize. Because beverage vending machines operate on a 24-
hour basis to maintain adequate conditions for the merchandise being
retailed, a rebound effect resulting from increased refrigeration
energy consumption seemed unlikely. Thus, DOE did not account for a
rebound effect in the LCC analysis. There were no comments on this
issue. Chapter 11 of the TSD provides additional information about the
NES spreadsheet.
On the topic of shipments by efficiency levels, Coca-Cola commented
that, essentially, all machines will be in the same efficiency class,
which is the optimal point between price and performance. (Coca-Cola,
No. 29 at p. 148) PepsiCo stated that every machine it approves for
purchase must meet ENERGY STAR Tier 2. This includes purchases by
PepsiCo bottlers as well. (PepsiCo, No. 29 at p. 149) Dixie-Narco
stated that vending distributors (or operators and independent
bottlers) do not mandate ENERGY STAR Tier 2, but that they are only a
small part of the business. (Dixie-Narco, No. 29 at pp. 150-152) USA
Technologies commented that much of the industry is already meeting
Tier 2 and that 80 to 90 percent of the machines sold are probably at
the Tier 2 levels (USA Technologies, No. 29 at pp. 101-102).
DOE understands that the major bottlers that purchase over 85
percent of the new machines require ENERGY STAR Tier 2, which went into
effect on July 1, 2007. Therefore, most of the machines that will be
purchased in 2012 when the new standards take effect are expected to
meet Tier 2 levels. In response to the input received, DOE has changed
the distribution of efficiency levels to reflect an estimate of 90
percent of the market meeting ENERGY STAR Tier 2 levels by 2012 in the
base case market efficiency distribution. DOE does not have information
on how the distribution of efficiency levels might change over the
analysis period (2012 to 2042) and therefore assumed that the
distribution in 2012 remained constant. See section IV.G.1 for more
details.
Regarding the period of the rulemaking analysis, EEI commented that
DOE should consider using a 20-year analytical timeframe if typical
machines only have a 10-year lifetime and the analysis covers ``two
lifetimes.''
The Department of Energy's appliance standards program is conducted
pursuant to Title III, Parts A and A-1 of EPCA (42 U.S.C. 6291-6317).
The program includes consumer products, such as refrigerators and
freezers, central air conditioners and central air conditioning heat
pumps, furnaces and water heaters, and certain commercial and
industrial equipment, including electric motors and commercial heating
and air conditioning equipment and water heaters.
EPCA directs DOE to conduct a series of rulemakings to consider
whether to amend the existing energy conservation standards. EPCA also
directs DOE to set any new standard such that the maximum improvement
in energy efficiency is achieved that is technologically feasible and
economically justified. In addition, the amount of energy saved must be
significant. (42 U.S.C. 6296(o)(2)) DOE calculates the net present
value (NPV) of new or amended standards to estimate the impacts of
standards on the nation. In performing the NPV analysis for the first
energy conservation standards rulemakings, DOE selected a 30-year
analysis period, beginning on the effective date of the standard,
because it closely matched the lifetime of the longest lived products
among the products being considered for standards. Matching the
lifetime of the longest lived products allows for a full turnover of
the stock.\31\ In subsequent years, for the next few rulemakings, DOE
used the same analysis end-date as the initial rulemakings, but with
the appropriate start-of-standard date, resulting in a shorter analysis
period. Then, in the 1990's rulemakings, DOE found that using the same
end-date of the analysis would result in analyses that could not
capture the full impact of amended standards. As a result, DOE
determined it was necessary to change the end-date of the analyses. DOE
settled on the 30-year analysis period, which allows DOE to capture the
full life of any product that was shipped in the first year in which
that standard became effective. Because products have varying
lifetimes, DOE uses a 30-year analysis period to maintain a consistent
time frame to compare the energy savings and economic impacts from all
the standards rulemakings. For consistency and for ease in comparing
results across rulemakings, DOE settled on a 30-year analysis period
for subsequent rulemakings.
---------------------------------------------------------------------------
\31\ Refrigerators have an average lifetime of 19 years, and,
based on industry data (Technical Support Document: Energy
Efficiency Standards for Consumer Products: Refrigerators,
Refrigerator-freezers, & Freezers, July 1995) on when refrigerators
are retired, DOE estimates the refrigerators are retired as early as
13 years and as late as 24 years (i.e., vintaging). DOE rounded up
24 years to 30 years in order to end the analysis on a decade.
---------------------------------------------------------------------------
DOE believes that using a 30-year analysis period is appropriate.
In order to compare energy savings for residential product classes or
commercial equipment classes across appliance rulemakings where the
various products and equipment classes have different lifetimes, DOE
must use at least the lifetime of the longest-lived product or
equipment type for assessment, since the annual energy consequences of
improving the longest-lived residential products or commercial
equipment would not be known until all of the market for such product
or equipment consisted of improved units. That would not happen until
the last of the pre-standard equipment is retired. Thirty years is a
practical estimate for that event for short- and long-lived equipment.
To compare economic costs and savings for products or equipment
using discounted present value, it is common in economics to use the
stream of benefits and costs over the lifetime of the equipment. In DOE
energy conservation standards rulemakings, the outer limit for economic
benefits and costs is established at the last year of life
[[Page 26041]]
of the oldest equipment purchased during the 30-year period used for
energy savings comparisons.
There are also economic consequences for choosing different time
periods over which to compare rules. As an example, consider two
different time periods that could be used to compare two rules, one for
30-year equipment and one for 20-year equipment with identical costs
and savings, but a shorter 20-year lifetime. If the 30-year period
comparison period were shortened to 20 years to compare the two rules
there would be significant consequences for NPV. Approximately one-
third of the (undiscounted) savings from equipment with a 30-year life
would be not counted, and the value of the savings would be reduced by
about 15 percent at a 7 percent discount rate and by about 24 percent
at a 3 percent discount rate. In addition, the investment required for
shorter-life equipment that would have been required with a 30-year
comparison would be ignored if the lifetime of the shorter-lived
equipment is used to compare rulemakings. Therefore, DOE believes the
30-year analytical period enables it to fully capture the impacts of
standards on the nation as well as to compare the relative economic
impacts of different rulemakings. DOE will continue to use the 30-year
analytical timeframe for this rulemaking. DOE will consider changes to
the analytical period in other rulemakings, where appropriate; such as
rulemakings for products with significantly shorter lifetimes (both
average life and the life of the oldest product when retired).
On the topic of site-to-source energy conversion factor, EEI
commented that DOE should account for the fact that more than 29 States
now have renewable portfolio standards that will increase the amount of
zero emissions and zero Btu electricity production sources by 2010,
2015, 2020, or 2025. These factors will reduce the overall heat rate
faster than the AEO forecast, and DOE should not use fossil fuel power
plant heat rates as a ``proxy'' for renewable electricity generation
stations (EEI, No. 37 at p. 3).
DOE will continue to use AEO2009 base electricity price and the
price projections as long as no other credible and publicly available
data that could be used to generate or revise the site-to-source energy
conversion factors are made available to DOE.\32\
---------------------------------------------------------------------------
\32\ DOE is committed to using the latest AEO forecast that is
appropriate for its analysis. For example, if an updated AEO
forecast is available for the final rule analysis, DOE will use that
forecast. However, if an updated AEO forecast is published after the
final rule analysis is completed, but before the final rule is
published, the analysis will remain unchanged. DOE may conduct some
sensitivity analyses, if appropriate, to determine if its
conclusions would change based on the updated AEO forecast.
Table IV-9--Summary of National Energy Savings and Net Present Value
Input
------------------------------------------------------------------------
Input ANOPR Description Changes for NOPR
------------------------------------------------------------------------
Shipments....................... Annual shipments No growth in
from shipments shipments; based
model (chapter 9 on industry
of the ANOPR TSD, comments on the
Shipments ANOPR, all
Analysis). shipments are
replacements.
Effective Date of Standard...... 2012.............. No change.
Base Case Efficiencies.......... Distribution of Efficiency mix
base case changed based on
shipments by industry comment.
efficiency level.
Standards Case Efficiencies..... Distribution of No change.
shipments by
efficiency level
for each
standards case.
Standards case
annual market
shares by
efficiency level
remain constant
over time for the
base case and
each standards
case.
Annual Energy Consumption per Annual weighted- No change.
Unit. average values
are a function of
energy
consumption level
per unit, which
are established
in chapter 7 of
the ANOPR TSD,
Energy Use
Characterization.
Total Installed Cost per Unit... Annual weighted- No change.
average values
are a function of
energy
consumption level
(see chapter 8 of
the ANOPR TSD).
Repair Cost per Unit............ Annual weighted- No change.
average values
increase with
manufacturer's
cost (chapter 8
of the ANOPR TSD).
Maintenance Cost per Unit....... Annual weighted- Annual weighted-
average value average value
equals $165.44 equals $154
(chapter 8 of the (chapter 8 of the
ANOPR TSD). TSD).
Escalation of Electricity Prices EIA AEO2007 Updated to AEO2009
forecasts (to forecasts.
2030) and
extrapolation
beyond 2030
(chapter 8 of the
ANOPR TSD).
Electricity Site-to-Source Conversion varies Conversion varies
Conversion. yearly and is yearly and is
generated by DOE/ generated by DOE/
EIA's NEMS* model EIA's NEMS model.
(a time-series Calculated
conversion factor marginal rates by
that includes year.
electric
generation,
transmission, and
distribution
losses).
Discount Rate................... 3% and 7% real.... No change.
Present Year.................... Future costs are Future costs are
discounted to discounted to
2008. 2009
[[Page 26042]]
Rebound Effect.................. As explained in No change.
the LCC inputs
section, DOE does
not anticipate
unit energy
consumption to
rebound above the
levels used in
the LCC analysis
and passed to the
NIA analysis.
Further, the
shipments model
develops shipment
projections to
meet historical
market saturation
levels. The
shipment model
does not adjust
shipments as a
function of unit
energy
consumption
levels, because
DOE has no
information with
which to
calibrate such a
relationship.
------------------------------------------------------------------------
1. Base Case and Standards Case Forecasted Efficiencies
Components of DOE's estimates of NES and NPV are the energy
efficiencies of shipped equipment that DOE forecasts over time for the
base case (without new standards) and for each standards case. The
forecasted efficiencies represent the distribution of energy efficiency
of the equipment under consideration that is shipped over the forecast
period (i.e., from the assumed effective date of a new standard to 30
years after the standard becomes effective).
The average annual energy consumption of the BVMs shipped in a
given year depends on the per-unit energy consumption of BVM equipment
at each efficiency level and the mix of efficiency levels of new units
that is shipped in each year. Per-unit energy consumption at each
efficiency level is determined in the energy use characterization. (See
chapter 7 of the TSD.) The standards affect the mix of annual shipments
by efficiency level as briefly described below. (See chapter 11 for
details.)
Because no published data were available on market shares broken
down by efficiency level, DOE developed estimates based on comments
from interested parties at the ANOPR public meeting. These comments
concerned approximate market shares of current shipments by equipment
class and size, and approximate shipments by efficiency level for the
base case (i.e., without new standards).
DOE developed base case efficiency forecasts based on the estimated
market shares by equipment class and efficiency level. Because there
are no historical data to indicate how equipment efficiencies or
relative equipment class preferences have changed over time, DOE
assumed that forecasted market shares would remain frozen at the 2012
efficiency level until the end of the forecast period (30 years after
the effective date or 2042).
For its estimate of standards case forecasted efficiencies, DOE
used a ``roll-up'' scenario to establish the market shares by
efficiency level for the year that standards become effective (i.e.,
2012). Information available to DOE suggests that equipment shipments
with efficiencies in the base case that did not meet the standard
levels under consideration would roll up to meet the new standard
levels. Also, DOE assumed that all equipment efficiencies in the base
case that were above the standard levels under consideration likely
would not be affected.
2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost,
and Repair Costs
The difference in shipments by equipment efficiency level between
the base case and standards case was the basis for determining the
reduction in per-unit annual energy consumption that could result from
new standards. The beverage vending machine stock in a given year is
the total number of beverage vending machines shipped from earlier
years that survive in the given year. The NES spreadsheet model tracks
the number of beverage vending machines shipped each year and estimates
the total beverage vending machine stock for each year. The annual
energy consumption by efficiency level for each equipment class comes
from the LCC analysis on a per-unit basis. Similarly, the total
installed, maintenance, and repair costs for each efficiency level for
each equipment class analyzed in the LCC are on a per-unit basis. Using
the total estimated shipments and total estimated stock by equipment
class and efficiency level, DOE calculates the annual energy
consumption for the beverage vending machine stock in each year, the
maintenance and repair costs associated with the equipment stock, and
the total installed costs associated with new shipments in each year
based on the standards scenario and associated distribution of
shipments by efficiency level.
As explained above, DOE assumes that all Class A machines and 75
percent of Class B machines are installed indoors and that 25 percent
of Class B machines are located outdoors. To calculate a weighted
energy use for all Class B machines, DOE added aggregated results based
on State-by-State TMY2 weather station data to the annual energy
consumption of the remaining 75 percent of Class B machines that are
located indoors. DOE further aggregated energy consumption at the State
level to arrive at the national average energy consumption, using the
2000 Census population data.\33\ Table IV-10 presents the national
average annual energy consumption figures for the three different sizes
of Class B machines.
---------------------------------------------------------------------------
\33\ The U.S. Census Bureau,``2000 Census,'' http://factfinder.census.gov/servlet/GCTTable?_bm=y&-geo_id=01000US&-_box_head_nbr=GCT-PH1&-context=gct&-ds_name=DEC_2000_SF1_U&-tree_id=4001&-format=US-9. Accessed March 25, 2007.
[[Page 26043]]
Table IV-10--National Average Annual Energy Consumption for Class B Machines, by Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual energy consumption (all locations, kWh)
---------------------------------------------------------------------------------------------
Size Level 1
(Baseline) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large..................................................... 2019 1890 1842 1760 1746 1561 1526
Medium.................................................... 1925 1799 1731 1658 1645 1463 1431
Small..................................................... 1724 1606 1505 1505 1495 1313 1285
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table IV-11 shows annual energy consumption for each size of Class
A machine. National average energy consumption figures are identical to
State energy consumption figures. These national average annual energy
consumption figures are used in the subsequent LCC, PBP, and NES
analyses.
Table IV-11--Annual Energy Consumption for Class A Machines, All Sizes and All Locations, by Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average annual energy consumption (all locations, kWh)
-------------------------------------------------------------------------------------------------------
Size Level 1
(Baseline) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large........................................... 2464 2267 2099 1916 1785 1679 1610 1438
Medium.......................................... 2383 2011 1916 1734 1529 1442 1383 1252
Small........................................... 2227 1924 1734 1551 1442 1361 1307 1186
--------------------------------------------------------------------------------------------------------------------------------------------------------
DOE's energy use characterization assumes that there are no
controls limiting display lighting or compressor operation in a
beverage vending machine to certain hours of the day. As a result, the
display lighting or compressor operation would not be affected by
occupancy patterns in the building. However, using occupancy sensors
and other controllers might reduce a vending machine's energy
requirements during long periods of non-use, such as overnight and
weekends. This occupancy controller option is often used when de-
lamping a vending machine is not advisable (i.e., when a vending
machine does not have a captive audience or when de-lamping results in
reduced vending sales revenues). Controllers can either be added on or
enabled in certain beverage vending machines. See section IV.D for
additional discussion of lighting controls and occupancy sensors. See
chapter 7 in the TSD.
3. Escalation of Electricity Prices
DOE uses the most recent AEO reference case to forecast energy
prices for standard rulemakings. DOE used the AEO2009 reference case
forecasts for future electricity prices, extended out to the end of the
analysis period. DOE extrapolated the trend in values from 2020 to 2030
of the forecast to establish prices for the remainder of the analysis
period. DOE intends to update its analysis for the final rule to
reflect the AEO2009 electricity price forecasts when final versions of
these price forecasts are available.
4. Electricity Site-to-Source Conversion
The site-to-source conversion factor is a multiplier used for
converting site energy, expressed in kWh, into primary or source
energy, expressed in quadrillion Btu (quads). The site-to-source
conversion factor accounts for losses in electricity generation,
transmission, and distribution. For the ANOPR, DOE used site-to-source
conversion factors based on U.S. average values for the commercial
sector, calculated from AEO2008, Table A5. The average conversion
factors vary over time because of projected changes in electricity
generation sources (i.e., the power plant types projected to provide
electricity to the country). For the NOPR, DOE developed marginal site-
to-source conversion factors that relate the national electrical energy
savings at the point of use to the fuel savings at the power plant.
These factors use the NEMS model and the examination of the
corresponding energy savings from standards scenarios considered in
DOE's utility impact analysis (chapter 14 of the TSD). The conversion
factors vary over time because of projected changes in electricity
generation sources and power plant dispatch scenarios. DOE used average
U.S. conversion factors in the ANOPR because the utility impact
analysis that is used to determine marginal conversion factors
appropriate to efficiency standards for beverage vending machines
occurs in the NOPR stage of the analysis.
To estimate NPV, DOE calculated the net impact each year as the
difference between total operating cost savings (including electricity,
repair, and maintenance cost savings) and increases in total installed
costs (including MSP, sales taxes, distribution channel markups, and
installation costs). DOE calculated the NPV of each TSL over the life
of the equipment using three steps. First, DOE determined the
difference between the equipment costs under the TSL and the base case
to calculate the net equipment cost increase resulting from the TSL.
Second, DOE determined the difference between the base case operating
costs and the TSL operating costs to calculate the net operating cost
savings from the TSL. Third, DOE determined the difference between the
net operating cost savings and the net equipment cost increase to
calculate the net savings (or expense) for each year. DOE then
discounted the annual net savings (or expenses) for beverage vending
machines purchased on or after 2012 to the reference year 2009, and
summed the discounted values to determine the NPV of a TSL. An NPV
greater than zero shows net savings (i.e., the TSL would reduce overall
customer expenditures relative to the base case in present value
terms). An NPV less than zero (i.e., negative value) indicates that the
TSL would result in a net increase in customer expenditures in present
value terms.
H. Life-Cycle Cost Subgroup Analysis
In analyzing the potential impact of new or amended standards on
commercial customers, DOE evaluates the impact on identifiable groups
(i.e., subgroups) of customers, such as
[[Page 26044]]
different types of businesses that may be disproportionately affected
by an energy conservation standard. The subgroup used to perform this
evaluation was manufacturing and/or industrial facilities that purchase
their own vending machines. This customer subgroup is likely to include
owners of high-cost vending machines because they have the highest
capital costs and face the lowest electricity prices of any customer
subgroup. These two conditions make it likely that this subgroup will
have the lowest life-cycle cost savings of any major customer group.
The Joint Comment suggested that DOE focus its customer subgroup
analysis on life-cycle costs rather than first-cost impacts. (Joint
Comment, No. 34 at p. 6) DOE agrees with the Joint Comment and will
continue in this rulemaking to focus the customer LCC subgroup analysis
on examination of the life-cycle cost impacts. There will likely be
first-cost increases with higher standard levels but also increased
energy savings over the lifetime of the equipment. By examining LCC,
DOE considers both impacts simultaneously for the designated subgroup
in the LCC subgroup analysis, just as it does for the entire customer
base in the LCC analysis.
DOE determined the impact on this beverage vending machine customer
subgroup using the LCC spreadsheet model. DOE conducted the LCC and PBP
analyses for beverage vending machine customers. The standard LCC and
PBP analyses (described in section IV.E) include various types of
businesses that own and use beverage vending machines. The LCC
spreadsheet model allows for the identification of one or more
subgroups of businesses, which can then be analyzed by sampling only
each subgroup. The results of DOE's LCC subgroup analysis are
summarized in section V.B.1.b and described in detail in chapter 12 of
the TSD.
I. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impact of energy
conservation standards on beverage vending machine manufacturers, and
to calculate the impact of such standards on domestic manufacturing
employment and capacity. The MIA has both quantitative and qualitative
aspects. The quantitative part of the MIA primarily relies on the GRIM,
an industry-cash-flow model customized for this rulemaking. The GRIM
inputs are data characterizing the industry cost structure, shipments,
and revenues. The key output is the INPV. Different sets of assumptions
(scenarios) will produce different results. The qualitative part of the
MIA addresses factors such as equipment characteristics,
characteristics of particular firms, and market and equipment trends,
as well as an assessment of the impacts of standards on manufacturer
subgroups. The complete MIA is outlined in chapter 13 of the TSD.
DOE conducted the MIA in three phases. Phase 1, Industry Profile,
consisted of preparing an industry characterization. Phase 2, Industry
Cash Flow Analysis, focused on the industry as a whole. In this phase,
DOE used the GRIM to prepare an industry cash-flow analysis. DOE used
publicly available information developed in Phase 1 to adapt the GRIM
structure to analyze refrigerated beverage vending machine equipment
energy conservation standards. In Phase 3, Subgroup Impact Analysis,
DOE interviewed manufacturers representing the majority of domestic
refrigerated beverage vending machine equipment sales. During these
interviews, DOE discussed engineering, manufacturing, procurement, and
financial topics specific to each company, and also obtained each
manufacturer's view of the industry as a whole. The interviews provided
valuable information DOE used to evaluate the impacts of energy
conservation standards on manufacturer cash flows, manufacturing
capacities, and employment levels.
a. Phase 1, Industry Profile
In Phase 1 of the MIA, DOE prepared a profile of the refrigerated
beverage vending machine equipment industry 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 refrigerated
beverage vending machine equipment industry. DOE collected such
information as market share, equipment shipments, markups, and cost
structure for various manufacturers. The industry profile includes
further detail on the overall market, equipment characteristics,
estimated manufacturer market shares, the financial situation of
manufacturers, and trends in the number of firms of refrigerated
beverage vending machine equipment industry.
The industry profile included a top-down cost analysis of
refrigerated beverage vending machine equipment manufacturers that DOE
used to derive equipment 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
information to further calibrate its initial characterization of the
industry, including U.S. Securities and Exchange Commission (SEC) 10-K
reports, Standard & Poor's (S&P) stock reports, and corporate annual
reports.
b. Phase 2, Industry Cash-Flow Analysis
Phase 2 of the MIA focused on the financial impacts of potential
energy conservation standards on the industry as a whole. DOE used the
GRIM to calculate the financial impacts of energy conservation
standards on manufacturers. In Phase 2, DOE used the GRIM to perform a
preliminary industry cash-flow analysis. In performing this analysis,
DOE used the financial values determined during Phase 1 and the
shipment scenarios used in the NIA analysis.
c. Phase 3, Subgroup Impact Analysis
Using average cost assumptions to develop an industry cash-flow
estimate does not adequately assess differential impacts among
manufacturer subgroups. For example, small manufacturers, niche
players, or manufacturers exhibiting a cost structure that largely
differs from the industry average could be more negatively affected.
DOE used the results of the industry characterization analysis (in
Phase 1) to group manufacturers that exhibit similar characteristics.
DOE established two subgroups for the MIA corresponding to large
and small business manufacturers of beverage vending machines. For the
beverage vending machine manufacturing industry, small businesses, as
defined by the Small Business Administration (SBA), are manufacturing
enterprises with 500 or fewer employees. Based on identification of
these two subgroups, DOE prepared one interview guide with questions
related to beverage vending machine manufacturing for large and small
manufacturers. DOE used the interview guide to tailor the GRIM to
address unique financial characteristics of manufacturers of the
industry. DOE interviewed companies from each subgroup, including
subsidiaries and independent firms and public and private corporations.
The purpose of the interviews was to develop an understanding of how
manufacturer impacts vary by TSL. During the course of the MIA, DOE
interviewed manufacturers representing the vast
[[Page 26045]]
majority of domestic beverage vending machine sales. Many of these same
companies also participated in interviews for the engineering analysis.
However, the MIA interviews broadened the discussion from primarily
technology-related issues to include business-related topics. One
objective was to obtain feedback from industry on the assumptions used
in the GRIM and to isolate key issues and concerns. See chapter 13 of
the TSD for details.
2. Discussion of Comments
In the ANOPR, DOE reported that manufacturers claimed higher energy
conservation standards could deter some customers from buying higher
margin units with more features. 73 FR 34130. The Joint Comment
disagreed with this claim, stating that manufacturers have many options
besides energy use to differentiate products. All these features have
value to customers because they help sell more product or cut operating
costs. (Joint Comment, No. 34 at pp. 6-7)
For the ANOPR, DOE reported some of the preliminary concerns
manufacturers voiced during the initial engineering interviews. For the
NOPR, DOE interviewed manufacturers and major customers and conducted
market research to understand profitability in the beverage vending
machine industry. DOE learned that the vast majority of equipment
produced by manufacturers meets the same efficiency levels. In
addition, the energy consumption of most equipment sold in the beverage
vending machine industry is set by the specifications of the major
purchasers of the equipment. Based on manufacturer interviews and the
information found in the MIA, manufacturers design their equipment to
meet this requirement of the large purchasers, but rarely exceed it.
Because efficiency does not vary and the product designs are determined
mainly by the major purchasers of the equipment, manufacturers
typically do not earn a higher margin for additional features. Annual
shipments are mainly determined by contracts with the major customers
to replace a portion of retiring equipment. Additional features are
unlikely to stimulate additional demand, especially if these features
add costs to the purchaser or manufacturer. Due to split incentives,
manufacturers may not earn a higher margin for equipment that reduces
operating costs for the end-user, since these benefits are not directly
conferred on the purchaser.
The Joint Comment stated that DOE provided an estimate for the life
cycle of a beverage vending machine production line during the ANOPR.
The Joint Comment also stated that the low end of this range is shorter
than the time frame from the beginning of this rulemaking to the
possible effective date of the standard. Thus, a manufacturer that
chooses to anticipate a standard can reduce or eliminate standards-
induced capital conversion costs. The commenters believe that DOE
should not view capital conversion costs as a result of the regulation,
but as a result of some manufacturers' failure to plan for standards.
While manufacturers cannot know precise standards levels, the ANOPR
analysis provides a very strong indication that standards at or near
level 7 should be expected. (Joint Comment, No. 34 at p. 7)
In the ANOPR, DOE stated that a beverage vending machine production
line has a life cycle of approximately 5 to 10 years in the absence of
standards. 73 FR 34130. However, manufacturers would not be able to
reduce or eliminate standards-induced capital conversion costs because
a 5-year production line life cycle is shorter than the time frame
between the initiation of this rulemaking and the possible effective
date. In the GRIM, DOE incorporates annual research and development
costs and the capital expenditures manufacturers would undertake
regardless of standards. The INPV reported for the beverage vending
machine industry incorporates the impacts due to new energy
conservation standards. DOE separates recurring research and
development and capital expenditures that occur regardless of energy
conservation standards from equipment and capital conversion costs.
Capital and equipment conversion costs capture the additional costs
that manufacturers will face due to standards and are necessary to
accurately calculate the impacts standards have on INPV. To minimize
the costs that may be required to convert production lines to produce
higher efficiency equipment, manufacturers will usually wait until
standards are published. Manufacturers will not know the stringency of
this standard until the publication of the final rule, which is
scheduled for August 8, 2009. Finally, the energy conservation standard
for this rulemaking applies to all equipment manufactured on or after 3
years of the publication of the final rule (42 U.S.C. 6295(v)(3)). This
allows manufacturers 3 years after the publication date of the energy
conservation standard levels to make any changes to production lines
that would be required to comply with the new energy conservation
standard. Since this preparation time is less than the lower end of the
estimated beverage vending machine production line life cycle, DOE
assumes that one-time capital conversion costs can be attributed to the
new energy conservation standard level.
The Joint Comment questioned the assertion that stringent standards
could cause production to be moved outside the United States. The Joint
Comment noted that sourcing decisions are sensitive to the costs of
production and product distribution, and not to the energy efficiency
of the unit being produced (Joint Comment, No. 34 at p. 7).
DOE agrees that sourcing decisions are sensitive to the costs of
production and product distribution. However, since the efficiency of
equipment sold can directly affect production costs, DOE believes that
the level of the new energy conservation standard could affect sourcing
decisions. However, as noted in the Joint Comment, sourcing decisions
are based on several factors, including many outside the scope of this
rulemaking (e.g., product distribution costs). Consequently, DOE does
not speculate how standards will affect sourcing decisions.
3. Government Regulatory Impact Model Analysis
The GRIM analysis uses a standard annual cash-flow analysis that
incorporates manufacturer selling prices, manufacturing production
costs, shipments, and industry financial information as inputs. The
analysis models changes in costs, distribution of shipments,
investments, and associated margins that would result from new or
amended 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 (2008) 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 compare changes in INPV between a base case and various
TSLs (the standards cases). Essentially, the difference in INPV between
the base case and a standards case represents the financial impact of
energy conservation standards on manufacturers. DOE collected this
information from a number of sources, including publicly available data
and interviews with manufacturers. See chapter 13 of the TSD for
details.
4. Manufacturer Interviews
As part of the MIA, DOE discussed potential impacts of new energy
conservation standards with
[[Page 26046]]
manufacturers responsible for more than 65 percent of the beverage
vending machines on the market. These interviews were in addition to
those DOE conducted as part of the engineering analysis. DOE used the
interviews to evaluate the impacts of new energy conservation standards
on manufacturer cash flows, manufacturing capacities, and employment
levels. Key issues that the manufacturers identified for DOE to
consider in developing energy conservation standards are discussed in
chapter 13 of the TSD.
5. Government Regulatory Impact Model Key Inputs and Scenarios
a. Base Case Shipments Forecast
The GRIM estimates manufacturer revenues based on unit shipment
forecasts and the distribution by equipment class and efficiency.
Changes in the efficiency mix at each standard level are a key driver
of manufacturer finances. Consequently, DOE is seeking comment on the
shipments forecast (section VII.E.2). For this analysis, the GRIM used
the NES shipments forecasts from 2008 to 2042. Total shipments
forecasted by the NES for the base case in 2012 are shown in Table IV-
12 and further discussed in this section of today's notice and chapter
10 of the TSD. Using the equipment class shipment assumptions from the
NES, the GRIM maintains total industry shipments consisting of 55
percent Class A equipment and 45 percent Class B equipment throughout
the analysis period.
Table IV-12-Total NES-Forecasted Shipments in 2012
[Number of Units]
------------------------------------------------------------------------
Total industry shipments
Equipment class by equipment class
------------------------------------------------------------------------
Class A....................................... 49,500
Class B....................................... 40,500
------------------------------------------------------------------------
In the shipments analysis, DOE also estimated the distribution of
efficiencies in the base case for beverage vending machines (chapter 10
of the TSD). Table IV-13 and Table IV-14 show examples of the
distribution of efficiencies in the base case for a Class A medium-size
and a Class B medium-size beverage vending machine.
Table IV-13--GRIM Distribution of Shipments in the Base Case for Class A Medium-Sized Beverage Vending Machines
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline
TSL kWh/day 6.10 TSL 1 5.27 TSL 2 4.75 TSL 3 4.25 TSL 4 3.95 TSL 5 3.73 TSL 6 3.58 TSL 7 3.25
--------------------------------------------------------------------------------------------------------------------------------------------------------
Distribution of shipments percent....... 10 90 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table IV-14--GRIM Distribution of Shipments in the Base Case for Class B Medium-Sized Beverage Vending Machines
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline
TSL kWh/day 4.96 TSL 1 4.62 TSL 2 4.31 TSL 3 4.31 TSL 4 4.28 TSL 5 3.78 TSL 6 3.69
--------------------------------------------------------------------------------------------------------------------------------------------
Distribution of Shipments percent......... 10 0 90 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
b. Standards Case Shipments Forecast
For each standards case, DOE assumed that shipments at efficiencies
below the projected standard levels were most likely to roll up to
those efficiency levels in response to an energy conservation standard.
This scenario assumes that demand for high-efficiency equipment is a
function of its price without regard to the standard level. See chapter
13 of the TSD for additional details.
c. Manufacturing Production Costs
DOE derived manufacturing production costs (MPCs) from
manufacturing selling prices found in the engineering analysis. Using
data from the U.S. Census Bureau to develop an industry cost structure,
DOE disaggregated the financial components that comprise manufacturing
selling price (production costs, SG&A, R&D, and profit). By summing the
labor, overhead, materials, and depreciation portions of the
manufacturing selling price, DOE estimated the manufacturing production
costs for the analyzed equipment. Further discussion of how DOE
calculated other GRIM financial inputs from publicly available
information is found in chapter 13 of the TSD.
d. Manufacturing Markup Scenarios
To understand how baseline and more efficient equipment are
differentiated, DOE reviewed manufacturer catalogs and information
gathered by manufacturers. In the base case, DOE used the manufacturer
selling prices from the engineering analysis. For the analysis, DOE
considered different manufacturer markup scenarios for beverage vending
machines. Scenarios were used to bound the range of expected equipment
prices following new energy conservation standards. For each equipment
class, DOE used the markup scenarios that best characterized the
prevailing markup conditions and captured the range of market responses
that could result from new energy conservation standards. DOE learned
from interviews with manufacturers that the majority only offer one
equipment line for each product class that meets the same efficiency
level. Similar efficiency levels and the small number of product
offerings in each product class generally mean that there is no
difference in markup used to differentiate baseline equipment from
premium equipment.
For the MIA, DOE considered two distinct markup scenarios: (1) The
preservation-of-gross-margin-percentage scenario, and (2) the
preservation-of-operating-profit scenario. Under the ``preservation-of-
gross-margin-percentage'' scenario, DOE applied a single, uniform
``gross margin percentage'' markup across all efficiency levels. This
scenario implies that as production cost increases with efficiency, the
absolute dollar markup will increase. For this scenario, DOE used a
markup that yielded the same manufacturer selling prices found in the
engineering analysis. The implicit assumption behind the
``preservation-of-operating profit'' scenario is that the industry can
only maintain its operating profit (earnings before interest and taxes)
from the baseline after implementation of the standard (2012). The
industry impacts occur in this
[[Page 26047]]
scenario when manufacturers expand their capital base and production
costs to make more expensive equipment, but the operating profit does
not change from current conditions. DOE implemented this markup
scenario in the GRIM by setting the non-production cost markups at each
TSL to yield approximately the same operating profit in both the base
case and the standard case in the year after standard implementation
(2012).
e. Equipment 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. For the purpose of the MIA, DOE
classified these conversion costs into two major groups: (1) Equipment
conversion costs, and (2) capital conversion costs. Equipment
conversion costs are one-time investments in research, development,
testing, and marketing, focused on making equipment designs comply with
the new energy conservation standard. Capital conversion costs are one-
time investments in property, plant, and equipment to adapt or change
existing production facilities so that new equipment designs can be
fabricated and assembled.
DOE assessed the R&D expenditures manufacturers would be required
to make at each TSL. DOE obtained financial information through
manufacturer interviews and aggregated the results to mask any
proprietary or confidential information from any one manufacturer. DOE
considered a number of manufacturer responses for beverage vending
machines at each TSL. DOE estimated the total equipment conversion
costs by gathering manufacturer responses, then weighting these
responses by market share.
DOE also evaluated the level of capital conversion expenditures
manufacturers would incur to comply with energy conservation standards.
DOE used the manufacturer interviews to gather data on the level of
capital investment required at each TSL. Manufacturers explained how
different TSLs affected their ability to use existing plants, tooling,
and equipment. From the interviews, DOE was able to estimate what
portion of existing manufacturing assets would need to be replaced or
reconfigured, and what additional manufacturing assets would be
required to manufacture the higher-efficiency products.
The investment figures used in the GRIM can be found in section
V.B.2 of today's notice. For additional information on the estimated
product conversion and capital conversion costs, see chapter 13 of the
TSD.
J. Utility Impact Analysis
The utility impact analysis estimates the effects of reduced energy
consumption resulting from improved equipment efficiency on the utility
industry. This utility analysis compares forecast results for a case
comparable to the AEO2008 reference case and forecasts for policy cases
incorporating each of the beverage vending machine TSLs.
NPCC asked whether the utility impact analysis computes a national
capital cost savings because of the change in new utility capacity from
each standard level (NPCC, No. 29 at p. 196). DOE does compute the
impact on total gigawatts (GW) of generation capacity in its utility
impact analysis, but does not monetize changes in capital costs for
building power plants.
DOE analyzed the effects of proposed standards on electric utility
industry generation capacity and fuel consumption using a variant of
EIA's NEMS. The NEMS-BT is run similarly to the AEO2008 NEMS, except
that beverage vending machine energy usage is reduced by the amount of
energy (by fuel type) saved because of the TSLs. DOE obtained the
inputs of the NES from the NES spreadsheet model. For the final rule,
DOE intends to report utility analysis results using a version of NEMS-
BT based on the AEO2009 NEMS.
DOE conducted the utility analysis as policy deviations from the
AEO2008, applying the same basic set of assumptions. In the utility
analysis, DOE reported the changes in installed capacity and generation
by fuel type that result for each TSL, as well as changes in end-use
electricity sales. Chapter 14 of the NOPR TSD provides details of the
utility analysis methods and results.
K. Employment Impact Analysis
Employment impact is one factor DOE considers in selecting a
standard. Employment impacts include direct and indirect impacts.
Direct employment impacts are any changes in the number of employees
for beverage vending machine manufacturers, their suppliers, and
related service firms. Indirect impacts are those changes of employment
in the larger economy that occur because of the shift in expenditures
and capital investment caused by the purchase and operation of more
efficient beverage vending machines. The MIA in this rulemaking
addresses only the direct employment impacts on manufacturers of
beverage vending machines. Chapter 15 of the TSD describes other,
primarily indirect, employment impacts.
Indirect employment impacts from beverage vending machine standards
consist of the net jobs created or eliminated in the national economy,
other than in the manufacturing sector being regulated, as a
consequence of (1) Reduced spending by end users on electricity (offset
to some degree by the increased spending on maintenance and repair),
(2) reduced spending on new energy supply by the utility industry, (3)
increased spending on the purchase price of new beverage vending
machines, 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 developing this notice of proposed rulemaking, DOE estimated
indirect national employment impacts using an input/output model of the
U.S. economy, called ImSET (Impact of Sector Energy Technologies)
developed by DOE's Building Technologies Program. ImSET is a personal-
computer-based, economic analysis model that characterizes the
interconnections among 188 sectors of the economy as national input/
output structural matrices using data from the U.S. Department of
Commerce's 1997 Benchmark U.S. input-output table. The ImSET model
estimates changes in employment, industry output, and wage income in
the overall U.S. economy resulting from changes in expenditures in
various sectors of the economy. DOE estimated changes in expenditures
using the NES spreadsheet. ImSET then estimated the net national
indirect employment impacts of beverage vending machine efficiency
standards on employment by sector.
The ImSET input/output model suggests that the proposed beverage
vending machine efficiency standards could increase the net demand for
labor in the economy and the gains would most likely be very small
relative to total national employment. DOE therefore concludes that the
proposed beverage vending machine standards are not likely to produce
employment benefits that are sufficient to fully offset any adverse
impacts on employment in the beverage vending machine industry. For
more details on the employment impact analysis and its results, see
chapter 15 of the TSD and section V.B.3.c of this notice.
[[Page 26048]]
L. Environmental Assessment
DOE has prepared a draft environmental assessment (EA) pursuant to
the National Environmental Policy Act and the requirements under 42
U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(a) to determine the environmental
impacts of the standards being established in today's final rule.
Specifically, DOE estimated the reduction in total emissions of
CO2 and NOX using the NEMS-BT computer model. DOE
calculated a range of estimates for reduction in Hg emissions using
current power sector emission rates. The EA does not include the
estimated reduction in power sector impacts of sulfur dioxide
(SO2), because DOE has determined that any such reduction
resulting from an energy conservation standard would not affect the
overall level of SO2 emissions in the United States due to
the presence of national caps on SO2 emissions. These topics
are addressed further below; see chapter 16 of the TSD for additional
detail.
The NEMS-BT is run similarly to the AEO2008 NEMS, except the
beverage vending machine energy use is reduced by the amount of energy
saved (by fuel type) due to the trial standard levels. The inputs of
national energy savings come from the NIA analysis. For the EA, the
output is the forecasted physical emissions. The net benefit of the
standard is the difference between emissions estimated by NEMS-BT and
the AEO2008 reference case. The NEMS-BT tracks CO2 and
NOX emissions using a detailed module that provides broad
coverage of all sectors and includes interactive effects.
Sulfur Dioxide (SO2)
The Clean Air Act Amendments of 1990 set an emissions cap on
SO2 for all power generation. Attaining this target is
flexible among generators and is enforced through emissions allowances
and tradable permits. In other words, with or without a standard, total
cumulative SO2 emissions will always be at or near the
ceiling, while there may be some timing differences among yearly
forecasts. Thus, it is unlikely that there will be reduced overall
SO2 emissions from standards as long as the emissions
ceilings are enforced. Although there may be no actual reduction in
SO2 emissions, 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 lessen the need to purchase SO2
emissions allowance credits, and thereby decrease the costs of
complying with regulatory caps on emissions.
NOX
NOX emissions from 28 eastern States and the District of
Columbia (D.C.) are limited under the Clean Air Interstate Rule (CAIR),
published in the Federal Register on May 12, 2005. 70 FR 25162 (May 12,
2005). Although the rule has been remanded to EPA by the D.C. Circuit,
it will remain in effect until it is replaced by a rule consistent with
the Court's opinion in North Carolina v. EPA. Because all States
covered by CAIR opted to reduce NOX emissions through
participation in cap-and-trade programs for electric generating units,
emissions from these sources are capped across the CAIR region. As with
the SO2 emissions cap, energy conservation standards are not
likely to have a physical effect on NOX emissions in those
States. However, the standards proposed in today's NOPR might have
produced an environmentally related economic impact in the form of
lower prices for emissions allowance credits if they were large enough.
DOE believes that such standards would not produce such an impact
because the estimated reduction in NOX emissions or the
corresponding increase in available allowance credits in States covered
by the CAIR cap would be too small to affect allowance prices for
NOX.
In contrast, new or amended energy conservation standards would
reduce NOX emissions in those 22 States that are not
affected by the CAIR, and these emissions could be estimated from NEMS-
BT. As a result, DOE used the NEMS-BT to forecast emission reductions
from the beverage vending machine standards that are considered in
today's NOPR.
Though currently in effect, CAIR has been the subject of
significant litigation. CAIR was vacated by the U.S. Court of Appeals
for the District of Columbia Circuit (D.C. Circuit) in its July 11,
2008, decision in North Carolina v. Environmental Protection
Agency.\34\ However, on December 23, 2008, the D.C. Circuit decided to
allow the CAIR to remain in effect until it is replaced by a rule
consistent with the court's earlier opinion.\35\
---------------------------------------------------------------------------
\34\ 531 F.3d 896 (D.C. Cir. 2008).
\35\ North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008)
(remand of vacatur).
---------------------------------------------------------------------------
Mercury (HG)
Similar to SO2 and NOX, future emissions of
Hg would have been subject to emissions caps under the Clean Air
Mercury Rule (CAMR). The CAMR would have permanently capped emissions
of mercury for new and existing coal-fired plants in all States by
2010, but was vacated by the D.C. Circuit in its February 8, 2008,
decision in New Jersey v. Environmental Protection Agency.\36\ DOE
typically uses the NEMS-BT model to calculate emissions from the
electrical generation sector; however, the 2008 NEMS-BT model is not
suitable for assessing mercury emissions in the absence of a CAMR cap.
Thus, DOE used a range of Hg emissions rates (in tons of Hg per energy
per TWh produced) based on the AEO2008. Because the high end of the
range of Hg emissions rates attributable to electricity generation are
from coal-fired power plants, DOE based that emissions rate on the tons
of mercury emitted per TWh of coal-generated electricity. DOE's low
estimate assumed that future standards would displace electrical
generation from natural gas-fired powered power plants. The low end of
the range of Hg emissions rates is zero because natural gas-fired
powered power plants have virtually no Hg emissions associated with
their operations. To estimate the reduction in mercury emissions, DOE
multiplied the emissions rates by the reduction in electricity
generation associated with the standards proposed in today's NOPR.
---------------------------------------------------------------------------
\36\ New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008).
---------------------------------------------------------------------------
Refrigerant Leaks
DOE received one comment regarding the treatment of refrigerant
leaks during beverage vending machine production and end-use in which
DOE was asked how it would analyze this issue in the environmental
assessment. (EEI, No. 37 at p. 4) In response, DOE notes that it has no
reliable information on the rates of refrigerant leaks during the
production of and during operational life of beverage vending machines,
and consequently did not conduct a quantitative analysis of
environmental impacts from refrigerant leaks. DOE does not anticipate a
significant change in shipments for beverage vending machines,
significant changes in refrigerant use by the beverage vending machine
manufacturers, or significant changes in refrigerant leakage rates as a
result of new energy conservation standards. DOE does not have any
information indicating that refrigerant leakage rates would vary by
energy efficiency level.
M. Monetizing Carbon Dioxide and Other Emissions Impacts
DOE also calculated the possible monetary benefit of
CO2, NOX, and Hg
[[Page 26049]]
reductions. Cumulative monetary benefits were determined using discount
rates of 3 and 7 percent. DOE monetized reductions in CO2
emissions due to the standards proposed in this NOPR based on a range
of monetary values drawn from studies that attempt to estimate the
present value of the marginal economic benefits (based on the avoided
marginal social costs of carbon) likely to result from reducing
greenhouse gas emissions. The marginal social cost of carbon is an
estimate of the monetary value to society of the environmental damages
of CO2 emissions. This concept is used rather than
compliance costs because CO2 is not regulated. Several
parties provided comments on the economic valuation of CO2
for the NOPR.
On the treatment of emissions, Earthjustice made the following four
statements:
(1) DOE cannot rationally weigh the economic benefit of reduced
emissions unless it actually calculates the economic dimension of those
emissions reductions. (Earthjustice, No. 38 at p. 2)
(2) DOE must evaluate the impact of vending machine standards on
NOX through a two-pronged approach, calculating both the
effect on allowance prices under the NOX SIP Call rule,
where applicable, and the monetary value of avoided NOX
emissions. (Earthjustice, No. 38 at p. 3)
(3) Once DOE calculates the projected reductions in mercury
emission, it must assign an appropriate economic value to those
emissions. (Earthjustice, No. 38 at p. 3)
(4) Excluding CO2 emissions reduction benefits from
DOE's NPV analysis on the basis of uncertainty about their precise
measure would be arbitrary and capricious. (Earthjustice, No. 38 at p.
4)
In addition, NRDC advocated that DOE monetize the value of
CO2 emissions and take that into account in the LCC
analysis, using a price for carbon emissions based on EIA's analysis of
the Lieberman-Warner bill. (NRDC, Public Meeting Transcript, No. 29 at
p. 107)
In response to the ANOPR comments on monetization of emissions and
how that is included in the DOE analyses, DOE notes that neither EPCA
nor NEPA requires that the economic value of emissions reduction be
incorporated in the LCC or NPV analysis of energy savings. Unlike
energy savings, the economic value of the emissions reductions
discussed by commenters is not priced in the marketplace. DOE has
chosen to report these benefits separately from the net benefits of
energy savings. A summary of the monetary results is shown in section
V.B.6 of this notice. DOE will consider both values when weighing the
benefits and burdens of standards.
With respect to NOX, the proposed standards might have
produced an environmentally related economic impact in the form of
lower prices for emissions allowance credits if they were large enough.
However, DOE believes that in the present case, such standards would
not produce even an environmentally related economic impact in the form
of lower prices for emissions allowance credits because the estimated
reduction in NOX emissions or the corresponding allowance
credits in States covered by the CAIR cap would be too small to affect
allowance prices for NOX under the CAIR.
V. Analytical Results
A. Trial Standard Levels
DOE analyzed seven energy consumption levels for Class A equipment
and six energy consumption levels for Class B equipment in the LCC and
NIA analyses. For the NOPR, DOE determined that each of these levels
should be presented as a possible TSL and correspondingly identified
seven TSLs for Class A and six TSLs for Class B equipment. For each
equipment class, the range of TSLs selected includes the energy
consumption level providing the maximum NES level for the class, the
level providing the maximum NES while providing a positive NPV, the
level providing the maximum NPV, and the level approximately equivalent
to ENERGY STAR Tier 2. Many of the higher levels selected correspond to
equipment designs that incorporate specific noteworthy technologies
that can provide energy savings benefits. For Class A, DOE also
included two intermediate efficiency levels to fill in significant
energy consumption gaps between the levels identified above the ENERGY
STAR Tier 2 equivalent level. For Class A equipment, the ENERGY STAR
Tier 2 equivalent TSL level, TSL 1, allows for the highest energy
consumption. For Class B, DOE included one trial standard level with
energy consumption higher than that provided by ENERGY STAR Tier 2.
For the ANOPR, DOE proposed four candidate standard levels for each
equipment class based on the levels that provided maximum energy
savings, maximum efficiency level with positive LCC savings, maximum
LCC savings, and the highest efficiency level with a payback of less
than 3 years.
DOE preserved energy consumption levels from the ANOPR that met the
same economic criteria in the NOPR, but also included the Tier 2
equivalency level and several additional TSLs. These additional levels
either provide additional intermediate efficiency levels or include
specific noteworthy technologies examined in the engineering analysis.
Table V-1 and Table V-2 show the TSL levels DOE selected for the
equipment classes and sizes analyzed. For Class A equipment, TSL 7 is
the max-tech level for each equipment class. TSL 6 is the maximum
efficiency level with a positive NPV at the 7-percent discount rate,
achieved by incorporating an electronically commutated motor (ECM)
condenser fan. TSL 5 is the efficiency level with the maximum NPV and
maximum LCC savings, achieved by using an advanced refrigerant
condenser design. TSL 4 is the level that first incorporated LED
lighting as a design feature in the engineering analysis. TSL 3 and TSL
2 were intermediate efficiency levels chosen to bridge the gap between
TSL 4, and the ENERGY STAR Tier 2 equivalent level, TSL 1.
For Class B equipment, TSL 6 is the max-tech level for each
equipment size. TSL 5 is the level that first incorporated LED lighting
as a design option in the engineering analysis. TSL 4 is the next
highest efficiency level including incorporation of an ECM condenser
fan motor. TSL 3 was achieved by using an advanced refrigerant
condenser design. This TSL provided an NPV value of essentially 0, with
total capital expenditures for new equipment balanced by total
operating cost savings over the NIA analysis period, based on a 7-
percent discount rate. TSL 2 is the ENERGY STAR Tier 2 level for Class
B equipment. This TSL provided the maximum LCC savings and maximum NPV
savings at a 7-percent discount rate. TSL 1, which provided an energy
consumption level approximately 4 percent higher than TSL 2, was also
included in the analysis. TSL 1 represented the first level
incorporating an evaporator fan driven by an ECM in the engineering
analysis.
As determined in the ANOPR, DOE chose to characterize the proposed
TSL levels in terms of proposed equations that establish a maximum
daily energy consumption (MDEC) limit through a linear equation of the
following form:
MDEC = A x V + B
Where:
A is expressed in terms of kWh/day/ft\3\ of measured volume,
V is the measured refrigerated volume (ft\3\) calculated for the
equipment, and
B is an offset factor expressed in kWh/day.
Coefficients A and B are uniquely derived for each equipment class
based on a linear equation passing between
[[Page 26050]]
the daily energy consumption values for equipment of different
refrigerated volumes. For the development of the A and B coefficients,
DOE used the energy consumption values shown in Table V-1 and Table V-2
for the medium and large equipment sizes within each class of beverage
vending machine. DOE did not use the small equipment sizes in each
class because information from the ANOPR indicated that there are no
significant shipments of this equipment size. However, DOE seeks input
from interested parties on whether the proposed linear equation used to
describe the maximum daily energy consumption standards should be based
on medium and large equipment (using two points); small, medium, and
large equipment (three points); or some other possible weighting
strategy. Results for using two points and three points are described
in more details in chapter 9 of the TSD.
Chapter 9 of the TSD explains the methodology DOE used for
selecting TSLs and developing the equations shown in Table V-3.
Table V-1--Trial Standard Levels for Class A Equipment Expressed in Terms of Daily Energy Consumption
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level in order of efficiency
Size Test metric -----------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Engineering level................ ..................... 1 5 *n/a *n/a 6 7 9 11
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small............................ kWh/day.............. 6.1 5.27 4.75 4.25 3.95 3.73 3.58 3.25
Medium........................... kWh/day.............. 6.53 5.51 5.25 4.75 4.19 3.95 3.79 3.43
Large............................ kWh/day.............. 6.75 6.21 5.75 5.25 4.89 4.60 4.41 3.94
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Not applicable. These levels established as intermediate points along the engineering cost curves.
Table V-2--Trial Standard Levels for Class B Equipment Expressed in Terms of Daily Energy Consumption
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level in order of efficiency
Size Test metric -----------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Engineering level.................... ....................... 1 2 4 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small................................ kWh/day................ 4.96 4.62 4.31 4.31 4.28 3.78 3.69
Medium............................... kWh/day................ 5.56 5.2 4.99 4.76 4.72 4.22 4.12
Large................................ kWh/day................ 5.85 5.48 5.33 5.07 5.03 4.52 4.41
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V-3--Trial Standard Levels Expressed in Terms of Equations and Coefficients for Each Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level Test metric Class A Class B
----------------------------------------------------------------------------------------------------------------
Baseline........................ kWh/day............ MDEC = 0.019 x V + MDEC = 0.068 x V + 4.07.
6.09.
TSL 1........................... kWh/day............ MDEC = 0.062 x V + MDEC = 0.066 x V + 3.76.
4.12.
TSL 2........................... kWh/day............ MDEC = 0.044 x V + MDEC = 0.080 x V + 3.24.
4.26.
TSL 3........................... kWh/day............ MDEC = 0.044 x V + MDEC = 0.073 x V + 3.16.
3.76.
TSL 4........................... kWh/day............ MDEC = 0.062 x V + MDEC = 0.073 x V + 3.12.
2.80.
TSL 5........................... kWh/day............ MDEC = 0.058 x V + MDEC = 0.070 x V + 2.68.
2.66.
TSL 6........................... kWh/day............ MDEC = 0.055 x V + MDEC = 0.068 x V + 2.63.
2.56.
TSL 7........................... kWh/day............ MDEC = 0.045 x V + n/a*.
2.42.
----------------------------------------------------------------------------------------------------------------
* Not applicable. There is no TSL 7 for Class B machines.
B. Economic Impacts on Commercial Customers
1. Economic Impacts on Commercial Customers
a. Life-Cycle Cost and Payback Period
To evaluate the economic impact of the TSLs on customers, DOE
conducted an LCC analysis for each TSL. More efficient beverage vending
machines are expected to affect customers in two ways: annual operating
expense is expected to decrease and purchase price is expected to
increase. DOE analyzed the net effect by calculating the LCC. Inputs
used for calculating the LCC include total installed costs (i.e.,
equipment price plus installation costs), annual energy savings,
average electricity costs by customer, energy price trends, repair
costs, maintenance costs, equipment lifetime, and discount rates.
DOE's LCC and PBP analyses provided five outputs for each TSL that
are reported in Table V-4 through Table V-6 for Class A equipment. The
first three outputs are the percentages of standard-compliant machine
purchases that would result in (1) A net LCC increase, (2) no impact,
or (3) a net LCC savings for the customer. DOE used the estimated
distribution of shipments by efficiency level for each equipment class
to determine the affected customers. The fourth output is the average
net LCC savings from standard-compliant equipment. The fifth output is
the average PBP for the customer investment in standard-compliant
equipment. The PBP is the number of years it would take for the
customer to recover, through energy savings, the increased costs of
higher efficiency equipment compared to baseline efficiency equipment.
[[Page 26051]]
Table V-4--Summary LCC and PBP Results for Class A-Large-IN
----------------------------------------------------------------------------------------------------------------
Trial Standard Level
-----------------------------------------------------------------------------------
1 2 3 4 5 6 7
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC 0 0 0 0 0 7 100
Increase %.................
Equipment with No Change in 90 0 0 0 0 0 0
LCC %......................
Equipment with Net LCC 10 100 100 100 100 93 0
Savings %..................
Mean LCC Savings $.......... 91 145 204 246 272 271 (1,419)
Mean Payback Period years... 2.1 2.9 3.2 3.3 3.5 3.9 74.0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-5--Summary LCC and PBP Results for Class A-Medium-IN
----------------------------------------------------------------------------------------------------------------
Trial Standard Level
-----------------------------------------------------------------------------------
1 2 3 4 5 6 7
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC 0 0 0 0 0 0 100
Increase %.................
Equipment with No Change in 90 0 0 0 0 0 0
LCC %).....................
Equipment with Net LCC 10 100 100 100 100 100 0
Savings %..................
Mean LCC Savings $.......... 175 223 258 327 339 331 (1,119)
Mean Payback Period years... 2.0 1.9 2.8 3.0 3.3 3.7 59.2
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-6--Summary LCC and PBP Results for Class A-Small-IN
----------------------------------------------------------------------------------------------------------------
Trial standard level
-----------------------------------------------------------------------------------
1 2 3 4 5 6 7
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC 0 0 0 0 0 7 100
Increase %.................
Equipment with No Change in 90 0 0 0 0 0 0
LCC %......................
Equipment with Net LCC 10 100 100 100 100 93 0
Savings %..................
Mean LCC Savings $.......... 141 197 251 284 297 290 (1,090)
Mean Payback Period years... 2.0 2.7 3.1 3.2 3.5 3.9 69.7
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
For the Class A equipment, there are positive net LCC savings on
average through TSL 6. Only 10 percent of all equipment purchased is
expected to achieve a net LCC savings at the first TSL level, since
about 90 percent of the equipment on the market in 2012 is expected to
meet that standard. LCC savings consistently peak at TSL 5, but for
between 93 percent and 100 percent of purchasers, Class A equipment is
projected to achieve LCC savings even at TSL 6. Simple average PBPs are
projected to be less than 3 years for all Class A equipment through TSL
2. PBPs are less than 4 years through TSL 6.
DOE's LCC and PBP analyses provided the same five outputs for each
TSL for Class B equipment. These outputs are reported in Table V-7
through Table V-9.
Table V-7--Summary LCC and PBP Results for Class B-Large
----------------------------------------------------------------------------------------------------------------
Trial standard level
-----------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase %....... 0 9 19 27 100 100
Equipment with No Change in LCC %....... 90 0 0 0 0 0
Equipment with Net LCC Savings %........ 10 91 81 73 0 0
Mean LCC Savings $...................... 48 53 51 42 (515) (2,352)
Mean Payback Period years............... 3.0 4.1 5.8 6.6 74.0 100.0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-8--Summary LCC and PBP Results for Class B--Medium
----------------------------------------------------------------------------------------------------------------
Trial standard level
-----------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase %....... 0 11 21 33 100 100
Equipment with No Change in LCC %....... 90 0 0 0 0 0
Equipment with Net LCC Savings %........ 10 89 79 67 0 0
Mean LCC Savings $...................... 46 57 48 38 (528) (2,170)
[[Page 26052]]
Mean Payback Period years............... 3.1 4.1 6.1 6.9 76.9 100.0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-9--Summary LCC and PBP Results for Class B--Small
----------------------------------------------------------------------------------------------------------------
Trial standard level
-----------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Equipment with Net LCC Increase %....... 1 39 39 47 100 100
Equipment with No Change in LCC %....... 90 0 0 0 0 0
Equipment with Net LCC Savings %........ 10 61 61 53 0 0
Mean LCC Savings $...................... 39 26 26 13 (582) (2,070)
Mean Payback Period years............... 3.5 7.5 7.5 9.1 86.9 100.0
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
For Class B equipment, there are positive net LCC savings on
average through TSL 4. Only 10 percent of all equipment purchased is
expected to achieve a net LCC savings at the first TSL level, since
about 90 percent of the equipment on the market in 2012 is expected to
meet that standard. LCC savings consistently peak at TSL 3, but for 53
percent to 74 percent of purchasers, Class B equipment is projected to
achieve LCC savings at TSL 5. Simple average PBPs are projected to be
about 3 years for large and medium size Class B equipment at TSL 1.
PBPs are about 4 years for large and medium size Class B equipment
through TSL 2.
b. Life-Cycle Cost Subgroup Analysis
Using the LCC spreadsheet model, DOE estimated the impact of the
TSLs on the following customer subgroup: Manufacturing facilities that
have purchased their own beverage vending machines. This is the largest
component of the 5 percent of site owners who also own their own
vending machines, and comprises about 2 percent of all beverage vending
machines. About 95 percent are owned by bottlers and vendors. The
manufacturing facilities subgroup was analyzed because, in addition to
being the largest independent block of owners, it had among the highest
financing costs (based on weighted average cost of capital) and faced
the lowest energy costs of any customer group. The group was therefore
expected to have the least LCC savings and longest PBP of any
identifiable customer group.
DOE estimated the LCC and PBP for the manufacturing facilities
subgroup. Table V-10 shows the mean LCC savings for equipment that
meets the proposed energy conservation standards for the manufacturing
facilities subgroup, and Table V-11 shows the mean PBP (in years) for
this subgroup. More detailed discussion on the LCC subgroup analysis
and results can be found in chapter 12 of the TSD.
Table V-10--Mean Life-Cycle Cost Savings for Refrigerated Beverage Vending Machine Equipment Purchased by the Manufacturing Facilities LCC Subgroup
(2008$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment Class Size TSL 1 TSL 2 TSL 3 TSL 4 TSL5 TSL6 TSL 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
A S $94 $123 $150 $166 $168 $153 -$1,210
A M 118 152 160 197 197 181 -1,256
A L 60 89 121 144 153 142 -1,537
B S 22 -6 -6 -19 -623 -2,072 NA
B M 27 28 9 -2 -579 -2,183 NA
B L 29 27 13 2 -567 -2,361 NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V-11 Mean Payback Period for Refrigerated Beverage Vending Machine Equipment Purchased by the Manufacturing Facilities LCC Subgroup (Years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment Class Size TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
A S 2.4 3.4 3.8 4.0 4.3 4.8 81.0
A M 2.4 2.3 3.5 3.7 4.1 4.6 74.1
A L 2.6 3.5 3.9 4.1 4.4 4.9 84.2
B S 4.4 10.0 10.0 12.4 95.8 100.0 NA
B M 3.9 5.2 7.9 9.1 88.7 100.0 NA
B L 3.7 5.1 7.4 8.6 86.1 100.0 NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
For beverage vending machines, the LCC and PBP impacts for
manufacturing facilities that own their own beverage vending machines
are less than those of all customers. Because they face lower energy
costs, the lower value of energy savings lengthens the period over
which the original investment is paid back and also reduces operating
cost savings over
[[Page 26053]]
the lifetime of more efficient beverage vending machines. In addition,
because they face higher financing costs, these sites have a relatively
high opportunity cost for investment, so the value of future
electricity savings from higher efficiency equipment is further
reduced. Even so, for this subgroup of Class A machines, LCC is still
positive for all but the TSL 8 level. PBP is lengthened by about a
year, but is still less than 4 years at TSL 1 and less than 5 years at
TSL.
2. Economic Impacts on Manufacturers
To assess the lower end of the range of potential impacts for the
beverage vending machine industry, DOE considered the preservation-of-
gross-margin-percentage scenario. This scenario represents the lower
end of the range of industry profitability because it assumes that
manufacturers are able to pass through increased production costs to
their customers. However, manufacturers indicated during interviews
that market conditions usually do not allow them to fully pass costs to
their customers.
To assess the higher end of the range of potential impacts for the
beverage vending machine industry, DOE considered the preservation-of-
operating-profit scenario. The preservation-of-operating-profit
scenario models manufacturer concerns about the overcapacity of the
industry and the inability to set the prices they charge their
customers. In this scenario, manufacturers spend the necessary
investments required to convert their facilities to produce standards-
compliant equipment. Despite this effort, operating profit does not
change in absolute dollars and decreases as a percentage of revenue.
a. Class A Beverage Vending Machine Equipment
Table V-12 and Table V-13 show the MIA results for each TSL using
both scenarios described above for Class A beverage vending machines.
Table V-12--Manufacturer Impact Analysis for Class A Beverage Vending Machine Equipment Under the Preservation of Gross Margin Percentage Markup
Scenario
Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Metric Units Base ----------------------------------------------------------------------------
case 1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................. 2008$ millions........... 35.3 35.3 35.1 33.4 33.2 26.5 22.9 26.8
Change in INPV........................ 2008$ millions........... ........ 0.0 (0.2) (1.9) (2.1) (8.8) (12.4) (8.3)
%........................ ........ 0.08 -0.65 -5.47 -5.86 -24.95 -35.09 -23.67
Equipment Conversion Costs............ 2008$ millions........... ........ 0.0 0.6 0.6 1.2 2.9 3.5 3.5
Capital Conversion Costs.............. 2008$ millions........... ........ 0.0 0.0 2.2 2.2 9.1 13.0 14.1
Total Investment Required............. 2008$ millions........... ........ 0.0 0.6 2.8 3.4 11.9 16.4 17.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-13--Manufacturer Impact Analysis for Class A Beverage Vending Machine Equipment Under the Preservation of Operating Profit Markup Scenario
Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial Standard Level
Metric Units Base ----------------------------------------------------------------------------
case 1 2 3 4 5 6 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................. 2008$ millions........... 35.3 35.3 34.9 32.7 32.2 25.4 21.6 14.1
Change in INPV........................ 2008$ millions........... ........ (0.0) (0.4) (2.6) (3.1) (9.9) (13.7) (20.9)
%........................ ........ -0.04 -1.04 -7.45 -8.83 -28.14 -38.89 -59.74
Equipment Conversion Costs............ 2008$ millions........... ........ 0.0 0.6 0.6 1.2 2.9 3.5 3.5
Capital Conversion Costs.............. 2008$ millions........... ........ 0.0 0.0 2.2 2.2 9.1 13.0 14.1
Total Investment Required............. 2008$ millions........... ........ 0.0 0.6 2.8 3.4 11.9 16.4 17.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
DOE estimates that there are no significant impacts on INPV for
Class A equipment to meet TSL 1. The vast majority of equipment for
sale today meets TSL 1. Therefore, DOE expects there will be no
equipment or capital conversion costs and that industry revenue and
production costs will not be significantly negatively affected.
At TSL 2, DOE estimated the impacts in INPV for Class A equipment
to range from approximately -$0.2 million to -$0.4 million, a change in
INPV of -0.65 percent to -1.04 percent. At this level, the industry
cash flow decreases by approximately 6.5 percent, to $2.12 million,
compared to the base case value of $2.27 million in the year leading up
to the standards. At TSL 2, manufacturers will have to make some
component switches to comply with the standard. However, most
manufacturers will not have to make significant alterations to their
production process and will only require minimal conversion costs.
Though standards will increase the manufacturing production costs, the
incremental cost is not substantially larger than most equipment sold
today, resulting in minimal impacts on industry value.
At TSL 3, DOE estimated the impacts on INPV for Class A equipment
to range from approximately -$1.9 million to -$2.6 million, a change in
INPV of -5.47 percent to -7.45 percent. At this level, the industry
cash flow decreases by approximately 46 percent, to $1.23 million,
compared to the base case value of $2.27 million in the year leading up
to the standards. At TSL 3, manufacturers will have to make additional
component switches and minor changes to their production lines,
resulting in minimal equipment and capital conversion costs. Standards
increase production costs, but these
[[Page 26054]]
additional costs are not enough to severely affect INPV even if the
dollar value of operating profit remains unchanged.
At TSL 4, DOE estimated the impacts on INPV for Class A equipment
to range from -$2.1 million to -$3.1 million, a change in INPV of
approximately -5.86 percent to -8.83 percent. At this level, the
industry cash flow decreases by approximately 52.4 percent to $1.08
million, compared to the base case value of $2.27 million in the year
leading up to the standards. At TSL 4, certain manufacturers have to
make major changes to their production lines, while others will only
have to make minor component changes to their existing production lines
to comply with the standard. As a result, DOE believes TSL 4 may have
differential impacts among manufacturers. The most significant change
that must be implemented at this TSL is replacing fluorescent lighting
with LEDs. If profitability remains at pre-standard then the impacts on
INPV are worse.
At TSL 5, DOE estimated the impacts on INPV for Class A equipment
to range from -$8.8 million to -$9.9 million, a change in INPV of
approximately -24.95 percent to -28.14 percent. At this level, the
industry cash flow decreases by approximately 191.9 percent to -$2.09
million, compared to the base case value of $2.27 million in the year
leading up to the standards. At TSL 5, certain manufacturers have to
completely redesign all their existing equipment, while others only
have to make costly changes to their existing production lines to
comply with the standard. Therefore, DOE believes TSL 5 has
differential impacts among manufacturers. Depending on the pathway to
meet TSL 5, manufacturers may have to alter their existing equipment
cabinet designs, which would greatly increase conversion costs. These
costly equipment and capital conversion costs are the most significant
driver of INPV. In addition, the higher manufacturing costs of
standards-compliant equipment could reduce profitability.
At TSL 6, DOE estimated the impacts on INPV for Class A equipment
to range from -$12.4 million to -$13.7 million, a change in INPV of
approximately -35.09 percent to -38.89 percent. DOE seeks comment on
the magnitude of this estimated decline in INPV. Also, at TSL 6, the
industry cash flow decreases by approximately 267.0 percent to -$3.79
million, compared to the base case value of $2.27 million in the year
leading up to the standards. In addition, manufacturers have to
redesign all their existing equipment and make capital investments in
their production lines to comply with the standard. Manufacturers will
have to make additional alterations to the existing equipment cabinet
designs. In addition, the equipment changes necessary to meet TSL 6 are
more complex, which increases the engineering and capital resources
that must be employed. The production costs of equipment that meets TSL
6 are higher than at TSL 5. The cost to manufacture standards-compliant
equipment could have a greater impact on profitability if the dollar
value of operating profit remains unchanged. However, at TSL 5, the
costly equipment and capital conversion costs are a more significant
driver of INPV because the revenues from the higher incremental prices
do not offset the greater conversion expenditures even if operating
profit increases under standards. At TSL 6, DOE believes there are no
differential impacts among manufacturers.
At TSL 7 (max-tech), DOE estimated the impacts on INPV for Class A
to range from -$8.3 million to -$20.9 million, a change in INPV of
approximately -23.67 percent to -59.74 percent. At this level, the
industry cash flow decreases by approximately 287.9 percent to -$4.27
million, compared to the base case value of $2.27 million in the year
leading up to the standards. Similar to TSL 6, TSL 7 involves
additional and more complex changes to equipment cabinet designs. These
additional changes increase equipment and capital conversion costs.
However, the substantial increases in production costs to manufacture
standard-compliant equipment is also a significant driver of INPV. If
profitability does not increase with the substantially higher
manufacturing costs, then the impact on INPV is much larger.
b. Class B Beverage Vending Machine Equipment
Table V-14 and Table V-15 show the MIA results for Class B beverage
vending machines at each TSL using the preservation-of-gross-margin-
percentage and preservation-of-operating-profit scenarios described
above.
Table V-14--Manufacturer Impact Analysis for Class B Beverage Vending Machine Equipment Under the Preservation of Gross Margin Percentage Markup
Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units Base case -----------------------------------------------------------------
1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2008$ millions............... 22.1 22.1 22.1 21.3 20.9 12.4 11.0
Change in INPV............................ 2008$ millions............... ........... 0.0 0.0 (0.8) (1.3) (9.7) (11.2)
%............................ ........... 0.04 0.07 -3.71 -5.71 -44.01 -50.38
Equipment Conversion Costs................ 2008$ millions............... ........... 0.0 0.0 1.7 2.6 3.5 6.9
Capital Conversion Costs.................. 2008$ millions............... ........... 0.0 0.0 0.0 0.0 11.0 14.7
Total Investment Required................. 2008$ millions............... ........... 0.0 0.0 1.7 2.6 14.5 21.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
Table V-15--Manufacturer Impact Analysis for Class B Beverage Vending Machine Equipment Under the Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preservation of gross margin percentage markup scenario
---------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units Base case -----------------------------------------------------------------
1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2008$ millions............... 22.1 22.1 22.1 21.2 20.8 8.8 (1.3)
[[Page 26055]]
Change in INPV............................ 2008$ millions............... ........... (0.0) (0.0) (0.9) (1.3) (13.4) (23.4)
%............................ ........... -0.05 -0.10 -4.17 -6.07 -60.33 -105.79
Equipment Conversion Costs................ 2008$ millions............... ........... 0.0 0.0 1.7 2.6 3.5 6.9
Capital Conversion Costs.................. 2008$ millions............... ........... 0.0 0.0 0.0 0.0 11.0 14.7
Total Investment Required................. 2008$ millions............... ........... 0.0 0.0 1.7 2.6 14.5 21.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
DOE estimates that there are no significant impacts on INPV for
Class B equipment at TSL 1 or TSL 2. The vast majority of equipment for
sale today meets these TSLs. Therefore, DOE expects there will be no
equipment or capital conversion costs and that industry revenues and
production costs will not be significantly negatively affected at TSL 1
or TSL 2.
At TSL 3, DOE estimated the impacts in INPV for Class B equipment
to range from approximately -$0.8 million to -$0.9 million, a change in
INPV of -3.71 percent to -4.17 percent. At this level, the industry
cash flow decreases by approximately 30.9 percent, to $.98 million,
compared to the base case value of $1.42 million in the year leading up
to the standards. At TSL 3, manufacturers will have to make some
component switches to comply with the standard. However, most
manufacturers will not have to significantly alter their production
process. In addition, these minor design changes will not raise the
production costs beyond the cost of most equipment sold today,
resulting in minimal impacts on industry value.
At TSL 4, DOE estimated the impacts on INPV for Class B equipment
to range from -$1.3 million to -$1.3 million, a change in INPV of
approximately -5.71 percent to -6.07 percent. At this level, the
industry cash flow decreases by approximately 46.3 percent to $.76
million, compared to the base case value of $1.42 million in the year
leading up to the standards. At TSL 4, manufacturers will have to make
additional component switches, resulting in minimal equipment
conversion costs. Standards increase production costs, but the cost
increases are not enough to severely affect INPV if profitability
remains the same as it was before standards.
At TSL 5, DOE estimated the impacts on INPV for Class B equipment
to range from -$9.7 million to -$13.4 million, a change in INPV of
approximately -44.01 percent to -60.33 percent. At this level, the
industry cash flow decreases by approximately 371.9 percent to -$3.87
million, compared to the base case value of $1.42 million in the year
leading up to the standards. At TSL 5, manufacturers have to redesign
all their existing equipment and make capital investments in their
production lines to comply with the standard. In addition, the
equipment designs necessary to meet TSL 5 are more complex, which
increases the engineering and capital resources that must be employed.
Finally, the production costs of equipment that meets TSL 5 are higher.
The cost to manufacture standards-compliant equipment could have a
greater impact on the industry if operating profit does not increase
with production costs.
At TSL 6 (max-tech), DOE estimated the impacts on INPV for Class B
to range from -$11.2 million to -$23.4 million, a change in INPV of
approximately -50.38 percent to -105.79 percent. At this level, the
industry cash flow decreases by approximately 549.7 percent to -$6.40
million, compared to the base case value of $1.42 million in the year
leading up to the standards. Similar to TSL 5, TSL 6 involves more
complex changes to existing cabinet designs. These additional changes
increase the equipment and capital conversion costs. However, the
substantial increase in cost of manufacturer standards-compliant
equipment at this TSL is also a significant driver of INPV. If
profitability does not increase with the substantially higher
manufacturing costs, then the impact on INPV is much larger.
c. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several regulations may have
serious consequences for some manufacturers, groups of manufacturers,
or an entire industry. Assessing the impact of a single regulation may
overlook this cumulative regulatory burden.
DOE recognizes that each regulation can significantly affect
manufacturers' financial operations. Multiple regulations affecting the
same manufacturer can quickly reduce manufacturers' profits and
possibly cause manufacturers to exit from the market. However, DOE
could not identify any other DOE regulations that would affect the
manufacturers of beverage vending machines or their parent companies.
DOE requested information about the cumulative regulatory burden during
manufacturer interviews. In general, manufacturers were not greatly
concerned about other Federal, State, or international regulations. The
requirements of their major customers have a greater impact on their
business than any of these other regulations. For further information
about the cumulative regulatory burden impacts, see chapter 13 of the
TSD.
d. Impacts on Employment
DOE used the GRIM to assess the impacts of energy conservation
standards on beverage vending machine industry employment. DOE used
statistical data from the U.S. Census Bureau's 2006 Annual Survey of
Manufacturers, the results of the engineering analysis, and interviews
with manufacturers to estimate the inputs necessary to calculate
industry-wide labor expenditures and employment levels.\37\
---------------------------------------------------------------------------
\37\ Results of the U.S. Census Bureau's 2007 Annual Survey of
Manufacturers are not yet available.
---------------------------------------------------------------------------
The vast majority of beverage vending machines are manufactured in
the United States. Based on results of the GRIM, DOE expects that there
would be slightly positive direct employment impacts among domestic
beverage vending machine manufacturers for TSL 1 through TSL 6 for
Class A equipment and TSL 1 through TSL 5 for Class B equipment. The
GRIM estimates that employment would increase by fewer than 20
employees for Class A
[[Page 26056]]
equipment at TSL 1 through TSL 6 and fewer than 42 employees for Class
B equipment at TSL 1 though TSL 5. The employment impacts at the max-
tech levels for both equipment classes are positive. The employment
impacts are more positive at the max-tech levels because more labor is
required and the production costs of the most efficient equipment
greatly increase. The employment impacts calculated in the GRIM are
shown in Table V-29 and Table V-30 in section V.C.
The results calculated in the GRIM do not account for the possible
relocation of domestic jobs to lower-labor-cost countries, which may
occur independently of new standards or may be influenced by the level
of investments new standards require. Manufacturers stated that
although there are no current plans to relocate production facilities,
higher TSLs would increase pressure to cut costs, which could result in
relocation. In addition, standards could increase pressure to
consolidate within the industry due to the low profitability and
existing excess capacity. DOE requests comment on whether or not the
proposed standard risks industry consolidation. Because the labor
impacts in the GRIM do not take relocation or consolidation into
account, the labor impacts would be different if manufacturers chose to
relocate to lower cost countries or if manufacturers consolidated.
Chapter 13 of the TSD further discusses how the employment impacts are
calculated and shows the projected changes in employment levels by TSL.
The conclusions in this section are independent of any conclusions
regarding employment impacts from the broader U.S. economy estimated in
the employment impact analysis. Those impacts are documented in chapter
15 of the accompanying TSD.
e. Impacts on Manufacturing Capacity
According to the majority of beverage vending machine
manufacturers, new energy conservation standards will not affect
manufacturers' production capacity. Within the last decade, annual
shipments of beverage vending machines have decreased almost three-
fold. Due to the decline in shipments, it is likely that any of the
major manufacturers has the capacity to meet most of the recent market
demand. Consequently, the industry has the capacity to make many times
more units than are currently sold each year. Thus, DOE believes
manufacturers will be able to maintain manufacturing capacity levels
and continue to meet market demand under new energy conservation
standards.
f. Impacts on Subgroups of Manufacturers
As discussed above, using average cost assumptions to develop an
industry cash-flow estimate is not adequate for assessing differential
impacts among manufacturer subgroups. Small manufacturers, niche
equipment manufacturers, and manufacturers exhibiting a cost structure
that differs largely from the industry average could be affected
differently. DOE used the results of the industry characterization to
group manufacturers exhibiting similar characteristics.
DOE evaluated the impact of new energy conservation standards on
small manufacturers as defined by the SBA. During DOE's interviews,
small business manufacturers suggested that the impacts of standards
would not differ from impacts on larger companies. For a discussion of
the impacts on small manufacturers, see chapter 13 of the TSD.
3. National Impact Analysis
a. Amount and Significance of Energy Savings
Because the pattern and strategies for improving the energy
performance of beverage vending machines is somewhat different between
Class A and Class B equipment, energy savings are reported separately
for each class of equipment by TSL. The national energy savings were
between 0.001 and 0.107 quads, depending on the TSL and equipment
class, an amount of energy savings that DOE considers significant.
There is clear and convincing evidence that each TSL that is more
stringent than the baseline efficiency level would result in
significantly more energy savings, ranging from 0.001 quads to 0.107
quads beyond that achieved in ENERGY STAR Tier 1 equipment.
To estimate the energy savings through 2042 due to new energy
conservation standards, DOE compared the energy consumption of beverage
vending machines under the base case to energy consumption under a new
standard. The energy consumption calculated in the NIA is source
energy, taking into account energy losses in the generation and
transmission of electricity as discussed in section IV.J.
DOE tentatively determined the amount of energy savings at each of
the seven TSLs being considered for Class A equipment and six TSLs for
Class B equipment, then analyzed and aggregated the results across the
three sizes for each equipment class.
Table V-16 shows the forecasted aggregate national energy savings
of Class A equipment at each TSL. The table also shows the magnitude of
the estimated energy savings if the savings are discounted at the 7-
percent and 3-percent real discount rates. Each TSL considered in this
rulemaking would result in significant energy savings, and the amount
of savings increases with higher energy conservation standards (chapter
11 of the TSD). DOE reports both undiscounted and discounted values of
energy savings. Each TSL analyzed results in additional energy savings,
ranging from an estimated 0.004 quads to 0.107 quads for TSLs 1 through
7 (undiscounted).
Table V-16--Summary of Cumulative National Energy Savings for Class A Equipment
(Energy Savings for Units Sold from 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Primary National Energy Savings (quads)
----------------------------------------------------------------------------------------------------------------
Trial standard level Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1............................................................... 0.004 0.002 0.001
2............................................................... 0.019 0.011 0.006
3............................................................... 0.043 0.025 0.013
4............................................................... 0.068 0.038 0.020
5............................................................... 0.080 0.045 0.024
6............................................................... 0.088 0.050 0.026
7............................................................... 0.107 0.060 0.031
----------------------------------------------------------------------------------------------------------------
[[Page 26057]]
In Table V-17, DOE reports both undiscounted and discounted values
of energy savings for Class B equipment. Each higher TSL analyzed
results in additional energy savings, ranging from an estimated 0.001
quads to 0.035 quads for TSLs 1 through 6 (undiscounted).
Table V-17--Summary of Cumulative National Energy Savings for Class B Equipment
(Energy Savings for Units Sold from 2012 to 2042)
----------------------------------------------------------------------------------------------------------------
Primary National Energy Savings (quads)
----------------------------------------------------------------------------------------------------------------
Trial standard level Undiscounted 3% Discounted 7% Discounted
----------------------------------------------------------------------------------------------------------------
1............................................................... 0.001 0.001 0.000
2............................................................... 0.002 0.001 0.001
3............................................................... 0.010 0.006 0.003
4............................................................... 0.012 0.007 0.003
5............................................................... 0.031 0.018 0.009
6............................................................... 0.035 0.020 0.010
----------------------------------------------------------------------------------------------------------------
b. Net Present Value
The NPV analysis is a measure of the cumulative benefit or cost of
standards to the Nation. In accordance with the Office of Management
and Budget's (OMB) guidelines on regulatory analysis (OMB Circular A-4,
section E, September 17, 2003), DOE calculated an estimated NPV using
both a 7-percent and 3-percent real discount rate. The 7-percent rate
is an estimate of the average before-tax rate of return to private
capital in the U.S. economy. This rate reflects the returns to real
estate and small business capital as well as corporate capital. DOE
used this discount rate to approximate the opportunity cost of capital
in the private sector, since recent OMB analysis has found the average
rate of return to capital to be near this rate. In addition, DOE used
the 3-percent discount rate to capture the potential effects of
standards on private consumption (e.g., through higher prices for
equipment and purchase of reduced amounts of energy). This rate
represents the rate at which society discounts future consumption flows
to their present value. This rate can be approximated by the real rate
of return on long-term Government debt (e.g., the yield on Treasury
notes minus the annual rate of change in the Consumer Price Index),
which has averaged about 3 percent on a pre-tax basis for the last 30
years.
Table V-18 shows the estimated cumulative NPV for beverage vending
machines resulting from the sum of the NPV calculated for the Class A
equipment class. Table V-19 assumes the AEO2009 reference case forecast
for electricity prices. At a 7-percent discount rate, TSLs 1 through 6
show positive cumulative NPVs. The highest NPV is provided by TSL 5 at
$0.108 billion. TSL 6 provided $0.105 billion. TSL 7 showed an NPV at -
$0.719 billion, the result of negative NPV observed in all sizes of
this equipment class.
Table V-18--Summary of Cumulative Net Present Value for Class A
Equipment (AEO2009 Reference Case)
------------------------------------------------------------------------
NPV\*\ billion 2008$
-------------------------------
Trial standard level 7% Discount 3% Discount
rate rate
------------------------------------------------------------------------
1....................................... 0.009 0.020
2....................................... 0.038 0.084
3....................................... 0.062 0.149
4....................................... 0.098 0.235
5....................................... 0.108 0.263
6....................................... 0.105 0.265
7....................................... (0.719) (1.210)
------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative NPV (i.e., net cost).
At a 3-percent discount rate, all but TSL 7 showed a positive NPV,
with the highest NPV provided at TSL 6 (i.e., $0.265 billion). TSL 5
provided a near equivalent NPV at $0.263 billion. TSL 7 provided an NPV
of -$1.210 billion. DOE estimates that all Class A equipment at TSL 7
has negative NPVs at a 3-percent discount rate.
Table V-19 shows the estimated cumulative NPV for beverage vending
machines resulting from the sum of the NPV calculated for Class B
equipment. This table assumes the AEO2009 reference case forecast for
electricity prices. At a 7-percent discount rate, TSLs 1 through 4 show
positive cumulative NPVs. The highest NPV is provided by TSL 2 at
$0.003 billion. TSL 3 provided zero NPV. TSL 5 and TSL 6 show a
negative NPV. TSL 5 has a -$0.256 billion NPV, the result of negative
NPV observed in all sizes of Class B equipment.
[[Page 26058]]
Table V-19--Summary of Cumulative Net Present Value for Class B
Equipment (AEO2009 Reference Case)
------------------------------------------------------------------------
NPV billion 2008$
-------------------------------
Trial standard level 7% Discount 3% Discount
rate rate
------------------------------------------------------------------------
1....................................... 0.002 0.005
2....................................... 0.003 0.007
3....................................... 0.000 0.008
4....................................... (0.004) 0.001
5....................................... (0.256) (0.442)
6....................................... (1.013) (1.822)
------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative NPV (i.e., net cost).
At a 3-percent discount rate, TSLs 1 through 4 showed a positive
NPV, with the highest NPV provided at TSL 3 ($0.008 billion). TSL 2
provided a near equivalent NPV at $0.007 billion. TSL 5 provided an NPV
of -$0.442 billion. DOE estimated that all Class B equipment sizes at
TSL 5 have negative NPVs at a 3-percent discount rate.
In addition to the reference case, DOE examined the NPV under the
AEO2009 high-growth and low-growth electricity price forecasts. The
results of this examination can be found in chapter 11 of the TSD.
c. Impacts on Employment
Besides the direct impacts on manufacturing employment discussed in
section V.B.2.d, DOE develops general estimates of the indirect
employment impacts of proposed standards on the economy. As discussed
above, DOE expects energy conservation standards for beverage vending
machines to reduce energy bills for commercial customers, and the
resulting net savings to be redirected to other forms of economic
activity. DOE also realizes that these shifts in spending and economic
activity by vending machine operators and site owners could affect the
demand for labor. The impact comes in a variety of businesses not
directly involved in the decision to make, operate, or pay the utility
bills for beverage vending machines. The economic impact is
``indirect.'' To estimate these indirect economic effects, DOE used an
input/output model of the U.S. economy using U.S. Department of
Commerce, Bureau of Economic Analysis (BEA) and Bureau of Labor
Statistics (BLS) data (as described in section IV.K; see chapter 15 of
the TSD for details).
In this input/output model, the spending of the money saved on
utility bills when more efficient vending machines are deployed is
centered in economic sectors that create more jobs than are lost in
electric utilities when spending is shifted from electricity to other
products and services. Thus, the proposed beverage vending machine
energy conservation standards are likely to slightly increase the net
demand for labor in the economy. However, the net increase in jobs is
so small that it would be imperceptible in national labor statistics
and might be offset by other, unanticipated effects on employment.
Neither the BLS data nor the input/output model used by DOE includes
the quality of jobs. As shown in Table V-20 and Table V-21, DOE
estimates that net indirect employment impacts from a proposed beverage
vending machine standard are likely to be very small.
Table V-20--Net National Change in Indirect Employment From Class A Equipment: Jobs in 2012 to 2042
----------------------------------------------------------------------------------------------------------------
Net national change in jobs
Trial standard level ---------------------------------------------------
2012 2022 2032 2042
----------------------------------------------------------------------------------------------------------------
1........................................................... 0 10 13 14
2........................................................... 3 50 57 64
3........................................................... 5 113 132 146
4........................................................... 9 173 203 226
5........................................................... 9 204 239 265
6........................................................... 9 223 262 292
7........................................................... (61) 220 267 304
----------------------------------------------------------------------------------------------------------------
Table V-21--Net National Change in Indirect Employment From Class B Equipment: Jobs in 2012 to 2042
----------------------------------------------------------------------------------------------------------------
Net national change in jobs
Trial standard level ---------------------------------------------------
2012 2022 2032 2042
----------------------------------------------------------------------------------------------------------------
1........................................................... 0 3 4 4
2........................................................... 0 5 5 6
3........................................................... 0 24 29 33
4........................................................... 0 28 34 38
5........................................................... (19) 66 80 90
6........................................................... (78) 39 56 68
7........................................................... NA NA NA NA
----------------------------------------------------------------------------------------------------------------
Note: Numbers in parentheses indicate negative values.
[[Page 26059]]
4. Impact on Utility or Performance of Equipment
In performing the engineering analysis, DOE considers design
options that would not lessen the utility or performance of the
individual classes of equipment (42 U.S.C. 6295(o)(2)(B)(i)(IV) and
6316(e)(1)). As presented in the screening analysis (chapter 4 of the
TSD), DOE eliminates design options that reduce the utility of the
equipment from consideration. For this notice, DOE tentatively
concluded that none of the efficiency levels proposed for beverage
vending machines reduce the utility or performance of the equipment.
5. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition likely to
result from standards. It directs the Attorney General to determine in
writing the impact, if any, of any lessening of competition likely to
result from a proposed standard (42 U.S.C. 6295(o)(2)(B)(i)(V) and
6316(e)(1)). To assist the Attorney General in making such a
determination, DOE provided the Department of Justice (DOJ) with copies
of this notice and the TSD for review. During MIA interviews, domestic
manufacturers indicated that foreign manufacturers have not entered the
beverage vending machine market for the past several years.
Manufacturers also stated that little or no consolidation has occurred
among beverage vending machine manufacturers in recent years.
Manufacturers indicated that the competitive nature of the industry has
created pressure to consolidate, but that new energy conservation
standards should not put any one manufacturer at a competitive
disadvantage. Manufacturers have also stated that there has been some
consolidation among bottlers in the industry. DOE believes that these
trends will continue in this market regardless of the proposed standard
levels chosen.
DOE does not believe that standards would result in domestic firms
moving their production facilities outside the United States. The vast
majority of beverage vending machines are manufactured in the United
States and, during interviews, manufacturers in general indicated they
would modify their existing facilities to comply with energy
conservation standards.
6. Need of the Nation To Conserve Energy
Improving the energy efficiency of beverage vending machines, where
economically justified, would likely improve the security of the
Nation's energy system by reducing overall demand for energy, thus
reducing the Nation's reliance on foreign sources of energy. Reduced
demand would also likely improve the reliability of the electricity
system, particularly during peak-load periods.
Energy savings from higher standards for beverage vending machines
would also produce environmental benefits in the form of reduced
emissions of air pollutants and greenhouse gases associated with energy
production. Table V-22 provides DOE's estimate of cumulative
CO2, NOx, and Hg emissions reductions that would
result from the TSLs considered in this rulemaking for both Class A and
Class B equipment. The expected energy savings from the proposed
standards for beverage vending machines may also reduce the cost of
maintaining nationwide emissions standards and constraints. In the
draft EA (found in chapter 16 of the TSD accompanying this notice), DOE
reports estimated annual changes in CO2, NOx, and
Hg emissions attributable to each TSL.
Table V-22--Cumulative CO[ihel2] and Other Emissions Reductions (Cumulative Reductions for Products Sold from 2012 to 2042)
Trial standard levels for Class A
------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Emissions Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO[ihel2] (Mt)............................................... 0.23 1.01 2.27 3.56 4.19 4.61 5.59
NOx (kt)..................................................... 0.03 0.14 0.31 0.48 0.57 0.62 0.75
Hg (tons)
Low...................................................... 0 0 0 0 0 0 0
High..................................................... 0.004 0.017 0.038 0.059 0.069 0.076 0.093
--------------------------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Trial standard levels for Class B
-----------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
----------------------------------------------------------------------------------------------------------------
Emissions Reductions
----------------------------------------------------------------------------------------------------------------
CO2 (Mt).......................... 0.07 0.11 0.53 0.61 1.64 1.83
NOx (kt).......................... 0.01 0.01 0.07 0.08 0.22 0.25
Hg (tons)
Low........................... 0 0 0 0 0 0
High.......................... 0.001 0.002 0.009 0.010 0.027 0.030
----------------------------------------------------------------------------------------------------------------
Mt = million metric tons
kt = thousand tons
Note: Negative values indicate emission increases. Detail may not sum to total due to rounding.
As noted in section IV.L, DOE does not report SO2
emissions reductions from power plants because reductions from an
energy conservation standard would not affect the overall level of U.S.
SO2 emissions due to emissions caps.
NOx emissions are currently subject to emissions caps
under the Clean Air Interstate Rule (CAIR) published in the Federal
Register on May 12, 2005. 70 FR 25162 (May 12, 2005). The CAIR caps
emissions in 28 eastern States and
[[Page 26060]]
the District of Columbia (DC) (collectively ``States''). As with the
SO2 emissions cap, energy conservation standards are not
likely to have a physical effect on NOx emissions in those
States. However, the standards proposed in today's NOPR might have
produced an environmentally related economic impact in the form of
lower prices for emissions allowance credits if they were large enough.
DOE believes that such standards would not produce such an impact
because the estimated reduction in NOx emissions or the
corresponding increase in available allowance credits in States covered
by the CAIR cap would be too small to affect allowance prices for
NOx.
In contrast, new or amended energy conservation standards would
reduce NOx emissions in those 22 States that are not
affected by the CAIR, and these emissions could be estimated from NEMS-
BT. As a result, DOE used the NEMS-BT to forecast emission reductions
from the beverage machine standards that are considered in today's
NOPR.
Though currently in effect, CAIR has been the subject of
significant litigation. CAIR was vacated by the U.S. Court of Appeals
for the District of Columbia Circuit (D.C. Circuit) in its July 11,
2008, decision in North Carolina v. Environmental Protection
Agency.\38\ However, on December 23, 2008, the D.C. Circuit decided to
allow the CAIR to remain in effect until it is replaced by a rule
consistent with the court's earlier opinion.\39\
---------------------------------------------------------------------------
\38\ 531 F.3d 896 (D.C. Cir. 2008).
\39\ North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008)
(remand of vacatur).
---------------------------------------------------------------------------
DOE established a range of Hg emission rates to estimate the Hg
emissions that could be reduced through standards. DOE's low estimate
assumed that future standards would displace electrical generation only
from natural gas-fired power plants, thereby resulting in an effective
emission rate of zero. (Under this scenario, coal-fired power plant
generation would remain unaffected.) The low-end emission rate is zero
because natural gas-fired power plants have virtually zero Hg emissions
associated with their operation.
DOE's high estimate, which assumed that standards would displace
only coal-fired power plants, was based on a nationwide mercury
emission rate from AEO2008. (Under this scenario, gas-fired power plant
generation would remain unaffected.) Because power plant emission rates
are a function of local regulation, scrubbers, and the mercury content
of coal, it is extremely difficult to identify a precise high-end
emission rate. Therefore, the most reasonable estimate is based on the
assumption that all displaced coal generation would have been emitting
at the average emission rate for coal generation as specified by
AEO2008. As noted previously, because virtually all mercury emitted
from electricity generation is from coal-fired power plants, DOE based
the emission rate on the tons of mercury emitted per TWh of coal-
generated electricity. Based on the emission rate for 2006, DOE derived
a high-end emission rate of 0.0255 tons per TWh. To estimate the
reduction in mercury emissions, DOE multiplied the emission rate by the
reduction in coal-generated electricity due to the standards considered
in the utility impact analysis. These changes in Hg emissions are
extremely small, ranging from 0 to 0.02 percent of the national base-
case emissions forecast by NEMS-BT, depending on the TSL.
DOE has considered the possible monetary value of the benefits
likely to result from the CO2 emission reductions associated
with standards. To put the potential monetary benefits from reduced
CO2 emissions into a form that would likely be most useful
to decision makers and interested parties, DOE used the same methods it
used to calculate the net present value of consumer cost savings. DOE
converted the estimated yearly reductions in CO2 emissions
into monetary values, which were then discounted over the life of the
affected equipment to the present using both 3-percent and 7-percent
discount rates.
DOE previously proposed using the range $0 to $20 per ton for the
year 2007 in 2007$. 73 FR 62034, 62110 (Oct. 17, 2008). These estimates
were based on a previous analysis that used a range of no benefit to an
average benefit value reported by the Intergovernmental Panel on
Climate Change (IPCC). DOE derived the IPCC estimate used as the upper
bound value from an estimate of the mean value of worldwide impacts due
to climate change and not just the effects likely to occur within the
United States. This previous analysis assumed that the appropriate
value should be restricted to a representation of those costs and
benefits likely to be experienced in the United States. DOE expects
that such domestic values would be lower than comparable global values;
however, there currently are no consensus estimates for the U.S.
benefits likely to result from CO2 emission reductions.
Because U.S.-specific estimates were unavailable and DOE did not
receive any additional information that would help narrow the proposed
range of domestic benefits, DOE used the global mean value as an upper
bound U.S. value.
The Department of Energy, together with other Federal agencies, is
reviewing various methodologies for estimating the monetary value of
reductions in CO2 and other greenhouse gas emissions. This
review will consider the comments on this subject that are part of the
public record for this and other rulemakings, as well as other
methodological assumptions and issues, such as whether the appropriate
values should represent domestic U.S. or global benefits (and costs).
Given the complexity of the many issues involved, this review is
ongoing. However, consistent with DOE's legal obligations, and taking
into account the uncertainty involved with this particular issue, DOE
has included in the proposed rulemaking the values and analyses
previously conducted.
Given the uncertainty surrounding estimates of the social cost of
carbon, DOE previously concluded that relying on any single estimate
may be inadvisable because that estimate will depend on many
assumptions. Working Group II's contribution to the ``Fourth Assessment
Report'' of the IPCC notes the following:
The large ranges of SCC are due in the large part to differences
in assumptions regarding climate sensitivity, response lags, the
treatment of risk and equity, economic and non-economic impacts, the
inclusion of potentially catastrophic losses, and discount
rates.\40\
---------------------------------------------------------------------------
\40\ ``Climate Change 2007--Impacts, Adaptation and
Vulnerability.'' Contribution of Working Group II to the ``Fourth
Assessment Report'' of the IPCC, 17. Available at http://www.ipcc.ch/ipccreports/ar4-wg2.htm (last accessed Aug. 7, 2008).
Because of this uncertainty, DOE previously used the SCC value from
Tol (2005), which was presented in the IPCC's ``Fourth Assessment
Report'' and provided a comprehensive meta-analysis of estimates for
the value of SCC. Tol released an update of his 2005 meta-analysis in
September 2007 that reported an increase in the mean estimate of SCC
from $43 to $71 per ton carbon. Although the Tol study was updated in
2007, the IPCC has not adopted the update. As a result, DOE previously
decided to continue to rely on the study cited by the IPCC. DOE notes
that the conclusions of Tol in 2007 are similar to the conclusions of
Tol in 2005. In 2007, Tol continues to indicate that there is no
consensus regarding the monetary value of reducing CO2
emissions by 1 ton. The broad range of values in both Tol studies are
the result of significant differences in the methodologies used in
[[Page 26061]]
the studies Tol summarized. According to Tol, all of the studies have
shortcomings, largely because the subject is inherently complex and
uncertain and requires broad multidisciplinary knowledge. Thus, it was
not certain that the values reported in Tol in 2007 are more accurate
or representative than the values reported in Tol in 2005.
For today's NOPR, DOE used the range of values based on the values
presented in Tol (2005) as proposed. Additionally, DOE applied an
annual growth rate of 2.4 percent to the value of SCC, as suggested by
the IPCC Working Group II (2007, p. 822). This growth rate is based on
estimated increases in damage from future emissions that published
studies have reported. Because the values in Tol (2005) were presented
in 1995$, DOE calculated more current values, assigning a range for SCC
of $0 to $20 (2007$) per ton of CO2 emissions.
The upper bound of the range DOE used is based on Tol (2005), which
reviewed 103 estimates of SCC from 28 published studies. Tol concluded
that when only peer-reviewed studies published in recognized journals
are considered, ``climate change impacts may be very uncertain but [it]
is unlikely that the marginal damage costs of carbon dioxide emissions
exceed $50 per ton carbon [comparable to a 2007 value of $20 per ton
carbon dioxide when expressed in 2007 U.S. dollars with a 2.4 percent
growth rate].''
In setting a lower bound, DOE's analysis agreed with the IPCC
Working Group II (2007) report that ``significant warming across the
globe and the locations of significant observed changes in many systems
consistent with warming is very unlikely to be due solely to natural
variability of temperatures or natural variability of the systems'' (p.
9), and thus tentatively concluded that a global value of zero for the
SCC cannot be justified. However, DOE concludes that it is reasonable
to allow for the possibility that the SCC for the United States may be
quite low. In fact, some of the studies examined by Tol (2005) reported
negative values for the SCC. DOE assumes that it is most appropriate to
use U.S. benefit values rather than world benefit values in its
analysis, and U.S. values will likely be lower than global values.
Table V-23 and Table V-24 present the resulting estimates of the
potential range of NPV benefits associated with reducing CO2
emissions for both Class A and Class B equipment based on the range of
values used by DOE for this proposed rule.
Table V-23--Estimates of Savings From CO2 Emissions Reductions at All TSLs at a Seven-Percent Discount Rate and
Three-Percent Discount Rate for Class A Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated CO2 estimated CO2
cumulative CO2 emission emission
TSL emission reductions at 7% reductions at 3%
reductions Mt discount rate discount rate
million 2007$ million 2007$
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.23 0-2.2 0-4.3
2...................................................... 1.01 0-9.7 0-18.9
3...................................................... 2.27 0-21.9 0-42.5
4...................................................... 3.56 0-34.3 0-66.6
5...................................................... 4.19 0-40.4 0-78.5
6...................................................... 4.61 0-44.5 0-86.4
7...................................................... 5.59 0-53.9 0-104.7
----------------------------------------------------------------------------------------------------------------
Table V-24--Estimates of Savings From CO2 Emissions Reductions at All TSLs at a Seven-Percent Discount Rate and
Three-Percent Discount Rate for Class B Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated CO2 estimated CO2
cumulative CO2 emission emission
TSL emission reductions at 7% reductions at 3%
reductions Mt discount rate discount rate
million 2007$ million 2007$
----------------------------------------------------------------------------------------------------------------
1...................................................... 0.07 0-0.7 0-1.3
2...................................................... 0.11 0-1.0 0-2
3...................................................... 0.53 0-5.1 0-10
4...................................................... 0.61 0-5.9 0-11.4
5...................................................... 1.64 0-15.8 0-30.8
6...................................................... 1.83 0-17.6 0-34.2
----------------------------------------------------------------------------------------------------------------
The Department is well aware that scientific and economic knowledge
about the contribution of CO2 and other greenhouse gas
emissions (GHG) to changes in the future global climate and the
potential resulting damages to the world economy continues to evolve
rapidly. Thus, any value placed in this rulemaking on reducing
CO2 emissions is subject to likely change. DOE recognizes
the importance of continuing to monitor current research on the
potential economic damages resulting from climate change, and of
periodically updating estimates of the value of reducing CO2
emissions to reflect continuing advances in scientific and economic
knowledge about the nature and extent of climate change and the threat
it poses to world economic development. Further, DOE recognizes the
interest and expertise of other federal agencies, particularly the
Environmental Protection Agency and the Department of Transportation,
in the issue of valuing the reductions in climate damages that are
likely to result from those agencies' own efforts to reduce GHG
emissions. DOE will continue to work closely with those and other
federal agencies in the development and review of the economic values
of reducing GHG emissions.
DOE also investigated the potential monetary benefit of reduced
SO2, NOX, and Hg emissions from the TSLs it
considered. As previously stated, DOE's initial analysis assumed the
presence of
[[Page 26062]]
nationwide emission caps on SO2 and Hg, and caps on
NOX emissions in the 28 States covered by the CAIR. In the
presence of these caps, DOE concluded that no physical reductions in
power sector emissions would occur, but that the standards could put
downward pressure on the prices of emissions allowances in cap-and-
trade markets. Estimating this effect is very difficult because of
factors such as credit banking, which can change the trajectory of
prices. DOE has concluded that the effect from energy conservation
standards on SO2 allowance prices is likely to be negligible
based on runs of the NEMS-BT model. See chapter 16 of the TSD
accompanying this notice for further details.
Because the courts have decided to allow the CAIR rule to remain in
effect, projected annual NOX allowances from NEMS-BT are
relevant. As noted above, standards would not produce an economic
impact in the form of lower prices for emissions allowance credits in
the 28 eastern States and D.C. covered by the CAIR cap. New or amended
energy conservation standards would reduce NOX emissions in
those 22 States that are not affected by the CAIR. For the area of the
United States not covered by the CAIR, DOE estimated the monetized
value of NOX emissions reductions resulting from each of the
TSLs considered for today's NOPR based on environmental damage
estimates from the literature. Available estimates suggest a very wide
range of monetary values for NOX emissions, ranging from
$370 per ton to $3,800 per ton of NOX from stationary
sources, measured in 2001$ (equivalent to a range of $432 per ton to
$4,441 per ton in 2007$).\41\
---------------------------------------------------------------------------
\41\ OMB, Office of Information and Regulatory Affairs, ``2006
Report to Congress on the Costs and Benefits of Federal Regulations
and Unfunded Mandates on State, Local, and Tribal Entities,''
Washington, DC (2006).
---------------------------------------------------------------------------
To estimate the monetary value of Hg emission reductions resulting
from the TSLs considered for today's NOPR, DOE utilized a range of
monetary values per ton of emissions and a range of physical emission
reductions for Hg. Similar to SO2 and NOX, future
emissions of Hg would have been subject to emissions caps under the
Clean Air Mercury Rule (CAMR). The CAMR would have permanently capped
emissions of mercury for new and existing coal-fired plants in all
States by 2010, but was vacated by the D.C. Circuit in its February 8,
2008, decision in New Jersey v. Environmental Protection Agency.\42\
DOE typically uses the NEMS-BT model to calculate emissions from the
electrical generation sector; however, the 2008 NEMS-BT model is not
suitable for assessing mercury emissions in the absence of a CAMR cap.
Thus, DOE used a range of Hg emissions rates (in tons of Hg per energy
per TWh produced) based on the AEO2008. Because the high end of the
range of Hg emissions rates attributable to electricity generation are
from coal-fired power plants, DOE based that emissions rate on the tons
of mercury emitted per TWh of coal-generated electricity. DOE's low
estimate assumed that future standards would displace electrical
generation from natural gas powered power plants. The low end of the
range of Hg emissions rates is zero because natural gas powered power
plants have virtually no Hg emissions associated with their operations.
To estimate the reduction in mercury emissions, DOE multiplied the
emissions rates by the reduction in electricity generation associated
with the standards proposed in today's NOPR.
---------------------------------------------------------------------------
\42\ New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008).
---------------------------------------------------------------------------
DOE estimated the national monetized values per ton based on
environmental damage estimates from the literature. DOE conducted
research for today's NOPR and determined that the impact of mercury
emissions from power plants on humans is considered highly uncertain.
However, DOE identified two estimates of the environmental damage of
mercury based on two estimates of the adverse impact of childhood
exposure to methyl mercury on IQ for American children, and subsequent
loss of lifetime economic productivity resulting from these IQ losses.
The high-end estimate is based on an estimate of the current aggregate
cost of the loss of IQ in American children that results from exposure
to mercury of U.S. power plant origin ($1.3 billion per year in year
2000$), which works out to $32.6 million per ton emitted per year
(2007$).\43\ The low-end estimate is $0.66 million per ton emitted (in
2004$) or $0.739 million per ton in 2007$. DOE derived this estimate
from a published evaluation of mercury control using different methods
and assumptions from the first study, but also based on the present
value of the lifetime earnings of children exposed.\44\ Tables V-25
through Table V-28 present the resulting estimates of the potential
range of present value benefits associated with reducing national
NOX and Hg emissions for Class A and B equipment.
---------------------------------------------------------------------------
\43\ Trasande, L., et al., ``Applying Cost Analyses to Drive
Policy that Protects Children,'' 1076 Ann. N.Y. Acad. Sci. 911
(2006).
\44\ Ted Gayer and Robert Hahn, ``Designing Environmental
Policy: Lessons from the Regulation of Mercury Emissions,''
Regulatory Analysis 05-01, AEI-Brookings Joint Center for Regulatory
Studies, Washington, DC (2004). A version of this paper was
published in the Journal of Regulatory Economics in 2006. The
estimate was derived by back-calculating the annual benefits per ton
from the net present value of benefits reported in the study.
Table V-25--Estimates of Savings From Reducing NOX and Hg Emissions at All TSLs at a Seven-Percent Discount Rate
for Class A Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
TSL cumulative NOX emission cumulative Hg emission
emission reductions emission reductions
reductions kt thousand 2007$ reductions tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1................................... 0.03 5-50 0-0.004 0-44
2................................... 0.14 21-221 0-0.017 0-196
3................................... 0.31 48-497 0-0.038 0-441
4................................... 0.48 76-778 0-0.059 0-690
5................................... 0.57 89-918 0-0.069 0-814
6................................... 0.62 98-1010 0-0.076 0-896
7................................... 0.75 119-1224 0-0.093 0-1086
----------------------------------------------------------------------------------------------------------------
[[Page 26063]]
Table V-26--Estimates of Savings From Reducing NOX and Hg Emissions at All TSLs at a Seven-Percent Discount Rate
for Class B Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
TSL cumulative NOX emission cumulative Hg emission
emission reductions emission reductions
reductions kt thousand 2007$ reductions tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1................................... 0.01 2-16 0-0.001 0-14
2................................... 0.01 2-23 0-0.002 0-21
3................................... 0.07 11-116 0-0.009 0-103
4................................... 0.08 13-133 0-0.010 0-118
5................................... 0.22 35-359 0-0.027 0-319
6................................... 0.25 39-400 0-0.030 0-355
----------------------------------------------------------------------------------------------------------------
Table V-27--Estimates of Savings From Reducing NOX and Hg Emissions at All TSLs at a Three-Percent Discount Rate
for Class A Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
TSL cumulative NOX emission cumulative Hg emission
emission reductions emission reductions
reductions kt thousand 2007$ reductions tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1................................... 0.03 8-85 0-0.004 0-76
2................................... 0.14 37-377 0-0.017 0-338
3................................... 0.31 83-849 0-0.038 0-761
4................................... 0.48 129-1330 0-0.059 0-1192
5................................... 0.57 153-1568 0-0.069 0-1405
6................................... 0.62 168-1726 0-0.076 0-1547
7................................... 0.75 203-2092 0-0.093 0-1874
----------------------------------------------------------------------------------------------------------------
Table V-28--Estimates of Savings From Reducing NOX and Hg Emissions at All TSLs at a Three-Percent Discount Rate
for Class B Equipment
----------------------------------------------------------------------------------------------------------------
Value of Value of
Estimated estimated NOX Estimated estimated Hg
TSL cumulative NOX emission cumulative Hg emission
emission reductions emission reductions
reductions kt thousand 2007$ reductions tons thousand 2007$
----------------------------------------------------------------------------------------------------------------
1................................... 0.01 3-27 0-0.001 0-24
2................................... 0.01 4-40 0-0.002 0-36
3................................... 0.07 19-199 0-0.009 0-178
4................................... 0.08 22-227 0-0.010 0-204
5................................... 0.22 60-614 0-0.027 0-550
6................................... 0.25 67-684 0-0.030 0-613
----------------------------------------------------------------------------------------------------------------
7. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)
and 6316(e)(1)) DOE identified no factors other than those already
considered above for analysis.
C. Proposed Standard
EPCA specifies that any new or amended energy conservation standard
for any type (or class) of covered equipment shall be designed to
achieve the maximum improvement in energy efficiency that the Secretary
determines is technologically feasible and economically justified. (42
U.S.C. 6295(o)(2)(A) and 6316(e)(1)) In determining whether a standard
is economically justified, the Secretary must determine whether the
benefits of the standard exceed its burdens. (42 U.S.C.
6295(o)(2)(B)(i) and 6316(e)(1)) The new or amended standard must
``result in significant conservation of energy.'' (42 U.S.C.
6295(o)(3)(B) and 6316(e)(1))
DOE developed trial standard levels independently for Class A and
Class B beverage vending machines. DOE considered 7 TSLs for Class A
and 6 TSLs for Class B. In selecting the proposed energy conservation
standards for both classes of beverage vending machines for
consideration in today's notice of proposed rulemaking, DOE started by
examining the maximum technologically feasible levels, and determined
whether those levels were economically justified. Upon finding the
maximum technologically feasible levels not to be justified, DOE
analyzed the next lower TSL to determine whether that level was
economically justified. DOE repeated this procedure until it identified
a TSL that was economically justified.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, Table V-29 and Table V-30 present summaries of quantitative
analysis results for each TSL for Class A equipment and Class B
equipment, respectively, based on the assumptions and methodology
discussed above. These tables present the results or, in some cases, a
range of results, for each TSL. The range of values reported in these
tables for industry impacts represents the results for the different
markup scenarios that DOE used to estimate manufacturer impacts.
1. Class A Equipment
[[Page 26064]]
Table V-29--Summary of Results for Class A Equipment Based Upon the AEO2009 Reference Case Energy Price
Forecast*
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7
----------------------------------------------------------------------------------------------------------------
Primary Energy Saved quads.. 0.004 0.019 0.043 0.068 0.080 0.088 0.107
7% Discount Rate............ 0.001 0.006 0.013 0.020 0.024 0.026 0.031
3% Discount Rate............ 0.002 0.011 0.025 0.038 0.045 0.050 0.060
Generation Capacity 0.002 0.009 0.020 0.031 0.037 0.041 0.049
Reduction GW**.............
NPV 2008$ billion:
7% Discount Rate........ 0.009 0.038 0.062 0.098 0.108 0.105 (0.719)
3% Discount Rate........ 0.020 0.084 0.149 0.235 0.263 0.265 (1.210)
Industry Impacts:
Industry NPV 2008$ 0 (0.2)-(0.4 (1.9)-(2.6 (2.1)-(3.1 (8.8)-(9.9 (12.4)-(13 (8.3)-(20.
million................ ) ) ) ) .7) 9)
Industry NPV % change... 0.1 (0.6)-(1. (5.5)-(7.4 (5.9)-(8.8 (25.0)-(28 (35.1)-(38 (23.7)-(59
0) ) ) .1) .9) .7)
Cumulative Emissions
Impacts[dagger]:
CO2 Reductions Mt....... 0.23 1.01 2.27 3.56 4.19 4.61 5.59
Value of CO2 Reductions 0-2.2 0-9.7 0-21.9 0-34.3 0-40.4 0-44.5 0-53.9
at 7% Discount Rate
million 2007$..........
Value of CO2 Reductions 0-4.3 0-18.9 0-42.5 0-66.6 0-78.5 0-86.4 0-104.7
at 3% Discount Rate
million 2007$..........
NOX Reductions kt........... 0.03 0.14 0.31 0.48 0.57 0.62 0.75
Value of NOX Reductions at 5-50 21-221 48-497 76-778 89-918 98-1010 119-1224
7% Discount Rate thousand
2007$......................
Value of NOX Reductions at 8-85 37-377 83-849 129-1330 153-1568 168-1726 203-2092
3% Discount Rate thousand
2007$......................
Hg Reductions tons.......... 0-0.004 0-0.017 0-0.038 0-0.059 0-0.069 0-0.076 0-0.093
Value of Hg Reductions at 7% 0-44 0-196 0-441 0-690 0-814 0-896 0-1086
Discount Rate thousand
2007$......................
Value of Hg Reductions at 3% 0-76 0-338 0-761 0-1192 0-1405 0-1547 0-1874
Discount Rate thousand
2007$......................
Life-Cycle Cost:............
Net Savings %........... 10 100 100 100 100 100 98
Net Increase %.......... 0 0 0 0 0 2 100
No Change %............. 90 0 0 0 0 0 0
Mean LCC Savings 2008$.. 154 204 245 307 322 316 (1,194)
Mean PBP years.......... 2.0 2.1 2.9 3.1 3.4 3.8 62.9
Direct Domestic Employment 0 2 8 12 15 19 133
Impacts (2012) jobs........
Indirect Employment Impacts 14 64 146 226 265 292 304
(2042) jobs................
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the amount
indicated.
** Change in installed generation capacity by the year 2042 based on AEO2009 Reference Case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include
physical reductions at power plants as well as production of emissions allowance credits where NOX emissions
are subject to emissions caps.
First, DOE considered TSL 7, the most efficient level for Class A
beverage vending machines. TSL 7 would save an estimated 0.107 quads of
energy through 2042, an amount DOE considers significant. Discounted at
7 percent, the projected energy savings through 2042 would be 0.031
quads. For the Nation as a whole, DOE projects that TSL 7 would result
in a net decrease of $719 million in NPV, using a discount rate of 7
percent. The emissions reductions at TSL 7 are 5.59 Mt of
CO2, up to 0.75 kt of NOX, and up to 0.093 tons
of Hg. These reductions have a value of up to $53.9 million for
CO2, $1.2 million for NOX, and $1.1 million for
Hg, at a discount rate of 7 percent. DOE also estimates that at TSL 7,
total electric generating capacity in 2042 will decrease compared to
the base case by 0.049 GW.
At TSL 7, DOE projects that the average Class A beverage vending
machine customer will experience an increase in LCC of $1,194 compared
to the baseline. At TSL 7, DOE estimates the fraction of customers
experiencing LCC increases will be 100 percent. The mean PBP for the
average Class A beverage vending machine customer at TSL 7 compared to
the baseline level is projected to be 62.9 years.
At higher TSLs, manufacturers have a more difficult time
maintaining current operating profit levels with larger increases in
manufacturing production costs, as standards increase recurring
operating costs like capital expenditures, purchased materials, and
carrying inventory. Therefore, it is more likely that the higher end of
the range of impacts will be reached at TSL 7 (i.e., a drop of 59.7
percent in INPV). Manufacturers expressed great concern about high
capital and equipment conversion costs necessary to convert production
into standards-compliant equipment. At TSL 7, there is the risk of very
large negative impacts on the industry if manufacturers' operating
profits levels are reduced. See section IV.I for additional
manufacturer concerns.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 7, DOE finds that the benefits to the Nation of TSL
7 (i.e., energy savings and emissions reductions (including
environmental and monetary benefits)) do not outweigh the burdens
(i.e., a decrease of $719 million in NPV and a decrease of 59.7 percent
in INPV). Because the burdens of TSL 7 outweigh the benefits, TSL 7 is
not economically justified. Therefore, DOE proposes to reject TSL 7 for
Class A equipment.
DOE then considered TSL 6, which provides for Class A equipment the
maximum efficiency level that the analysis showed to have positive NPV
to the Nation. TSL 6 would likely save an estimated 0.088 quads of
energy through 2042, an amount DOE considers
[[Page 26065]]
significant. Discounted at 7 percent, the projected energy savings
through 2042 would be 0.026 quads. For the Nation as a whole, DOE
projects that TSL 6 would result in a net increase of $105 million in
NPV, using a discount rate of 7 percent. The estimated emissions
reductions at TSL 6 are 4.61 Mt of CO2, up to 0.62 kt of
NOx, and up to 0.076 tons of Hg. These reductions have a
value of up to $44.5 million for CO2, $1.0 million for
NOx, and $896,000 for Hg, at a discount rate of 7 percent.
Total electric generating capacity in 2042 is estimated to decrease
compared to the base case by 0.041 GW under TSL 6.
At TSL 6, DOE projects that the average beverage vending machine
customer will experience a reduction in LCC of $316 compared to the
baseline. The mean PBP for the average beverage vending machine
customer at TSL 6 is projected to be 3.8 years compared to the purchase
of baseline equipment.
As is the case with TSL 7, DOE believes the majority of
manufacturers would need to completely redesign all Class A equipment
offered for sale. Therefore, DOE expects beverage vending machine
manufacturers would have some difficulty maintaining current operating
profit levels with higher production costs. Similar to TSL 7, it is
more likely that the higher end of the range of impacts would be
reached at TSL 6 (i.e., a decrease of 38.9 percent in INPV). However,
compared to the baseline, Class A equipment showed significant positive
LCC savings on a national average basis and customers did not
experience an increase in LCC with a standard at TSL 6 compared with
purchasing baseline equipment. The PBP calculated for Class A equipment
was lower than the life of the equipment.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 6, DOE proposes that for Class A equipment, TSL 6
represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified. TSL 6 is
technologically feasible because the technologies required to achieve
these levels are already in existence. TSL 6 is economically justified
because the benefits to the Nation (i.e., increased energy savings of
0.088 quads, emissions reductions including environmental and monetary
benefits of, for example, 4.61 Mt of carbon dioxide emissions reduction
with an associated value of up to $44.5 million at a discount rate of 7
percent, and an increase of $105 million in NPV) outweigh the costs
(i.e., a decrease of 38.9 percent in INPV). There is also the added
benefit in terms of a reduction in total electrical generating capacity
in 2042 compared to the base case of 0.041 GW under the TSL 6 scenario.
Therefore, DOE proposes TSL 6 as the energy conservation standard
for Class A beverage vending machines in this NOPR. DOE seeks comment
and further data or information on the magnitude of the estimated
decline in INPV at TSL 6, and what impact this level could have on
industry parties, including small businesses. DOE also requests comment
on whether the energy savings and related benefits of TSL 6 outweigh
the costs, including potential manufacturer impacts. DOE is
particularly interested in receiving comments, views, and further data
or information from interested parties concerning: (1) Why the private
market has not been able to capture the energy benefits proposed in TSL
6; (2) whether and to what extent parties estimate they will be able to
transfer costs of implementing TSL 6 on to consumers; (3) whether and
to what extent parties estimate distributional chain intermediaries
(such as wholesalers or bottlers) will be able to absorb TSL 6
implementation costs and in turn transfer these costs to on-site
consumers, who ultimately benefit from the energy gains associated with
the proposed standard.
2. Class B Equipment
Table V-30--Summary of Results for Class B Equipment Based on the AEO2009 Reference Case Energy Price Forecast*
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
----------------------------------------------------------------------------------------------------------------
Primary Energy Saved (quads)..... 0.001 0.002 0.010 0.012 0.031 0.035
7% Discount Rate................. 0.000 0.001 0.003 0.003 0.009 0.010
3% Discount Rate................. 0.001 0.001 0.006 0.007 0.018 0.020
Generation Capacity Reduction 0.001 0.001 0.005 0.005 0.014 0.016
(GW)**..........................
NPV (2008$ billion):
7% Discount Rate............. 0.002 0.003 0.000 (0.004) (0.256) (1.013)
3% Discount Rate............. 0.005 0.007 0.008 0.001 (0.442) (1.822)
Industry Impacts
Industry NPV (2008$ million). 0 0 (0.8)-(0.9 (1.3)-(1.3 (9.7)-(13.4) (11.2)-(23.4)
) )
Industry NPV (% Change)...... 0-(0.1) 0.1-(0.1) (3.7)-(4.2 (5.7)-(6.1 (44.0)-(60.3 (50.4)-(105.8)
) ) )
Cumulative Emissions
Impacts[dagger]:
CO2 Reductions (Mt).......... 0.07 0.11 0.53 0.61 1.64 1.83
Value of CO2 reductions at 7% 0-0.7 0-1 0-5.1 0-5.9 0-15.8 0-17.6
discount rate (million
2007$)......................
Value of CO2 reductions at 3% 0-1.3 0-2 0-10 0-11.4 0-30.8 0-34.2
discount rate (million
2007$)......................
NOX Reductions (kt).............. 0.01 0.01 0.07 0.08 0.22 0.25
Value of NOX reductions at 7% 2-16 2-23 11-116 13-133 35-359 39-400
discount rate (thousand 2007$)..
Value of NOX reductions at 3% 3-27 4-40 19-199 22-227 60-614 67-684
discount rate (thousand 2007$)..
Hg Reductions (t)................ 0-0.001 0-0.002 0-0.009 0-0.010 0-0.027 0-0.030
Value of Hg reductions at 7% 0-14 0-21 0-103 0-118 0-319 0-355
discount rate (thousand 2007$)..
Value of Hg reductions at 3% 0-24 0-36 0-178 0-204 0-550 0-613
discount rate (thousand 2007$)..
Life-Cycle Cost
Net Savings (%).............. 10 100 90 80 69 0
Net Increase (%)............. 0 11 21 32 100 100
No Change (%)................ 90 0 0 0 0 0
Mean LCC Savings (2008$)..... 47 56 49 39 (525) (2216)
[[Page 26066]]
Mean PBP (years)............. 3.1 4.1 6.0 6.9 76.2 100
Direct Domestic Employment 0 0 3 4 41 134
Impacts (2012) (jobs)...........
Indirect Employment Impacts 4 6 33 38 90 68
(2042) (jobs)...................
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values. For LCCs, a negative value means an increase in LCC by the amount
indicated.
** Change in installed generation capacity by the year 2042 based on AEO2008 Reference Case.
[dagger] CO2 emissions impacts include physical reductions at power plants. NOX emissions impacts include
physical reductions at power plants as well as production of emissions allowance credits where NOX emissions
are subject to emissions caps.
First, DOE considered TSL 6, the most efficient level for Class B
beverage vending machines. TSL 6 would likely save an estimated 0.035
quads of energy through 2042, an amount DOE considers significant.
Discounted at 7 percent, the projected energy savings through 2042
would be 0.01 quads. For the Nation as a whole, DOE projects that TSL 6
would result in a net decrease of $1.013 billion in NPV, using a
discount rate of 7 percent. The emissions reductions at TSL 6 are 1.83
Mt of CO2, up to 0.25 kt of NOX, and up to 0.03
tons of Hg. These reductions have a value of up to $17.6 million for
CO2, $400,000 for NOX, and $355,000 for Hg, at a
discount rate of 7 percent. DOE also estimates that at TSL 6, total
electric generating capacity in 2042 will decrease compared to the base
case by 0.016 GW.
At TSL 6, DOE projects that for the average customer, the LCC of
Class B beverage vending machines will increase by $2,216 compared to
the baseline. At TSL 6, DOE estimates the fraction of customers
experiencing LCC increases will be 100 percent. The mean PBP for the
average Class B beverage vending machine customer at TSL 6 compared to
the baseline level is projected to be 100 years.
At higher TSLs, manufacturers have a more difficult time
maintaining operating profit with large increases in production costs.
Therefore, it is more likely that the higher end of the range of
impacts would be reached at TSL 6 (i.e., a decrease of 105.8 percent in
INPV). At TSL 6, there is the risk of very large negative impacts on
the industry if manufacturers' operating profit levels are reduced.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 6, DOE finds that the benefits to the Nation of TSL
6 (i.e., energy savings and emissions reductions including
environmental and monetary benefits) do not outweigh the burdens (i.e.,
a decrease of $1.013 billion in NPV, a decrease of 105.8 percent in
INPV, and an economic burden on customers). Therefore, DOE proposes
that the burdens of TSL 6 outweigh the benefits and TSL 6 is not
economically justified. Therefore, DOE proposes to reject TSL 6 for
Class B equipment.
TSL 5 offers the maximum efficiency levels for Class B equipment
that provide positive NPV to the Nation. TSL 5 would likely save an
estimated 0.031 quads of energy through 2042, an amount DOE considers
significant. Discounted at 7 percent, the projected energy savings
through 2042 would be 0.009 quads. For the Nation as a whole, DOE
projects that TSL 5 would result in a net decrease of $256 million in
NPV, using a discount rate of 7 percent. The estimated emissions
reductions at TSL 5 are 1.64 Mt of CO2, up to 0.22 kt of
NOX, and up to 0.027 tons of Hg. These reductions have a
value of up to $15.8 million for CO2, $359,000 for
NOX, and $319,000 for Hg at a discount rate of 7 percent.
Total electric generating capacity in 2042 is estimated to decrease
compared to the base case by 0.014 GW at TSL 5.
At TSL 5, DOE projects that the average Class B beverage vending
machine customers will experience an increase in LCC of $525 compared
to the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 5 is projected to be 76.2 years compared to the
purchase of baseline equipment.
As with TSL 6, DOE believes the majority of manufacturers would
need to completely redesign all Class B equipment offered for sale at
TSL 5. Therefore, DOE expects that manufacturers will have difficulty
maintaining operating profit with larger MPC increases. Similar to TSL
6, manufacturers expect the higher end of the range of impacts to be
reached at TSL 5 (i.e., a decrease of 60.3 percent in INPV).
After carefully considering the analysis and evaluating the
benefits and burdens of TSL 5, DOE finds that the benefits to the
Nation of TSL 5 (i.e., energy savings and emissions reductions,
including environmental and monetary benefits) do not outweigh the
burdens (i.e., a decrease of $256 million in NPV and a decrease of 60.3
percent in INPV, as well as the economic burden on customers).
Therefore, DOE proposes that the burdens of TSL 5 outweigh the benefits
and TSL 5 is not economically justified. Therefore, DOE proposes to
reject TSL 5 for Class B equipment.
TSL 4 would likely save an estimated 0.012 quads of energy through
2042, an amount DOE considers significant. Discounted at 7 percent, the
projected energy savings through 2042 would be 0.003 quads. For the
Nation as a whole, DOE projects that TSL 4 would result in a net
decrease of $4 million in NPV, using a discount rate of 7 percent.
However, using a 3-percent discount rate, DOE projects that TSL 4 would
result in a net increase of $1 million in NPV. The estimated emissions
reductions at TSL 4 are 0.61 Mt of CO2, up to 0.08 kt of
NOX, and up to 0.01 tons of Hg. Based on previously
developed estimates, these reductions could have a value of up to $5.9
million for CO2, $133,000 for NOX, and $118,000
for Hg at a discount rate of 7 percent. Total electric generating
capacity in 2042 is estimated to decrease compared to the base case by
0.005 GW at TSL 4.
At TSL 4, DOE projects that the average Class B beverage vending
machine customer will experience a reduction in LCC of $39 compared to
the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 4 is projected to be 6.9 years compared to the
purchase of baseline equipment.
At TSL 4, DOE believes manufacturers would need to redesign most
existing Class B equipment offered for sale. Therefore, DOE expects
that manufacturers will have difficulty maintaining operating profit
with high increases in production costs. Similar to TSL 5, it is more
likely that the higher end of the range of impacts would be reached at
TSL 4 (i.e., a decrease of 6.1 percent in INPV). However, compared to
the baseline, Class B equipment showed significant positive LCC savings
on a national average and customers did not
[[Page 26067]]
experience an increase in LCC at TSL 4. The PBP calculated for Class B
equipment was less than the lifetime of the equipment.
After carefully considering the analysis and evaluating the
benefits and burdens of TSL 4, DOE finds that the benefits to the
Nation of TSL 4 (i.e., energy savings and emissions reductions,
including environmental and monetary benefits) do not outweigh the
burdens (i.e., a decrease of $4 million in NPV and a decrease of up to
6.1 percent in INPV). DOE proposes that the burdens of TSL 4 outweigh
the benefits and TSL 4 is not economically justified. Therefore, DOE
proposes to reject TSL 4 for Class B equipment.
TSL 3 would likely save an estimated 0.010 quads of energy through
2042, an amount DOE considers significant. Discounted at 7 percent, the
projected energy savings through 2042 would be 0.003 quads. For the
Nation as a whole, DOE projects that TSL 3 would result in no change in
NPV (less than $0.5 million) using a discount rate of 7 percent.
However, using a 3-percent discount rate, DOE projects that TSL 3 would
result in a net increase of $8 million in NPV. The estimated emissions
reductions at TSL 3 are 0.53 Mt of CO2, up to 0.07 kt of
NOX, and up to 0.009 tons of Hg. Based on previously
developed estimates, these reductions could have a value of up to $5.1
million for CO2, $116,000 for NOX, and $103,000
for Hg at a discount rate of 7 percent. Total electric generating
capacity in 2042 is estimated to decrease compared to the base case by
0.005 GW at TSL 3.
At TSL 3, DOE projects that the average Class B beverage vending
machine customer will experience a reduction in LCC of $49 compared to
the baseline. The mean PBP for the average Class B beverage vending
machine customer at TSL 3 is projected to be 6.0 years compared to the
purchase of baseline equipment.
At TSL 3, DOE believes manufacturers would have to make some
component switches to comply with the standard, but most manufacturers
will not have to significantly alter their production process. These
minor design changes would not raise the production costs beyond the
cost of most equipment sold today, resulting in minimal impacts on
industry value. Compared to the baseline, Class B equipment showed
significant positive LCC savings on a national average and customers
did not experience an increase in LCC at TSL 3. The PBP calculated for
Class B equipment was less than the lifetime of the equipment.
After carefully considering the analysis and weighing the benefits
and burdens of TSL 3, DOE proposes that for Class B equipment, TSL 3
represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified. TSL 3 is
technologically feasible because the technologies required to achieve
these levels are already in existence. TSL 3 is economically justified
because the benefits to the Nation (i.e., an increase of $8 million in
NPV using a 3-percent discount rate, energy savings, and emissions
reductions, including the estimated monetary value of certain
environmental benefits) outweigh the costs (i.e., a decrease of 4.2
percent in INPV). Therefore, DOE is proposing TSL 3 as the energy
conservation standard for Class B beverage vending machines in this
NOPR.
For the reasons discussed above, DOE also requests comments on
whether it should adopt a different TSL for Class B beverage vending
machines.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
Today's proposal has been determined to be a significant regulatory
action under Executive Order 12866, ``Regulatory Planning and Review.''
58 FR 51735 (October 4, 1993). Accordingly, this proposed rule was
subject to review by OMB under the Executive Order. However, DOE has
also determined that today's regulatory action is not an ``economically
significant'' action under section 3(f)(1) of the Executive Order
Executive Order 12866 requires that each agency identify in writing
the specific market failure or other problem that warrants new agency
action, as well as assess the significance of that problem to determine
whether any new regulation is necessary. Executive Order 12866, Sec.
1(b)(1).
In the ANOPR for this rulemaking, DOE requested feedback and data
on a number of issues related to Executive Order 12866 and the
existence of a market failure in the beverage vending machine industry.
In the ANOPR, DOE sought (1) Data on the efficiency levels of existing
beverage vending machines in use by owner (i.e., site owner or machine
operator), electricity price, equipment class (Class A or Class B
machines) and installation type (i.e., indoors or outdoors); (2)
comment on the availability of energy efficiency information to end
users and the extent to which the information leads to informed
choices, specifically given how such equipment is purchased; (3)
detailed data on the distribution of energy efficiency levels for both
the new site owner and equipment operator markets; (4) data on and
suggestions for the existence and extent of potential market failures
to complete an assessment of the significance of these failures and,
thus, the net benefits of regulation; and (5) comments on the weight
that should be given to ``external'' benefits resulting from improved
energy efficiency of beverage vending machines that are not captured by
the users of such equipment. These benefits include both environmental
and energy security-related externalities that are not reflected in
energy prices, such as reduced emissions of greenhouse gases and
reduced use of natural gas and oil for electricity generation.
DOE prepared a regulatory impact analysis (RIA) for this
rulemaking, which is contained in the TSD. The RIA is subject to review
by the Office of Information and Regulatory Affairs (OIRA) in the OMB.
The RIA consists of (1) A statement of the problem addressed by this
regulation and the mandate for Government action, (2) a description and
analysis of policy alternatives to this regulation, (3) a qualitative
review of the potential impacts of the alternatives, and (4) the
national economic impacts of the proposed standard.
The RIA assesses the effects of feasible policy alternatives to
beverage vending machine standards and provides a comparison of the
impacts of the alternatives. DOE evaluated the alternatives in terms of
their ability to achieve significant energy savings at reasonable cost,
and compared them to the effectiveness of the proposed rule. DOE
analyzed these alternatives qualitatively with reference to the
particular market dynamics of the beverage vending industry.
DOE identified the following major policy alternatives for
achieving increased beverage vending machine energy efficiency:
No new regulatory action
Financial incentives, including tax credits and rebates
Revisions to voluntary energy efficiency targets (e.g.,
ENERGY STAR program criteria)
Early replacement
Bulk government purchases
Prescriptive standards that would mandate design
requirements (e.g., lighting and refrigeration controls)
DOE qualitatively evaluated each alternative's ability to achieve
significant energy savings at reasonable cost and compared it to the
effectiveness of the proposed rule. The following
[[Page 26068]]
paragraphs discuss each policy alternative. (See chapter 17 of the TSD,
Regulatory Impact Analysis, for further details.)
No new regulatory action. The case in which no regulatory action is
taken for beverage vending machines constitutes the base case (or no
action) scenario. By definition, no new regulatory action yields zero
energy savings and a net present value of zero dollars.
Tax credits, rebates, and other financial incentives. DOE
considered the impact of various financial incentives at both the
ENERGY STAR Tier 2 level and higher efficiency levels, and examined the
likelihood of an increase in customers purchasing high-efficiency
equipment due to these financial incentives.
In considering the impact of financial incentives, DOE reviewed
existing rebate programs for beverage vending machines. The majority
are utility-sponsored rebate programs that provide incentives for
incorporating lighting and temperature controllers. Also, similar
rebates for other technologies (e.g., ECM motors for evaporator fans)
are provided in other industries, such as in the food sales industry
for commercial refrigerated display cases, and could theoretically be
adapted for beverage vending machines. However, utility rebate programs
are aimed at the site of installation and not at the purchasers of the
machines (as most of the controllers covered by the rebate are add-on
devices), and utility rebates are only provided for reducing
electricity at sites served by the utility. Because beverage vending
machines purchased by large-scale bottlers may not remain on a given
site, tracking the location of rebated equipment could be an issue for
utilities. Also, because most utility rebate programs are not aimed at
purchasers, these programs do not provide incentives for large bottlers
to choose high-efficiency equipment.
Besides utility-sponsored rebate programs, other possibilities for
programs include national manufacturer rebates, purchaser rebates, or
tax incentives. Typically, these programs are advocated as a means to
encourage households or organizations that are sensitive to the first
cost of equipment to purchase or manufacture more costly efficient
equipment that ultimately has a favorable payoff either to the
purchaser, to society, or both. The incentive can be given to the buyer
of the equipment, the rate payer, or the manufacturer, depending on
which method is considered to be most administratively effective.
However, the nature of the beverage vending machine industry and market
makes this approach largely ineffective. At least 75 percent of
beverage vending machines are purchased by two companies (Coca-Cola and
PepsiCo) and their affiliated bottlers and distributors. In the ANOPR
public meeting, PepsiCo stated that all beverage vending machines
purchased by the company are required to meet ENERGY STAR Tier 2
levels. (PepsiCo, Public Meeting Transcript, No. 29 at p. 149) Coca-
Cola stated that by 2010, the beverage vending machines purchased by
the company would use half as much energy as they do now, which would
meet at least ENERGY STAR Tier 1 levels. 73 FR 34104. These companies
purchase ENERGY STAR equipment despite the first-cost increase because
it improves their public image, which results in higher sales in the
long run. (Coca-Cola, Public Meeting Transcript, No. 29 at pp. 154-56)
Direct compensation for the energy savings is not assured but comes
only through a negotiation with the site. Because the driving economic
force for these companies is product sales, not equipment purchases,
lowering the purchase price of equipment would make no significant
difference in market behavior, and the program would simply transfer
the amount of tax credit or rebate to the rebated entity without having
induced extra purchases of efficient beverage vending machines.
Regarding the use of rebates or other incentives beyond Tier 2
efficiency levels, it is not clear how the buying policy of Coca-Cola
and PepsiCo would be influenced by tax credits or rebates. However, the
companies are large enough to successfully finance the higher costs of
beverage vending machines more efficient than Tier 2 with or without
tax credits or rebates.
While rebates or tax credits may affect small purchasers, their
influence over the market for beverage vending machines is marginal. In
addition, because of the existing market dynamics, a significant
portion of any economic incentive paid for the purchase of Tier 2
efficiency equipment could be free riders, those that would purchase
Tier 2 equipment absent incentives. This is particularly true of
rebates paid to manufacturers. Rebates to purchasers would have to be
limited to small volumes of purchases by individual rebatees and target
non-bottler, site-owned equipment. Tax credits to purchasers face
similar issues. Currently, no national manufacturer rebates, purchaser
rebates, or tax incentives are available for enhancement of beverage
vending machine efficiency.
DOE sees value in the continued use of rebates for lighting and
temperature controller technologies even under the standards proposed
in this notice of proposed rulemaking. Because the impact of these
technologies is not captured in the DOE test procedure for beverage
vending machines, employing these technologies in the field will
continue to provide reductions in energy consumption beyond those that
can be achieved by the standards proposed for beverage vending
machines. The reductions will continue to accrue at the site of
installation; therefore, these rebates, primarily for the purchase of
aftermarket controller equipment, should continue to be provided to the
installation site directly.
Revisions to voluntary energy efficiency targets (e.g., ENERGY
STAR). ENERGY STAR currently has two levels of efficiency targets: Tier
1 and Tier 2. The current program appears to have been effective at
inducing large-scale adoption of ENERGY STAR Tier 1 equipment.
Furthermore, the beverage vending industry expects that ENERGY STAR
will be highly effective in securing purchases of Tier 2 equipment due
to the favorable response of the two purchasers who essentially define
the market, Coca-Cola and PepsiCo. While it is possible that voluntary
programs for equipment more efficient than Tier 2 would also be
effective, DOE lacks a quantitative basis to determine how effective
such a program might be. As noted previously, broader economic and
social considerations are in play than simple economic return to the
equipment purchaser. DOE lacks the data necessary to quantitatively
project the degree to which such voluntary programs for more expensive,
higher efficiency equipment would modify the market.
Bulk Government purchases and early replacement incentive programs:
DOE also considered, but did not analyze, the potential of bulk
Government purchases and early replacement incentive programs as
alternatives to the proposed standards. Bulk purchases would have very
limited impact on improving the overall market efficiency of beverage
vending machines because they are a small part of the total market and
the volume of high-efficiency equipment purchases that the Federal
Government might make directly (versus equipment installed by bottlers
at Federal Government sites). In the case of replacement incentives,
several policy options exist to promote early replacement, including a
direct national program of customer incentives, incentives paid to
utilities to promote an early replacement program, market promotions
through equipment manufacturers, and replacement of
[[Page 26069]]
Federally owned equipment. In considering early replacements, DOE
estimates that the energy savings realized through a one-time early
replacement of existing stock equipment does not result in energy
savings commensurate to the cost to administer the program.
Consequently, DOE did not analyze this option in detail.
Prescriptive standards that would mandate design requirements
(e.g., lighting and refrigeration controls). EPCA provides that
standards regulating the energy use of certain equipment may be design
standards, which require specific features in the design of the
equipment; or performance standards, which describe a required level of
equipment performance (e.g., maximum kWh/year energy consumption) and
provide a manufacturer with discretion in determining how best to meet
that performance level. (42 U.S.C. 6291(6)) However, EPCA does not
include beverage vending machines in the list of equipment for which a
design requirement is acceptable. (42 U.S.C. 6291(6)(B), 6292(a))
Furthermore, EPCA specifically requires DOE to base its test procedure
for this equipment on ANSI/ASHRAE Standard 32.1-2004, ``Methods of
Testing for Rating Vending Machines for Bottled, Canned or Other Sealed
Beverages.'' (42 U.S.C. 6293(b)(15)) The test methods in ANSI/ASHRAE
Standard 32.1-2004 consist of means to measure energy consumption.
For these reasons, DOE does not intend to develop design
requirements for this equipment. Instead, DOE intends to develop
standards that allow a maximum level of energy use for each beverage
vending machine, and manufacturers could meet these standards with
their own choice of design methods.
Performance standards. The difficulty in using these non-regulatory
alternatives must be gauged against the more direct benefits calculated
for the performance standards DOE is proposing in this NOPR. Based on
its qualitative review, DOE is not confident that any of the
alternatives it examined would save as much energy as today's proposed
rule, and the financial incentives in particular may engender
significant free ridership issues. Also, several of the alternatives
would require new enabling legislation, since authority to carry out
those alternatives does not exist.
B. Review Under the Regulatory Flexibility Act/Initial Regulatory
Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) for
any rule that by law must be proposed for public comment, unless the
agency certifies that the rule, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
As required by Executive Order 13272, ``Proper Consideration of Small
Entities in Agency Rulemaking'' 67 FR 53461 (August 16, 2002), DOE
published procedures and policies on February 19, 2003, to ensure that
the potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of General Counsel's
Web site, http://www.gc.doe.gov.
For the beverage vending machine manufacturing industry, small
businesses, as defined by the SBA, are manufacturing enterprises with
500 or fewer employees. DOE used the small business size standards
published on August 28, 2008, as amended, by the SBA to determine
whether any small entities would be required to comply with the rule.
(61 FR 3286 and codified at 13 CFR Part 121.) The size standards are
listed by North American Industry Classification System (NAICS) code
and industry description. Beverage vending machine manufacturing is
classified under NAICS 333311.
The beverage vending machine industry is characterized by both
large and small manufacturers that service a wide range of customers,
including large bottlers and direct end-users. Almost all beverage
vending machines sold in the United States are manufactured
domestically. Three major companies supply roughly 90 percent of all
equipment sales. Most of the sales for these companies are made to a
few major bottlers. One of the major manufacturers with significant
market share is considered a small business. The remaining 10 percent
of industry shipments is believed to be supplied by five manufacturers.
All of these companies that do not supply the major bottlers are
considered to be small businesses.
Before issuing this notice of proposed rulemaking, DOE, through its
contractor, contacted all identified small business manufacturers.
These manufacturers were provided a questionnaire seeking information
to better understand the impacts of the proposed standards on small
businesses and how these impacts differ between large and small
manufacturers. The small business interview questionnaire is a
condensed version of the manufacturer interview guide described in the
manufacturer impact analysis, chapter 13 of the TSD, and includes the
following questions:
Are you aware of the US Department of Energy's (DOE's)
ongoing rulemaking to establish national minimum energy conservation
standards for refrigerated beverage vending machines? \45\ Would you
like to be added to DOE's e-mail database for updates relating to this
rulemaking?
---------------------------------------------------------------------------
\45\ For information on DOE's efficiency standards rulemaking
for beverage vending machines, visit the following Web site: http://www1.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines.html.
---------------------------------------------------------------------------
We are assessing the impacts of a potential energy
conservation standard on small businesses. Is your company a small
business (defined as less than 500 employees by the US Small Business
Administration (SBA), including all subsidiaries and parent companies,
and employees in all countries where you operate)?
What are the key issues for your company regarding energy
conservation standards for refrigerated beverage vending machines and
this rulemaking?
DOE would like to understand the small-business beverage
vending machine industry in general and your company in particular.
Could you please provide information on the following:
Is your company a domestic or international company?
What types of refrigerated beverage vending machines do
you manufacture? Do you manufacture Class A or Class B refrigerated
beverage vending machines, or both? 46 47 What sizes of
refrigerated beverage vending machines do you manufacture, measured in
vendible capacity and/or refrigerated volume? Could you provide energy
efficiency figures for those identified models? Does your equipment
meet ENERGY STAR Tier I, Tier II, or any level above those energy
efficiency levels? 48 49
---------------------------------------------------------------------------
\46\ ``Class A'' refers to a beverage vending machine that cools
the entire internal volume. Class A machines are also referred to as
``fully-cooled'' machines.
\47\ ``Class B'' refers to any beverage vending machine not
considered to be Class A. Class B machines are often ``zone-cooled''
machines, in that they typically cool only a fraction of the volume
of the machine.
\48\ Tier I: Energy Consumption <=0.55 [8.66 + (0.009 x Vendible
Capacity)].
\49\ Tier II: Energy Consumption <=0.45 [8.66 + (0.009 x
Vendible Capacity)].
---------------------------------------------------------------------------
Do you manufacture equipment other than refrigerated
beverage vending machines? Do you manufacture any niche or specialty
type refrigerated beverage vending machines that do not easily fall in
the categories from the previous question?
[[Page 26070]]
What are the types of customers you serve in the
refrigerated beverage vending machine market?
Would a new energy conservation standard for refrigerated
beverage vending machines (whereby all your competitors are also
required to meet the same minimum level of energy consumption for their
machines) cause any burdens on your business? If so, please explain.
Please consider costs such as new designs, capital investment,
prototype testing, and marketing that might be required.
DOE would like to understand your company's employment
impacts as a result of standards. Would your company consider
relocating manufacturing to outside the United States as a result of
new energy conservation standards? If not, would standards cause your
domestic employment level to change (increase or decrease)?
Are there any reasons that a small business such as yours
might be at a disadvantage relative to a larger business under
mandatory energy conservation standards? Please consider such factors
as technical expertise, access to capital, bulk purchasing power for
materials, etc. If so, would you be willing to participate in a full
manufacturer interview where DOE will request detailed information
about your business and possible impacts due to energy conservation
standards?
DOE reviewed the standard levels considered in this notice of
proposed rulemaking under the provisions of the Regulatory Flexibility
Act and the procedures and policies published on February 19, 2003.
Based on this review, DOE has prepared an IRFA for this rulemaking. The
IRFA describes potential impacts on small businesses associated with
beverage vending machine design and manufacturing.
The potential impacts on beverage vending machine manufacturers are
discussed in the following sections of this IRFA. DOE has transmitted a
copy of this IRFA to the Chief Counsel for Advocacy of the Small
Business Administration for review.
1. Reasons for the Proposed Rule
Part A of subchapter III (42 U.S.C. 6291-6309) provides for the
Energy Conservation Program for Consumer Products Other Than
Automobiles.\50\ The amendments to EPCA contained in the Energy Policy
Act of 2005 (EPACT 2005), Public Law 109-58, include new or amended
energy conservation standards and test procedures for some of these
products, and direct DOE to undertake rulemakings to promulgate such
requirements. In particular, section 135(c)(4) of EPACT 2005 amends
EPCA to direct DOE to prescribe energy conservation standards for
beverage vending machines (42 U.S.C. 6295(v)). Hence, DOE is proposing
energy conservation standards for refrigerated bottle or canned
beverage vending machines.\51\
---------------------------------------------------------------------------
\50\ This part was originally titled Part B; however, it was
redesignated Part A, after Part B of Title III was repealed by
Public Law 109-58. Similarly, Part C, Certain Industrial Equipment,
was redesignated Part A-1.
\51\ Because of its placement in Part A of Title III of EPCA,
the rulemaking for beverage vending machine energy conservation
standards is bound by the requirements of 42 U.S.C. 6295. However,
since beverage vending machines are commercial equipment, DOE
intends to place the new requirements for beverage vending machines
in Title 10 of the Code of Federal Regulations (CFR), Part 431
(``Energy Efficiency Program for Certain Commercial and Industrial
Equipment''), which is consistent with DOE's previous action to
incorporate the EPACT 2005 requirements for commercial equipment.
The location of the provisions within the CFR does not affect either
their substance or applicable procedure, so DOE is placing them in
the appropriate CFR part based on their nature or type.
---------------------------------------------------------------------------
2. Objectives of and Legal Basis for the Proposed Rule
EPCA provides that any new or amended standard for beverage vending
machines 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) and (v)). EPCA precludes DOE from adopting any
standard that would not result in significant conservation of energy
(42 U.S.C. 6295(o)(3)(B) and (v)). Moreover, DOE may not prescribe a
standard for certain equipment if no test procedure has been
established for that equipment, or if DOE determines by rule that the
standard is not technologically feasible or economically justified and
will not result in significant conservation of energy (42 U.S.C.
6295(o)(3)(A)(B) and (v)). To determine whether economic justification
exists, DOE reviews comments received and conducts analysis to
determine whether the economic benefits of the proposed standard exceed
the burdens to the greatest extent practicable, taking into
consideration seven factors set forth in 42 U.S.C. 6295(o)(2)(B) and
(v). (See section II.B of this preamble.)
EPCA also states that the Secretary may not prescribe an amended or
new standard if interested parties have established by a preponderance
of the evidence that the standard is likely to result in the
unavailability in the United States of any equipment type (or class)
with performance characteristics (including reliability), features,
sizes, capacities, and volumes that are substantially the same as those
generally available in the United States (42 U.S.C. 6295 (o)(4) and
(v)). Further information concerning the background of this rulemaking
is provided in chapter 1 of the TSD.
3. Description and Estimated Number of Small Entities Regulated
To establish a list of small beverage vending machine
manufacturers, DOE examined publicly available data and contacted
manufacturers to determine if they meet the SBA's definition of a small
manufacturing facility and if their manufacturing facilities are
located within the United States. Based on this analysis, DOE confirmed
that there are six small manufacturers of beverage vending machines.
One of these six small manufacturers is one of the top three major
manufacturers, who supply roughly 90 percent of all equipment sales.
The full line of products offered by this small manufacturer and the
remaining two major manufacturers, which are considered large
businesses, are covered under this rulemaking (i.e., equipment that
dispenses refrigerated bottled or canned beverages). The remaining five
small manufacturers comprise approximately 10 percent of industry
shipments for covered equipment. See chapter 3 of the TSD for further
details on the beverage vending machine market. In its examination of
the beverage vending machine industry, DOE has determined that these
small business manufactures with small market shares differ
significantly from the large manufacturers. The primary difference
between these small business manufacturers and the large business
manufacturers is that these five small business manufacturers produce a
wide variety of specialty and niche equipment that are not covered
under this rulemaking. The specialty and niche equipment that these
small manufacturers produce include machines that dispense a wide range
of items including snacks, heated drinks, electronic goods, DVDs,
bowling supplies, and medical products. Furthermore, unlike the major
manufacturers, these small business manufacturers do not sell equipment
to the major bottlers because they do not produce covered equipment in
the necessary volumes. Instead, these manufacturers rely on providing
customized equipment in much smaller volumes.
Requests for interviews were delivered electronically to the six
manufacturers that met the small business criteria. DOE received
[[Page 26071]]
responses from fewer than half and conducted an on-site interview with
only one. In the questionnaire and during the interview, DOE requested
information that would determine if there are differential impacts on
small manufacturers that may result from new energy conservation
standards. See chapter 13 of the TSD for further discussion about the
methodology DOE used in its analysis of manufacturer impacts to include
small manufacturers.
4. Description and Estimate of Compliance Requirements
Potential impacts on manufacturers include impacts associated with
beverage vending machine design and manufacturing. The level of
research and development needed to meet energy conservation standards
increases with more stringent standards. As mentioned previously, DOE
examined the level of impacts that small manufacturers would incur by
identifying small business manufacturers and, through its contractor,
sending them a short questionnaire seeking information to better
understand the impacts of the proposed standard that are unique to
small manufacturers. Since not all of the small business manufacturers
responded to the questionnaire, it is difficult to specifically
quantify how the impacts of the proposed standards differ between large
and small manufacturers. However, DOE found that, for the small
business manufacturer with a major market share, the impacts of the
proposed standard would not differ greatly from those of its larger
competitors, and, for the remaining small business manufacturers, the
impacts would not be significant.
Small Business Manufacturer With a Major Market Share
The small business manufacturer that has a major market share in
covered equipment will not be disproportionately disadvantaged by the
proposed standard. It has a large shipment volume as a major supplier
to the large bottlers and its access to capital is nearly identical to
its larger competitors. Its large shipment volume allows it to
distribute the added cost of compliance across its products, similar to
the large manufacturers. Correspondingly, it echoed the large
manufacturers' concerns about new energy conservation standards,
including conversion costs needed to meet standards, meeting customer
needs, and current market conditions. DOE found no significant
differences in the R&D emphasis or marketing strategies between this
small business manufacturer with a major market share and large
manufacturers. As a result, DOE does not believe the impacts of the
proposed standard will be significantly different for the small
business manufacturer with a large market share when compared to those
expected for the large business manufacturers.
Small Business Manufacturers With Small Market Shares
DOE does not expect the small businesses with small market shares
to be compromised by the proposed energy conservation standard. DOE
estimates that only approximately 40 percent of their offered vending
equipment is covered by the proposed standard. The majority of
equipment offered is specialty or niche equipment. As a result, the
primary source of revenue for these small manufacturers comes from
supplying a market underserved by the major manufacturers of covered
equipment. Any cost disadvantage experienced by these small
manufacturers as a result of the proposed standard can be balanced by
the relatively larger profit margins achievable by charging premium
prices for niche equipment. As a result, DOE believes the proposed
standard will not affect the competitive position of the small business
manufacturers with small market shares in covered equipment.
To estimate a portion of the differential impacts of the proposed
standard on the small manufacturers with small market shares, DOE
compared their cost of compliance for testing and certifying covered
equipment with that of the major manufacturers (the two large and one
small business manufacturers that account for 90 percent of industry
shipments). Manufacturers must test the energy performance of each
basic model it manufacturers in order to determine compliance with
energy conservation standards and testing requirements. Therefore, DOE
examined the number of basic models available from each manufacturer to
determine an estimate for the differential in overall compliance costs.
The number of basic models attributed to each manufacturer is based on
an examination of the different models advertised by each. DOE
estimates the cost of testing a piece of covered equipment to be
approximately $2,000. A typical major manufacturer has approximately 23
basic models, approximately 85 percent of which are covered and would
require separate standards compliance certifications. Therefore, DOE
estimates that a typical major manufacturer will incur approximately
$44,013 in annual costs for standards compliance certifications. DOE
estimates that a typical small manufacturer with small market share has
approximately 27 basic models, 44 percent of which are covered and
would require separate standards compliance certifications. DOE
estimates that a typical small manufacturer will incur approximately
$14,380 in annual costs for standards compliance certifications.
According to this comparison, the cost of certification for a small
manufacturer with small market share is significantly lower than that
of a major manufacturer.
As stated above, DOE expects that there will be some differential
impacts associated with beverage vending machine design and
manufacturing on small manufacturers. DOE requests comments on how
small business manufacturers will be affected due to new energy
conversation standards. Specifically, DOE requests comments on the
compliance costs and other impacts to small manufacturers that do not
supply the high-volume customers of beverage vending machines.
5. Duplication, Overlap, and Conflict With Other Rules and Regulations
DOE is not aware of any rules or regulations that duplicate,
overlap, or conflict with the rule being considered today.
6. Significant Alternatives to the Rule
The primary alternatives to the proposed rule considered by DOE are
the other TSLs besides the ones being proposed today, TSL 6 for Class A
and TSL 3 for Class B. As discussed in section VI.B subsection 6, DOE
expects that the differential impact on small beverage vending machine
manufacturers would be less severe in moving from TSL 5 to proposed TSL
6 for Class A than it would be in moving from TSL 6 to TSL 7. For Class
B machines, DOE expects that the differential impact on small beverage
vending machine manufacturers would be less significant in moving from
TSL 2 to proposed TSL 3 than it would be in moving from TSL 4 to TSL 5.
While lower TSLs (i.e., TSLs 1-5 for Class A and TSLs 1 and 2 for Class
B) would have less impact on all manufacturers affected by this
rulemaking, including the small manufacturers, these TSLs do not meet
the statutory requirement that DOE implement the standard that is
designed to achieve the maximum improvement in energy efficiency that
is technologically feasible and economically justified.
In addition, the TSD includes a regulatory impact analysis (RIA)
(chapter 17 of the TSD), which discusses the following policy
alternatives: (1) No new regulatory
[[Page 26072]]
action, (2) financial incentives including rebates or tax credits, (3)
revisions to voluntary energy efficiency targets such as ENERGY STAR
program criteria, (4) bulk government purchases, (5) early replacement
incentive programs, and (6) prescriptive standards that would mandate
design requirements (e.g., lighting and refrigeration controls). DOE
does not intend to consider these alternatives further because they are
either not feasible to implement, or not expected to result in energy
savings as large as those that would be achieved by the standard levels
under consideration.
Section 603(c) of the RFA lists the following as alternatives that
agencies should consider in an IRFA: (1) Establishment of different
compliance or reporting requirements for small entities or timetables
that take into account the resources available to small entities, (2)
clarification, consolidation, or simplification of compliance and
reporting requirements for small entities, (3) use of performance
rather than design standards, and (4) exemption for certain small
entities from coverage of the rule, in whole or in part.\52\
---------------------------------------------------------------------------
\52\ Id. at 36.
---------------------------------------------------------------------------
For alternatives (1) and (2) above, testing and reporting of
certification and compliance with the proposed energy conservation
standards are expected to be a relatively minor component of compliance
compared with manufacturers' other actions to meet the standard. In
addition, as explained further in the discussion of alternative (4),
DOE is not authorized to delay the setting of the standard past August
9, 2009, and the standard must apply to products manufactured 3 years
after the date of publication of the final rule. (42 U.S.C. 6295(v)(2)
and (3). Therefore, DOE cannot establish different energy standards or
a different timetable for small entities, as contemplated by
alternative (1). The proposed rule is a performance standard rather
than a prescriptive standard, so alternative (3) is not applicable to
the proposed rule.
Alternative (4) considers exemptions for small entities in whole or
in part. The authority granted to DOE to promulgate the proposed rule
under the Energy Policy Act of 2005 (EPACT 2005) does not allow for
exemptions in whole or in part. EPACT 2005 amended the Energy Policy
and Conservation Act by adding new subsections 325(v)(2), (3) and (4),
which direct the Secretary of Energy to issue, by rule, energy
conservation standards for refrigerated bottled or canned beverage
vending machines. (42 U.S.C. 6295(v) (1), (2), and (3)) \53\\\ The
proposed standards apply to all beverage vending machines manufactured
3 years after publication of the final rule establishing the energy
conservation standards and offered for sale in the United States (42
U.S.C. 6295(v)(4)) [emphasis added].\54\ However, a manufacturer can
petition DOE's Office of Hearing and Appeals (OHA) for exception relief
from the energy conservation standard pursuant to OHA's authority under
section 504 of the DOE Organization Act (42 U.S.C. 7194), as
implemented at subpart B of 10 CFR part 1003. OHA grants such relief on
a case-by-case basis if it determines that a manufacturer has
demonstrated that meeting the standard would cause hardship, inequity,
or unfair distributions of burdens.
---------------------------------------------------------------------------
\53\ Note that the relevant statutory provisions were renumbered
pursuant to section 316(d)(1) of EISA, Public Law 110-140.
\54\ This provision was redesignated by EISA, section 316(d)(1),
as 42 U.S.C. 6295(v)(3).
---------------------------------------------------------------------------
Chapter 13 of the TSD contains additional information about the
impact of this rulemaking on manufacturers. As mentioned above, the
other policy alternatives are described in section VI.A of the preamble
and in the Regulatory Impact Analysis (chapter 17 of the TSD). Since
the impacts of these policy alternatives are less than the impacts
described above for TSL 6 for Class A and TSL 3 for Class B, DOE
expects that the impacts on small manufacturers of these alternatives
would also be less than the impacts described above for the proposed
standard levels. DOE requests comment on the impacts on small
manufacturers for these and any other possible alternatives to the
proposed rule. DOE will consider any comments received regarding
impacts on small manufacturers for all the alternatives identified,
including those in the RIA, for the final rule.
C. Review Under the Paperwork Reduction Act
This rulemaking will impose no new information or record keeping
requirements. Accordingly, OMB clearance is not required under the
Paperwork Reduction Act. (44 U.S.C. 3501 et seq.)
D. Review Under the National Environmental Policy Act
DOE is preparing a draft environmental assessment of the impacts of
the potential standards. The assessment will include an examination of
the potential effects of emission reductions likely to result from the
rule in the context of global climate change as well as other types of
environmental impacts. DOE anticipates completing a Finding of No
Significant Impact (FONSI) before publishing the final rule on beverage
vending machines, pursuant to the National Environmental Policy Act of
1969 (NEPA) (42 U.S.C. 4321 et seq.), the regulations of the Council on
Environmental Quality (40 CFR parts 1500-1508), and DOE's regulations
for compliance with the NEPA (10 CFR part 1021). The draft EA can be
found in chapter 16 of the TSD.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. The Executive Order also requires agencies
to have an accountable process to ensure meaningful and timely input by
State and local officials in the development of regulatory policies
that have federalism implications. On March 14, 2000, DOE published a
statement of policy describing the intergovernmental consultation
process it will follow in the development of such regulations. (65 FR
13735.) DOE has examined today's proposed rule and has determined that
it would not have a substantial direct effect on the States, on the
relationship between the Federal Government and the States, or on the
distribution of power and responsibilities among the various levels of
government. EPCA governs and prescribes Federal preemption of State
regulations on energy conservation for the equipment that is the
subject of today's proposed rule. Specifically, EPCA provides that
States are preempted from adopting new standards once DOE publishes a
final rule. Once the final rule takes effect, State standards that were
in effect at the time of the publication of the final rule are
preempted. (42 U.S.C. 6295(ii)) States can petition DOE for waiver from
such preemption to the extent, and based on criteria, set forth in
EPCA. (42 U.S.C. 6297(d) and 6316(b)(2)(D)) No further action is
required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the
[[Page 26073]]
general duty to adhere to the following requirements: (1) Eliminate
drafting errors and ambiguity, (2) write regulations to minimize
litigation, and (3) provide a clear legal standard for affected conduct
rather than a general standard and promote simplification and burden
reduction. With regard to the review required by section 3(a), section
3(b) of Executive Order 12988 specifically requires that Executive
agencies make every reasonable effort to ensure that the regulation (1)
clearly specifies the preemptive effect, if any; (2) clearly specifies
any effect on existing Federal law or regulation; (3) provides a clear
legal standard for affected conduct while promoting simplification and
burden reduction; (4) specifies the retroactive effect, if any; (5)
adequately defines key terms; and (6) addresses other important issues
affecting clarity and general draftsmanship under any guidelines issued
by the Attorney General. Section 3(c) of Executive Order 12988 requires
Executive agencies to review regulations in light of applicable
standards in section 3(a) and section 3(b) to determine whether they
are met or it is unreasonable to meet one or more of them. DOE has
completed the required review and determined that this proposed rule
meets the relevant standards of Executive Order 12988 to the extent
permitted by law.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) (UMRA), requires each Federal agency to assess the effects of
Federal regulatory actions on State, local and Tribal governments and
the private sector. For a proposed regulatory action likely to result
in a rule that may cause the expenditure by State, local, and Tribal
governments, in the aggregate, or by the private sector of $100 million
or more in any one year (adjusted annually for inflation), section 202
of UMRA requires a Federal agency to publish a written statement that
estimates the resulting costs, benefits, and other effects on the
national economy. (2 U.S.C. 1532(a), (b)). UMRA also requires a Federal
agency to develop an effective process to permit timely input by
elected officers of State, local, and Tribal governments on a proposed
``significant intergovernmental mandate,'' and requires an agency plan
for giving notice and opportunity for timely input to potentially
affected small governments before establishing any requirements that
might significantly or uniquely affect small governments. On March 18,
1997, DOE published a statement of policy on its process for
intergovernmental consultation under UMRA, (62 FR 12820) (also
available at http://www.gc.doe.gov). Today's proposed rule does not
impose expenditures of $100 million or more on the private sector. It
does not contain a Federal intergovernmental mandate.
Section 202 of UMRA authorizes an agency to respond to the content
requirements of UMRA in any other statement or analysis that
accompanies the proposed rule. 2 U.S.C. 1532(c). The content
requirements of section 202(b) of UMRA relevant to a private sector
mandate substantially overlap the economic analysis requirements that
apply under section 325(o) of EPCA and Executive Order 12866. The
Supplementary Information section of this notice of proposed rulemaking
and the Regulatory Impact Analysis section of the TSD respond to those
requirements.
Under section 205 of UMRA, DOE is obligated to identify and
consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. DOE is required to select from those alternatives the most
cost-effective and least burdensome alternative that achieves the
objectives of the rule unless DOE publishes an explanation for doing
otherwise or the selection of such an alternative is inconsistent with
law. As required by sections 325(o), 345(a) and 342(c)(4)(A) of EPCA
(42 U.S.C. 6295(o), 6316(a) and 6313(c)(4)(A)), today's proposed rule
would establish energy conservation standards for beverage vending
machines that are designed to achieve the maximum improvement in energy
efficiency that DOE has determined to be both technologically feasible
and economically justified. A full discussion of the alternatives
considered by DOE is presented in the Regulatory Impact Analysis in the
TSD.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule that may affect family
well-being. This proposed rule would not have any impact on the
autonomy or integrity of the family as an institution. Accordingly, DOE
has concluded that it is not necessary to prepare a Family Policymaking
Assessment.
I. Review Under Executive Order 12630
DOE has determined, under Executive Order 12630, Governmental
Actions and Interference with Constitutionally Protected Property
Rights, 53 FR 8859 (March 18, 1988), that this regulation would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by OMB. The OMB's
guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's
guidelines were published at 67 FR 62446 (October 7, 2002). DOE has
reviewed today's notice under the OMB and DOE guidelines and has
concluded that it is consistent with applicable policies in those
guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to OMB a
Statement of Energy Effects for any proposed significant energy action.
A ``significant energy action'' is defined as any action by an agency
that promulgated or is expected to lead to promulgation of a final
rule, and that (1) Is a significant regulatory action under Executive
Order 12866, or any successor order; and (2) is likely to have a
significant adverse effect on the supply, distribution, or use of
energy; or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use.
Today's regulatory action would not have a significant adverse
effect on the supply, distribution, or use of energy and, therefore, is
not a significant energy action. Accordingly, DOE has not prepared a
Statement of Energy Effects.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science
[[Page 26074]]
and Technology (OSTP), issued its Final Information Quality Bulletin
for Peer Review (Bulletin). 70 FR 2664, (January 14, 2005) The Bulletin
establishes that certain scientific information shall be peer reviewed
by qualified specialists before it is disseminated by the Federal
Government, including influential scientific information related to
agency regulatory actions. The purpose of the bulletin is to enhance
the quality and credibility of the Government's scientific information.
Under the Bulletin, the energy conservation standards rulemakings
analyses are ``influential scientific information.'' The Bulletin
defines ``influential scientific information'' as ``scientific
information the agency reasonably can determine will have, or does
have, a clear and substantial impact on important public policies or
private sector decisions.'' 70 FR 2667 (January 14, 2005)
In response to OMB's Bulletin, DOE conducted a formal peer review
of the energy conservation standards development process and analyses
and has prepared a Peer Review Report pertaining to the energy
conservation standards rulemaking analyses. The Energy Conservation
Standards Rulemaking Peer Review Report dated February 2007 has been
disseminated and is available at http://www.eere.energy.gov/buildings/appliance_standards/peer_review.html.
VII. Public Participation
A. Attendance at Public Meeting
The time, date and location of the public meeting are provided in
the DATES and ADDRESSES sections at the beginning of this document. To
attend the public meeting, please notify Ms. Brenda Edwards at (202)
586-2945. As explained in the ADDRESSES section, foreign nationals
visiting DOE headquarters are subject to advance security screening
procedures. Any foreign national wishing to participate in the meeting
should advise DOE of this fact as soon as possible by contacting Ms.
Brenda Edwards to initiate the necessary procedures.
B. Procedure for Submitting Requests To Speak
Any person who has an interest in today's notice, or who is a
representative of a group or class of persons that has an interest in
these issues, may request an opportunity to make an oral presentation.
Please hand-deliver requests to speak to the address shown under the
heading ``Hand Delivery/Courier'' in the ADDRESSES section of this
NOPR, between 9 a.m. and 4 p.m., Monday through Friday, except Federal
holidays. Also, requests may be sent by mail to the address shown under
the heading ``Postal Mail'' in the ADDRESSES section of this NOPR, or
by e-mail to [email protected].
Parties requesting to speak should briefly describe the nature of
their interest in this rulemaking and provide a telephone number for
contact. DOE asks parties selected to be heard to submit a copy of
their statements at least two weeks before the public meeting, either
in person, by postal mail, or by e-mail as described in the preceding
paragraph. Please include an electronic copy of your statement on a
computer diskette or compact disk when delivery is by postal mail or in
person. Electronic copies must be in WordPerfect, Microsoft Word,
Portable Document Format (PDF), or text (American Standard Code for
Information Interchange (ASCII)) file format. At its discretion, DOE
may permit any person who cannot supply an advance copy of his or her
statement to participate, if that person has made alternative
arrangements with the Building Technologies Program. In such
situations, the request to give an oral presentation should ask for
alternative arrangements.
C. Conduct of Public Meeting
DOE will designate a DOE official to preside at the public meeting
and may also use a professional facilitator to aid discussion. The
meeting will not be a judicial or evidentiary-type public hearing, but
DOE will conduct it in accordance with 5 U.S.C. 553 and section 336 of
EPCA (42 U.S.C. 6306). A court reporter will be present to record and
transcribe the proceedings. DOE reserves the right to schedule the
order of presentations and to establish the procedures governing the
conduct of the public meeting. After the public meeting, interested
parties may submit further comments about the proceedings, and any
other aspect of the proposed rulemaking, until the end of the comment
period.
The public meeting will be conducted in an informal, conference
style. DOE will present summaries of comments received before the
public meeting, allow time for presentations by participants, and
encourage all interested parties to share their views on issues
affecting this rulemaking. Each participant will be allowed to make a
prepared general statement (within time limits determined by DOE)
before discussion of a particular topic. DOE will permit other
participants to comment briefly on any general statements.
At the end of all prepared statements on a topic, DOE will permit
participants to clarify their statements briefly and comment on
statements made by others. Participants should be prepared to answer
questions by DOE and by other participants concerning these issues. DOE
representatives may also ask questions of participants concerning other
matters relevant to the proposed rulemaking. The official conducting
the public meeting will accept additional comments or questions from
those attending, as time permits. The presiding official will announce
any further procedural rules or modification of the above procedures
that may be needed for proper conduct of the public meeting.
DOE will include the entire record of this proposed rulemaking,
including the transcript from the public meeting, in the docket for
this rulemaking. For access to the docket to read the transcript, visit
the U.S. Department of Energy, Resource Room of the Building
Technologies Program, 950 L'Enfant Plaza, SW., 6th Floor, 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. Any person may purchase a copy of the transcript
from the transcribing reporter.
D. Submission of Comments
DOE will accept comments, data, and information regarding all
aspects of this NOPR before or after the public meeting, but no later
than the date provided at the beginning of this notice of proposed
rulemaking. Please submit comments, data, and information
electronically to the following e-mail address:
[email protected]. Submit electronic comments in
WordPerfect, Microsoft Word, PDF, or ASCII file format and avoid the
use of special characters or any form of encryption. Comments in
electronic format should be identified by the docket number EERE-2006-
STD-0125 and/or RIN 1904-AB58, and whenever possible carry the
electronic signature of the author. Absent an electronic signature,
comments submitted electronically must be followed and authenticated by
submitting a signed original paper document. No faxes will be accepted.
Under 10 CFR 1004.11, any person submitting information that he or
she believes to be confidential and exempt by law from public
disclosure should submit two copies: One copy of the document including
all the information believed to be confidential, and one
[[Page 26075]]
copy of the document with the information believed to be confidential
deleted. DOE will make its own determination about the confidential
status of the information and treat it according to its determination.
Factors of interest to DOE when evaluating requests to treat
submitted information as confidential include (1) A description of the
items, (2) whether and why such items are customarily treated as
confidential within the industry, (3) whether the information is
generally known by or available from other sources, (4) whether the
information has previously been made available to others without
obligation concerning its confidentiality, (5) an explanation of the
competitive injury to the submitting person which would result from
public disclosure, (6) when such information might lose its
confidential character due to the passage of time, and (7) why
disclosure of the information would be contrary to the interest.
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this proposed
rule.
List of Subjects in 10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation.
Issued in Washington, DC, on May 22, 2009.
Steven G. Chalk,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable
Energy.
For the reasons set forth in the preamble, DOE proposes to amend
Chapter II of Title 10, Code of Federal Regulations, Part 431 to read
as set forth below.
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
1. The authority citation for part 431 continues to read as
follows:
Authority: 42 U.S.C. 6291-6317.
2. In Sec. 431.292 add, in alphabetical order, new definitions for
``bottled or canned beverage'', ``Class A'', ``Class B'', and ``V'' to
read as follows:
Sec. 431.292 Definitions concerning refrigerated bottled or canned
beverage vending machines.
* * * * *
Bottled or canned beverage means a beverage in a sealed container.
Class A means a refrigerated bottled or canned beverage vending
machine that is fully cooled.
Class B means any refrigerated bottled or canned beverage vending
machine not considered to be Class A.
* * * * *
V means the refrigerated volume (ft\3\) of the refrigerated bottled
or canned beverage vending machine, as measured by AHAM HRF-1-2004
(incorporated by reference, see Sec. 431.293).
3. Section 431.293 is revised to read as follows:
Sec. 431.293 Materials incorporated by reference.
(a) General. DOE incorporates by reference the following standards
into subpart Q of part 431. The material listed has been approved for
incorporation by reference by the Director of the Federal Register in
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Any subsequent
amendment to a standard by the standard-setting organization will not
affect the DOE regulations unless and until amended by DOE. Material is
incorporated as it exists on the date of the approval and a notice of
any change in the material will be published in the Federal Register.
All approved material is available for inspection at the National
Archives and Records Administration (NARA). For information on the
availability of this material at NARA, call 202-741-6030 or visit
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. This material is also available for
inspection at U.S. Department of Energy, Office of Energy Efficiency
and Renewable Energy, Building Technologies Program, 6th Floor, 950
L'Enfant Plaza, SW., Washington, DC 20024, 202-586-2945, or visit
http://www.eere.energy.gov/buildings/appliance_standards. Standards
can be obtained from the sources listed below.
(b) ANSI. American National Standards Institute, 25 W. 43rd Street,
4th Floor, New York, NY 10036, 212-642-4900, or visit http://www.ansi.org.
(1) ANSI/AHAM HRF-1-2004, Energy, Performance and Capacity of
Household Refrigerators, Refrigerator-Freezers and Freezers, approved
July 7, 2004, IBR approved for Sec. 431.294.
(2) ANSI/ASHRAE Standard 32.1-2004, Methods of Testing for Rating
Vending Machines for Bottled, Canned, and Other Sealed Beverages,
approved December 2, 2004, IBR approved for Sec. 431.294.
4. In subpart Q, add an undesignated center heading and Sec.
431.296 to read as follows:
Energy Conservation Standards
Sec. 431.296 Energy conservation standards and their effective dates.
Each refrigerated bottled or canned beverage vending machine
manufactured on or after 3 years from the date of publication of the
final rule, shall have a daily energy consumption (in kilowatt hours
per day) that does not exceed the following:
------------------------------------------------------------------------
Maximum daily energy consumption
Equipment class kilowatt hours per day
------------------------------------------------------------------------
Class A.............................. 0.055 x V + 2.56
Class B.............................. 0.073 x V + 3.16
------------------------------------------------------------------------
[FR Doc. E9-12410 Filed 5-26-09; 4:15 pm]
BILLING CODE 6450-01-P