[Federal Register Volume 74, Number 215 (Monday, November 9, 2009)]
[Proposed Rules]
[Pages 57738-57802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26544]
[[Page 57737]]
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Part II
Department of Energy
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10 CFR Part 431
Energy Conservation Program: Energy Conservation Standards for Certain
Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens, and
Electric and Gas Kitchen Ranges and Ovens) and for Certain Commercial
and Industrial Equipment (Commercial Clothes Washers); Proposed Rule
Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 /
Proposed Rules
[[Page 57738]]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2006-STD-0127]
RIN 1904-AB93
Energy Conservation Program: Energy Conservation Standards for
Certain Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens,
and Electric and Gas Kitchen Ranges and Ovens) and for Certain
Commercial and Industrial Equipment (Commercial Clothes Washers)
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Supplemental notice of proposed rulemaking and notice of public
meeting.
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SUMMARY: On October 17, 2008, the U.S. Department of Energy (DOE)
issued a notice of proposed rulemaking (NOPR) in which DOE proposed
amendments to the energy conservation standards for several residential
products and commercial equipment, including commercial clothes washers
(CCWs). DOE decided to conduct additional, supplemental rulemaking
analyses for CCWs to address certain alleged data problems. Today's
document details these supplemental analyses and proposes revised CCW
standard levels for consideration.
DATES: DOE will hold a public meeting on November 16, 2009, from 9 a.m.
to 5 p.m., in Washington, DC. DOE must receive requests to speak at the
public meeting and receive a signed original and an electronic copy of
statements to be given at the public meeting before 4 p.m., November
13, 2009.
DOE will accept comments, data, and information regarding the
supplemental notice of proposed rulemaking (SNOPR) received not later
than December 9, 2009. See section VII, ``Public Participation,'' of
today's supplemental notice for details.
ADDRESSES: The public meeting will be held at the U.S. Department of
Energy, Forrestal Building, 1E-245, 1000 Independence Avenue, SW.,
Washington, DC 20585. (Please note that foreign nationals visiting DOE
Headquarters are subject to advanced security screening procedures. If
you are a foreign national and wish to participate in the workshop,
please inform DOE of this fact as soon as possible by contacting Ms.
Brenda Edwards at (202) 586-2945 so that the necessary procedures can
be completed.)
Any comments submitted must identify the SNOPR for Energy
Conservation Standards for Home Appliance Products, and provide docket
number EERE-2006-STD-0127 and/or regulatory information number (RIN)
1904-AB93. Comments may be submitted using any of the following
methods:
1. Federal eRulemaking Portal: http://www.regulations.gov. Follow
the instructions for submitting comments.
2. E-mail: [email protected]. Include docket
number EE-2006-STD-0127 and/or RIN number 1904-AB93 in the subject line
of the message.
3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy,
Building Technologies Program, Mailstop EE-2J, 1000 Independence
Avenue, SW., Washington, DC 20585-0121. Please submit one signed
original paper copy.
4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of
Energy, Building Technologies Program, Room 1J-018, 1000 Independence
Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-2945.
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 today's supplemental notice for details.
Docket: For access to the docket to read background documents or
comments received, visit the U.S. Department of Energy, Resource Room
of the Building Technologies Program, 950 L'Enfant Plaza, SW., Suite
600, Washington, DC 20585-0121, (202) 586-2945, between 9 a.m. and 4
p.m., Monday through Friday, except Federal holidays. Please call Ms.
Brenda Edwards at the above telephone number for additional information
regarding visiting the Resource Room.
FOR FURTHER INFORMATION CONTACT: Mr. Stephen Witkowski, U.S. Department
of Energy, Energy Efficiency and Renewable Energy, Building
Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington,
DC 20585-0121. Telephone: (202) 586-7463. E-mail:
[email protected].
Ms. Francine Pinto, Esq. or Ms. Betsy Kohl, Esq., U.S. Department
of Energy, Office of General Counsel, GC-71/72, 1000 Independence
Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-5000. E-
mail: [email protected], [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Proposed Rule
II. Introduction
A. Consumer Overview
B. Authority
C. Background
1. Current Standards
2. History of Standards Rulemaking
D. Test Procedures
E. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need of the Nation to Conserve Energy
g. Other Factors
2. Rebuttable Presumption
III. Methodology and Revisions to the Analyses Employed in the
October 2008 Proposed Rule
A. Equipment Classes
B. Technology Assessment
C. Engineering Analysis
1. Efficiency Levels
a. Revised Efficiency Levels
b. Technological Feasibility of the Revised Top-Loading Max-Tech
Level
2. Manufacturing Costs
D. Life-Cycle Cost and Payback Period Analysis
1. Equipment Prices
2. Installation Cost
3. Annual Energy Consumption
4. Energy and Water Prices
a. Energy Prices
b. Water and Wastewater Prices
5. Repair and Maintenance Costs
6. Equipment Lifetime
7. Discount Rates
8. Effective Date of the Amended Standards
9. Equipment Energy Efficiency in the Base Case
10. CCW Split Incentive
11. Rebound Effect
12. Inputs to Payback Period Analysis
13. Rebuttable-Presumption Payback Period
E. National Impact Analysis--National Energy Savings and Net
Present Value Analysis
1. General
2. Shipments
a. New Construction Shipments
b. Replacements and Non-replacements
c. Purchase Price, Operating Cost, and Income Impacts
3. Other Inputs
a. Base-Case Forecasted Efficiencies
b. Standards-Case Forecasted Efficiencies
c. Annual Energy Consumption
d. Site-to-Source Conversion
e. Energy Used in Water and Wastewater Treatment and Delivery
f. Total Installed Costs and Operating Costs
g. Discount Rates
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h. Effects of Standards on Energy Prices
F. Consumer Subgroup Analysis
G. Manufacturer Impact Analysis
H. Employment Impact Analysis
I. Utility Impact Analysis
J. Environmental Assessment
K. Monetizing Carbon Dioxide and Other Emissions Impacts
IV. Discussion of Other Comments
A. Proposed TSLs for Commercial Clothes Washers
B. Proposed Standards for Commercial Clothes Washers
V. Analytical Results
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable-Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value
c. Impacts on Employment
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
C. Proposed Standards
1. Overview
2. Conclusion
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Attendance at Public Meeting
B. Procedure for Submitting Requests to Speak
C. Conduct of Public Meeting
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act \1\ (EPCA), as amended,
provides that any amended energy conservation standard DOE prescribes,
including those for CCWs, shall be designed to ``achieve the maximum
improvement in energy efficiency * * * which the Secretary determines
is technologically feasible and economically justified.'' (42 U.S.C.
6295(o)(2)(A) and 6316(a)) Furthermore, any new or amended standard
must ``result in significant conservation of energy.'' (42 U.S.C.
6295(o)(3)(B) and 6316(a)) In accordance with these and other statutory
criteria discussed in this notice, DOE proposes in today's SNOPR to
amend the energy conservation standards for CCWs and raise efficiency
levels as shown in Table I.1. The standards would apply to all CCWs
manufactured in, or imported into, the United States 3 years after the
publication of the final rule in the Federal Register.
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\1\ 42 U.S.C. 6291 et seq.
Table I.1--Existing and Proposed Energy Conservation Standards for Commercial Clothes Washers
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Existing energy conservation standards (effective January 1, Proposed energy conservation standards
2007) -------------------------------------------------
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Equipment class Standards Equipment class Standards
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Commercial clothes washers........... 1.26 Modified Energy Top-loading commercial 1.6 Modified Energy
Factor/9.5 Water clothes washers. Factor/8.5 Water
Factor. Factor.
Front-loading 2.00 Modified Energy
commercial clothes Factor/5.5 Water
washers. Factor.
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DOE estimates that the energy conservation standards proposed in
today's SNOPR would save a significant amount of energy--an estimated
0.10 quadrillion British thermal units (Btu), or quads, of cumulative
energy over 30 years (2013-2043). This amount is equivalent to 2 days
of U.S. gasoline use. In addition, today's proposed standards for CCWs
save over 143 billion gallons of cumulative water consumption over 30
years (2013-2043).
The cumulative national net present value (NPV) of total consumer
costs and savings of today's proposed standards from 2013 to 2043, in
2008 dollars (2008$), ranges from $0.4 billion (7-percent discount
rate) to $0.9 billion (3-percent discount rate). This is the estimated
total value of future operating-cost savings minus the estimated
increased equipment costs, discounted to the present year (2009). DOE
estimates the CCW industry net present value (INPV) to be approximately
$62 million in 2008$. If DOE adopts today's proposed standards,
manufacturers expect a decline of between 7.8 percent and 11.4 percent
of the INPV, which is approximately $5 to $7 million. However, the NPV
for consumers (at the 7-percent discount rate) would exceed industry
losses due to energy efficiency standards by at least 80 times.
DOE believes that the impacts of standards on consumers would be
positive for CCWs, even though the standards may increase some initial
costs. DOE estimates that today's proposed modified energy factor (MEF)
and water factor (WF) standards for CCWs would increase the retail
price by $214 per unit for top-loading washers and $23 for front-
loading washers, but the operating cost savings outweigh these price
increases, resulting in positive economic impacts to CCW consumers.
DOE's analyses indicate that the energy savings resulting from
today's proposed standards would have benefits to utilities and to the
environment. The energy saved is in the form of electricity and natural
gas, and DOE expects the energy savings from today's proposed standards
to eliminate the need for approximately 18 megawatts (MW) of generating
capacity by 2043. This result reflects DOE's use of energy price
projections from the U.S. Energy Information Administration (EIA)'s
April 2009 release of the Annual Energy Outlook 2009 (AEO 2009)
reflecting provisions of the American Recovery and Reinvestment Act of
2009 (ARRA 2009; Pub. L. 111-5). DOE intends to use the most recently
available version of EIA's AEO to generate the results for the final
rule.
In addition, today's proposed standards would have environmental
benefits, which would be estimated to result in cumulative
(undiscounted) greenhouse gas emission reductions of 5.1 million tons
(Mt) of carbon dioxide (CO2) from 2013 to 2043. DOE
estimates that the range of the monetized value of
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CO2 emission reductions based on global estimates of the
value of CO2 is $13 million to $140 million at a 7-percent
discount rate and $28 million to $303 million at a 3-percent discount
rate. The standards for CCWs would also result in 3.04 kilotons (kt) of
nitrogen oxides (NOX) emissions reductions from 2013 to
2043. The standards for CCWs would also possibly result in power plant
mercury (Hg) emissions reductions of up to 0.03 t from 2013 to 2043.
The benefits and costs of today's proposed standards can also be
expressed in terms of annualized (2008$) values from 2013-2043.
Estimates of annualized values are shown in Table I.2. The annualized
monetary values are the sum of the annualized national economic value
of operating savings benefits (energy, maintenance and repair),
expressed in 2008$, plus the monetary values of the benefits of carbon
dioxide emission reductions, otherwise known as the Social Cost of
Carbon (SCC) expressed as $19 per metric ton of carbon dioxide, in
2007$. The $19 value is a central interim value from a recent
interagency process. Although this $19 value represents emissions that
are valued in 2007$, the monetary benefits of cumulative emissions
reductions are reported in 2008$ so that they can be compared with the
other costs and benefits in the same dollar units. The derivation of
this value is discussed in section V.B.6. Although summing the value of
operating savings to the values of CO2 reductions provides a
valuable perspective, please note the following: 1) the national
operating savings are domestic U.S. consumer monetary savings found in
market transactions while the CO2 value is based on a range
of estimates of imputed marginal social cost of carbon from $5 to $55
per metric ton (2007$), which are meant to reflect the global benefits
of carbon dioxide reductions; and 2) the assessments of operating
savings and CO2 savings are performed with different
computer models, leading to different time frames for analysis. The
present value of national operating savings is measured for the period
2013-2065 (31 years from 2013 to 2043 inclusive, plus the lifetime of
the longest-lived equipment shipped in the 31st year), then converted
the annualized equivalent for the 31 years. The value of
CO2, on the other hand is meant to reflect the present value
of all future climate related impacts, even those beyond 2065.
Using a 7-percent discount rate for the annualized cost analysis,
the combined cost of the standards established in today's notice for
CCWs is $23.4 million per year in increased equipment and installation
costs, while the annualized benefits are $60.6 million per year in
reduced equipment operating costs and $5.1 million in CO2
reductions, for a net benefit of $42.2 million per year. Using a 3-
percent discount rate, the cost of the standards established in today's
final rule is $22.7 million per year in increased equipment and
installation costs, while the benefits of today's standards are $72.8
million per year in reduced operating costs and $5.9 million in
CO2 reductions, for a net benefit of $56.0 million per year.
Table I.2--Annualized Benefits and Costs for Commercial Clothes Washers
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Units
Primary Low estimate High estimate --------------------------------
Category estimate (AEO (low growth (high growth Year Disc (in Period
reference case) case) case) dollars percent) covered
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Benefits
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Annualized Monetized........ 60.6........... 54.9........... 66.6........... 2008 7 31
(millions$/year)............ 72.8........... 65.3........... 80.4........... 2008 3 31
Annualized Quantified....... 0.14 CO2 (Mt).. 0.14 CO2 (Mt).. 0.14 CO2 (Mt).. NA 7 31
0.087 NOX (kt). 0.087 NOX (kt). 0.087 NOX (kt). NA 7 31
0.001 Hg (t)... 0.001 Hg (t)... 0.001 Hg (t)... NA 7 31
0.16 CO2 (Mt).. 0.16 CO2 (Mt).. 0.16 CO2 (Mt).. NA 3 31
0.094 NOX (kt). 0.094 NOX (kt). 0.094 NOX (kt). NA 3 31
0.001 Hg (t)... 0.001 Hg (t)... 0.001 Hg (t)... NA 3 31
CO2 Monetized Value (at $19/ 5.1............ 5.1............ 5.1............ 2008 7 31
Metric Ton, millions$/year).
5.9............ 5.9............ 5.9............ 2008 3 31
Total Monetary Benefits..... 65.7........... 59.9........... 71.6........... 2008 7 31
(millions$/year)*........... 78.7........... 71.2........... 86.3........... 2008 3 31
Qualitative.................
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Costs
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Annualized Monetized........ 23.4........... 21.9........... 24.6........... 2008 7 31
(millions$/year)............ 22.7........... 20.9........... 23.9........... 2008 3 31
Qualitative.................
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Net Benefits/Costs
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Annualized Monetized, 42.2........... 38.1........... 47.0........... 2008 7 31
including Carbon Benefits*
(million$/year).
56.0........... 50.3........... 62.4........... 2008 3 31
Qualitative.................
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*Per the above discussion, this represents a simplified estimate that includes both 2007$ and 2008$.
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In sum, today's proposed standards represent the maximum
improvement in energy and water efficiency that is technologically
feasible and economically justified. DOE found that the benefits of
today's proposed standards (energy and water savings, consumer average
life-cycle cost (LCC) savings, national NPV increase, and emissions
reductions) outweigh the costs (loss of INPV and LCC increases for some
consumers). DOE has concluded that the standards proposed in today's
SNOPR are economically justified and technologically feasible,
particularly since units achieving these standard levels are already
commercially available. DOE notes that it considered higher efficiency
levels as trial standard levels (TSLs), and is still considering them
in this rulemaking; however, DOE tentatively believes that the burdens
of the higher efficiency levels (loss of INPV and LCC increases for
some consumers) outweigh the benefits (energy savings, LCC savings for
some consumers, national NPV increase, and emissions reductions). After
reviewing public comments on this SNOPR, DOE may ultimately decide to
adopt one of the other TSLs or another value in between.
II. Introduction
A. Consumer Overview
DOE is proposing in today's SNOPR energy conservation standard
levels for CCWs as shown in Table I.1 above. These proposed standards
would apply to equipment manufactured or imported 3 years after the
date the final rule is published in the Federal Register.\2\
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\2\ DOE anticipates publishing a final rule for commercial
clothes washer energy conservation standards by January 1, 2010,
pursuant to the requirements of the Energy Policy Act of 2005 (EPACT
2005; Pub. L. 109-058), which would make any amended standards
effective on January 1, 2013.
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DOE research suggests that commercial consumers will see benefits
from today's proposed standards even though DOE expects the purchase
price of the high efficiency CCWs to increase (by 2 to 28 percent) from
the average price of this equipment today. However, the energy
efficiency gains are expected to result in lower energy and water
costs, saving consumers $53 to $103 per year on their energy and water
bills, again depending on the equipment class. When these savings are
summed over the lifetime of the equipment, consumers are expected to
save an average of $20 to $190, depending on the equipment class,
utility costs, and other factors. DOE estimates that the payback period
for the more efficient, higher-priced equipment will range from 0.2 to
5.6 years, depending on the equipment class.
B. Authority
Title III of EPCA sets forth a variety of provisions designed to
improve energy efficiency. Part A-1 of Title III (42 U.S.C. 6311-6317)
establishes an energy conservation program for ``Certain Industrial
Equipment,'' which deals with a variety of commercial and industrial
equipment (referred to hereafter as ``covered equipment'') including
CCWs. (42 U.S.C. 6312; 6313(e)) EPCA sets both energy and water
efficiency standards for CCWs, and authorizes DOE to amend both. (42
U.S.C. 6313(e))
Section 136(a) and (e) of the Energy Policy Act of 2005 (EPACT
2005; Pub. L. 109-058) added CCWs as equipment covered under EPCA and
established standards for such equipment that is manufactured on or
after January 1, 2007.\3\ (42 U.S.C. 6311(1) and 6313(e)) These
amendments to EPCA also require that DOE issue a final rule by January
1, 2010, to determine whether these standards should be amended. (EPACT
2005, section 136(e); 42 U.S.C. 6313(e)) If amended standards are
justified, they would become effective no later than January 1, 2013.
(Id.)
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\3\ Under the statute, a CCW must have a modified energy factor
(MEF) of at least 1.26 and a water factor (WF) of not more than 9.5.
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It is pursuant to the authority set forth above that DOE is
conducting the present rulemaking for CCWs. The following discusses
some of the key provisions of EPCA relevant to this standards-setting
rulemaking.
Under EPCA, the overall program consists of the following core
elements: (1) Testing; (2) labeling; and (3) Federal energy
conservation standards. The Federal Trade Commission (FTC) is
responsible for labeling equipment covered by part A, and DOE
implements the remainder of the program. Under 42 U.S.C. 6293 and 6314,
EPCA authorizes DOE, subject to certain criteria and conditions, to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of covered equipment. The test
procedures for CCWs appear at 10 CFR part 430, subpart B, appendix J1
(pursuant to 10 CFR 431.154).
EPCA provides criteria for prescribing new or amended standards for
covered products and equipment.\4\ As indicated above, any new or
amended standard 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 6316(a)) The statute also
provides that, in deciding whether a standard is economically
justified, DOE must, after receiving comments on the proposed standard,
determine whether the benefits of the standard exceed its burdens by
considering, to the greatest extent practicable, the following seven
factors:
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\4\ The EPCA provisions discussed in the remainder of this
subsection directly apply to covered products, and also apply to
certain covered equipment, such as CCWs, by virtue of 42 U.S.C.
6316(a). Note that the term ``product'' is used generally to refer
to consumer appliances, while ``equipment'' is used generally to
refer to commercial units.
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(1) The economic impact of the standard on manufacturers and
consumers of the products or equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products or equipment in the type (or class)
compared to any increase in the price, initial charges, or maintenance
expenses for the covered products that are likely to result from the
imposition of the standard;
(3) The total projected amount of energy (or, as applicable, water)
savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered
products or equipment likely to result from the imposition of the
standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant. (42 U.S.C.
6295(o)(2)(B)(i) and 6316(a))
Furthermore, EPCA contains what is commonly known as an ``anti-
backsliding'' provision. (42 U.S.C. 6295(o)(1)) This provision
prohibits the Secretary from prescribing any amended standard that
either increases the maximum allowable energy use or decreases the
minimum required energy efficiency of a covered product or equipment.
Also, the Secretary may not prescribe an amended or a new standard if
the Secretary finds that interested persons have established by a
preponderance of the evidence that the standard is likely to result in
the unavailability in the United States of any product type (or class)
with performance characteristics, features, sizes, capacities, and
volume that are substantially the same as those generally available in
the United States at the time of the Secretary's finding. (42 U.S.C.
6295(o)(4))
In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii)),
establishes a
[[Page 57742]]
rebuttable presumption that a standard is economically justified if the
Secretary finds that ``the additional cost to the consumer of
purchasing a product complying with an energy conservation standard
level will be less than three times the value of the energy (and as
applicable, water) savings during the first year that the consumer will
receive as a result of the standard,'' as calculated under the test
procedure in place for that standard. (42 U.S.C. 6295(o)(2)(B)(iii))
See Section II.G.2.
In promulgating a standard for a type or class of covered product
or equipment that has two or more subcategories, DOE must specify a
different standard level from that which applies generally to such type
or class of products or equipment ``for any group of covered products
which have the same function or intended use, if * * * covered products
within such group--(A) consume a different kind of energy from that
consumed by other covered products within such type (or class); or (B)
have a capacity or other performance-related feature which other
products within such type (or class) do not have and such feature
justifies a higher or lower standard'' than applies or will apply to
the other products. (42 U.S.C. 6295(q)(1)) In determining whether a
performance-related feature justifies such a different standard for a
group of equipment, DOE must consider ``such factors as the utility to
the consumer of such a feature'' and other factors DOE deems
appropriate. Id. Any rule prescribing such a standard must include an
explanation of the basis on which such higher or lower level was
established. (42 U.S.C. 6295(q)(2))
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) DOE can, however, grant waivers
of Federal preemption for particular State laws or regulations, in
accordance with the procedures and other provisions of EPCA found in 42
U.S.C. 6297(d). Specifically, States that regulate an energy
conservation standard for a type of covered product for which there is
a Federal energy conservation standard may petition the Secretary for a
DOE rule that allows the State regulation to become effective with
respect to such covered product. (42 U.S.C. 6297(d)(1)(A)) DOE must
prescribe a rule granting the petition if the Secretary finds that the
State has established by a preponderance of the evidence that its
regulation is needed to meet ``unusual and compelling State or local
energy * * * interests.'' (42 U.S.C. 6297(d)(1)(B))
C. Background
1. Current Standards
EPCA, as amended by EPACT 2005, prescribes energy conservation
standards for CCWs manufactured on or after January 1, 2007. (42 U.S.C.
6313(e)) These standards require that CCWs have an MEF of at least 1.26
cubic feet of capacity (ft\3\) per kilowatt-hour (kWh) and a WF of not
more than 9.5 gallons of water (gal) per ft\3\. (Id.; 10 CFR 431.156)
2. History of Standards Rulemaking
To initiate the current rulemaking to consider energy conservation
standards, on March 15, 2006, DOE published on its Web site a document
titled, Rulemaking Framework for Commercial Clothes Washers and
Residential Dishwashers, Dehumidifiers, and Cooking Products (Framework
Document).\5\ 71 FR 15059 (March 27, 2006). The Framework Document
described the procedural and analytical approaches that DOE anticipated
using to evaluate energy conservation standards for these products, and
identified various issues to be resolved in conducting the rulemaking.
DOE held a public meeting on April 27, 2006, to present the Framework
Document, to describe the analyses it planned to conduct during the
rulemaking, to receive comments from interested parties, and to inform
and facilitate interested parties' involvement in the rulemaking. DOE
received 11 written comments in response to the Framework Document
after the public meeting.
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\5\ This document is available on the DOE Web site at: http://www1.eere.energy.gov/buildings/appliance_standards/commercial/clothes_washers.html.
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On December 4, 2006, DOE posted two spreadsheet tools for this
rulemaking on its Web site.\6\ The first tool calculates LCC and
payback periods (PBPs) and included spreadsheets for: (1) Dishwashers;
(2) dehumidifiers; (3) cooktops; (4) ovens; (5) microwave ovens; and
(6) CCWs. The second tool--the national impact analysis (NIA)
spreadsheets--calculate the impacts on shipments and the national
energy savings (NES) and NPV at various candidate standard levels for:
(1) Dishwashers; (2) dehumidifiers; (3) cooktops and ovens; (4)
microwave ovens; and (5) CCWs.
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\6\ These spreadsheets are available on the DOE Web site at:
http://www1.eere.energy.gov/buildings/appliance_standards.
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DOE published the advance notice of proposed rulemaking (ANOPR) for
this rulemaking on November 15, 2007 (November 2007 ANOPR) (72 FR
64432), and held a public meeting on December 13, 2007, to present and
seek comment on the November 2007 ANOPR analytical methodology and
results. The November 2007 ANOPR included background information on the
history and conduct of this rulemaking. 72 FR 64432, 64438-39 (Nov. 15,
2007) In the November 2007 ANOPR, DOE described and sought further
comment on the analytical framework, models, and tools (e.g., LCC and
NIA spreadsheets) it was using to analyze the impacts of energy
conservation standards for these products. In conjunction with the
November 2007 ANOPR, DOE also posted on its Web site the complete
November 2007 ANOPR technical support document (TSD). The TSD included
the results of a number of DOE's preliminary analyses, including: (1)
The market and technology assessment; (2) screening analysis; (3)
engineering analysis; (4) energy and water use determination; (5)
markups analysis to determine equipment price; (6) LCC and PBP
analyses; (7) shipments analysis; (8) NIA; and (9) manufacturer impact
analysis (MIA). In the November 2007 ANOPR and at the public meeting,
DOE invited comment in particular on the following issues concerning
CCWs: (1) Product classes; (2) horizontal-axis designs; (3)
technologies unable to be analyzed and exempted product classes,
including potential limitations of existing test procedures; (4) per-
cycle energy consumption; (5) consumer prices; (6) repair and
maintenance costs; (7) efficiency distributions in the base case; (8)
shipments forecasts; (9) base-case and standards-case forecasted
efficiencies; and (10) TSLs. 72 FR 64432, 64512-14 (Nov. 15, 2007).
On October 17, 2008, DOE published a NOPR (October 2008 NOPR) in
the Federal Register, in which it proposed amended energy conservation
standards for certain products and equipment, including CCWs. 73 FR
62034. The energy conservation standards proposed in the October 2008
NOPR for CCWs are shown in Table II.1.
[[Page 57743]]
Table II.1--Commercial Clothes Washer Energy Conservation Standards
Proposed in the October 2008 NOPR
------------------------------------------------------------------------
Modified energy Water factor,
Equipment factor, ft\3\/kWh gal/ft\3\
------------------------------------------------------------------------
Top-loading CCWs................... 1.76 8.3
Front-loading CCWs................. 2.0 5.5
------------------------------------------------------------------------
In the October 2008 NOPR, DOE described and sought further comment
on the analytical framework, models, and tools (e.g., LCC and NIA
spreadsheets) it was using to analyze the impacts of energy
conservation standards for this equipment. In conjunction with the
October 2008 NOPR, DOE also posted on its Web site the complete
technical support document (TSD), which along with the October 2008
NOPR, is available at http://www1.eere.energy.gov/buildings/appliance_standards/. The TSD included the results of a number of DOE's analyses,
including: (1) The market and technology assessment; (2) screening
analysis; (3) engineering analysis; (4) energy and water use
determination; (5) markups analysis to determine equipment price; (6)
LCC and PBP analyses; (7) shipments analysis; (8) NES and national
impact analyses; and (9) MIA. In the October 2008 NOPR and at the
public meeting held on November 13, 2008 (referred to as the ``November
2008 public meeting''), DOE invited comment in particular on the
following issues concerning CCWs: (1) The efficiency levels; (2) DOE's
determination of the maximum technologically feasible (max-tech)
efficiency levels for top-loading and front-loading CCWs; (3) the
magnitude of possible equipment class shifting to front-loading CCWs;
(4) the analysis and data relevant to the price elasticity of demand
for calculating the anticipated energy and water savings at different
TSLs; (5) the analysis of consumer knowledge of the Federal ENERGY STAR
program and its potential as a resource for increasing knowledge of the
availability and benefits of energy efficient appliances in the home
appliance consumer market; (6) discount rates other than 7 percent and
3 percent real to discount future emissions reductions; (7) data that
might enable DOE to test for market failures or other specific problems
for CCWs; and (8) the determination of anticipated environmental
impacts of the standards proposed in the October 2008 NOPR,
particularly with respect to the methods for valuing the expected
CO2 and NOX emissions savings. 73 FR 62034, 62133
(Oct. 17, 2008).
The October 2008 NOPR also included background information, in
addition to that set forth above, on the history and conduct of this
rulemaking. 73 FR 62034, 62040-62041 (Oct. 17, 2008). DOE presented the
methodologies and results for the October 2008 NOPR analyses at the
November 2008 public meeting. Comments presented by interested parties
during this meeting and submitted in response to the October 2008 NOPR
concerning the accuracy of the stated max-tech CCW efficiency level led
to a thorough investigation of CCW efficiencies and today's SNOPR. DOE
subsequently tested the max-tech unit at an independent test facility,
revised the max-tech level, updated the analysis, and is publishing the
SNOPR to allow interested parties to comment on the revised efficiency
level proposals.
DOE expects to issue a final rule in this rulemaking no later than
January 1, 2010, as required by EPCA, as amended by EPACT 2005 (42
U.S.C. 6313(e)). Based on this schedule, the estimated effective date
of any amended energy conservation standards for this equipment would
be January 1, 2013, 3 years after the final rule is published in the
Federal Register.
D. Test Procedures
EPCA directs DOE to use the same test procedures for CCWs as those
established by DOE for residential clothes washers (RCWs). (42 U.S.C.
6314(a)(8)) 73 FR 62034, 62043-62044 (Oct. 17, 2008). While DOE
believes commercial laundry practices likely differ from residential
practices,\7\ DOE concluded in the October 2008 NOPR that the existing
clothes washer test procedure (at 10 CFR part 430, subpart B, appendix
J1) adequately accounts for the efficiency rating of CCWs, and that
DOE's methods for characterizing energy and water use in the October
2008 NOPR analyses adequately accounted for the consumer usage patterns
specific to CCWs.
---------------------------------------------------------------------------
\7\ CCWs are typically used more frequently and filled with a
larger load than RCWs.
---------------------------------------------------------------------------
In response to the October 2008 NOPR, Alliance Laundry Systems
(Alliance), GE Consumer & Industrial (GE), and AHAM agreed with DOE's
conclusion that the DOE clothes washer test procedure is adequate for
rating CCWs. (Alliance, Public Meeting Transcript, No. 40.5 at p. 22;
Alliance, No. 45 at p. 1; GE, No. 48 at p. 4; AHAM, Public Meeting
Transcript, No. 40.5 at pp. 26-27; AHAM, No. 47 at p.4) \8\ DOE did not
receive any comments objecting to the use of the DOE clothes washer
test procedure for CCWs. Therefore DOE continues to consider the
existing DOE test procedure adequate to measure energy and water
consumption of CCWs.
---------------------------------------------------------------------------
\8\ A notation in the form ``Alliance, No. 45 at p. 1''
identifies a written comment (1) made by Alliance Laundry Systems
(Alliance), (2) recorded in document number 45 that is filed in the
docket of this rulemaking (Docket No. EE-2006-STD-0127), maintained
in the Resource Room of the Building Technologies Program, and (3)
which appears on page 1 of document number 45.
---------------------------------------------------------------------------
E. Technological Feasibility
1. General
DOE considers a design option to be technologically feasible if it
is in use by the respective industry or if research has progressed to
the development of a working prototype. Therefore, in each standards
rulemaking, DOE conducts a screening analysis, based on information it
has gathered regarding existing technology options and prototype
designs. In consultation with manufacturers, design engineers, and
other interested parties, DOE develops a list of design options for
consideration in the rulemaking. Once DOE has determined that a
particular design option is technologically feasible, it further
evaluates each design option in light of the following three additional
criteria: (a) Practicability to manufacture, install, and service; (b)
adverse impacts on product utility or availability; or (c) adverse
impacts on health or safety. 10 CFR part 430, subpart C, appendix A,
section 4(a)(3) and (4). All design options that pass these screening
criteria are candidates for further assessment in the engineering and
subsequent analyses in the NOPR (or SNOPR) stage.
DOE published a list of evaluated CCW technologies in the November
2007 ANOPR. 72 FR 64432, 64458 (Nov. 15, 2007). For the reasons
described in
[[Page 57744]]
the November 2007 ANOPR and in chapter 4 of the SNOPR TSD, DOE is not
considering the following design options, as they do not meet one or
more of the screening criteria: bubble action, electrolytic
disassociation of water, ozonated laundering, reduced thermal mass,
suds saving, and ultrasonic washing. In this supplemental notice, DOE
has not screened out any additional technology options that were
retained in the October 2008 NOPR analyses. No comments were received
objecting to the technology options which were screened out in the
October 2008 NOPR. 73 FR 62034, 62052 (Oct. 17, 2008).
Therefore, DOE believes all of the efficiency levels evaluated in
this notice, which are based upon the retained design options, are
technologically feasible. For more detail on DOE's method for
developing CCW technology options and the process for screening these
options, refer to the chapters 3 and 4 of the SNOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE considers an amended or new standard for a type (or class)
of equipment such as front-loading or top-loading CCWs, it 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)(2) and 6316(a)) For the October 2008
NOPR, DOE determined the max-tech efficiency levels for front-loading
and top-loading CCWs in the engineering analysis, based on published
MEF and WF values of commercially available equipment. (See chapter 5
in the NOPR TSD.) In proposing these max-tech levels, DOE noted that
some CCWs exceed the max-tech MEF or WF levels, but not both. For
example, two front-loading models exceed the max-tech MEF--they are
rated at 2.45 and 2.68 MEF, respectively, in the Consortium for Energy
Efficiency (CEE) qualifying product list for its Commercial, Family-
Sized Washer Initiative--but don't achieve a max-tech WF level--they
are rated at 5.69 and 5.47 WF, respectively. In the California Energy
Commission (CEC) equipment database for CCWs, DOE found one top-loading
model that exceeds the max-tech WF--it is rated at 7.3 WF--but not the
max-tech MEF level--it is rated at 1.32 WF. This model has been
discontinued, as discussed in the November 2007 ANOPR and the October
2008 NOPR TSD. The max-tech efficiency levels proposed in the October
2008 NOPR were selected to represent the best available combinations of
high MEF and low WF for each equipment class.
For the October 2008 NOPR, DOE proposed the max-tech levels shown
in Table II.2. 73 FR 62034, 62036 (Oct. 17, 2008).
Table II.2--Commercial Clothes Washer Max-Tech Efficiency Levels
Proposed in the October 2008 NOPR
------------------------------------------------------------------------
Max-tech level
---------------------
Equipment class MEF, WF, gal/
ft\3\/kW ft\3\
------------------------------------------------------------------------
Top-Loading CCWs.................................. 1.76 8.3
Front-Loading CCWs................................ 2.35 4.4
------------------------------------------------------------------------
According to the CEE database, three front-loading CCWs rated at
the max-tech efficiency level are on the market in the United States.
One model listed in the database which exceeds the max-tech level is
rated at (2.84 MEF/3.68 WF), but DOE determined this CCW has yet to be
sold in the United States. The front-loading max-tech level was based
on a single model listed in the CEC database.
The max-tech top-loading CCW efficiency rating in the October 2008
NOPR was questioned by Alliance at the November 2008 NOPR meeting.
(Alliance, Public Meeting Transcript, No. 40.5 at pp. 90-92) In
response, DOE contracted an independent testing laboratory to verify
the performance ratings for the max-tech top-loading CCW. The
laboratory results (based on a 3-unit sample) suggest that the unit
achieves 1.63 MEF/8.4 WF. Based on this information, for the SNOPR
analysis, DOE revised the max-tech top-loading CCW level downward to
1.60 MEF/8.5 WF, a level proposed in the October 2008 NOPR as a ``gap-
fill'' level and one which DOE concludes is attainable by the max-tech
CCW model. For more details on this selection of max-tech levels for
the SNOPR, see section III.C.1 of today's supplemental notice.
In sum, Table II.3 lists the max-tech levels that DOE is proposing
for today's SNOPR. Today's proposed front-loading max-tech level is the
same as in the October 2008 NOPR, whereas today's proposed top-loading
max-tech level has been revised based on the independent test results.
Table II.3--Commercial Clothes Washer Max-Tech Efficiency Levels
Proposed for This SNOPR
------------------------------------------------------------------------
Max-tech level
---------------------
Equipment class MEF, WF, gal/
ft\3\/kW ft\3\
------------------------------------------------------------------------
Top-Loading CCWs.................................. 1.60 8.5
Front-Loading CCWs................................ 2.35 4.4
------------------------------------------------------------------------
F. Energy Savings
1. Determination of Savings
DOE used its NIA spreadsheet tool to estimate energy savings from
amended standards for CCWs. (Section III.E of today's supplemental
notice and chapter 11 of the SNOPR TSD describe the NIA spreadsheet
model.) DOE forecasted energy savings over the period of analysis
(beginning in 2013, the year that amended standards would go into
effect, and ending in 2043) for each TSL, relative to the base case,
which represents the forecast of energy consumption in the absence of
amended energy conservation standards. DOE quantified the energy
savings attributable to amended energy conservation standards as the
difference in energy consumption between the standards case and the
base case. The base case represents the forecast of energy consumption
in the absence of amended energy conservation standards. The base case
considers market demand for more efficient equipment.
The NIA spreadsheet tool calculates the electricity savings in
``site energy'' expressed in kWh. Site energy is the energy directly
consumed on location by an individual equipment. DOE reports national
energy savings on an annual basis in terms of the aggregated source
energy savings, which is the savings of energy that is used to generate
and transmit the energy consumed at the site. To convert site energy to
source energy, DOE derived conversion factors, which change with time,
from the March 2009 release of the AEO 2009. (See TSD chapter 11
accompanying today's supplemental notice for further details.)
2. Significance of Savings
EPCA, as amended, prohibits DOE from adopting a standard for a
product if that standard would not result in ``significant'' energy
savings. (42 U.S.C. 6295(o)(3)(B)) While the Act does not define the
term ``significant,'' the U.S. Court of Appeals for the District of
Columbia, in Natural Resources Defense Council v. Herrington, 768 F.2d
1355,
[[Page 57745]]
1373 (D.C. Cir. 1985), indicated that Congress intended ``significant''
energy savings in this context to be savings that were not ``genuinely
trivial.'' The energy savings for energy conservation standards at each
of the TSLs considered in this rulemaking are nontrivial, and,
therefore, DOE considers them ``significant'' within the meaning of 42
U.S.C. 6295(o)(3)(B).
G. Economic Justification
1. Specific Criteria
As noted earlier, EPCA provides seven factors to be evaluated in
determining whether an energy conservation standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)). The following sections discuss
how DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
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 during the period between the announcement of a
regulation and the time when the regulation becomes effective, and a
long-term assessment. The impacts analyzed include INPV (which values
the industry on the basis of expected future cash flows), cash flows by
year, changes in revenue and income, and other measures of impact, as
appropriate. Second, DOE analyzes and reports the impacts on different
types of manufacturers, with particular attention to impacts on small
manufacturers. Third, DOE considers the impact of standards on domestic
manufacturer employment, manufacturing capacity, plant closures, and
loss of capital investment. DOE also takes into account cumulative
impacts of different regulations on manufacturers. For more details on
this analysis, see section III.G.
For commercial consumers, measures of economic impact include the
changes in LCC and payback period for the equipment at each TSL. Under
EPCA, the LCC is one of the seven factors to be considered in
determining economic justification. (42 U.S.C. 6295(o)(2)(B)(i)(II)) It
is discussed in detail in the section below.
b. Life-Cycle Costs
The LCC is the sum of the purchase price of equipment (including
the installation) and the operating expense (including energy and
maintenance expenditures), discounted over the lifetime of the
equipment.
In this rulemaking, DOE calculated both LCC and LCC savings for
various CCW efficiency levels. DOE established the variability and
uncertainty in energy and water use by defining the uncertainty and
variability in the use (cycles per day) of the equipment. The
variability in energy and water pricing were characterized by regional
differences in energy and water prices. To account for uncertainty and
variability in other inputs, such as equipment lifetime and discount
rate, DOE used a distribution of values with probabilities attached to
each value. For each consumer with a CCW, DOE sampled the values of
these inputs from the probability distributions. As a result, the
analysis produced a range of LCCs. This approach permits DOE to
identify the percentage of consumers achieving LCC savings or attaining
certain payback values due to an increased energy conservation
standard, in addition to the average LCC savings or average payback for
that standard. DOE presents the LCC savings as a distribution, with a
mean value and a range. In the analysis prepared for the October 2008
NOPR, DOE assumed that the consumer will purchase the equipment in
2012. For today's SNOPR, that assumption has been changed to 2013 due
to the expected effective date of any amended standards. See section
III.D for more details on the analysis.
c. Energy Savings
While significant conservation of energy is a separate statutory
requirement for imposing an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a proposed standard,
to consider the total projected energy savings that are expected to
result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
in the October 2008 NOPR, DOE used the NIA spreadsheet results in its
consideration of total projected savings expected to be directly
attributable to the considered standard levels. See section III.E for
more details on this analysis.
d. Lessening of Utility or Performance of Equipment
In establishing classes of equipment, DOE considered whether the
evaluated design options would likely lessen the utility or performance
of CCWs. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) In the October 2008 NOPR, DOE
determined that none of the considered TSLs would reduce the utility or
performance of the equipment under consideration in the rulemaking.
Specifically, the standards proposed in the October 2008 NOPR would
maintain the consumer utility of washing clothes in a washer with
either top or front access. 73 FR 62034, 62047 (Oct. 17, 2008). This
conclusion remains the same for the proposed standards in today's
SNOPR. As in the October 2008 NOPR, the efficiency levels considered in
today's SNOPR for both equipment classes require no changes in
equipment design or unusual installation requirements that could reduce
the utility or performance of CCWs.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition that is
likely to result from standards. It directs the Attorney General to
determine the impact, if any, of any lessening of competition likely to
result from a proposed standard and to transmit such determination to
the Secretary, not later than 60 days after the publication of a
proposed rule, together with an analysis of the nature and extent of
such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)). DOE received
the Attorney General's determination dated December 16, 2008. It is
discussed in section V.B.5 below, and is reprinted at the end of this
SNOPR. Impacts on manufacturers are also discussed in section III.G
below.
f. Need of the Nation To Conserve Energy
The non-monetary benefits of today's proposed standards are likely
to be reflected in improvements to the security and reliability of the
Nation's energy system-namely, reductions in the overall demand for
energy will result in reduced costs for maintaining reliability of the
Nation's electricity system. DOE conducts a utility impact analysis to
estimate how standards may impact the Nation's needed power generation
capacity. This analysis captures the effects of efficiency improvements
on electricity consumption by the equipment which is the subject of
this rulemaking.
Today's proposed standards also 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
emissions reductions based on the estimated level of power generation
displaced by energy conservation standards. DOE reports the
environmental effects from each TSL in an environmental assessment in
chapter 16 of the SNOPR TSD. (42. U.S.C. 6295(o)(2)(B)(i)(VI) and
6316(a)) See section III.J for more details on this analysis.
[[Page 57746]]
g. Other Factors
The Secretary, in determining whether a standard is economically
justified, may consider other factors that the Secretary deems to be
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) In considering amended
standards for today's SNOPR, the Secretary found no relevant factors
other than those identified elsewhere in today's SNOPR.
2. Rebuttable Presumption
As set forth under 42 U.S.C. 6295(o)(2)(B)(iii), there is a
rebuttable presumption that an energy conservation standard is
economically justified if the increased installed cost for equipment
that meets the standard is less than three times the value of the
first-year energy savings resulting from the standard (and water
savings in the case of a water efficiency standard). DOE's LCC and PBP
analyses generate values that calculate the payback period for
consumers of equipment meeting potential energy conservation standards,
which includes, but is 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 analysis serve as the basis for DOE to definitively
evaluate the economic justification for a potential standard level
(thereby supporting or rebutting the results of any preliminary
determination of economic justification). Section III.D.13 of today's
supplemental notice addresses the rebuttable-presumption payback
calculation.
III. Methodology and Revisions to the Analyses Employed in the October
2008 Proposed Rule
DOE used economic models to estimate the impacts of the TSLs used
in weighing the benefits and burdens of amended standards for the
equipment that is the subject of this rulemaking. Specifically, DOE
developed the relationship between cost and efficiency for this
equipment, and calculated the simple payback period for the purposes of
addressing the rebuttable presumption that a standard with a payback
period of less than 3 years is economically justified. The LCC
spreadsheet calculates the consumer benefits and payback periods for
amended energy conservation standards. The NIA spreadsheet provides
shipments forecasts and then calculates NES and NPV impacts of
potential amended energy conservation standards. DOE also assessed
manufacturer impacts, largely through use of the Government Regulatory
Impact Model (GRIM).
Additionally, DOE estimated the impacts of energy conservation
standards due to equipment on utilities and the environment. DOE used a
version of EIA's National Energy Modeling System (NEMS) for the utility
and environmental analyses. The NEMS model simulates the energy economy
of the United States and has been developed over several years by the
EIA primarily for the purpose of preparing the AEO. The NEMS produces
forecasts for the United States that are available in the public
domain. The version of NEMS used for appliance standards analysis is
called NEMS-BT and is primarily based on the AEO 2009 April Release
with minor modifications.\9\ The NEMS-BT offers a sophisticated picture
of the effect of standards, since it accounts for the interactions
between the various energy supply and demand sectors and the economy as
a whole.
---------------------------------------------------------------------------
\9\ The EIA approves the use of the name NEMS to describe only
an AEO version of the model without any modification to code or
data. Because the present analysis entails some minor code
modifications and runs the model under various policy scenarios that
deviate from AEO assumptions, the name NEMS-BT refers to the model
as used here. (``BT'' stands for DOE's Building Technologies
Program.) For more information on NEMS, refer to The National Energy
Modeling System: An Overview, DOE/EIA-0581 (98) (Feb.
1998)(available at: http://tonto.eia.doe.gov/ FTPROOT/forecasting/
058198.pdf).
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A. Equipment Classes
In general, when evaluating and establishing energy conservation
standards, DOE divides covered products or equipment into classes by
the type of energy used, capacity, or other performance-related
features that affect consumer utility and efficiency. (42 U.S.C.
6295(q); 6316(a)) Different energy conservation standards may apply to
different equipment classes. Id.
In the October 2008 NOPR, DOE proposed separate equipment classes
and accompanying standards for top-loading and front-loading CCWs with
separate standards for each class. 73 FR 62034, 62036 (Oct. 17, 2008).
Thus the October 2008 NOPR represented a change from the November 2007
ANOPR and from EPACT 2005 \10\, which placed all CCWs into a single
equipment class with a single energy efficiency and water efficiency
standard. The October 2008 NOPR stated that DOE believes it has the
authority to establish additional equipment classes within an equipment
category, if warranted. DOE determined in the October 2008 NOPR that
two equipment classes are warranted because an amended standard would
set MEF for all CCWs at a level significantly higher than what the max-
tech for top-loading machines can attain today, and effectively
eliminate top-loading CCWs from the market. Id.
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\10\ 42 U.S.C. 6313(e); codified at 10 CFR 431.156.
---------------------------------------------------------------------------
DOE explained the basis of its authority to establish separate
classes, and noted that it had previously established and used classes
for residential clothes washers (RCW) in previous rulemakings and had
cited the likely elimination of one of these classes as one of several
reasons for denying the California Energy Commission's (CEC) petition
for waiver from Federal preemption of its RCW regulation. DOE then
concluded that, ``Given the similarities in technologies and design and
operating characteristics between RCWs and CCWs, * * * the axis of
access must be accorded similar treatment in the context of the current
CCW rulemaking.'' DOE also asserted that, ``If DOE were to propose an
amended standard for CCWs under the statutory criteria set forth in
EPCA based upon a single product class, the result would be a standard
that would effectively eliminate top-loading CCW's from the market * *
*;''
Alliance, GE, Whirlpool Corporation (Whirlpool), and AHAM supported
the two equipment classes as proposed in the October 2008 NOPR.
(Alliance, Public Meeting Transcript, No. 40.5 at p. 22; Alliance, No.
45 at p. 1; GE, Public Meeting Transcript, No. 40.5 at p. 31; GE, No.
48 at p. 4; Whirlpool, Public Meeting Transcript, No. 40.5 at p. 28;
Whirlpool, No. 50 at pp. 2-3, AHAM, Public Meeting Transcript, No. 40.5
at p. 26; AHAM, No. 47 at p. 4)
ASAP, American Council for an Energy-Efficient Economy (ACEEE),
American Rivers, Natural Resources Defense Council, Northeast Energy
Efficiency Partnerships, Northwest Power and Conservation Council,
Southern California Edison, Southern California Gas Company, and San
Diego Gas and Electric Company, jointly, (the Joint Comment) and ASAP,
individually, stated that they dispute DOE's conclusion that two
equipment classes are required under the law to preserve the
availability of top-loading machines. (Joint Comment, No. 44 at pp. 5-
6; ASAP, Public Meeting Transcript, No. 40.5 at p. 33) EarthJustice
(EJ) noted that a horizontal-axis CCW, like some horizontal-axis
residential models, could be designed with top-loading access through a
hatch. (EJ, Public Meeting Transcript, No. 40.5 at p. 26)
[[Page 57747]]
The Joint Comment stated that the ability to load a CCW from the front
is substantially the same as the ability to load from the top. (Joint
Comment, No. 44 at appendix A, pp. 1-4) Thus, the unavailability of
top-loading CCWs would have no effect on equipment utility.
In response to the EarthJustice, DOE examined the potential use of
top-loading, horizontal-axis machines in the CCW market. While a top-
loading horizontal-axis design can provide access similar to
traditional vertical-axis clothes washers, the consumer utility of a
top-loading, horizontal-axis clothes washer may not be sufficiently
comparable to that of a top-loading, vertical-axis clothes washer,
since users of top-loading horizontal-axis units must perform multiple
actions to undo and re-secure the hatch every time they access the
inside of the wash basket. DOE research suggests that the added
complication in loading and unloading such a clothes washer appears to
be more relevant in a shared laundry and laundromat setting and less
relevant in an institutional setting due to consumer education issues.
In any case, DOE knows of no top-loading, horizontal-axis machines in
the U.S. market for CCWs.
As discussed in the October 2008 NOPR, DOE concluded that the
method of ``loading'' clothes (i.e., the axis of access) is a
``feature'' of RCWs within the meaning of 42 U.S.C. 6295(o)(4). Due to
similarities in technologies and in design and operating
characteristics between RCWs and CCWs, the axis of access may also be
considered a feature in the context of this CCW rulemaking. Therefore,
DOE tentatively concludes that top-loading, vertical-axis CCWs provide
unique utility, and that, as determined in the October 2008 NOPR, axis
of access is a feature pursuant to EPCA. Thus, DOE is retaining the two
proposed equipment classes from the October 2008 NOPR in today's SNOPR.
DOE seeks comment as to whether the method of ``loading'' clothes
washers, or any other characteristic commonly associated with
traditional ``top-loading'' or ``front-loading'' clothes washers are
``features'' within the meaning of 42 U.S.C. 6295(o)(4) in EPCA and
whether the availability of such feature(s) would likely be affected by
eliminating the separate classes for these equipment types previously
established by DOE. This is identified as Issue 1 in section VII.E of
today's supplemental notice (Issues on Which DOE Seeks Comment.)
As noted above, in the October 2008 NOPR, DOE took the position
that EPCA does not permit adoption of a standard that would eliminate
top-loading CCWs because the method of loading is a ``feature.'' 73 FR
62034, 62049-50. Furthermore, in DOE's denial of the CEC's petition for
waiver from Federal preemption (71 FR 78157 (December 28, 2006)) and
the ensuing litigation, California Energy Commission v. DOE, Case. No.
07-71576 (9th Cir.), DOE took the position that it could not waive
Federal preemption, in part because the proposed California regulation
of residential clothes washer water usage would result in the
unavailability of top-loading residential clothes washers in the
California market, based on DOE's evaluation of the clothes washer
market in 2006.
DOE is willing to reconsider its previous conclusions as part of
this rulemaking. More specifically, DOE is soliciting public comments
on whether one or more of the characteristics commonly associated with
different types of clothes washers, such as method of loading, presence
or absence of agitators, ability to interrupt cycles, and possibly
others, provide consumer utility that should, under existing law, be
recognized and protected by DOE through the maintenance or
establishment of separate equipment classes. DOE also seeks comments as
to whether, as a consequence of market and technology developments, it
should maintain the same equipment classes for commercial clothes
washers as it does for residential clothes washers.
DOE notes that, if warranted by the public comments received and
its further consideration of this issue, it were to establish a single
equipment class in setting standards for CCWs, DOE intends to give
considerable weight to the potential adverse effects of a single
equipment class efficiency standard on competition in the CCW market.
That is, DOE does not intend to set a standard that would produce
significant adverse impacts on competition in this market.
B. Technology Assessment
For the technology assessment in the October 2008 NOPR analyses,
DOE considered all RCW and CCW technology options that it is aware are
or have been incorporated into working prototypes or commercially
available clothes washers at the time of the analysis. ASAP stated that
DOE should give more serious consideration to innovations currently in
production on the RCW market. (ASAP, Public Meeting Transcript, No.
40.5 at pp. 33-34) DOE did not receive information on specific
technologies for RCWs that it did not consider. Further, DOE notes that
it considered as design options many technologies that are found in
both RCWs and CCWs. Of the technology options screened out, only suds
saving \11\ has appeared previously as a feature in commercially
available RCWs. DOE research suggests that clothes washers
incorporating a suds-saving feature have not been available on the
market since 2005, and further DOE research suggests that suds saving
would be impractical to install in a commercial setting for reasons
such as space limitations, questionable energy savings, incompatibility
with CCW usage patterns, and lack of consumer acceptance. Therefore,
DOE concludes that suds-savings is an RCW feature that was
appropriately screened out for the CCW SNOPR analysis.
---------------------------------------------------------------------------
\11\ A suds-saving feature allows water from one wash cycle to
be reused in the next wash cycle. After agitation, sudsy wash water
is pumped into a separate storage tub, remaining there until the
next wash cycle. While the water is stored, soil settles to the
bottom of the tub. During the next wash cycle, all but an inch of
the water is pumped back into the washer tub for use again. Clothes
washers with the suds-saving feature must be larger than typical
clothes washers in order to accommodate the additional storage tub.
---------------------------------------------------------------------------
In addition, DOE has gathered and analyzed data published by CEC,
CEE, and the ENERGY STAR Program to provide an overview of the energy
efficiency levels achieved in today's CCWs and RCWs. Certain
information about technologies associated with high-efficiency clothes
washers can be determined by evaluating the models in these databases.
DOE found that all front-loading CCWs on the market today are more
efficient than top-loading CCW models. No top-loading CCW listed in
these databases has an MEF greater than 1.76, whereas the majority of
front-loading CCWs are listed as having MEFs greater than 2.0.
Similarly, no top-loading CCW is rated as having a WF below 8.0,
whereas the majority of front-loading CCWs have rated WFs below 7.0. In
contrast, DOE research suggests that the most efficient vertical-axis
RCWs achieve efficiency levels comparable to some horizontal-axis CCWs
on the market today.\12\ High efficiency, vertical-axis platforms that
do not employ an agitator have been sold into the RCW market for
several
[[Page 57748]]
years, but have yet to be released in a CCW form. DOE expects
manufacturers will continue to introduce new features first in the
higher-volume residential markets before transitioning them to
commercial applications. At this time, however, DOE is not aware of
such technologies being incorporated in either commercially available
CCWs or working CCW prototypes, and therefore did not consider them in
the SNOPR analyses.
---------------------------------------------------------------------------
\12\ Typically, vertical-axis clothes washers are accessed from
the top (also known as ``top-loaders''), while horizontal-axis
clothes washers are accessed from the front (also known as ``front-
loaders''). However, a limited number of residential horizontal-axis
clothes washers which are accessible from the top (using a hatch in
the wash basket) are currently available, although DOE is unaware of
any such CCWs on the market. For the purposes of this analysis, the
terms ``vertical-axis'' and ``top-loading'' will be used
interchangeably, as will the terms ``horizontal-axis'' and ``front-
loading.'' Additionally, clothes washers that have a wash basket
whose axis of rotation is tilted from horizontal are considered to
be horizontal-axis machines.
---------------------------------------------------------------------------
Whirlpool stated that there are considerable differences between
RCWs and CCWs, including, but not limited to heavier duty components
and a smaller basket utilized in CCW's. According to Whirlpool, the
smaller basket is required by CCW customers, and it is inherently more
difficult to achieve high efficiency with smaller baskets. (Whirlpool,
No. 50 at p. 3)
For these reasons, DOE believes it has adequately considered RCW
technologies that may be applicable to CCWs in its technology
assessment. See chapter 3 of the SNOPR TSD for more information on the
technologies considered.
C. Engineering Analysis
The purpose of the engineering analysis is to characterize the
relationship between the incremental manufacturing cost and efficiency
improvements of CCWs. DOE used this cost-efficiency relationship as
input to the PBP, LCC, and NES analyses.
To estimate incremental manufacturing costs, DOE has identified
three basic methodologies: (1) The design-option approach, which
provides the incremental costs of adding to a baseline model design
options that will improve its efficiency; (2) the efficiency-level
approach, which provides the incremental costs of moving to higher
energy efficiency levels, without regard to the particular design
option(s) used to achieve such increases; and (3) the cost-assessment
(or reverse-engineering) approach, which provides ``bottom-up''
manufacturing cost assessments for achieving various levels of
increased efficiency, based on detailed data on costs for parts and
material, labor, shipping/packaging, and investment for models that
operate at particular efficiency levels. DOE conducted the engineering
analysis for this rulemaking using the efficiency-level approach. For
this analysis, DOE relied upon efficiency data published in multiple
databases, including those published by CEC, CEE and ENERGY STAR, which
were supplemented with limited laboratory testing, data gained through
reverse-engineering analysis, and primary and secondary research.
1. Efficiency Levels
The efficiency levels for CCWs are defined by two factors
normalized by wash basket volume--MEF and WF. These two variables are
only directly related to each other via the average hot water usage by
a clothes washer, as measured by the DOE test procedure. Other measured
parameters affect only one variable or the other. For example, cold
water consumption only affects the WF, while remaining moisture content
(RMC) only affects the MEF. (See chapter 5 of the SNOPR TSD for further
explanation.)
In the October 2008 NOPR, DOE proposed the following efficiency
levels for CCWs.
Table III.1--Commercial Clothes Washer Efficiency Levels Proposed in the
October 2008 NOPR
------------------------------------------------------------------------
Modified energy factor (ft\3\/kWh)/
water factor (gal/ft\3\)
Efficiency level -------------------------------------
Top-loading Front-loading
------------------------------------------------------------------------
Baseline.......................... 1.26/9.5 1.72/8.0
1................................. 1.42/9.5 1.80/7.5
2................................. 1.60/8.5 2.00/5.5
3................................. 1.76/8.3 2.20/5.1
4................................. N/A 2.35/4.4
------------------------------------------------------------------------
a. Revised Efficiency Levels
In response to the October 2008 NOPR, Alliance disputed DOE's
finding that the proposed max-tech level for top-loading CCWs is
technically feasible, based on Alliance's internal testing of one max-
tech unit. Alliance stated that there were numerous inconsistencies
related to the stated efficiencies of the max-tech top-loading CCW, the
GE WNRD2050G, in databases such as those published by the CEC and
ENERGY STAR. (Alliance, Public Meeting Transcript, No. 40.5 at pp. 22-
24 and 90-92) According to Alliance, its own tests for the same model
did not achieve the published efficiency levels of 1.76 MEF/8.3 WF.
Alliance suggested that DOE should test and confirm the max-tech
model's efficiency before continuing to use it as the basis for the
max-tech efficiency levels proposed in the October 2008 NOPR.
(Alliance, No. 45 at Attachment 2, pp. 4-5)
GE responded in its written comments that there was indeed a
transposition error, which led to the inconsistencies noted by
Alliance. GE stated that the equipment label indicated an energy rating
of 472 kWh per year, equaling 1.204 kWh per cycle, meaning that
consumers were getting a more efficient product than the energy rating
contained on the label. GE stated that it takes any labeling error very
seriously, and corrected the issue immediately upon its discovery. (GE,
No. 48 at pp. 4-5). DOE review of present and past ENERGY STAR
databases for CCWs failed to find an entry for the WNRD2050G. Based on
market research and the CEC addition of the unit in December 2007, it
appears that the WNRD2050G was released into production in December
2007. Thus, because the model's stated WF (8.3) was above the cutoff
for ENERGY STAR eligibility (8.0) at that time, DOE concludes that the
WNRD2050G was never listed in the ENERGY STAR database for CCWs.
In response to comments about the validity of published CCW data,
the DOE rulemaking team purchased three nominally identical max-tech
top-loading CCWs, and hired an independent test facility to determine
their average efficiency rating per the DOE test procedure.\13\ The
test results suggest that the max-tech CCW achieves a 1.63 MEF/8.4 WF
efficiency rating instead of 1.76 MEF/8.3 WF as stated. Even at this
lower max-tech level, the unit identified as the max-tech top-loading
CCW model for the October 2008 NOPR continues to be the max-
[[Page 57749]]
tech top-loading CCW for the SNOPR analyses. However, as the tested
values do not agree with the MEF and WF ratings in the CEC database on
which the October 2008 NOPR analyses were based, and because this model
was the only top-loading CCW stated to meet the (1.76 MEF/8.3 WF) max-
tech level defined in the October 2008 NOPR, DOE elected to eliminate
that efficiency level from the top-loading CCW analysis in the SNOPR.
---------------------------------------------------------------------------
\13\ A minimum of three washers are required to be tested per
the DOE test procedure (10 CFR 430 subpart B, appendix J1) to give
test results some statistical certainty. If variability in the test
results for the three washers is too high, an additional three units
must be tested. For the DOE testing, no additional test units were
required because the initial results had sufficiently low
variability to be statistically valid.
---------------------------------------------------------------------------
Accordingly, DOE is proposing (1.60 MEF/8.5 WF) for today's max-
tech level. Originally included based upon the CEE's Tier 2 qualifying
criteria for CCWs effective between January 1, 2004, and January 1,
2007, 1.6 MEF/8.5 WF is an efficiency level for which DOE had
previously solicited feedback from interested parties and which is also
very close to the tested results for the max-tech CCW. The max-tech
model uses many standard top-loader components and materials; hence,
DOE research suggests that no CCW manufacturer would suffer material
harm since they all should be able to produce top-loading machines that
meet the max-tech efficiency level without technical difficulty.
ASAP stated that DOE should review current and upcoming ENERGY STAR
efficiency levels for RCWs and subsequently revise efficiency levels
under consideration for CCWs. ASAP noted that there are vertical-axis
RCWs with agitators on the market that exceed the max-tech CCW level
(i.e., that impeller-type clothes washers are not necessary to exceed
the current max-tech CCW efficiency level as implied by some
manufacturers). (ASAP, Public Meeting Transcript, No. 40.5 at pp. 202-
203) DOE is aware of the clothes washers referenced by ASAP and notes
that they are only sold into the RCW market. Thus, it is not possible
to assess whether these washers would be able to stand up to the rigors
of operating in the CCW market. DOE research suggests that these
washers are heavily patented, possibly preventing competitors such as
the LVM from developing similar appliances. DOE research also suggests
that some of the means by which these washers achieve their high
efficiency levels (such as adaptive fill, a high number of wash
programs, etc.) would yield few savings in a CCW setting, where washers
are typically only washed with full loads and a limited number of wash
programs are desired to limit consumer education needs. For these
reasons, DOE did not consider these clothes washers in determining
revised efficiency levels for the CCW analysis.
Thus, for today's SNOPR, DOE has proposed revised top-loading CCW
efficiency levels shown in Table III.2, in which the max-tech top-
loading level is now efficiency level 2 (1.60 MEF/8.5 WF). No changes
have been made to the efficiency levels proposed in the October 2008
NOPR for front-loading CCWs in today's supplemental notice.
Table III.2--Commercial Clothes Washer Efficiency Levels Proposed for
This SNOPR
------------------------------------------------------------------------
Modified energy factor (ft\3\/kWh)/
water factor (gal/ft\3\)
Efficiency level -------------------------------------
Top-loading Front-loading
------------------------------------------------------------------------
Baseline.......................... 1.26/9.5 1.72/8.0
1................................. 1.42/9.5 1.80/7.5
2................................. 1.60/8.5 2.00/5.5
3................................. N/A 2.20/5.1
4................................. N/A 2.35/4.4
------------------------------------------------------------------------
DOE seeks comment on the revised efficiency levels for top-loading
CCWs. This is identified as Issue 2 in section VII.E of today's
supplemental notice (Issues on Which DOE Seeks Comment).
b. Technological Feasibility of the Revised Top-Loading Max-Tech Level
DOE also received numerous comments regarding the viability in
commercial settings of the max-tech top-loading CCW evaluated in the
October 2008 NOPR. Alliance and GE commented that the commercial
acceptance of the technology behind the max-tech vertical-axis CCW is
as yet unknown because the GE model was introduced only recently and
because the max-tech unit is currently only sold into the on-premise
laundry market segment, where the frequency of user abuse such as
overloading is lower than in other commercial segments (laundromats,
multi-family housing, etc.). (Alliance, Public Meeting Transcript, No.
40.5 at p. 23; GE, Public Meeting Transcript, No. 40.5 at pp. 173-174;
GE, No. 48 at p.4;) Whirlpool suggested that the practice of
overloading impairs top-loading CCWs more than front-loading machines,
and, thus, inherently limits the efficiency levels that top-loading
CCWs can achieve. Whirlpool also stated that CCWs are more prone to
user abuse, such as extreme overloading, than RCWs. Whirlpool noted
that certain residential platforms are not able to achieve proper
clothes roll-over and, hence, cleaning when overfilled. (Whirlpool, No.
50 at pp. 2-3) The Joint Comment stated that on-premise laundry is
served primarily by larger capacity equipment than is covered by this
rulemaking. (Joint Comment, No. 44 at pp. 4-5) Conversely, Alliance
stated that the max-tech vertical-axis CCW is based on a lightweight
RCW platform that is poorly suited to commercial usage. (Alliance, No.
45 at Attachment 2, p. 7)
DOE recognizes that the max-tech top-loading CCW is currently
marketed only to on-premise laundry facilities and is not yet offered
with a coin-box or smart card reader option for laundromat or multi-
housing laundry use. DOE research indicates that the max-tech CCW is
based on a standard vertical-axis RCW platform (i.e., one with an
agitator) with selective upgrades, including spray rinse, four water-
level settings, additional low-temperature wash programs, a low-standby
power supply, and an electronic control board/user interface/drive
system that is customized for its intended use. No proprietary
technologies were observed, and, thus, DOE believes that all CCW
manufacturers could market vertical-axis clothes washers with similar
performance in time for the effective date of today's proposed rule.
The unit shares many characteristics with CCWs from the same
manufacturer marketed towards laundromat and multi-unit housing
applications, including an industry-standard 25-minute wash cycle. In
its teardown analysis, DOE observed that the max-tech top-loading CCW
appears to be built with similar construction and components as similar
CCW models marketed to commercial laundromats, which are also largely
based on an existing RCW platform. Thus, DOE believes that the max-tech
CCW is equally rugged and durable as
[[Page 57750]]
other units on the market. Further, DOE believes that applicable
payment-system interfaces could be incorporated in time for the
effective date of today's proposed standards.
DOE research also suggests that commercial acceptance depends on
wash performance. Multiple comments from interested parties were
received concerning wash performance of high-efficiency clothes
washers. The Multi-Housing Laundry Association (MLA) and Alliance
commented that the top-loading CCW standard proposed in the October
2008 NOPR could result in reduced equipment quality and clothes washing
and rinsing performance. Alliance stated that the required reductions
in water consumption and and/or low wash temperature to meet the
standard proposed in the October 2008 NOPR would negatively affect
consumer utility. Alliance stated that the max-tech vertical-axis CCW,
when used with common clothes washing detergents, may not provide
adequate clothes washing performance. (Alliance, Public Meeting
Transcript, No. 40.5 at pp. 23-24 and p. 202; Alliance No. 45 at p. 1
and Attachment 2, p. 14; MLA No. 49 at pp. 3-4) DOE recognizes that any
amended energy efficiency standard could result in a lessening of
certain equipment utility and hence interviews interested parties to
better understand the potential impacts of energy efficiency strategies
that manufacturers might employ in their equipment. Although interested
parties have suggested that the max-tech model does not provide
acceptable washing and rinsing performance targets, especially when
overloaded, they have yet to submit evidence of such performance
degradation. Furthermore, DOE is not aware of any widely accepted,
quantitative measures associated with clothes washing performance.
While DOE research uncovered a rinse-performance standard that was
developed by Australian clothes washer manufacturers, this rinse test
has yet to find acceptance in the U.S. market.
DOE also received comments on whether the max-tech vertical-axis
efficiency level could be achieved by multiple CCW models. Alliance
stated that it would be unwise to set a standard close to the max-tech
level, since it could eliminate all but the max-tech model from the
market. (Alliance, No. 45 at Attachment 2, p. 13) Alliance believes a
properly functioning top-loading CCW market requires a range of models
to serve all users. (Alliance, No. 45 at Attachment 2, p. 13) DOE notes
that the MEF/WF combination for vertical-axis CCWs proposed in the
October 2008 NOPR as TSL 2 and currently proposed in today's SNOPR as
the max-tech level is not based on either the stated or the tested max-
tech vertical-axis unit. Rather, the combination of MEF and WF proposed
is set at a level slightly below the measured max-tech values, and is a
level for which DOE had previously collected manufacturing, capital
expenditure, product development, and other costs. For today's
supplemental notice, DOE revised the max-tech level to the values at
TSL 2 proposed in the October 2008 NOPR--1.60 MEF/8.5 WF --based on its
independent testing. Compared to the top-loading max-tech level and
proposed standard of 1.76 MEF/8.3 WF published in the October 2008
NOPR, the revised level is slightly less stringent (see section III.C.1
for a complete discussion of this change) and may allow manufacturers
to field units with higher tested efficiencies in the future. For
example, the max-tech unit may be revised to achieve its stated
efficiency level. DOE believes that this revision of the proposed max-
tech level for today's SNOPR should help alleviate some manufacturers'
concerns regarding the technological feasibility and commercial
acceptance of a max-tech top-loading CCW.
Alliance commented that front-loading CCWs with electric heaters
have an MEF of 1.96, which would not meet the front-loading standards
proposed in the October 2008 NOPR. According to Alliance, customers in
some parts of the northern United States need such heaters to
supplement their hot water supply in order to maintain proper wash
temperatures despite very cold water supply temperatures. (Alliance,
Public Meeting Transcript, No. 40.5 at p. 22) DOE has received no data
on the extent or size of this impact or of the affected population.
Hence, DOE invites comment, including population and efficiency impact
data, to describe this issue.
DOE also invites further comment and information on the
technological feasibility of the proposed max-tech CCW, including
washing and rinsing performance measures for CCWs and population data
for water heating CCWs. This is identified as Issue 3 in section VII.E
of today's supplemental notice (Issues on Which DOE Seeks Comment).
2. Manufacturing Costs
In the October 2008 NOPR, DOE presented manufacturing cost
estimates based on the November 2007 ANOPR analysis, revised in
response to detailed CCW manufacturer feedback obtained at the NOPR
stage for equipment at each efficiency level. 73 FR 62034, 62055-62056
(Oct. 17, 2008). These manufacturing costs were the basis of inputs for
a number of other analyses in this rulemaking, including the LCC,
national impact, and GRIM analyses.
As described in the October 2008 NOPR, DOE found that a low-volume
manufacturer (LVM) operates in both the residential and CCW markets.
DOE considers this manufacturer to be low-volume because its annual
shipments in the combined RCW and CCW market are significantly lower
than those of its larger competitors. However, unlike its larger
rivals, most of the LVM's unit shipments are in the CCW market, where
the LVM has significant market share. Also unlike its diversified
competitors, this company exclusively manufactures laundry equipment. A
review of the Securities and Exchange Commission (SEC) 10-K documents
filed by the LVM revealed that, as of 2005, this company derived 22
percent of its total revenue from the sale of front- and top-loading
clothes washers and 87 percent of that income was from the commercial
market.\14\ As a result, the LVM could be affected disproportionately
by any rulemaking concerning CCWs compared to its competitors, for whom
CCWs represent less than 2 percent of total clothes washer sales.
Alliance stated that it is the LVM and that it has neither the
purchasing power nor the funding to support wide-ranging research and
development programs like those of its larger, more diverse rivals.
(Alliance, No. 45 at Attachment 2, p. 8) As a result, the manufacturing
costs for Alliance are inherently higher compared to those of its
rivals. Alliance believes that the cost of compliance with the top-
loading CCW standard proposed in the October 2008 NOPR would be
especially high if Alliance were required to introduce non-traditional
agitator designs to meet it. (Alliance, Public Meeting Transcript, No.
40.5 at p. 23 and p. 202) DOE research suggests that this efficiency
level for vertical-axis clothes washers can be met with conventional,
non-proprietary technology that is on the market today. Since the
October 17, 2008 NOPR meeting, DOE has received no further comments on
the manufacturing cost curves. Thus, for today's SNOPR, DOE has
retained all cost estimates presented in the October 2008 NOPR at the
retained efficiency levels, though each value was scaled by the
Producer Price Index (PPI) multiplier for the commercial laundry
equipment industry (NAICS 333312)
[[Page 57751]]
between 2007 and 2008 to update the costs in the October 2008 NOPR to
2008$.\15\ These are shown in Table III.3.
---------------------------------------------------------------------------
\14\ SEC documents pertaining to the LVM are available online
at: http://sec.gov/cgi-bin/browse-idea?action=getcompany&CIK=0001063697&owner=exclude&count=40.
\15\ PPI data is maintained by the Bureau of Labor Statistics
and is available at http://www.bls.gov/ppi/.
Table III.3--Commercial Clothes Washer Incremental Manufacturing Costs
----------------------------------------------------------------------------------------------------------------
Modified energy factor (ft\3\/ Incremental cost
kWh)/water factor (gal/ft\3\) -------------------------------
Efficiency level --------------------------------
Top-loading Front-loading Top-loading Front-loading
----------------------------------------------------------------------------------------------------------------
Baseline........................................ 1.26/9.5 1.72/8.0 $0.00 $0.00
1............................................... 1.42/9.5 1.80/7.5 77.60 0.00
2............................................... 1.60/8.5 2.00/5.5 134.99 14.21
3............................................... N/A 2.20/5.1 N/A 39.34
4............................................... N/A 2.35/4.4 N/A 66.16
----------------------------------------------------------------------------------------------------------------
D. Life-Cycle Cost and Payback Period Analysis
In response to the requirements of section 325(o)(2)(B)(i) of the
Act, DOE conducted LCC and PBP analyses to evaluate the economic
impacts of possible amended energy conservation standards for owners of
CCWs. This section of the notice describes these analyses. DOE
conducted the analysis using a spreadsheet model developed in Microsoft
(MS) Excel for Windows 2007. (See the SNOPR TSD, chapter 8).
The LCC is the total consumer expense over the life of the
equipment, including purchase and installation expense and operating
costs (energy and water expenditures, repair costs, and maintenance
costs). The PBP is the number of years it would take for the consumer
to recover the increased costs of a higher-efficiency equipment through
energy savings. To calculate the LCC, DOE discounted future operating
costs to the time of purchase and summed them over the lifetime of the
equipment. DOE measured the change in LCC and the change in PBP
associated with a given efficiency level relative to a base case
forecast of equipment efficiency. The base case forecast reflects the
market in the absence of amended mandatory energy conservation
standards. As part of the LCC and PBP analyses, DOE developed data that
it used to establish equipment prices, installation costs, annual
energy consumption, energy and water prices, maintenance and repair
costs, equipment lifetime, and discount rates.
DOE was unable to develop a consumer sample for CCWs because EIA's
Commercial Building Energy Consumption Survey (CBECS) does not provide
the necessary data to develop one.\16\ Instead, DOE established the
variability and uncertainty in energy and water use by defining the
uncertainty and variability in the use (cycles per day) of the
equipment. The variability in energy and water pricing was
characterized by regional differences in energy and water prices. DOE
calculated the LCC associated with a baseline CCW. To calculate the LCC
savings and PBP associated with equipment meeting higher efficiency
standards, DOE substituted the baseline unit with a more efficient
design.
---------------------------------------------------------------------------
\16\ Available online at: http://www.eia.doe.gov/emeu/cbecs/.
---------------------------------------------------------------------------
Table III.4 summarizes the approaches and data DOE used to derive
the inputs to the LCC and PBP calculations for the October 2008 NOPR,
and the changes it made for today's SNOPR. DOE did not introduce
changes to the LCC and PBP analyses methodology described in the
October 2008 NOPR. However, as the following sections discuss in more
detail, DOE revised some of the inputs to the analysis. Chapter 8 of
the TSD accompanying this notice contains detailed discussion of the
methodology utilized for the LCC and PBP analyses as well as the inputs
developed for the analyses.
Table III.4--Summary of Inputs and Key Assumptions in the LCC and PBP
Analyses
------------------------------------------------------------------------
Changes for the
Inputs October 2008 NOPR SNOPR
------------------------------------------------------------------------
Affecting Installed Costs:
Equipment Price......... Derived by Updated prices from
multiplying 2006$ to 2008$.
manufacturer cost
by manufacturer,
distributor markups
and sales tax.
Installation Cost....... Baseline cost Updated costs from
updated with RS 2006$ to 2008$.
Means Mechanical
Cost Data, 2008.
Affecting Operating Costs:
Annual Energy and Water Per-cycle energy and No change.
Use. water use based on
MEF and WF levels.
Disaggregated into
per-cycle machine,
dryer, and water
heating energy
using data from
DOE's 2000 TSD for
residential clothes
washers. Annual
energy and water
use determined from
the annual usage
(number of use
cycles). Usage
based on several
studies including
research sponsored
by MLA \17\ and the
Coin Laundry
Association \18\
(CLA). Different
use cycles
determined for
multi-family and
laundromat
equipment
applications.
[[Page 57752]]
Energy and Water/ Electricity: Updated Electricity: Updated
Wastewater Prices. using EIA's 2006 using EIA's 2007
Form 861 data. Form 861 data.
Natural Gas: Updated Natural Gas: Updated
using EIA's 2006 using EIA's 2007
Natural Gas Monthly. Natural Gas
Water/Wastewater: Monthly.
Updated using RFC/ Water/Wastewater: No
AWWA's 2006 Water change.
and Wastewater Variability: No
Survey. change.
Variability:
Regional energy
prices determined
for 13 regions;
regional water/
wastewater price
determined for four
regions.
Energy and Water/ Energy: Forecasts Reference Case
Wastewater Price Trends. updated with EIA's forecast updated
AEO 2008. with EIA's AEO 2009
Water/Wastewater: April Release. High-
Linear Growth and Low-
extrapolation of Growth forecasts
1970-2007 updated with EIA's
historical trends AEO 2009 March
in national water Release.
price index. Water/Wastewater
Prices: Updated to
include historical
trend through 2008.
For the four years
after 2008, fixed
the annual price to
the value in 2008
to prevent a dip in
the forecasted
prices.
Repair and Maintenance Estimated annualized Updated costs from
Costs. repair costs for 2006$ to 2008$.
each efficiency
level based on half
the equipment
lifetime divided by
the equipment
lifetime.
Affecting Present Value of
Annual Operating Cost
Savings
Equipment Lifetime...... Based on data from No change.
various sources
including the CLA.
Different lifetimes
established for
multi-family and
laundromat
equipment
applications.
Variability and
uncertainty
characterized with
Weibull probability
distributions.
Discount Rates.......... Approach based on No change.
cost of capital of
publicly traded
firms in the
sectors that
purchase CCWs.
Primary data source
is Damodaran
Online\19\.
Affecting Installed and
Operating Costs:
Effective Date of New 2012................ 2013.
Standard.
Base-Case Efficiency Analyzed as two Updated to reflect
Distributions. equipment classes: the most recent
top-loading and distributions on
front-loading. the number of
Distributions for available models at
both classes based the efficiency
on the number of levels.
available models at Top-Loading: 64.8%
the efficiency at 1.26 MEF/9.5 WF;
levels. 33.8% at 1.42 MEF/
Top-Loading: 63.6% 9.5 WF; 1.4% at
at 1.26 MEF/9.5 WF; 1.60 MEF/8.5 WF;
33.3% at 1.42 MEF/ 1.76 MEF/8.3 WF
9.5 WF; 0% at 1.60 removed as Max
MEF/8.5 WF; 3.0% at Tech.
1.76 MEF/8.3 WF. Front-Loading: 3.5%
Front-Loading: 7.4% at 1.72 MEF/8.0 WF;
at 1.72 MEF/8.0 WF; 0.0% at 1.80 MEF/
4.4% at 1.80 MEF/ 7.5 WF; 73.7% at
7.5 WF; 85.3% at 2.00 MEF/5.5 WF;
2.00 MEF/5.5 WF; 22.8% at 2.20 MEF/
1.5% at 2.20 MEF/ 5.1 WF; 0.0% at
5.1 WF; 1.5% at 2.35 MEF/4.4 WF.
2.35 MEF/4.4 WF.
------------------------------------------------------------------------
1. Equipment Prices
To calculate the equipment prices faced by CCW purchasers, DOE
multiplied the manufacturing costs developed from the engineering
analysis by the supply chain markups it developed (along with sales
taxes). DOE used the same supply chain markups for today's SNOPR that
were developed for the October 2008 NOPR. See chapter 7 of the TSD
accompanying this notice for additional information. To calculate the
final installed prices, DOE added installation cost to the equipment
prices.
---------------------------------------------------------------------------
\17\ Please see the following Web site for further information:
http://www.mla-online.com/.
\18\ Please see the following Web site for further information:
http://www.coinlaundry.org/.
\19\ Please see the following Web site for further information:
http://pages.stern.nyu.edu/~adamodar/.
---------------------------------------------------------------------------
2. Installation Cost
Installation costs include labor, overhead, and any miscellaneous
materials and parts. For the October 2008 NOPR and today's SNOPR, DOE
used data from the RS Means Mechanical Cost Data, 2008 on labor
requirements to estimate installation costs for CCWs.\20\ DOE estimates
that installation costs do not increase with equipment efficiency.
---------------------------------------------------------------------------
\20\ Available online at: http://www.rsmeans.com/bookstore/.
---------------------------------------------------------------------------
3. Annual Energy Consumption
DOE determined the annual energy and water consumption of CCWs by
multiplying the per-cycle energy and water use by the estimated number
of cycles per year. In the October 2008 NOPR, DOE concluded that the
use of the existing RCW test procedure provides a representative basis
for rating and estimating the per-cycle energy use of CCWs. For today's
SNOPR, DOE maintained the above approach.
4. Energy and Water Prices
a. Energy Prices
DOE derived average electricity and natural gas prices for 13
geographic areas consisting of the nine U.S. Census divisions, with
four large States (New York, Florida, Texas, and California) treated
separately.
DOE estimated commercial electricity prices for each of the 13
geographic areas based on data from EIA Form 861, Annual Electric Power
Industry Report.\21\ DOE calculated an average commercial electricity
price by first estimating an average commercial price
[[Page 57753]]
for each utility, and then calculated a regional average price by
weighting each utility with customers in a region by the number of
commercial customers served in that region. The calculations for
today's SNOPR used the most recent available data from 2007.
---------------------------------------------------------------------------
\21\ Available online at: http://www.eia.doe.gov/cneaf/electricity/page/eia861.html.
---------------------------------------------------------------------------
For the October 2008 NOPR, DOE estimated average commercial natural
gas prices in each of the 13 geographic areas based on 2006 data from
the EIA publication Natural Gas Monthly.\22\ DOE calculated an average
natural gas price for each area by first calculating the average prices
for each State, and then calculating a regional price by weighting each
State in a region by its population. For today's SNOPR, DOE used 2007
data from the same source.
---------------------------------------------------------------------------
\22\ Available online at: http://www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.html.
---------------------------------------------------------------------------
To estimate the trends in electricity and natural gas prices for
the October 2008 NOPR, DOE used the price forecasts in the AEO
2008.\23\ To arrive at prices in future years, DOE multiplied the
average prices described above by the forecast of annual average price
changes in AEO 2008. For today's supplemental notice, DOE updated its
energy price forecasts using those in the AEO 2009 April Release.
Because the AEO forecasts prices only to 2030, DOE followed past
guidelines provided to the Federal Energy Management Program by EIA and
used the average rate of change during 2020-2030 to estimate the price
trends beyond 2030.
---------------------------------------------------------------------------
\23\ All AEO publications are available online at: http://www.eia.doe.gov/oiaf/aeo/.
---------------------------------------------------------------------------
The spreadsheet tools used to conduct the LCC and PBP analysis
allow users to select either the AEO's high-growth case or low-growth
case price forecasts to estimate the sensitivity of the LCC and PBP to
different energy price forecasts. The AEO 2009 April Release provides
only forecasts for the Reference Case. Therefore, for today's
supplemental notice, DOE used the AEO 2009 March Release high-growth
case or low-growth forecasts to estimate high-growth and low-growth
price trends.
DOE received comment regarding the inputs into the energy price
forecasts. The Joint Comment recommended that DOE conduct a sensitivity
analysis using a basket of other forecasts besides the AEO. (Joint
Comment, No. 44 at p. 11) As mentioned above, DOE considered the AEO's
high-growth case and low-growth case price forecasts to estimate the
sensitivity of the LCC and PBP results to different energy price
forecasts. The AEO alternative forecasts provide a suitable range to
examine the sensitivity of LCC and PBP results to different energy
price forecasts.
Interested parties also recommended DOE consider pending
legislation that could influence future energy prices. The Joint
Comment stated that to realistically depict energy prices in the
future, DOE must consider the impact of carbon control legislation,
since such legislation is very likely. It also noted that there are
regional cap and trade programs that are in effect in the Northeast
(Regional Greenhouse Gas Initiative (RGG)) and the West (Western
Climate Initiative (WCI)) that will impact the price of electricity and
are not reflected in the AEO energy price forecasts. (Joint Comment,
No. 44 at p. 12) EJ stated that caps will likely be in place by the
time new standards become effective, so DOE should increase its
electricity prices to reflect the cost of complying with emission caps.
(EJ, Public Meeting Transcript, No. 40.5 at pp. 105-106) The shape 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 RGGI in its AEO
2009 April Release energy price forecasts. (WCI did not provide
sufficient detail to EIA in order for them to model the impact of the
WCI on energy price forecasts.) Therefore, the energy price forecasts
used in today's supplemental notice do include the impact of one of the
two regional cap and trade programs in the United States.
b. Water and Wastewater Prices
DOE obtained commercial water and wastewater price data from the
Water and Wastewater Rate Survey conducted by Raftelis Financial
Consultants (RFC) and the American Water Works Association (AWWA). For
the October 2008 NOPR and today's SNOPR, DOE used the 2006 Water and
Wastewater Rate Survey.\24\ The survey covers approximately 300 water
utilities and 200 wastewater utilities, with each industry analyzed
separately. DOE calculated values at the Census region level
(Northeast, South, Midwest, and West). Edison Electric Institute (EEI)
questioned why water and wastewater prices were not developed at the
Census division level. (EEI, Public Meeting Transcript, No. 40.5, p.
103 and p. 178) The samples that DOE obtained of 200-300 utilities are
not large enough to calculate regional prices for all U.S. Census
divisions and large States. Hence, DOE was only able to capture the
variability of water and wastewater prices at the Census region level.
---------------------------------------------------------------------------
\24\ Raftelis Financial Consultants, Inc., 2006 RFC/AWWA Water
and Wastewater Rate Survey, 2006, (2006). This document is available
at: http://www.raftelis.com/ratessurvey.html.
---------------------------------------------------------------------------
To estimate the future trend for water and wastewater prices, DOE
used data on the historic trend in the national water price index (U.S.
city average) provided by the Bureau of Labor Statistics (BLS). For the
October 2008 NOPR, DOE extrapolated a future trend based on the linear
growth from 1970 to 2007. The Joint Comment stated that (1) the trend
line for water and wastewater prices developed by DOE begins with an
anomalous dip of over seven percent in costs for 2008, rather than the
likely increase of 2 percent or more; and (2) DOE's trend forecast
understates the future cost of water and wastewater service by some ten
percent. (Joint Comment, No. 44 at pp. 3-4) For today's SNOPR, DOE
modified its future trends of water and wastewater prices based on some
of the Joint Comment's suggestions. DOE continued to the use the BLS
historical data, which now provides data for the year 2008, and
extrapolated the future trend based on the linear growth from 1970 to
2008. But rather than use the extrapolated trend to forecast the prices
for the four years after 2008, DOE pinned the annual price to the value
in 2008. Otherwise, forecasted prices for this 4-year time period would
have been up to 8 percent lower than the price in 2008. Estimating
prices in this manner is appropriate because it is consistent with the
historical trend that demonstrates that prices do not decrease over
time. Estimating prices in this manner also prevents the anomalous dip
noted by the Joint Comment. Beyond the 4-year time period, DOE used the
extrapolated trend to forecast prices out to the year 2043.
5. Repair and Maintenance Costs
Repair costs are associated with repairing or replacing components
that have failed in the appliance, whereas maintenance costs are
associated with maintaining the operation of the equipment. For the
October 2008 NOPR, DOE included increased repair costs based on an
algorithm developed by DOE for central air conditioners and heat pumps
and which was also used for residential furnaces and boilers.\25\
[[Page 57754]]
This algorithm calculates annualized repair costs by dividing half of
the equipment retail price over the equipment lifetime. Whirlpool
agreed with the assumptions DOE used to estimate CCW repair costs in
the October 2008 NOPR. (Whirlpool, No. 50 at p. 3) MLA stated that more
efficient CCWs incur higher maintenance costs. (MLA, No. 49 at p. 4)
ASAP asked whether DOE had gathered empirical data to estimate CCW
repair and maintenance costs. (ASAP, Public Meeting Transcript, No.
40.5 at pp. 110-111) DOE was unable to gather any empirical data
specific to CCWs to estimate repair and maintenance cost. In the
absence of better data, DOE retained its approach from the October 2008
NOPR for today's SNOPR.
---------------------------------------------------------------------------
\25\ U.S. Department of Energy, Technical Support Document:
Energy Efficiency Standards for Consumer Products: Residential
Central Air Conditioners and Heat Pumps (May 2002) chapter 5. This
document is available at: http://www.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_r.html.
---------------------------------------------------------------------------
6. Equipment Lifetime
For the October 2008 NOPR and today's SNOPR, DOE used a variety of
sources to establish low, average, and high estimates for equipment
lifetime. The average CCW lifetime was 11.3 years for multi-family
applications, and 7.1 years in laundromat applications. DOE
characterized CCW lifetimes with Weibull probability distributions.
7. Discount Rates
To establish discount rates for CCWs for the October 2008 NOPR and
today's SNOPR, DOE estimated the cost of capital of publicly traded
firms in the sectors that purchase CCWs as the weighted average of the
cost of equity financing and the cost of debt financing. DOE identified
the following sectors purchasing CCWs: (1) Educational services; (2)
hotels; (3) real estate investment trusts; and (4) personal services.
DOE estimated the weighted-average cost of capital (WACC) using the
respective shares of equity and debt financing for each sector that
purchases CCWs. It calculated the real WACC by adjusting the cost of
capital by the expected rate of inflation. To obtain an average
discount rate value, DOE used additional data on the number of CCWs in
use in various sectors. DOE estimated the average discount rate for
companies that purchase CCWs at 5.7 percent. DOE received comment on
the discount rates from Alliance, who suggested that the discount rates
used in LCC and PBP analyses should be updated to reflect current
financial market conditions. (Alliance, Public Meeting Transcript, No.
40.5 at pp. 115-116) DOE used the most recent available data (from
2006) from Damodaran Online and Ibbotson Associates to estimate its
discount rates for CCWs. Damodaran Online is a widely used source of
information about company debt and equity financing for most types of
firms. Ibbotson Associates is a leading authority on asset allocation
with expertise in capital market expectations and portfolio
implementation. DOE believes that the data it used are representative
of conditions that may apply when the first purchases impacted by
standards would be made. Therefore, DOE continued to use these sources
for today's SNOPR and will determine if the data used from both sources
needs to be updated for the final rule.
8. Effective Date of the Amended Standards
The compliance date is the future date when parties subject to the
requirements of a new standard must begin compliance. For the October
2008 NOPR, DOE assumed that any new energy efficiency standards adopted
in this rulemaking would require compliance in March 2012, 3 years
after the final rule was expected to be published in the Federal
Register. For today's SNOPR, DOE expects that the final rule will be
published by January 1, 2010, as required by EPACT 2005, with
compliance with new standards required by January 1, 2013. DOE
calculated the LCC for the appliance consumers as if they would
purchase new equipment in the year after the standard takes effect.
9. Equipment Energy Efficiency in the Base Case
For the LCC and PBP analysis, DOE analyzes higher efficiency levels
relative to a baseline efficiency level. However, some consumers may
already purchase equipment with efficiencies greater than the baseline
equipment levels. Thus, to accurately estimate the percentage of
consumers that would be affected by a particular standard level, DOE
estimates the distribution of equipment efficiencies that consumers are
expected to purchase under the base case (i.e., the case without new
energy efficiency standards). DOE refers to this distribution of
equipment energy efficiencies as a base-case efficiency distribution.
As discussed previously in section III.A, DOE decided to analyze CCWs
with two equipment classes--top-loading CCWs and front-loading CCWs.
For the October 2008 NOPR and today's SNOPR, DOE used the number of
available models within each equipment class to establish the base-case
efficiency distributions. Table III.5 presents the market shares of the
efficiency levels in the base case for CCWs. See chapter 8 of the TSD
accompanying this notice for further details on the development of CCW
base-case market shares.
Table III.5--Commercial Clothes Washers: Base Case Market Shares
--------------------------------------------------------------------------------------------------------------------------------------------------------
Top-loading Front-loading
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market Market
Standard level MEF WF share Standard level MEF WF share
(percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................... 1.26 9.50 64.8 Baseline..................... 1.72 8.00 3.5
1.......................................... 1.42 9.50 33.8 1............................ 1.80 7.50 0.0
2.......................................... 1.60 8.50 1.4 2............................ 2.00 5.50 73.7
3............................ 2.20 5.10 22.8
4............................ 2.34 4.40 0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
10. CCW Split Incentive
Under a split incentive situation, the party purchasing more
efficient and presumably more expensive equipment (referred to as
``consumers'' in this notice) may not realize the operating cost
savings from that equipment, because another party may pay the utility
bill. For the October 2008 NOPR, DOE evaluated the ability of CCW
owners to pass on the higher purchase costs of more expensive CCWs in
return for lower operational costs. DOE concluded that few route
operators
[[Page 57755]]
would allow themselves to be held to a lease agreement which would
prevent them from recovering the cost of more efficient CCW equipment.
The Joint Comment stated that contracts between route operators are
multi-housing property owners are subject to revision and renewal, and
that the division of coin-box revenue may be negotiated as a result of
cost-effective efficiency improvements in CCWs. (Joint Comment, No. 44
at p. 6) Because DOE received only supportive comments regarding its
assessment of the potential of a split incentive in the CCW market, DOE
continues to conclude for today's SNOPR that new CCW efficiency
standards are unlikely to lead to split incentives in the CCW market.
11. Rebound Effect
The rebound effect occurs when a piece of equipment, made more
efficient and used more intensively, does not yield the expected energy
savings from the efficiency improvement. In the case of more efficient
clothes washers, limited research has been conducted to show that there
is no rebound effect for home appliances, although the consumer may
choose to purchase larger models with more features that would result
in higher energy use.\26\ DOE did not receive any comments from
interested parties on the issue of the rebound effect for CCWs. Based
on the limited research showing no rebound effect for home appliances,
DOE did not include a rebound effect in its analysis of CCW standards.
---------------------------------------------------------------------------
\26\ L.A. Greening, D.L. Greene, and C. Difiglio. ``Energy
efficiency and consumption--the rebound effect--a survey.'' Energy
Policy 28 (2000) 389-401. Available for purchase at http://www.elsevier.com/locate/enpol.
---------------------------------------------------------------------------
12. Inputs to Payback Period Analysis
The PBP is the amount of time (expressed in years) it takes the
consumer to recover the additional installed cost of more efficient
equipment through operating cost savings, compared to baseline
equipment. The simple PBP does not account for changes in operating
expense over time or the time value of money. The inputs to the PBP
calculation are the total installed cost of the equipment to the
customer for each efficiency level and the annual (first-year)
operating expenditures for each efficiency level. For the October 2008
NOPR and today's SNOPR, the PBP calculation uses the same inputs as the
LCC analysis, except that energy price trends and discount rates are
not needed.
13. Rebuttable-Presumption Payback Period
As noted above, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii) and
6316(a)), establishes a rebuttable presumption that a standard is
economically justified if the Secretary finds that ``the additional
cost to the consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value of
the energy (and as applicable, water) savings during the first year
that the consumer will receive as a result of the standard,'' as
calculated under the test procedure in place for that standard. For
each TSL, DOE determined the value of the first year's energy savings
by calculating the quantity of those savings in accordance with DOE's
test procedure, and multiplying that amount by the average energy price
forecast for the year in which a new standard would be first
effective--in this case, 2013.
DOE received comments addressing the topic of using a rebuttable
presumption payback period to establish the economic justification of
an energy conservation standard level. The Joint Comment and EJ stated
that DOE's view that consideration of a full range of impacts is
necessary because the rebuttable presumption payback period criterion
is not sufficient for determining economic justification does not
reflect the extent to which the rebuttable presumption analysis
constrains DOE's authority to reject standards based on economic
impacts. (Joint Comment, No. 44 at appendix B, p. 1; EJ, Public Meeting
Transcript, No. 40.5 at p. 130) The Joint Comment stated that in 42
U.S.C. 6295(o)(2)(B)(iii), Congress erected a significant barrier to
DOE's rejection, on the basis of economic justifiability, of standard
levels to which the rebuttable presumption applies. Further, EJ and the
Joint Comment stated DOE preference to proceed under the seven-factor
test contained in 42 U.S.C. 6295(o)(2)(B)(i) is not pertinent.
The Joint Comment agreed with DOE that analysis under the seven-
factor test is necessary and has typically supported standards with
paybacks longer than 3 years. However, the Joint Comment stated that
DOE's decision-making must reflect the expressed intent of Congress
that the highest standard level resulting in cost recovery within 3
years constitutes the presumptive lowest standard level that DOE must
adopt. (Joint Comment, No. 44 at appendix B, pp. 1-2)
DOE does consider both the rebuttable presumption payback criteria,
as well as a full analysis including all seven relevant statutory
criteria under 42 U.S.C. 6295(o)(2)(B)(i) when examining potential
standard levels. However, DOE believes that the interested parties are
misinterpreting the statutory provision in question. The Joint Comment
and EJ present one possible reading of an ambiguous provision (i.e.,
that DOE need not look beyond the results of the rebuttable presumption
inquiry), but DOE believes that such an approach is neither required
nor appropriate, because it would ask the agency to potentially ignore
other relevant information that would bear on the selection of the most
stringent standard level that meets all applicable statutory criteria.
The interested parties' interpretation would essentially restrict DOE
from being able to rebut the findings of the preliminary presumptive
analysis.
The statute contains no such restriction, and such an approach
would hinder DOE's efforts to base its regulations on the best
available information. Similarly, DOE believes that the Joint Comment
misreads the statute in calling for a level that meets the rebuttable
presumption test to serve as a minimum level when setting the final
energy conservation standard. To do so would not only eliminate the
``rebuttable'' aspect of the presumption but would also lock in place a
level that may not be economically justified based upon the full review
of statutory criteria. DOE is already obligated under EPCA to select
the most stringent standard level that meets the applicable statutory
criteria, so there is no need to tie the same requirement to the
rebuttable presumption.
E. National Impact Analysis--National Energy Savings and Net Present
Value Analysis
1. General
DOE's NIA assesses the national energy savings, as well as the
national NPV of total consumer costs and savings, expected to result
from new standards at specific efficiency levels. DOE applied the NIA
spreadsheet to perform calculations of energy savings and NPV, using
the annual energy consumption and total installed cost data from the
LCC analysis. DOE forecasted the energy savings, energy cost savings,
equipment costs, and NPV for each equipment class from 2013 to 2043.
The forecasts provide annual and cumulative values for all four
parameters. In addition, DOE incorporated into its NIA spreadsheet the
capability to analyze sensitivity of the results to forecasted energy
prices
[[Page 57756]]
and equipment efficiency trends. Table III.6 summarizes the approach
and data DOE used to derive the inputs to the NES and NPV analyses for
the October 2008 NOPR and the changes made in the analyses for today's
SNOPR. A discussion of the inputs and the changes follows below. (See
chapter 11 of the SNOPR TSD for further details.)
Table III.6--Approach and Data Used to Derive the Inputs to the National
Energy Savings and NPV Analyses
------------------------------------------------------------------------
2008 NOPR Changes for the
Inputs description SNOPR
------------------------------------------------------------------------
Shipments................... Annual shipments See Table III.7.
from Shipments
Model.
Effective Date of Standard.. 2012................ 2013.
Base-Case Forecasted Shipment-weighted No change.
Efficiencies. efficiency (SWEF)
determined in the
year 2005. SWEF
held constant over
forecast period.
Standards-Case Forecasted Analyzed as two No change.
Efficiencies. equipment classes.
For each equipment
class, roll-up
scenario used for
determining SWEF in
the year that
standards become
effective for each
standards case.
SWEF held constant
over forecast
period.
Annual Energy Consumption Annual weighted- No change.
per Unit. average values as a
function of SWEF.
Total Installed Cost per Annual weighted- Updated costs from
Unit. average values as a 2006$ to 2008$.
function of SWEF.
Energy and Water Cost per Annual weighted- Updated costs from
Unit. average values a 2006$ to 2008$.
function of the
annual energy
consumption per
unit and energy
(and water) prices.
Repair Cost and Maintenance Incorporated changes Updated costs from
Cost per Unit. in repair costs as 2006$ to 2008$.
a function of
efficiency.
Escalation of Energy and Energy Prices: AEO Energy Prices:
Water/Wastewater Prices. 2008 forecasts (to Updated to AEO 2009
2030) extrapolation April Release
to 2042. forecasts for the
Water/Wastewater Reference Case. AEO
Prices: Linear 2009 April Release
extrapolation of does not provide
1970-2007 High-Growth and Low-
historical trends Growth forecasts;
in national water used AEO 2009 March
price index. Release High-Growth
and Low-Growth
forecasts to
estimate high and
low growth price
trends.
Water/Wastewater
Prices: Updated to
include historical
trend through 2008.
For the four years
following 2013
fixed the annual
price to the value
in 2008 to prevent
a dip in the
forecasted prices.
Energy Site-to-Source Conversion varies No change.
Conversion. yearly and is
generated by DOE/
EIA's NEMS program
(a time-series
conversion factor;
includes electric
generation,
transmission, and
distribution
losses).
Effect of Standards on Determined but found No change.
Energy Prices. not to be
significant.
Discount Rate............... Three and seven No change.
percent real.
Present Year................ Future expenses Future expenses
discounted to year discounted to year
2007. 2009.
------------------------------------------------------------------------
2. Shipments
The shipments portion of the NIA Spreadsheet is a Shipments Model
that uses historical data as a basis for projecting future shipments of
the equipment that are the subject of this rulemaking. In projecting
CCW shipments, DOE accounted for three market segments: (1) New
construction; (2) existing buildings (i.e., replacing failed
equipment); and (3) retired units not replaced. DOE used the non-
replacement market segment to calibrate the Shipments Model to
historical shipments data. For purposes of estimating the impacts of
prospective standards on equipment shipments (i.e., forecasting
standards-case shipments) DOE considered the combined effects of
changes in purchase price, annual operating cost, and household income
on the magnitude of shipments.
Table III.7 summarizes the approach and data DOE used to derive the
inputs to the shipments analysis for the October 2008 NOPR, and the
changes it made for today's SNOPR. The general approach for forecasting
CCW shipments for today's SNOPR remains unchanged from the October 2008
NOPR. That is, all CCW shipments (for both equipment classes) were
estimated for the new construction, replacement and non-replacement
markets. DOE then allocated shipments to each of the two equipment
classes based on the market share of each class. Based on data provided
by AHAM for the November 2007 ANOPR, DOE estimated that top-loading
washers comprise 80 percent of the market while front-loading washers
comprise 20 percent. DOE estimated that the equipment class market
shares would remain unchanged over the time period 2005-2042. A
discussion of the inputs and the changes follows below.
The Joint Comment suggested that DOE update its equipment class
market shares to reflect the impacts of the 2006 Federal tax incentives
for CCWs. (Joint Comment, No. 44 at p. 5) The Joint Comment noted that
the increased production of front-loading washers in the base-case
would in turn lead to lower conversion costs for manufacturers and,
therefore, make it less costly to meet higher CCW efficiency standards.
For today's supplemental notice, DOE reviewed the SEC 10K report of the
LVM of CCWs and determined that manufacturer tax credits in recent
Federal legislation have resulted in significantly increased sales of
the front-loading washers for the LVM. When accounting for the LVM's
market share, the increase in front-loading sales results in a current
market share of 30 percent for front-loading washers. Although tax
credits are set to expire after 2010, DOE believes that the
[[Page 57757]]
tax credits are impacting production costs and manufacturing
infrastructure such that front-loading washers would continue to
comprise 30 percent of the market over the entire forecast period.
Table III.7 below shows the inputs chosen for the Shipments
Analysis in today's supplemental notice.
Table III.7 Approach and Data Used To Derive the Inputs to the Shipments
Analysis
------------------------------------------------------------------------
October 2008 NOPR Changes for the
Inputs description SNOPR
------------------------------------------------------------------------
Number of Equipment Classes. Two equipment Updated, market
classes: top- share data based on
loading washers and SEC 10K report of
front-loading the LVM and tax
washers. Shipments credits claimed by
forecasts the LVM for
established for all producing high-
CCWs and then efficiency CCWs.
disaggregated into Market share
the two equipment determined to be:
classes based on 70% top-loading and
the market share of 30% front-loading.
top- and front- Equipment class
loading washers. market shares held
Market share data constant over
provided by AHAM; forecast period.
80% top-loading and
20% frontloading.
Equipment class
market shares held
constant over
forecast period.
New Construction Shipments.. Determined by No change in
multiplying multi- approach. Housing
housing forecasts forecasts updated
by forecasted with EIA AEO 2009
saturation of CCWs April Release
for new multi- forecasts for the
housing. Multi- Reference Case. AEO
housing forecasts 2009 March Release
with AEO 2008 forecasts used for
projections. the High-Growth
Verified frozen Case and Low-Growth
saturations with Case.
data from the U.S.
Census Bureau's
American Housing
Survey (AHS) for
1997-2005.
Replacements................ Determined by No change.
tracking total
equipment stock by
vintage and
establishing the
failure of the
stock using
retirement
functions from the
LCC and PBP
analysis.
Retirement
functions revised
to be based on
Weibull lifetime
distributions.
Retired Units not Replaced Used to calibrate Extended the time
(i.e., non-replacements). Shipments Model to period out to 2043
historical to reflect an
shipments data. updated date of
Froze the 2013 for when the
percentage of non- standard becomes
replacements at 15 effective.
percent for the
period
2007[boxh]2042 to
account for the
increased
saturation rate of
in-unit washers in
the multi-family
stock between 1997
and 2005 timeframe
shown by the AHS.
Historical Shipments........ Data sources include No change.
AHAM data
submittal,
Appliance Magazine,
and U.S. Bureau of
Economic Analysis'
quantity index data
for commercial
laundry.
Purchase Price, Operating Developed the No change.
Cost, and Household Income ``relative price''
Impacts due to efficiency elasticity which
standards. accounts for the
purchase price and
the present value
of operating cost
savings divided by
household income.
Used purchase price
and efficiency data
specific to
residential
refrigerators,
clothes washers,
and dishwashers
between 1980 and
2002 to determine a
``relative price''
elasticity of
demand, of -0.34.
Fuel Switching.............. Not applicable...... No change.
------------------------------------------------------------------------
DOE based its Shipments Model on the following three assumptions:
(1) All equipment shipments for new construction are driven by the new
multi-family housing market, (2) the relative market shares of the two
equipment applications, laundromats and common-area laundry facilities
in multi-family housing, are constant over time at 15 and 85 percent,
respectively, and (3) the U.S. Census Bureau's quantity index data can
be used to validate the shipments trend observed in the historical
data. The Joint Comment stated that DOE's assumed 85 percent to 15
percent split between sales for multi-family applications and sales for
laundromat applications is not based on robust or current data. (Joint
Comment, No. 44 at p. 5) It cited information from Alliance Laundry
that suggests that the ratio of multi-family to laundromat shipments is
about 36 percent to 64 percent. DOE based its market information on a
report from the CEE,\27\ which gathered information from several
sources. Therefore, DOE concluded that this source is more reliable
than information from a single manufacturer, and it continued to apply
the same multi-family/laundromat sales split used in the October 2008
NOPR for today's SNOPR.
---------------------------------------------------------------------------
\27\ Consortium for Energy Efficiency, Commercial Family-Sized
Washers: An Initiative Description of the Consortium for Energy
Efficiency (1998). This document is available at: http://www.cee1.org/com/cwsh/cwsh-main.php3.
---------------------------------------------------------------------------
DOE received comments regarding the impacts of impending amended
energy conservation standards for CCWs on unit sales. Alliance
suggested that impacts to the CCW market would encourage customers to
stock up on less efficient top-loading CCWs before the implementation
date, and keep older machines in operation longer. These effects would
undermine the effectiveness of the standards proposed in the October
2008 NOPR. (Alliance, No. 45 at Attachment 2, p. 10) As discussed below
in section III.E.2.c, DOE's shipments model uses a ``relative''
purchase price elasticity to determine the drop in shipments as a
function of increased purchase price and operating cost savings. The
model does forecast a drop in new shipments due to a high standard on
top-loading CCWs, which is expected to result in purchase of used CCWs.
DOE did not have sufficient information to account for possible
stocking up on less efficient top-loading CCWs before the
implementation date.
a. New Construction Shipments
To determine new construction shipments, DOE used a forecast of new
housing coupled with equipment market saturation data for new housing.
For new housing completions and mobile home placements, DOE adopted the
projections from EIA's AEO 2008 through 2030 for the October 2008 NOPR.
For today's SNOPR, DOE used the projections from EIA's AEO 2009
[[Page 57758]]
April Release Reference Case. For CCWs, DOE relied on new construction
market saturation data from the above-mentioned CEE report.
b. Replacements and Non-Replacements
DOE estimated replacements using equipment retirement functions
developed from equipment lifetimes. For the October 2008 NOPR and
today's SNOPR, DOE used retirement functions based on Weibull
distributions. For the October 2008 NOPR, DOE determined that the
growth of in-unit washer saturations in the multi-family stock over the
last 10 years was likely caused by conversions of rental property to
condominiums, resulting in the gradual phase-out or non-replacement of
failed CCWs in common-area laundry facilities. As a result, DOE used
the average percent of non-replacements over the period between 1999
and 2005 (18 percent) and maintained it over the entire forecast period
(2006 to 2042 for the October 2008 NOPR and 2007 to 2043 for today's
SNOPR). The effect of maintaining non-replacements at 18 percent
results in forecasted CCW shipments staying relatively flat during the
forecast period.
Multiple interested parties commented on the shipment forecasts
used by DOE in the October 2008 NOPR. Alliance agreed with the
relatively flat shipment forecast. (Alliance, Public Meeting
Transcript, No. 40.5 at p. 22; Alliance, No. 45 at p. 1) AHAM and
Whirlpool stated that the October 2008 NOPR estimates of future
shipments for CCWs were much more realistic than those used in the
November 2007 ANOPR. (AHAM, Public Meeting Transcript, No. 40.5 at p.
27; AHAM, No. 47 at p. 4; Whirlpool, Public Meeting Transcript, No 40.5
at p. 28; Whirlpool, No. 50 at p. 3) The Joint Comment questioned DOE's
forecast of reduced shipments for new and replacement CCWs, citing
Alliance's SEC filing which projected ``modest growth'' in the
installed base of commercial laundry equipment, estimated by Alliance
to have grown at 0.9 percent annually since 1997. (Joint Comment, No.
44 at p. 5) DOE believes that the information it used to forecast CCW
shipments for the October 2008 NOPR is more reliable than the limited
information provided by the Joint Comment on one manufacturer's
statement in a single SEC filing; thus DOE maintained the approach used
in the October 2008 NOPR for today's SNOPR.
c. Purchase Price, Operating Cost, and Income Impacts
To estimate the combined effects on CCW shipments from increases in
equipment purchase price and decreases in equipment operating costs due
to amended efficiency standards, DOE conducted a literature review and
a statistical analysis on a limited set of appliance price, efficiency,
and shipments data for the October 2008 NOPR. DOE used purchase price
and efficiency data specific to residential refrigerators, clothes
washers, and dishwashers between 1980 and 2002 to conduct regression
analyses. DOE's analysis suggests that the ``relative'' short-run price
elasticity of demand, averaged over the three appliances, is -0.34.
Because DOE's forecast of shipments and national impacts due to
standards spans over 30 years, DOE also considered how the relative
price elasticity is affected once a new standard takes effect. Past
analyses of consumer purchase decisions for automobiles suggest that
after the initial purchase price change, price elasticity becomes more
inelastic over the years until it reaches a terminal value. See
appendix 10A of the SNOPR TSD for more details on the development of
the short-run price elasticity of demand and the long-run effects on
the elasticity.
For the October 2008 NOPR, DOE incorporated a relative price
elasticity change that resulted in a terminal value of approximately
one-third of the short-run elasticity. In other words, DOE estimated
that consumer purchase decisions, in time, become less sensitive to the
initial change in the equipment's relative price. MLA commented that if
the standards result in a substantial increase in the use of front-
loading CCWs and a reduction or elimination in that of top-loading
CCWs, consumers would see resulting price increases driven by higher
purchase price and higher maintenance, service, and operating cost for
front-loading CCWs compared to top-loaders. (MLA, No. 49 at pp. 3-4) In
addition, ASAP questioned DOE's conclusion that standards more
aggressive than the ones proposed in the October 2008 NOPR for front-
loading CCWs could lead to significant recapture of the CCW market by
top-loading machines. (ASAP, Public Meeting Transcript, No. 40.5 at pp.
34-35 and pp. 160-161) For its October 2008 NOPR as well as today's
SNOPR, DOE estimated that price increases would lead to reductions in
unit shipments for both top-loading and front-loading CCWs. DOE
analyzed the impacts of increased purchase prices for each equipment
class independently of the other. DOE was not able to estimate the
cross price elasticity of demand between the two equipment classes to
determine whether consumers would switch from one type of CCW to the
other. But because the price impacts for more efficient top-loaders are
higher than those for more efficient front-loaders, DOE estimated that
top-loading CCW sales would decrease more rapidly than for front-
loaders. As a result, DOE estimated that front-loading CCWs would gain
an additional market share of only about 2 percent. In addition, DOE
estimated that those consumers forgoing the purchase of new top-loading
CCWs would instead purchase used top-loading CCWs with efficiencies
equal to baseline top-loader levels. DOE received no additional
comments on its analysis to estimate the combined effects of increases
in equipment purchase price and decreases in operating costs on CCW
shipments and, therefore, retained the approach for today's SNOPR.
Although DOE retained its approach from the October 2008 NOPR to
estimate the impacts from changes in purchase price and operating cost,
DOE has concerns over specific aspects of its analysis. First, because
purchase price and efficiency data for residential appliances were used
to develop the ``relative'' short-run price elasticity of demand, DOE
is uncertain how applicable the price elasticity is to the commercial
clothes washing market. Second, because estimates of the long-run price
elasticity of demand were derived from consumer automobile purchase
decisions, DOE is uncertain whether it can be inferred that the initial
CCW price elasticity of demand would become more inelastic over time.
Third, although a cross price elasticity of demand between top-loading
and front-loading CCWs could not be developed due to the lack of
specific data, DOE still has concern over the price interactions
between the two types of CCWs, especially under those circumstances
where the purchase price increase for one CCW equipment class is more
significant than for the other. Finally, DOE is concerned over its
assumption that consumers forgoing a top-loader CCW purchase due to a
price increase caused by standards would instead acquire used top-
loading washers. For example, those consumers forgoing a top-loading
CCW purchase may instead purchase a new front-loading CCW. To
understand the interactions between the used CCW market and the new
front-loading CCW market, the development of a cross price
[[Page 57759]]
elasticity between these two markets would be ideal.
Due to the lack of data and information to develop both short- and
long-run price elasticities of demand specific to CCWs as well as cross
price elasticities between top-loading and front-loading CCWs and used
and front-loading CCWs, DOE is seeking input and any data from
interested parties that may assist in the development of price
elasiticies specific to any or all of the items discussed above. This
is identified as Issue 4 in section VII.E of today's supplemental
notice (Issues on Which DOE Seeks Comment).
3. Other Inputs
a. Base-Case Forecasted Efficiencies
A key input to the calculations of NES and NPV are the energy
efficiencies that DOE forecasts for the base case (without new
standards). The forecasted efficiencies represent the annual shipment-
weighted energy efficiency (SWEF) of the equipment under consideration
over the forecast period (i.e., from the estimated effective date of a
new standard to 30 years after that date).
For the October 2008 NOPR, DOE first determined the distribution of
equipment efficiencies currently in the marketplace to develop a SWEF
for each equipment class for 2005. Using the SWEF as a starting point,
DOE developed base-case efficiencies based on estimates of future
efficiency increase. From 2005 to 2013 (2013 being the estimated
effective date of a new standard), DOE estimated that there would be no
change in the SWEF (i.e., no change in the distribution of equipment
efficiencies). Because there are no historical data to indicate how
equipment efficiencies have changed over time, DOE estimated that
forecasted efficiencies would remain at the 2013 level until the end of
the forecast period. DOE recognizes the possibility that equipment
efficiencies may change over time (e.g., due to voluntary efficiency
programs such as ENERGY STAR). But without historical information, DOE
had no basis for estimating how much the equipment efficiencies may
change. For today's supplemental notice, DOE maintained its estimate
that the SWEF would remain constant from 2005 through the end of the
forecast period.
b. Standards-Case Forecasted Efficiencies
For its determination of each of the cases with alternative
standard levels (``standards cases''), DOE used a ``roll-up'' scenario
in the October 2008 NOPR to establish the SWEF for 2013. In a roll-up
scenario, equipment efficiencies in the base case which do not meet the
standard level under consideration are projected to roll-up to meet the
new standard level. Further, all equipment efficiencies in the base
case that are above the standard level under consideration are not
affected by the standard. The same scenario is used for the forecasted
standards-case efficiencies as for the base-case efficiencies, namely,
that forecasted efficiencies remained at the 2013 efficiency level
until the end of the forecast period, as DOE has no data to reasonably
estimate how such efficiency levels might change over the next 30
years. By maintaining the same rate of increase for forecasted
efficiencies in the standards case as in the base case (i.e., no
change), DOE retained a constant efficiency difference between the two
cases over the forecast period. Although the no-change trends may not
reflect what would happen to base-case and standards-case equipment
efficiencies in the future, DOE believes that maintaining a constant
efficiency difference between the base case and standards case provides
a reasonable estimate of the impact that standards have on equipment
efficiency. It is more important to accurately estimate the efficiency
difference between the standards case and base case, than to accurately
estimate the actual equipment efficiencies in the standards and base
cases. DOE retained the approach used in the October 2008 NOPR for
today's SNOPR. But because the effective date of the standard is now
assumed to be 2013, DOE applied the ``roll-up'' scenario in the year
2013 to establish the SWEF for each of the standards cases.
c. Annual Energy Consumption
The annual energy consumption per unit depends directly on
equipment efficiency. For the October 2008 NOPR and today's SNOPR, DOE
used the SWEFs associated with the base case and each standards case,
in combination with the annual energy data, to estimate the shipment-
weighted average annual per-unit energy consumption under the base case
and standards cases. The national energy consumption is the product of
the annual energy consumption per unit and the number of units of each
vintage, which depends on shipments.
As noted above in section III.D, DOE used a relative price
elasticity to estimate standards-case shipments for CCWs. As a result,
shipments forecasted under the standards cases are lower than under the
base case. To avoid the inclusion of energy savings from reduced
shipments, DOE used the standards-case shipments projection and the
standards-case stock to calculate the annual energy consumption in the
base case. For CCWs, any drop in shipments caused by standards is
estimated to result in the purchase of used machines. As a result, the
standards-case forecast explicitly accounted for the energy and water
consumption of new standard-compliant CCWs and also used machines
coming into the market due to the drop in new equipment shipments.
DOE retained the use of the base-case shipments to determine the
annual energy consumption in the base case and the approach used in the
October 2008 NOPR for today's SNOPR.
d. Site-to-Source Conversion
To estimate the national energy savings expected from appliance
standards, DOE uses a multiplicative factor to convert site energy
consumption (energy use at the location where the appliance is
operated) into primary or source energy consumption (the energy
required to deliver the site energy). For the October 2008 NOPR, DOE
used annual site-to-source conversion factors based on the version of
NEMS that corresponds to AEO 2008. For today's SNOPR, DOE updated these
conversion factors based on the AEO 2009 March Release version of NEMS.
These conversion factors account for natural gas losses from pipeline
leakage and natural gas used for pumping energy and transportation
fuel. For electricity, the conversion factors vary over time due to
projected changes in generation sources (i.e., the power plant types
projected to provide electricity to the country). Since the AEO does
not provide energy forecasts that go beyond 2030, DOE used conversion
factors that remain constant at the 2030 values throughout the
remainder of the forecast.
In response to a request from the DOE, Office of Energy Efficiency
and Renewable Energy (EERE), the National Research Council (NRC)
appointed a committee on ``Point-of-Use and Full-Fuel-Cycle Measurement
Approaches to Energy Efficiency Standards'' to conduct a study called
for in Section 1802 of EPACT 2005.\28\ The fundamental task before the
committee was to evaluate the methodology used for setting energy
[[Page 57760]]
efficiency standards and to comment on whether site (point-of-use) or
source (full-fuel-cycle) measures of energy efficiency better support
rulemaking to achieve energy conservation goals. The NRC committee
defined site (point-of-use) energy consumption as reflecting the use of
electricity, natural gas, propane, and/or fuel oil by an appliance at
the site where the appliance is operated, based on specified test
procedures. Full-fuel-cycle energy consumption was defined as
including, in addition to site energy use, the energy consumed in the
extraction, processing, and transport of primary fuels such as coal,
oil, and natural gas; energy losses in thermal combustion in power-
generation plants; and energy losses in transmission and distribution
to homes and commercial buildings.
---------------------------------------------------------------------------
\28\ The National Academies, Board on Energy and Environmental
Systems, Letter to Dr. John Mizroch, Acting Assistant Secretary,
U.S. DOE, Office of EERE from James W. Dally, Chair, Committee on
Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards, May 15, 2009.
---------------------------------------------------------------------------
In evaluating the merits of using point-of-use and full-fuel-cycle
measures, the NRC committee noted that DOE uses what the committee
referred to as ``extended site'' energy consumption to assess the
impact of energy use on the economy, energy security, and environmental
quality. The extended site measure of energy consumption includes the
generation, transmission, and distribution but, unlike the full-fuel-
cycle measure, does not include the energy consumed in extracting,
processing, and transporting primary fuels. A majority of members on
the NRC committee believe that extended site energy consumption
understates the total energy consumed to make an appliance operational
at the site. As a result, the NRC committee's primary general
recommendation is for DOE to consider moving over time to use of a
full-fuel-cycle measure of energy consumption for assessment of
national and environmental impacts, especially levels of greenhouse gas
emissions, and to providing more comprehensive information to the
public through labels and other means, such as an enhanced Web site.
For those appliances that use multiple fuels (e.g., water heaters), the
NRC committee believes that measuring full-fuel-cycle energy
consumption would provide a more complete picture of energy used,
allowing comparison across many different appliances as well as an
improved assessment of impacts. The NRC committee also acknowledged the
complexities inherent in developing a full-fuel-cycle measure of energy
use and stated that a majority of the committee recommended a gradual
transition to that expanded measure and eventual replacement of the
currently used extended site measure. To improve consumers'
understanding, the committee recommended that DOE and the Federal Trade
Commission could evaluate potential indices of energy use and its
impacts and could explore various options for label design and content
using established consumer research methods.
DOE acknowledges that its site-to-source conversion factors do not
capture the energy consumed in extracting, processing, and transporting
primary fuels. DOE also agrees with the NRC committee's conclusion that
developing site-to-source conversion factors that capture the energy
associated with the extraction, processing, and transportation of
primary fuels is inherently complex and difficult. As a result, DOE
will evaluate whether moving to a full-fuel-cycle measure will enhance
its ability to set energy-efficiency standards.
DOE also notes that the NRC committee's recommendation to use a
full-fuel-cycle measure was especially focused on appliances using
multiple fuels. For single-fuel appliances, the committee recommended
that the current practice of basing energy efficiency requirements on
the site measure of energy consumption should be retained. Although
CCWs utilize heated water from both electric and natural gas water
heaters and are credited with improved performance by reducing the
energy used in electric and gas clothes dryers, the energy efficiency
metric with which they are regulated, the MEF, is expressed in terms of
electrical energy usage (cubic feet per kWh). As a result, for labeling
and enforcement purposes, CCWs are a single-fuel appliance. Therefore,
although a full-fuel-cycle measure may provide a better assessment of
national and environmental impacts, it is not necessary for providing
energy use comparisons among CCW models.
e. Energy Used in Water and Wastewater Treatment and Delivery
In the October 2008 NOPR, DOE did not include the energy required
for water treatment and delivery. It stated that EPCA defines ``energy
use'' to be ``the quantity of energy directly consumed by a consumer
product at point of use, determined in accordance with test procedures
under section 6293 of [42 U.S.C.].'' (42 U.S.C. 6291(4)) Based on the
definition of ``energy use,'' DOE does not believe it has the authority
to consider embedded energy (i.e., the energy required for water
treatment and delivery) in the analysis. Furthermore, even if DOE had
the authority, it does not believe adequate analytical tools exist to
conduct such an evaluation.\29\
---------------------------------------------------------------------------
\29\ An analytical tool equivalent to EIA's NEMS would be needed
to properly account for embedded energy impacts on a national scale,
including the embedded energy due to water and wastewater savings.
This new version of NEMS would need to analyze spending and energy
use in dozens, if not hundreds, of economic sectors. This version of
NEMS also would need to account for shifts in spending in these
various sectors to account for the marginal embedded energy
differences among these sectors. 72 FR 64432, 64498-99 (Nov. 15,
2007). DOE does not have access to such a tool or other means to
accurately estimate the source energy savings impacts of decreased
water or wastewater consumption and expenditures.
---------------------------------------------------------------------------
The Joint Comment stated that DOE's purported legal justification
ignores that EPCA not only provides ample authority for DOE to consider
this impact, but actually commands its consideration in weighing the
economic justification for efficiency standards. (Joint Comment, No.
44, pp. 12-13) It said that DOE's position that it lacks the authority
to consider the energy embedded in water is untenable in light of 42
U.S.C. 6295(o)(2)(B)(i)(VII), which provides that in assessing the
economic justification for a standard, DOE may consider any factors it
concludes are relevant. It added that 42 U.S.C. 6295(o)(2)(B)(i)(III)
directs DOE to consider, to the greatest extent practicable, ``the
total projected amount of energy * * * savings likely to result
directly from the imposition of such standard.'' It also stated that
the plain language of EPCA thus commands that DOE assess the ``energy
saving'' resulting from the standard, not simply the ``energy use'' of
the covered products or equipment. Moreover, though the statute
concerns those energy savings likely to ``result directly'' from the
standard, that language merely requires DOE to isolate the standard's
impact from other energy saving initiatives for purposes of the
economic justification analysis. (Joint Comment, No. 44 at p. 12-13)
Pacific Gas & Electric Company (PG&E) stated that because of the
preciousness of water in California and the embodied energy in it, a
higher standard for CCWs is merited. (PG&E, Public Meeting Transcript,
No. 40.5 at pp. 136-137 and p. 181) Furthermore, PG&E commented that
failing to consider energy in water due to the lack of an analytical
tool is not acceptable. (PG&E, Public Meeting Transcript, No. 40.5 at
pp. 178-179 and p. 183) Additional comments submitted by EJ, ASAP, and
ACEEE, suggested that the energy embedded in the delivery and treatment
of water and wastewater should be included in the determination of
national energy savings from the standards proposed in the October 2008
NOPR. (EJ, Public Meeting Transcript,
[[Page 57761]]
No. 40.5 at pp. 140-141 and p. 180; ASAP, Public Meeting Transcript,
No. 40.5 at pp. 180-181; ACEEE, Public Meeting Transcript, No. 40.5 at
p. 182)
DOE continues to maintain that it only has the authority to
consider the quantity of energy directly consumed by the equipment at
point of use, and the energy consumed in production and delivery of
that energy, in determining the total projected amount of energy
savings likely to result directly from the imposition of a standard.
Although DOE does agree with the Joint Comment that energy is consumed
in providing water and wastewater service, this energy is not directly
consumed by the equipment or in production and delivery of the energy.
Inclusion of the embedded energy associated with water and wastewater
service, would, for completeness, also require inclusion of the energy
associated with all other aspects of the installation and operation of
the equipment, e.g. the manufacture, distribution, and installation of
the equipment. Furthermore, since water districts charge all costs
related to transporting, treating, and distributing water to their
consumers, the embedded energy is already accounted for in the LCC
analysis. Thus, while DOE could go through the theoretical exercise of
disaggegrating energy costs from total water costs, the LCC results
would not change since the total cost of operating equipment would not
change.
f. Total Installed Costs and Operating Costs
The increase in total annual installed cost is equal to the
difference in the per-unit total installed cost between the base case
and standards case, multiplied by the shipments forecasted in the
standards case. The annual operating cost savings per unit includes
changes in energy, water, repair, and maintenance costs. DOE forecasted
energy prices for the October 2008 NOPR based on AEO 2008; it updated
the forecasts for today's SNOPR using data from AEO 2009 April Release.
For today's SNOPR, DOE maintained the accounting system it used to
develop repair and maintenance costs for more efficient CCWs in the
October 2008 NOPR.
g. Discount Rates
DOE multiplies monetary values in future years by the discount
factor to determine the present value. DOE estimated national impacts
using both a 3-percent and a 7-percent real discount rate, in
accordance with guidance provided by the Office of Management and
Budget (OMB) to Federal agencies on the development of regulatory
analysis (OMB Circular A-4 (Sept.17, 2003), section E, ``Identifying
and Measuring Benefits and Costs'').\30\ The Joint Comment stated that
DOE should use a 2 to 3 percent real discount rate for national impact
analyses. (Joint Comment, No. 44 at p. 11) It noted that societal
discount rates are the subject of extensive academic research, and the
weight of academic opinion is that the appropriate societal discount
rate is 3 percent or less. It urged DOE to give primary weight to
results based on the lower of the discount rates recommended by OMB.
OMB Circular A-4 references an earlier Circular A-94, which states that
a real discount rate of 7 percent should be used as a base case for
regulatory analysis. The 7 percent rate is an estimate of the average
before-tax rate of return to private capital in the U.S. economy. It
approximates the opportunity cost of capital, and, according to
Circular A-94, it is the appropriate discount rate whenever the main
effect of a regulation is to displace or alter the use of capital in
the private sector. OMB later found that the average rate of return to
capital remains near the 7-percent rate estimated in 1992. Circular A-4
also states that when regulation primarily and directly affects private
consumption, a lower discount rate is appropriate. ``The alternative
most often used is sometimes called the social rate of time preference
* * * the rate at which ``society'' discounts future consumption flows
to their present value.'' It suggests that the real rate of return on
long-term government debt may provide a fair approximation of the
social rate of time preference, and states that over the last 30 years,
this rate has averaged around 3 percent in real terms on a pre-tax
basis. It concludes that ``for regulatory analysis, [agencies] should
provide estimates of net benefits using both 3 percent and 7 percent.''
Consistent with OMB's guidance, DOE did not give primary weight to
results derived using a 3-percent discount rate.
---------------------------------------------------------------------------
\30\ OMB circulars are available online at: http://www.whitehouse.gov/omb/circulars/.
---------------------------------------------------------------------------
DOE also received comments regarding the discounting of emissions.
The Joint Comment stated that DOE should not apply a discount rate to
physical units of measure, such as tons of emissions or quads of
energy. (Joint Comment, No. 44 at p. 11) Consistent with Executive
Order 12866, ``Regulatory Planning and Review,'' 58 FR 51737 (Oct. 4,
1993), DOE follows the guidance of OMB regarding methodologies and
procedures for regulatory impact analysis that affect more than one
agency. Regarding energy and environmental benefits from energy
conservation standards, DOE reported both discounted and undiscounted
values. DOE retained the approach used in the October 2008 NOPR for
today's SNOPR.
h. Effects of Standards on Energy Prices
For the October 2008 NOPR, DOE conducted an analysis of the impact
of reduced energy demand associated with possible standards on CCWs on
prices of natural gas and electricity. The Joint Comment stated that
the electricity price mitigation effects of the standard proposed in
the October 2008 NOPR should be documented and the value of reduced
electricity bills to all consumers quantified as a benefit. (Joint
Comment, No. 44 at p. 11) The DOE analysis found that gas and electric
demand reductions resulting from max-tech standards for CCWs would have
no detectable change on the U.S. average wellhead natural gas price or
the average user price of electricity. DOE concluded that CCW standards
will not provide additional economic benefits resulting from lower
energy prices. Thus, for today's SNOPR DOE has made no change to its
assumptions about the effects of standards on energy prices. See
chapter 11 of the SNOPR TSD for more details.
F. Consumer Subgroup Analysis
In the October 2008 NOPR, DOE analyzed the potential effects of CCW
standards on two subgroups: (1) Consumers not served by municipal water
and sewer providers, and (2) small businesses. For consumers not served
by water and sewer, DOE analyzed the potential impacts of standards by
conducting the analysis with well and septic system prices, rather than
water and wastewater prices based on RFC/AWWA data. For small CCW
businesses, DOE analyzed the potential impacts of standards by
conducting the analysis with different discount rates, because small
businesses do not have the same access to capital as larger businesses.
DOE estimated that for businesses purchasing CCWs, the average discount
rate for small companies is 3.5 percent higher than the industry
average. Due to the higher costs of conducting business, as evidenced
by their higher discount rates, the benefits of CCW standards for small
businesses will be lower than for the general population of CCW owners.
For today's SNOPR DOE has made no changes to its assumptions about
benefits of CCW standards to small businesses.
DOE received comments regarding the economic impacts of higher
initial clothes washer costs. Alliance and MLA stated that the
standards proposed in
[[Page 57762]]
the October 2008 NOPR would result in substantial price increases for
customers of central area laundry rooms, especially for elderly, low-
income, college students, and disabled end-users. MLA stated that a
majority of the 35-50 million CCW customers are low- or low-to-middle
income people, many of whom are elderly or who suffer disabilities.
(Alliance, No. 45 at p. 1 and Attachment 2, p. 12; MLA, No. 49 at pp.
1-4) PG&E commented that lower-income consumers may pay higher energy
costs in laundry rooms using older machines than those who have access
to new machines. (PG&E, Public Meeting Transcript, No. 40.5 at p. 25)
DOE research suggests that the end-users of CCWs are unlikely to be the
owners of the equipment. Although low-income end-users do utilize CCWs,
it is unknown to what affect more efficient CCWs will impact their cost
of using the equipment. If the price of operating a CCW to an end-user
does increase, DOE estimates that such an increase would occur only if
the CCW owner needed to increase the price of operation to recover or
capture its increased costs of providing more efficient equipment while
not benefitting from the lower utility consumption. Although DOE does
recognize that this could occur, it is equally likely that the price of
operation to end-users would not increase as the increased expense to
the CCW owner of providing more efficient CCWs is more than offset by
lifetime utility bill savings from the more-efficient CCW. More details
on the consumer subgroup analysis can be found in chapter 12 of the
SNOPR TSD.
G. Manufacturer Impact Analysis
DOE performed an MIA to estimate the financial impact of amended
energy conservation standards on CCW 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,
and it also includes an assessment of the impacts of standards on
subgroups of manufacturers. DOE outlined its methodology for the MIA in
the October 2008 NOPR. 73 FR 62034, 62075-81 (Oct. 17, 2008). The
complete MIA for the October 2008 NOPR is presented in chapter 13 of
the NOPR TSD.
For today's supplemental notice, DOE updated the MIA results based
on several changes to other analyses that impact the MIA. The total
shipments and efficiency distributions were updated using the new
estimates outlined in the SNOPR NIA. The MIA also uses the new analysis
period in the NIA (2013-2043) and has updated the base year to 2009. As
discussed in section III.C.2, DOE updated the manufacturer production
costs and the capital and equipment conversion costs to 2008$ using the
producer price index for commercial laundry equipment manufacturing
(NAICS 333312). DOE updated the GRIM to allow the inclusion of Federal
production tax credits. DOE discusses the assumptions and methodology
used to calculate the Federal production tax in appendix 13C and in the
section below. For details of the MIA, see chapter 13 of the SNOPR TSD.
DOE also received a number of comments from interested parties in
response to the MIA analysis presented in the October 2008 NOPR.
Alliance stated that the top-loading CCW energy conservation standard
proposed in the October 2008 NOPR would eliminate Alliance from the CCW
market, and eliminate top-loading CCWs from the market as well.
(Alliance, No. 45 at Attachment 2, p. 3) Alliance stated that, if it
were to exit the CCW market, the CCW market would suffer significant
competitive harm. Alliance also stated that more than 20 route
operators and the MLA are opposed to the standard proposed in the
October 2008 NOPR because it would result in a loss of competition.
(Alliance, No. 45 at p. 1 and Attachment 2, pp. 6-12) Alliance stated
that the lower CCW market competition could lead to price increases
from Alliance's competitors, such as the combined Whirlpool and Maytag
entities, which currently control 72 percent of the RCW market.
Alliance predicted that these manufacturers would control about 90
percent of the CCW market if Alliance were to stop making CCWs.
Alliance sees this outcome as a monopoly for Whirlpool. (Alliance,
Public Meeting Transcript, No. 40.5 at p. 24)
Alliance stated that it cannot justify the investment necessary to
develop the technology required to reach the top-loading energy
conservation standard proposed in the October 2008 NOPR. Alliance cited
a lack of resources as the LVM to justify an investment in a ``non-
traditional'' top-loader with unknown market acceptance (Alliance, No.
45 at Attachment 2, p. 8). Alliance stated that the top-loading
standard proposed in the October 2008 NOPR would likely result in
significant, detrimental impacts to the LVM, as Alliance does not have
the resources for research and development, re-configuring production
lines, or licensing the advanced technology required to meet the
standard. (Alliance, Public Meeting Transcript, pp. 23-24) Alliance
believes that a top-loading energy conservation standard set at 1.42
MEF/9.5 WF would lessen these impacts. Alliance suggested that the top-
loading CCW energy conservation standard proposed in the October 2008
NOPR would force Alliance to cease production of CCWs due to the high
investment costs required to design and manufacture the technology to
meet the standard. (Alliance, Public Meeting Transcript, No. 40.5 at
pp. 22-24 and p. 202; Alliance, No. 45 at Attachment 2, pp. 7-8)
Alliance estimates these costs based on its belief that non-traditional
technology will be required to meet the standard with wash performance
that would be acceptable for commercial laundromat use.
MLA commented that the top-loading CCW standard proposed in the
October 2008 NOPR would most likely result in the elimination of all
but one manufacturer of top-loading CCWs (Whirlpool) as well as the
elimination of many route operators due to higher equipment costs
resulting from reduced competition. (MLA, No. 49 at pp. 1-3) Finally,
EEI suggested that DOE create a standard that will save energy and be
market neutral, such that multiple manufacturers could meet it. (EEI,
No. 56 at pp. 2-3)
EPCA directs DOE to consider any lessening of competition that is
likely to result from standards. It directs the Attorney General to
determine the impact, if any, of any lessening of competition likely to
result from a proposed standard and to transmit such determination to
the Secretary, not later than 60 days after the publication of a
proposed rule, together with an analysis of the nature and extent of
such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)). DOE received
a response from the Acting Assistant Attorney General on December 16,
2008. The letter stated that the Department of Justice (DOJ) is not in
a position to judge whether CCW manufacturers will be able to meet the
standards proposed in the October 2008 NOPR. Nevertheless, DOJ found a
``real risk that one or more of these manufacturers cannot meet the
proposed standard'' for top-loading CCWs published in the October 2008
[[Page 57763]]
NOPR. (Attorney General, No. 53 at p. 2)
In the October 2008 NOPR, DOE noted the concerns regarding the
proposed conservation standards for top-loading CCWs in particular. 73
FR 62034, 62103-104 (Oct. 17, 2008). DOE also included a section in
chapter 13 of the TSD that estimated likely financial impacts for the
LVM to meet the efficiency standards proposed in the 2008 NOPR. DOE
continues to offer a sub-group assessment of the differential impacts
on the LVM in chapter 13.
In response to concerns raised by DOJ and other concerns raised by
interested parties, DOE is proposing in today's SNOPR a 1.60 MEF/8.5 WF
standard for top-loading CCWs. DOE believes that this proposed energy
conservation standard will greatly ease the competitive concerns of
Alliance, GE, MLA, and DOJ. DOE research suggests that today's proposed
standard is within reach of all competitors in the market, since the
max-tech unit is based on a standard RCW top-loading platform (i.e. one
with an agitator) and that no proprietary technologies were used. DOE
research suggests that Alliance currently produces a model with 1.5
MEF/8.8 WF that DOE believes can be modified to meet today's proposed
standard. As such, a dramatic decline in competition in the CCW
industry does not seem likely since all manufacturers should be able to
release a washer with similar technology at the present efficiency
level. DOE requests comment on competitive concerns at today's proposed
standard.
Alliance and GE commented that the top-loading standard proposed in
the October 2008 NOPR would have a detrimental impact on the CCW
industry and labor force. (Alliance, Public Meeting Transcript, No.
40.5 at pp. 23-24; Alliance, No. 45 at Attachment 2, p. 3; GE, Public
Meeting Transcript, No. 40.5 at pp. 31-32) Furthermore, Alliance stated
that no manufacturer will be willing to use an unproven non-traditional
design in the commercial market, resulting in the elimination of top-
loading CCW production. With manufacturers like Alliance exiting the
business, over 1,000 jobs would be lost. Alliance also stated that
there could be spillover harm because Alliance could also exit other
laundry market segments. (Alliance, No. 45 at Attachment 2, p. 17)
For the October 2008 NOPR, DOE calculated the direct employment
impacts using the GRIM and information gathered from interviews with
manufacturers. In the October 2008 NOPR, DOE estimated that there would
be positive employment impacts among domestic commercial clothes washer
manufacturers for TSL 1 through TSL 5. Because production labor
expenditures are assumed to be a fixed percentage of the Cost of Goods
Sold (COGS) and the Manufacturing Product Costs (MPCs) increase with
more efficient equipment, labor tracks the increased prices in the
GRIM. The GRIM predicts a steady level of domestic employment after
standards at a level based on the increase in relative price. Because
the LVM had previously stated it would be eliminated from the
commercial market, DOE also specifically investigated the LVM
employment using its commercial washer revenues and additional
employment estimates. DOE's scenarios included one in which the LVM
ceased to produce soft-mount washers or standard dryers and a scenario
with a complete closure of the LVM's domestic manufacturing plant. DOE
estimated that the LVM's ceasing to produce soft-mount dryers and CCWs
would result in 292 lost production jobs and that a complete closure of
the facility would result in the dismissal of approximately 600 factory
employees. 73 FR 60234, 62102-3 (Oct. 17, 2008). DOE believes that the
energy conservation standard proposed in today's notice will allow the
LVM to continue to produce top-loading CCWs, mitigating any potential
closure of its domestic manufacturing facility. Further discussion of
the LVM and the potential impacts on direct employment for the CCW
industry is presented in chapter 13 of the TSD.
DOE received comments on the likely benefits of Federal producer
tax credits for which some CCW manufacturers could be eligible. Such
credits accrue to manufacturers on the basis of appliance or equipment
efficiencies as well as other eligibility requirements. The Joint
Comment stated that DOE did not account for Federal production tax
credits for efficient appliances produced after 2007 in the MIA and
that the LVM is likely to disproportionately benefit from these Federal
production tax incentives. According to the Joint Comment, the Federal
production tax credits should substantially off-set conversion capital
requirements and equipment conversion expenses, mitigating the
financial impacts of higher efficiency levels. (Joint Comment, No. 44
at pp. 7-10)
For the October 2008 NOPR, DOE did not fully account for the
impacts of the Federal production tax credits updated by The Energy
Improvement and Extension Act of 2008 (Pub. L. 110-343; EIEA 2008).
However, DOE research suggests that the Joint Comment overstates the
potential benefits that CCW manufacturers would accumulate through the
tax credits found in EIEA 2008. A key assumption in the Joint Comment
analysis is that all major CCW manufacturers indentified for this
rulemaking would be able to benefit from the tax credit (Joint Comment,
No. 44 at pp. 8-9). According to the title III, section 305 (b)(2) from
EIEA 2008, and title I section 1334 (c)(1)(B) from EPACT 2005, the tax
credit is only awarded for equipment produced in the United States.
Using market research and interviews with manufacturers, DOE believes
that only the LVM produces qualifying CCWs. Other manufacturers offer
washers that meet the MEFs and WF requirements, but these washers are
either made outside the United States or are sourced from other
domestic manufacturers, or are not sold in the commercial market. See
appendix 13C of the SNOPR TSD for further discussion of the Federal
production tax credit.
According to the Joint Comment, the Federal production tax credit
could be used by the industry to offset the conversion costs necessary
to comply with the energy conservation standards proposed in the
October 2008 NOPR. (Joint Comment, No. 44 at p. 7) In its analysis, the
Joint Comment does not account for any conversion costs associated with
a complete production transfer of top-load to front-load washers. The
equipment conversion and capital conversion cost shown in the GRIM and
chapter 13 take all existing front-loading washers into consideration,
including those that qualify for the Federal production tax credit. In
its calculation of the equipment and capital conversion costs, DOE
considered that the LVM already had qualifying washers at both 2.0 MEF/
6.0 WF and 2.2 MEF/4.5 WF levels; hence, no additional product
development appeared necessary to achieve these efficiency levels.
Therefore, DOE did not include any capital or product conversion costs
in the GRIM for the LVM at a 2.0 MEF level. However, DOE research
suggested that the LVM would have some capital conversion costs if the
front-loading efficiency level were raised to 2.2 MEF, because the
production levels of such washers would have to dramatically increase
from present shipment levels.
DOE acknowledges that the Federal production tax credit could have
mitigating effects in lessening the impacts due to energy conservation
standards. However, as described above and in appendix 13C, DOE
estimates the benefits of Federal production tax credits for CCW
manufacturers will not greatly mitigate the impacts due amended energy
conservation
[[Page 57764]]
standards. In the GRIM, DOE accounts for the Federal tax credit as a
direct cash benefit in the base and standards cases that increases the
INPV. This increase in industry value lessens the impacts on
manufacturers due to amended energy conservation standards. However,
because the benefit of the Federal production tax credit is less
significant than calculated in the Joint Comment and mostly occurs
outside the analysis period, the benefits do not substantially impact
the INPV calculated by DOE.
Because only the LVM produces qualifying CCWs, DOE based its
estimates of the potential benefits to the CCW industry by estimating
the potential Federal production tax credits that the LVM could
receive. Using publically available information, recent SEC filings,
and the information published in chapter 13 and appendix 13A of the
October 2008 NOPR, DOE estimated the LVM's front-loading CCW shipment
projections to 2010. These estimates suggest that the LVM could collect
$2.8 million in Federal production tax credits from 2008-2010 from the
provisions updated by EIEA 2008 and $4.1 million from the program from
2007 to 2010. Based on its calculations, the LVM received the biggest
benefit from the tax credit in 2008. According to the ENERGY STAR
database,\31\ the LVM released a model that qualified for the $250
Federal production tax credit on September 26, 2008, shortly before
EIEA 2008 was enacted. Because the higher tax credits were retroactive
for all of 2008, the LVM received a $2.4 million Federal tax credit in
2008 because it had substantially increased production of qualifying
front-loading CCWs. Using the LVM's SEC Form 10-Q for the quarter
ending March 31, 2009,\32\ DOE estimates that in 2009 the LVM will
receive $385,000 in Federal production tax credits. DOE estimates that
the LVM is unlikely to qualify for any additional Federal production
tax credit in 2010 even if the volume of qualifying washers increases.
DOE has a more extensive explanation of its calculations of the Federal
production tax credits in appendix 13C of the SNOPR TSD.
---------------------------------------------------------------------------
\31\ ENERGY STAR Qualified Commercial Clothes Washers. Available
online at: http://www.energystar.gov/index.cfm?fuseaction=clotheswash.display_commercial_cw.
\32\ The Alliance 10-Q Form is available at http://sec.gov/Archives/edgar/data/1063697/000119312509107306/d10q.htm.
---------------------------------------------------------------------------
The Joint Comment bases its analysis on manufacturers completely
shifting production to front-loading washers. However, DOE believes
that it is unlikely all manufacturers would shift production to
exclusively front-loading washers in response to the Federal production
tax credits or the energy conservation standards proposed in today's
rule. As discussed in section III.E, in response to the Federal
production tax credit, DOE estimates that the tax credits would
permanently transform the market so that front-loading washers would
continue to comprise 30 percent of the market over the entire forecast
period. This shift towards front-loading washers has mitigating effects
on the impacts on manufacturers due to energy conservation standards.
However, the shift is not great enough to significantly decrease the
impacts as the Joint Comment suggests. Using the same assumptions used
for calculations found in appendix 13A, DOE estimates that the LVM
increased the production of front-loading washers by approximately
10,000 washers in 2007 and 2008. Though the estimates show that there
were significant increases in front-loading shipments for the LVM in
2007 and 2008, shipments for fiscal year 2009 are projected to decrease
and hence reduce the Federal production tax credits.
The Joint Comment acknowledges but does not account for factors
that would offset the benefits from the Federal production tax credit
that would accrue to CCW manufacturers. In its LVM analysis for the
October 2008 NOPR, DOE examined the capital costs that would be
required to create a front-loading washer facility for 100,000 annual
unit shipments. DOE estimated that a green-field facility with all
production equipment would cost the LVM approximately $54 million. In
that same analysis, DOE estimated that the total tooling required would
cost approximately $18 million. If the LVM had to invest to exclusively
offer front-loading washers, these investments would more than offset
the benefit calculated in the Joint Comment for all CCW manufacturers.
In fact, the tooling alone would more than eliminate the benefit
calculated for the entire CCW industry in the Joint Comment. The Joint
Comment states that the LVM is in a position to disproportionately
benefit from the Federal production tax credit. (Joint Comment, No. 44
at p. 8) While DOE acknowledges that the LVM is the only manufacturer
eligible to receive a Federal production tax credit in the CCW market,
DOE research suggests that the LVM would not disproportionately benefit
because the costs to upgrade its production facilities for higher-
volume front-loading washer manufacturing, in addition to necessary
redesigns of its existing front-loading washers, are estimated to be
multiples of the tax credit. For further information, see appendix 13C
of the SNOPR TSD. The Joint Comment also states that part of the
Federal production tax credit will need to be shared with distributors
and customers to stimulate growth. (Joint Comment, No. 44 at p. 9)
However, the Joint Comment does not reduce the benefit to the CCW
industry that would occur if manufacturers did not keep all of the tax
credit.
DOE received comment regarding its characterization of CCW
manufacturers and the LVM in particular. The Joint Comment argued that
DOE should not characterize Alliance as an LVM, as the LVM reported
revenues equivalent to approximately half of the total CCW revenue and
claims to be the leading manufacturer of stand-alone commercial laundry
equipment in North America. (Joint Comment, No. 44 at p. 7) For the
October 2008 NOPR, DOE presented a separate analysis of the LVM. 73 FR
62034, 62103-104 (Oct. 17, 2008). Although DOE agrees with the Joint
Comment that the LVM has a significant share of the CCW industry based
on revenues in reports filed with the SEC, DOE believes that the LVM
does not have the same overall clothes washer manufacturing scale as
its competitors (for both residential products and commercial
equipment) and should be characterized as an LVM.
In the LVM analysis, DOE notes that most CCWs on the market in the
United States are based largely on RCW platforms that are upgraded
selectively. Some investments (such as the controllers) are CCW-
specific but only make up part of the total unit cost. The majority of
capital expenditures related to tooling, equipment, and other machinery
in a plant can usually be applied to the residential as well as the
commercial market. Thus, overall (both RCW and CCW) manufacturing scale
has a significant impact on the cost-effectiveness of potential
upgrades. A manufacturer with a high-volume residential line can cost
justify much more capital-intensive solutions if they are applicable in
both markets, in contrast to an LVM which lacks the scale to make the
investments worthwhile. Thus, an LVM may be required to purchase
upgrade options from third-party vendors instead of developing in-house
solutions that reduce costs at higher volumes. In the clothes washer
market, the most direct CCW competitor has over 60 times the overall
shipment volumes of the LVM. This scale difference also relates to
purchasing power. A large, diversified appliance manufacturer can use
its production scale to achieve better prices
[[Page 57765]]
for raw materials and commonly purchased components like controllers,
motors, belts, switches, sensors, and wiring harnesses. Even if a large
company purchases fewer items of a certain component, its overall
revenue relationship with a supplier may still enable it to achieve
better pricing than a smaller competitor, even if that competitor buys
certain components in higher quantities. Lastly, high-volume
manufacturers benefit from being able to source their components
through sophisticated supply chains on a worldwide basis. A low-volume
manufacturer is unlikely to be able to compete solely on manufacturing
cost.
DOE seeks comment on the determination of manufacturer impacts,
including the effects of manufacturer tax credits and competitive
concerns. This is identified as Issue 5 in section VII.E of today's
supplemental notice (Issues on Which DOE Seeks Comment.)
H. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a proposed standard. Employment impacts include
direct and indirect impacts. Direct employment impacts are changes in
the number of employees for manufacturers of equipment subject to
standards, their suppliers, and related service firms. The MIA
addresses these impacts.
Indirect employment impacts from standards consist of the net jobs
created or eliminated in the national economy, other than in the
manufacturing sector being regulated, due to: (1) Reduced spending by
end users on energy (electricity, gas (including liquefied petroleum
gas), and oil); (2) reduced spending on new energy supply by the
utility industry; (3) increased spending on the purchase price of new
equipment; and (4) the effects of those three factors throughout the
economy. DOE expects the net monetary savings from standards to be
redirected to other forms of economic activity. DOE also expects these
shifts in spending and economic activity to affect the demand for labor
in the short term, as explained below.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sectoral
employment statistics developed by the BLS. The BLS regularly publishes
its estimates of the number of jobs per million dollars of economic
activity in different sectors of the economy, as well as the jobs
created elsewhere in the economy by this same economic activity. Data
from BLS indicate that expenditures in the utility sector generally
create fewer jobs (both directly and indirectly) than expenditures in
other sectors of the economy. There are many reasons for these
differences, including wage differences and the fact that the utility
sector is more capital intensive and less labor intensive than other
sectors. (See Bureau of Economic Analysis, Regional Multipliers: A User
Handbook for the Regional Input-Output Modeling System (RIMS II),
Washington, DC, U.S. Department of Commerce (1992).) Efficiency
standards have the effect of reducing consumer utility bills. Because
reduced consumer expenditures for energy likely lead to increased
expenditures in other sectors of the economy, the general effect of
efficiency standards is to shift economic activity from a less labor-
intensive sector (i.e., the utility sector) to more labor-intensive
sectors (e.g., the retail and manufacturing sectors). Thus, based on
the BLS data alone, DOE believes net national employment will increase
due to shifts in economic activity resulting from standards for CCWs.
In developing the October 2008 NOPR and today's SNOPR, DOE
estimated indirect national employment impacts using an input/output
model of the U.S. economy called Impact of Sector Energy Technologies
(ImSET).\33\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model designed to estimate the national
employment and income effects of energy-saving technologies. The ImSET
software includes a computer-based I-O model with structural
coefficients to characterize economic flows among 188 sectors most
relevant to industrial, commercial, and residential building energy
use. The Joint Comment stated that DOE must consider its projections
that an increase in employment will result from the adoption of
standards in weighing the economic costs and benefits of strong
efficiency standards. (Joint Comment, No. 44 at p. 13) As described in
section V.B.3 below, DOE takes into consideration the indirect
employment impacts estimated using ImSET when evaluating alternative
standard levels. Direct employment impacts on the manufacturers that
produce CCWs are analyzed in the MIA, as discussed in section III.G.
For today's SNOPR, DOE has made no change to its method for estimating
employment impacts. For further details, see chapter 15 of the SNOPR
TSD.
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\33\ More information regarding ImSET is available online at:
http://www.pnl.gov/main/publications/external/technical_reports/PNNL-15273.pdf.
---------------------------------------------------------------------------
I. Utility Impact Analysis
The utility impact analysis estimates the change in the forecasted
power generation capacity for the Nation, which would be expected to
result from adoption of new standards. This analysis separately
determines the changes to supply and demand as a result of natural gas,
fuel oil, liquefied petroleum gas, or electricity residential
consumption savings due to the standard. For the October 2008 NOPR and
today's SNOPR, DOE calculated this change using the NEMS-BT computer
model. NEMS-BT models certain policy scenarios such as the effect of
reduced energy consumption per TSL by fuel type. The analysis output
provides a forecast for the needed generation capacities at each TSL.
The estimated net benefit of the standard for today's SNOPR is the
difference between the forecasted generation capacities by NEMS-BT and
the AEO 2009 April Release Reference Case. DOE obtained the energy
savings inputs associated with electricity and natural gas consumption
savings from the NIA. These inputs reflect the effects of efficiency
improvement on CCW energy consumption, both fuel (natural gas) and
electricity. Chapter 14 of the SNOPR TSD presents results of the
utility impact analysis.
In its October 2008 NOPR, DOE did not estimate impacts on water and
wastewater utilities because the water and wastewater utility sector is
more complicated than either the electric utility or gas utility
sectors, with a high degree of geographic variability produced by a
large diversity of water resource availability, institutional history,
and regulatory context. 73 FR 62034, 62082 (Oct. 17, 2008). For today's
SNOPR, for the reasons cited above, DOE did not estimate impacts to the
water and wastewater utility sector.
J. Environmental Assessment
Pursuant to the National Environmental Policy Act of 1969 (NEPA)
(42 U.S.C. 4321 et seq.) 42 U.S.C. 6295(o)(2)(B)(i)(VI), DOE prepared a
draft environmental assessment (EA) of the potential impacts of the
proposed standards for CCWs it considered for today's supplemental
notice which it has included as chapter 16 of the TSD for the SNOPR.
DOE found the environmental effects associated with the standards for
CCWs to be insignificant. Therefore, DOE is issuing a Finding of No
Significant Impact (FONSI), pursuant to NEPA, the regulations of the
Council on Environmental Quality (40 CFR parts 1500-1508), and DOE's
regulations for
[[Page 57766]]
compliance with NEPA (10 CFR part 1021). The FONSI is available in the
docket for this rulemaking.
In the EA, DOE estimated the reduction in power sector emissions of
CO2 and NOX using the NEMS-BT computer model. DOE
also calculated a range of estimates for reduction in Hg emissions
using 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.
NEMS-BT is run similarly to the AEO 2009 April Release NEMS, except
that CCW energy use is reduced by the amount of energy saved (by fuel
type) due to the TSLs. 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 a standard is the difference between
emissions estimated by NEMS-BT and the AEO 2009 April Release Reference
Case. The NEMS-BT tracks CO2 emissions using a detailed
module that provides results with broad coverage of all sectors and
inclusion of interactive effects.
Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for all electric generating units. The attainment of the
emissions cap is flexible among generators and is enforced through the
use of 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 between year-by-year forecast. Thus, it is unlikely that
there will be reduced SO2 emissions from standards as long
as there is enforcement of the emissions ceilings. Although there may
not be an 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 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.\34\ Although CAIR
has been remanded to EPA by the U.S. Court of Appeals for the District
of Columbia Circuit (D.C. Circuit), it will remain in effect until it
is replaced by a rule consistent with the Court's July 11, 2008 opinion
in North Carolina v. EPA.\35\ 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.
---------------------------------------------------------------------------
\34\ 70 FR 25162 (May 12, 2005).
\35\ 531 F.3d 896 (D.C. Cir. 2008); see also North Carolina v.
EPA, 550 F.3d 1176 (D.C. Cir. 2008).
---------------------------------------------------------------------------
For the 28 eastern States and D.C. where CAIR is in effect, no
NOX emissions reductions will occur due to the permanent
cap. Under caps, physical emissions reductions in those States would
not result from the energy conservation standards under consideration
by DOE, but 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 determined that in the
present case, such standards would not produce 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. In contrast, new or amended energy
conservation standards would reduce NOX emissions in those
22 States that are not affected by CAIR. As a result, the NEMS-BT does
forecast emission reductions from the CCW standards considered in
today's supplemental notice.
In the October 2008 NOPR, however, DOE provided a different
estimate of NOX reductions, because DOE assumed that the
CAIR had been vacated. 74 FR 16920, 17009-14 (April 13, 2009). This is
because the CAIR was vacated by the D.C. Circuit in its July 11, 2008
decision in North Carolina v. Environmental Protection Agency. 531 F.3d
896 (D.C. Cir. 2008). Thus, for the October 2008 NOPR, DOE established
a range of NOX reductions based on low and high emissions
rates (in kt of NOX emitted per terawatt-hour (TWh) of
electricity generated) derived from the AEO 2008. DOE anticipated that,
in the absence of the CAIR's trading program, the new or amended energy
conservation standards would reduce NOX emissions
nationwide, not just in 22 States.
Similar to SO2 and NOX, future emissions of
Hg would have been subject to emissions caps under Clean Air Mercury
Rule (CAMR) [70 FR 28606 (May 18, 2005)], which would have permanently
capped emissions of Hg for new and existing coal-fired plants in all
States by 2010, but the CAMR was vacated by the D.C. Circuit in its
decision in New Jersey v. Environmental Protection Agency prior to the
publication of the October 2008 NOPR. 517 F.3d 574 (D.C. Cir. 2008).
However, the NEMS-BT model DOE initially used to estimate the changes
in emissions for the proposed rule assumed that Hg emissions would be
subject to CAMR emission caps.
After CAMR was vacated, DOE was unable to use the NEMS-BT model to
estimate any changes in the physical quantity of Hg emissions (anywhere
in the country) that would result from standard levels it considered in
the October 2008 NOPR. Instead, DOE used an Hg emission rate (in metric
tons of Hg per energy produced) based on the AEO 2008. Because
virtually all Hg emitted from electricity generation is from coal-fired
power plants, DOE based the emission rate on the metric tons of Hg
emitted per TWh of coal-generated electricity. To estimate the
reduction in Hg emissions, DOE multiplied the emission rate by the
reduction in coal-generated electricity associated with standards
considered. Because the CAMR is still vacated, DOE continued to use the
approach utilized for the October 2008 NOPR, updated for the AEO 2009
April Release to estimate the Hg emission reductions due to standards
for today's SNOPR.
In addition to electricity, the operation of gas-fired CCWs results
in emissions of CO2 and NOX at the sites where
the appliances are used. NEMS-BT provides no means for estimating such
emissions. Therefore, DOE calculated separate estimates of the effect
of the potential standards on site emissions of CO2 and
NOX based on emissions factors derived from the literature.
Because natural gas combustion does not yield SO2 emissions,
DOE did not report in either the October 2008 NOPR or today's SNOPR the
effect of the proposed standards on site emissions of SO2.
K. Monetizing Carbon Dioxide and Other Emissions Impacts
DOE also calculated the possible monetary benefit of
CO2, NOX, and Hg reductions. Cumulative monetary
benefits were determined using discount rates of 3 and 7 percent. DOE
monetized reductions in CO2 emissions due to standards in
this proposed rule
[[Page 57767]]
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.
Several parties provided comments regarding the economic valuation
of CO2 for the October 2008 NOPR. Whirlpool does not support
an attempt to value those emissions as part of this rulemaking.
(Whirlpool, No. 50 at p. 8) EEI stated that utilities have embedded the
cost of complying with existing environmental legislation in their
price for electricity, and a similar approach may be reasonable for
valuing reduced CO2 emissions. (EEI, Public Meeting
Transcript, No. 40.5 at pp. 194-195) The Joint Comment stated that
DOE's valuation of avoided CO2 emissions should utilize
EIA's analysis of the Climate Security Act. The core scenario of this
analysis yields a $17 price per ton of CO2, with an annual
7.4 percent increase. (Joint Comment, No. 44 at p. 12) As discussed in
section V.B.6, DOE has updated the approach described in the October
2008 NOPR (73 FR 62034, 62107 (Oct. 17, 2008)) for its monetization of
environmental emissions reductions for today's SNOPR.
Although this rulemaking does not affect SO2 emissions
or NOX emissions in the 28 eastern States and D.C. where
CAIR is in effect, there are markets for SO2 and
NOX emissions allowances. The market clearing price of
SO2 and NOX emissions allowances is roughly the
marginal cost of meeting the regulatory cap, not the marginal value of
the cap itself. Further, because national SO2 and
NOX emissions are regulated by a cap and trade system, the
cost of meeting these caps is included in the price of energy. Thus,
the value of energy savings already includes the value of
SO2 and NOX control for those consumers
experiencing energy savings. The economic cost savings associated with
SO2 and NOX emissions caps is approximately equal
to the change in the price of traded allowances resulting from energy
savings multiplied by the number of allowances that would be issued
each year. That calculation is uncertain because the energy savings
from new or amended standards for CCWs would be so small relative to
the entire electricity generation market that the resulting emissions
savings would have almost no impact on price formation in the
allowances market. These savings would most likely be outweighed by
uncertainties in the marginal costs of compliance with SO2
and NOX emissions caps.
As reported above in section III.D.4.a, the Joint Comment stated
that to realistically depict energy prices in the future, DOE must
consider the impact of carbon control legislation, since such
legislation is very likely. The Joint Comment also noted that there are
regional cap and trade programs that are in effect in the Northeast
(Regional Greenhouse Gas Initiative (RGGI)) and the West (Western
Climate Initiative (WCI)) that will impact the price of electricity and
are not reflected in the AEO energy price forecasts. (Joint Comment,
No. 44 at p. 12) EJ stated that caps will likely be in place by the
time new standards become effective, so DOE should increase its
electricity prices to reflect the cost of complying with emission caps.
(EJ, Public Meeting Transcript, No. 40.5 at pp. 105-106)
In response, DOE incorporated current trends in its analysis, but
expressly did not include possible future legislation in this
rulemaking. The current NEMS-BT model used in projecting the
environmental impacts includes the CAIR rule, as described above, which
is projected to reduce SO2 and NOX emissions.
NEMS-BT also takes into account the current set of State-level
renewable portfolio standards, the effect of the RGGI, and utility
investor reactions to the possibility of future CO2 cap and
trade programs, all of which impact electricity prices and reduce the
projected carbon intensity of generation. The most recent Reference
Case, AEO 2009, is available at http://www.eia.doe.gov/oiaf/servicerpt/stimulus/index.html, and documentation of the AEO 2009 assumptions is
available at http://www.eia.doe.gov/oiaf/aeo/assumption/index.html.
In its October 2008 NOPR, DOE conducted a separate analysis of
wastewater discharge impacts as part of the environmental assessment
for commercial clothes washers. 73 FR 62034, 62112-3 (Oct. 17, 2008).
For today's supplemental proposed rule, DOE retained the same analysis
method for estimating wastewater discharge impacts. The results are
presented below in section V.B.6.
DOE seeks comment on the determination of environmental impacts.
This is identified as Issue 6 in section VII.E of today's supplemental
notice (Issues on Which DOE Seeks Comment).
IV. Discussion of Other Comments
A. Proposed TSLs for Commercial Clothes Washers
For the October 2008 NOPR, DOE based the TSLs on efficiency levels
explored in the November 2007 ANOPR, and selected the TSLs on
consideration of economic factors and current market conditions. ASAP
suggested that DOE set TSLs based upon industry benchmarks such as
current and forthcoming ENERGY STAR qualification levels and pending
Federal tax incentive performance levels. (ASAP, Public Meeting
Transcript, No. 40.5 at p. 33 and pp. 148-149) EIEA 2008 provided an
Energy Efficient Appliance Credit to manufacturers for any RCW or CCW
(front-loading or top-loading) produced domestically through 2010 with
an efficiency level of at least 2.0 MEF/6.0 WF, or a larger credit for
one that achieves 2.2 MEF/4.5 WF. The legislation also provides a
separate tax credit for any top-loading RCW that achieves an efficiency
level of at least 1.72 MEF/8.0 WF or a larger credit for one that
exceeds 1.8 MEF/7.5 WF. DOE considered the impacts of these tax credits
on the CCW industry in detail as part of the MIA. DOE accounts for the
Federal tax credit as a direct cash benefit in the base and standards
cases that increases the INPV. See section III.G of today's
supplemental notice and appendix 13C of the SNOPR TSD for further
discussion of this issue.
B. Proposed Standards for Commercial Clothes Washers
For the October 2008 NOPR, DOE made the preliminary determination
that the standards for top-loading and front-loading CCWs listed in
Table II.1 are technologically feasible and economically justified, and
invited comment on these proposed standard levels.
In response, Alliance stated that it would likely exit the clothes
washer market if standards based on a single CCW equipment class were
enacted, which would result in domestic job losses, a CCW market
disruption, and/or loss of competition in the CCW market. (Alliance,
No. 45 at Attachment 2, pp. 6-12) Alliance and GE urged DOE to consider
TSL 1 from the October 2008 NOPR (1.42 MEF/9.5 WF) as the appropriate
standard for top-loading CCWs. (Alliance, Public Meeting Transcript,
No. 40.5 at pp. 23-24; GE No. 48 at p. 5) Alliance believes that TSL 1
would result in energy savings while being technically feasible and
economically justified. Alliance also stated standards at TSL 1 would
avoid or lessen harm to Alliance and, hence,
[[Page 57768]]
reduce significant consumer impacts that would be associated with
Alliance likely ceasing production. (Alliance, No. 45 at Attachment 2,
p. 18)
GE opposed the top-loading standard proposed in the October 2008
NOPR due to small market size (1.3 percent) for coin-operated, top-
loading CCWs and the potential 31-percent decrease in industry cash
flows due to the proposed standards. GE commented that adoption of the
standards would essentially regulate the top-loading equipment class
out of the marketplace. GE also stated that the max-tech level for top-
loading CCWs is not yet justified as being sustainable in the harsher
consumer environment of laundromats, where units are subject to much
tougher conditions such as overloading. GE agreed with Alliance's
proposed standards for top-loaders of TSL 1 from the October 2008 NOPR
(1.42 MEF/9.5 WF), which would also make the CCW WF consistent with the
EISA 2007 standards for RCWs. (GE, Public Meeting Transcript, No. 40.5
at pp. 31-32; GE, No. 48 at pp. 4-5) MLA opposed the proposed October
2008 NOPR standard for top-loading CCWs, because there is currently no
commercially acceptable top-loading CCW that can meet it. MLA believes
the only way to comply with the top-loading CCW standard proposed in
the October 2008 NOPR is to produce machines with poor washing and
rinsing performance, high maintenance costs, and increased
manufacturing costs. (MLA, No. 49 at pp.1 and 4)
Whirlpool commented that it supports both the proposed top-loading
and front-loading standards in the October 2008 NOPR, though it
acknowledged industry support is not consistent. Both standards, it
said, are technologically feasible and enable substantial water and
energy savings, although it agreed with DOE that front-loading CCWs can
reach efficiency levels generally not attainable by top-loaders.
Whirlpool stated that it has yet to field a top-loading CCW that can
meet the proposed October 2008 NOPR standard, but that it believes
technology exists to develop such equipment by early 2012 without
violating intellectual property, provided that engineering and capital
resources are available. (Whirlpool, Public Meeting Transcript, No.
40.5 at p. 28; Whirlpool, No. 50 at pp. 2-3) Whirlpool identified risks
associated with the standards proposed in the October 2008 NOPR,
including higher unit, capital, and development costs; lower
reliability or perceived reliability due to the complexity of the
technology needed to meet the standard; lack of market acceptance for
lid locks on top-loading CCWs using spray rinse technology to meet the
standard; and durability and resistance to breakage under overloading
conditions. (Whirlpool, No. 50 at p. 3)
PG&E and EJ stated that adopting a single standard for all CCW
classes would result in the largest potential savings for consumers.
(EJ, Public Meeting Transcript, No. 40.5 at p. 200; PG&E, Public
Meeting Transcript, No. 40.5 at p. 201) The Joint Comment suggested
that a single standard based on efficiency achieved by front loaders
available in the market today would achieve 32 percent more energy
savings, 192 percent more water savings, and 78 percent more consumer
savings in present value terms than the standards proposed in the
October 2008 NOPR that treat top-loading and front-loading CCWs
separately. (Joint Comment, No. 44 at p. 1)
ASAP commented that the previous analyses leading up to the October
2008 NOPR [the analyses in the November 2007 ANOPR] clearly indicated
that there are tremendous life-cycle cost savings presented by high-
efficiency CCWs, and those are available to all sectors of the market.
ASAP believes that, for what appears to be a lack of a relatively small
amount of capital, recognizing that amount of capital is significant
for one manufacturer, hundreds of millions of dollars of consumer
savings are going to be foregone. ASAP also commented that DOE did not
substantiate its concerns about potential recapture of market share by
less efficient top-loaders when reducing the proposed standard for
front-loading CCWs from the level that would maximize life-cycle cost
savings to the standards proposed in the October 2008 NOPR. (ASAP,
Public Meeting Transcript, No. 40.5 at pp. 34-35)
In considering standards for today's supplemental notice, DOE first
notes that it has retained separate equipment classes for top-loading
and front-loading CCWs, for reasons discussed in section III.A. For
top-loading CCW standards, DOE has revised its analysis due to a re-
evaluation of the max-tech efficiency level, which resulted in the max-
tech level from the October 2008 NOPR being eliminated from
consideration as an efficiency level for today's supplemental notice
(see section III.C.1.a.) DOE did not change the engineering analysis
for front-loading CCWs from those presented in the October 2008 NOPR.
DOE has thus evaluated standards for both equipment classes, including
impacts to the consumer, manufacturer, and Nation, based on the
analyses outlined in section III, and presents the approach and results
for proposed standard levels for today's SNOPR in section V.
V. Analytical Results
A. Trial Standard Levels
DOE analyzed the benefits and burdens of a number of TSLs for the
CCWs that are the subject of today's supplemental proposed rule. As
discussed in section IV.A, for the October 2008 NOPR, DOE based the
TSLs on efficiency levels explored in the November 2007 ANOPR, and
selected the TSLs on consideration of economic factors and current
market conditions. As also discussed previously in section III.C.1.a,
DOE eliminated the maximum technologically efficiency level of 1.76
MEF/8.3 WF for the top-loading equipment class. Accordingly, for
today's supplemental proposed rule, DOE modified the TSLs it considered
for the October 2008 NOPR.
Table V.1 shows the TSLs for CCWs. TSLs consist of a combination of
MEF and WF for each equipment class. In all, DOE has considered five
TSLs. TSL 1 corresponds to the first candidate standard level from each
equipment class and represents the efficiency level for each class with
the least significant design change. TSL 2 represents the second
candidate standard level for front-loading washers while keeping top-
loading washers at its first candidate standard level. Over 96 percent
of the front-loading CCW equipment Stock Keeping Units (SKUs) currently
on the market either meets or exceeds the second candidate standard
level for front-loading washers. In the case of the second candidate
standard level for top-loading washers, a significant percent of the
market, over 35 percent, also meets or exceeds this efficiency level.
Therefore, TSL 2 corresponds to the candidate standard levels for each
equipment class that still represent a significant share of the market.
TSL 3 represents the second candidate standard level for top-loading
washers (the maximum efficiency level for this class), and keeps front-
loading washers at the second candidate standard level. For TSL 3,
front-loading washers were held to the second candidate standard level
in order to minimize the equipment price difference between the two
equipment classes. For TSL 4, top-loading washers are retained at their
maximum efficiency level while front-loading washers are incremented to
their third candidate standard level. Finally, TSL 5 corresponds to the
maximum technologically feasible level for each equipment class. In
progressing
[[Page 57769]]
from TSL 1 to TSL 5, the LCC savings, NES, and NPV all increase. TSL 5
represents the level with the minimum LCC and maximum NES and NPV.
Table V.1--Trial Standard Levels for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Top-Loading:
MEF......................... 1.42 1.42 1.60 1.60 1.60
WF.......................... 9.5 9.5 8.5 8.5 8.5
Front-Loading:
MEF......................... 1.80 2.00 2.00 2.20 2.35
WF.......................... 7.5 5.5 5.5 5.1 4.4
----------------------------------------------------------------------------------------------------------------
B. Economic Justification and Energy Savings
1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
To evaluate the net economic impact of standards on consumers, DOE
conducted LCC and PBP analyses for each TSL. In general, higher
efficiency equipment would affect consumers in two ways: (1) Annual
operating expense would decrease; and (2) purchase price would
increase. Section III.D of this notice discusses the inputs DOE used
for calculating the LCC and PBP.
The key outputs of the LCC analysis are a mean LCC savings relative
to the baseline equipment design, as well as a probability distribution
or likelihood of LCC reduction or increase, for each TSL and equipment
class. The LCC analysis also estimates the fraction of consumers for
which the LCC will decrease (net benefit), increase (net cost), or
exhibit no change (no impact) relative to the base-case equipment
forecast. No impacts occur when the equipment efficiencies of the base-
case forecast already equal or exceed the considered TSL efficiency.
Table V.2 and Table V.3 show the LCC and PBP results for both CCW
equipment applications for the top-loading class while Table V.4 and
Table V.5 show the LCC and PPB results for the front-loading equipment
class. For example, in the case of the multi-family application for
front-loading washers (Table V.4), TSL 2 (2.00 MEF/5.50 WF) shows an
average LCC savings of $19. Note that for TSL 2, 96.3 percent of
consumers in 2013 are assumed to already be using a front-loading CCW
in the base case at TSL 2 and, thus, have zero savings due to the
standard. If one compares the LCC of the baseline at 1.72 MEF/8.00 WF
($4220) to TSL 2 ($3690), then the difference in the LCCs is $530.
However, since the base case includes a significant number of consumers
that are not impacted by the standard, the average savings over all of
the consumers is actually $19, not $530. DOE determined the median and
average values of the PBPs shown below by excluding the percentage of
households not impacted by the standard. For example, in the case of
TSL 2 for front-loading washers in a multi-family application, 96.3
percent of the consumers did not factor into the calculation of the
median and average PBP.
BILLING CODE 6450-01-P
[[Page 57770]]
[GRAPHIC] [TIFF OMITTED] TP09NO09.000
[[Page 57771]]
b. Consumer Subgroup Analysis
Using the LCC spreadsheet model, DOE determined the impact of the
standards on the following CCW consumer subgroups: small business
owners and consumers without municipal water and sewer.
The results for consumers without municipal water and sewer
indicate that the LCC impacts and payback periods for this subgroup are
similar to the LCC impacts and payback periods on the full sample of
CCW consumers. But for small business owners, the LCC impacts and
payback periods are different from those associated with the general
population. For the top-loading equipment class, Table V.6 and Table
V.7 show the LCC impacts and payback periods for small multi-family
property owners and small laundromats, respectively, while Table V.8
and Table V.9 show the same but for the front-loading equipment class.
For all TSLs for both equipment classes, both sets of small business
owners, on average, realize LCC savings similar to the general
population. The difference between the small business population and
the general population occurs in the percentage of each population that
realizes LCC savings from standards. With the exception of TSL 1 for
top-loading washers, an overwhelming majority of the small business and
general populations benefit from standards at each TSL. But for both
equipment classes, a larger percentage of the general population
benefits from standards than small business owners. This occurs because
small businesses do not have the same access to capital as larger
businesses. As a result, smaller businesses have a higher average
discount rate than the industry average. Because of the higher discount
rates, smaller businesses do not value future operating costs savings
from more efficient CCWs as much as the general population. But to
emphasize, in spite of the higher discount rates, a majority of small
businesses still benefit from higher CCW standards at all TSLs, with
the exception of TSL 1 for the top-loading equipment class.
[[Page 57772]]
[GRAPHIC] [TIFF OMITTED] TP09NO09.001
BILLING CODE 6450-01-C
c. Rebuttable-Presumption Payback
As discussed above, EPCA establishes a rebuttable presumption that
an energy conservation standard is economically justified if the
increased purchase cost for equipment that meets the standard is less
than three times the value of the first-year energy savings resulting
from the standard. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE calculated a
rebuttable-presumption payback period for each TSL to determine whether
DOE could presume that a standard at that level is economically
justified. Table V.10 shows the rebuttable-presumption payback periods
for CCWs. Because only a single, average value is necessary for
establishing the rebuttable-presumption payback period, rather than
using distributions for input values, DOE used discrete values. As
required by EPCA, DOE based the
[[Page 57773]]
calculation on the assumptions in the DOE test procedures for CCWs. (42
U.S.C. 6295(o)(2)(B)(iii)) As a result, DOE calculated a single
rebuttable-presumption payback value, and not a distribution of payback
periods, for each TSL.
Table V.10--Rebuttable-Presumption Payback Periods for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
Payback period, years
---------------------------------------------------------------
Top-loading Front-loading
TSL ---------------------------------------------------------------
Multi-family Laundromat Multi-family Laundromat
application application application application
----------------------------------------------------------------------------------------------------------------
1............................................... >100 >100 0 0
2............................................... >100 >100 1.2 1.3
3............................................... 24.0 >100 1.2 1.3
4............................................... 24.0 >100 9.4 17.3
5............................................... 24.0 >100 10.0 17.6
----------------------------------------------------------------------------------------------------------------
With the exception of TSLs 1 to 3 for front-loading CCWs, the TSLs
in Table V.10 do not have rebuttable-presumption payback periods of
less than 3 years. As stated above, in addition to calculating the
rebuttable-presumption payback period DOE routinely conducts a thorough
economic analysis that considers the full range of impacts, including
those to consumers, manufacturers, the Nation, and the 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). Section V.C provides a complete discussion of
how DOE considered the range of impacts to select the standards
proposed in today's SNOPR.
2. Economic Impacts on Manufacturers
For the October 2008 NOPR, DOE used the INPV in the MIA to compare
the financial impacts of different TSLs on CCW manufacturers. 73 FR
62034, 62099-104 (Oct. 17, 2008). The INPV is the sum of all net cash
flows discounted by the industry's cost of capital (discount rate). DOE
used the GRIM to compare the INPV of the base case (no new energy
conservation standards) to that of each TSL for the CCW industry. To
evaluate the range of cash-flow impacts on the CCW industry, DOE
constructed different scenarios using different assumptions for
shipments that correspond to the range of anticipated market responses.
Each scenario results in a unique set of cash flows and corresponding
industry value at each TSL. These steps allowed DOE to compare the
potential impacts on the industry as a function of TSLs in the GRIM.
The difference in INPV between the base case and the standards case is
an estimate of the economic impacts that implementing that standard
level would have on the entire industry. For today's supplemental
notice, DOE continues to use the above methodology and presents the
results in the subsequent sections. See chapter 13 for additional
information on MIA methodology and results.
a. Industry Cash-Flow Analysis Results
The major source of uncertainty voiced by all manufacturers during
MIA interviews is the impact of higher standards on the number of CCWs
sold. Future equipment sales are particularly important considering the
high capital costs (particularly design, tooling, and product
verification costs) on the basis of the low volumes of equipment sold.
In light of the concern over future shipments, DOE modeled two MIA
scenarios, based on two shipment projections from the NIA.
To assess the lower end of the range of the potential impacts on
the CCW industry, DOE considered a scenario in which total CCW
shipments will not be negatively impacted at higher energy conservation
standards; this scenario is called the base-case shipments scenario. To
assess the higher end of the range of potential impacts for the CCW
industry, DOE considered a scenario in which total industry shipments
would decrease due to the combined effects of increases in purchase
price and decreases in operating costs due to new energy conservation
standards; this scenario is called the price elasticity of demand
scenario. In both scenarios, it is assumed that manufacturers will be
able maintain the same gross margins (as a percentage of revenues) that
are currently obtained in the base case.
As discussed in section III.G of today's supplemental notice, DOE
also considered the impact of Federal production tax credits on the CCW
industry. DOE does not include the benefit of these tax credits in its
results shown below. DOE includes these results in appendix 13C of the
TSD. DOE estimated that the total benefit of these Federal production
tax credits to the CCW industry from 2007 through 2010 would be
approximately $4.1 million. Because DOE discounts the industry cash
flows to the 2009 base year, in this scenario the base case INPV
increases by approximately $400,000 if the benefit from the Federal
production tax credits are included. As previously stated, although the
base-case and standards-case INPV increase as a result of Federal
production tax credits, the benefits do not significantly mitigate
possible impacts due to standards. For additional information on the
assumptions and calculations of Federal production tax credits for
CCWs, see appendix 13C of the TSD.
Table V.11 and Table V.12 show the MIA results for each TSL using
both shipment scenarios described above for CCW manufacturers.
[[Page 57774]]
[GRAPHIC] [TIFF OMITTED] TP09NO09.002
[[Page 57775]]
[GRAPHIC] [TIFF OMITTED] TP09NO09.003
At TSL 1, the impact on INPV and cash flow varies depending on the
manufacturers' ability to maintain revenues as shipments decrease due
to the price elasticity. DOE estimated the impacts in INPV at TSL 1 to
range from positive $3.7 million to positive $2.8 million, or a change
in INPV of 5.97 percent to 4.50 percent. At this level, the industry
cash flow does not decrease from the base-case value of $3.8 million in
the year leading up to the standards. Since all manufacturers currently
make or source top-loading and front-loading CCWs with efficiency
levels above this level, DOE assumed that there would be no equipment
or capital conversion costs.
At TSL 2, DOE estimated the impacts in INPV to range from positive
$1.4 million to positive $0.5 million, or a change in INPV of 2.24
percent to 0.76 percent. At this level, the industry cash flow
decreases by approximately 27.7 percent, to $2.8 million, compared to
the base-case value of $3.8 million in the year leading up to the
standards. Since all manufacturers of top-loading washers already sell
equipment that exceeds the efficiency requirements proposed at this
TSL, DOE assumed that there would be no equipment or capital conversion
costs for top-loading washers at this TSL. Over 95 percent of all
currently-sold front-loading CCW SKUs have efficiency levels that
achieve or exceed this level and all manufacturers sell front-loading
washers that achieve or exceed this level. Accordingly, DOE estimated
that the industry would incur relatively small equipment and capital
conversion costs at this TSL.
At TSL 3, DOE estimated the impacts in INPV to range from -$4.8
million to -$7.0 million, or a change in INPV of -7.81 percent to -
11.39 percent. At this level, the industry cash flow decreases by
approximately 158 percent, to -$2.2 million, compared to the base case
value of $3.8 million in the year leading up to the standards. Only one
manufacturer currently markets a single top-loading CCW SKU at this
TSL. DOE estimates that at least one manufacturer will need to redesign
and retool a line of top-loading CCWs to meet the efficiency
requirements of TSL 3. For top-loading CCWs, multiple manufacturers
stated that customers could see a reduction in wash quality or reject
new designs based on a perceived reduction in wash quality or rinse
performance at TSL 3. Over 95 percent of currently-sold front-loading
CCW SKUs have efficiency ratings that meet or exceed this level. Hence,
DOE estimated relatively small equipment and capital conversion costs
for these washers.
At TSL 4, DOE estimated the impacts in INPV at TSL 4 to range from
-$7.8 million to -$10.2 million, or a change in INPV of -12.73 percent
to -16.57 percent. At this level, the industry cash flow decreases by
approximately 206 percent, to -$4.1 million, compared to the base-case
value of $3.8 million in the year leading up to the standards. As with
TSL 3, the top-loading standard remains at max-tech at TSL 4, and the
impacts previously stated for this equipment class remain. Currently,
77 percent of front-loading washers shipped do not meet TSL 4,
resulting in multiple manufacturers having to redesign existing front-
loading equipment to conform cost-effectively to the standard. The $8.4
million in equipment and capital conversion costs estimated for this
TSL to redesign and retool for the front-loading standard, while not
appearing substantial on a nominal basis, are significant for
manufacturers due to low volumes of front-loading washers. Adjusting
for shipment volumes, investing $8.4 million in front-loading washers
is equivalent to investing over $18.5
[[Page 57776]]
million in top-loading washers. These investment costs are also high
compared to the industry value of $29 million for front-loading
washers. Consequently, it could be difficult for manufacturers to
justify the investments necessary to reach TSL 4 for front-loading
washers.
At TSL 5, DOE estimated the impacts in INPV to range from -$20.4
million to -$23.0 million, or a change in INPV of -33.09 percent to -
37.30 percent. At this level, the industry cash flow decreases by
approximately 371 percent, to -$10.3 million, compared to the base-case
value of $3.8 million in the year leading up to the standards. The top-
loading standard remains at max-tech at TSL 5. DOE estimates for TSL 5
that manufacturers would have to invest $24.4 million in front-loading
washer in an industry valued at $29 million. It likely would be
difficult for manufacturers to justify the investments necessary to
reach max-tech for both top-loading and front-loading washers.
b. Impacts on Employment
To quantitatively assess the impacts of energy conservation
standards on CCW manufacturing employment, DOE used the GRIM to
estimate the domestic labor expenditures and number of employees in the
base case and at each TSL from 2009 through 2043 for the CCW industry.
DOE used statistical data from the U.S. Census Bureau's 2006 Annual
Survey of Manufactures \36\ (2006 ASM) and 2006 Current Industry Report
\37\ (2006 CIR), the results of the engineering analysis, and
interviews with manufacturers to estimate the inputs necessary to
calculate industry-wide labor expenditures and domestic employment
levels. Labor expenditures are a function of the labor intensity of the
equipment, the sales volume, and an implicit assumption that wages
remain fixed in real terms over time. DOE notes that the MIA's analysis
detailing impacts on employment focuses specifically on the production
workers manufacturing the covered products or equipment, rather than a
manufacturer's broader operations. Thus, the estimated number of
impacted employees in the MIA is separate and distinct from the total
number of employees used to determine whether a manufacturer is a small
business for purposes of analysis under the Regulatory Flexibility Act.
---------------------------------------------------------------------------
\36\ The 2006 Annual Survey of Manufactures is available online
at: http://www.census.gov/mcd/asmhome.html.
\37\ The 2006 Current Industry Report is available online at:
http://www.census.gov/cir/www/alpha.html.
---------------------------------------------------------------------------
The estimates of production workers in this section only cover
workers up to and including the line-supervisor level that are directly
involved in fabricating and assembling equipment within the original
equipment manufacturer (OEM) facility. In addition, workers that
perform services that are closely associated with production operations
are included. Employees above the working-supervisor level are excluded
from the count of production workers. Thus, the labor associated with
non-production functions (e.g., advertisement, sales) is explicitly not
covered.\38\ In addition, DOE's estimates only account for production
workers that manufacture the specific equipment covered by this
rulemaking. For example, a worker on a clothes dryer production line
would not be included in the estimate of the number of CCW production
workers. Finally, this analysis also does not factor in the dependence
by some manufacturers on production volume to make their operations
viable. For example, should a major line of business cease to operate
or move to a geographic region, a production facility may no longer
have the manufacturing scale to obtain volume discounts on its
purchases nor be able to justify maintaining major capital equipment.
Thus, the impact on a manufacturing facility due to a line closure may
affect more employees than just the production workers, but again this
analysis focuses on the production workers directly impacted.
---------------------------------------------------------------------------
\38\ The 2006 ASM provides the following definition: ``The
`production workers' number includes workers (up through the line-
supervisor level) engaged in fabricating, processing, assembling,
inspecting, receiving, storing, handling, packing, warehousing,
shipping (but not delivering), maintenance, repair, janitorial and
guard services, product development, auxiliary production for
plant's own use (e.g., power plant), recordkeeping, and other
services closely associated with these production operations at the
establishment covered by the report. Employees above the working-
supervisor level are excluded from this item.''
---------------------------------------------------------------------------
Using the GRIM, DOE calculates that there are 188 U.S. production
workers in the CCW industry. Using the CIR data, DOE estimates that
approximately 81 percent of CCWs sold in the United States are
manufactured domestically. Today's supplemental notice estimates the
impacts on U.S. production workers in the CCW industry impacted by
energy conservation standards as shown in Table V.13.
Table V.13--Change in Total Number of Domestic Production Employees in 2012 in the Commercial Clothes Washer
Industry
----------------------------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Total Number of Domestic Production Workers in 2012..... 188 204 204 222 224 228
Change in Total Number of Domestic Production Workers in ......... 16 16 33 36 40
2012...................................................
----------------------------------------------------------------------------------------------------------------
DOE expects that there would be positive employment impacts among
domestic CCW manufacturers for TSL 1 through TSL 5. Because production
employment expenditures are assumed to be a fixed percentage of COGS
and the MPCs increase with more efficient equipment, labor tracks the
increased prices in the GRIM. The GRIM predicts a steady level of
domestic employment after standards at a level based on the increase in
relative price.
DOE reached this conclusion independent of the employment impacts
from the broader U.S. economy, which are documented in chapter 15 of
the TSD accompanying this notice. The employment conclusions do not
account for the possible relocation of domestic jobs to lower-labor-
cost countries because the potential relocation of U.S. jobs is
uncertain and highly speculative. The GRIM shows the employment levels
rising at higher TSLs. If all standards-compliant CCWs are produced in
the United States, the employment levels would be expected to be
reasonably accurate, as more efficient washers are more complex and
require more labor.
The actual impacts on domestic employment after standards depend on
whether any U.S. manufacturer decided to shift more U.S. production to
lower-cost countries. Due to the uncertainty in the business decisions
of where to manufacture washers after standards, DOE presents a range
of potential employment impacts if the potential for relocation is
considered. Today's proposed standards could result in adding 33
production workers (if all manufacturers continue to produce washers in
their existing U.S. facilities) to losing 188 production workers (if
all
[[Page 57777]]
U.S. manufacturers source or shift standards-compliant washers
production abroad).
Based on the CCW revenues reported in appendix 13A and using the
employment assumptions in section III.H, DOE estimates there are
approximately 150 production workers at the LVM manufacturing equipment
directly covered by this rulemaking. DOE estimates that there are an
additional 20 non-production employees attributable to CCWs at the
facility. The domestic facility also manufactures residential top-
loading washers, standard dryers, front-loading residential washers,
washer-extractors, and tumbler dryers. If the LVM decided to no longer
produce any soft-mount washers or standard dryers at the facility
because it could not sell dryers without selling washers, approximately
292 production and 40 non-production jobs would be lost. Including all
production workers involved in covered and non-covered equipment, the
closure of the LVM domestic manufacturing plant would equate to a loss
of approximately 600 factory employees.
A further discussion of the LVM and the potential impacts of
relocation on employment for the CCW industry at other TSLs are
presented in chapter 13 of the TSD.
c. Impacts on Manufacturing Capacity
According to the majority of CCW manufacturers, new energy
conservation standards could potentially impact manufacturers'
production capacity depending on the efficiency level required.
Necessary redesigns of front-loading and top-loading CCWs will not
change the fundamental assembly of the equipment or cause a drastic
increase in the volume requirements of front-loading washers. Thus, DOE
believes manufacturers will be able to maintain manufacturing capacity
levels and continue to meet market demand under new energy conservation
standards as long as manufacturers continue to offer top-loading and
front-loading washers.
However, a very high efficiency standard for top-loading clothes
washers could potentially cause one or more manufacturer(s) to abandon
further manufacture of top-loading clothes washers after the effective
date (due to concerns about wash quality, for example). Instead of
manufacturing top-loading clothes washers, manufacturers could elect to
switch their entire production over to front-loading clothes washers.
Since top-loading and front-loading clothes washers share few, if any
parts, are built on completely separate assembly lines, and are built
at very different production volumes, a manufacturer may not be able to
make a platform switch from top-loading to front-loading washers
without significant impacts on equipment development and capital
expenses, along with capacity constraints. However, DOE believes that
the energy conservation standard proposed in today's supplemental
notice for top-loading CCWs mitigates much of that risk.
Multiple manufacturers stated during interviews that front-loading
CCWs represent a relatively small segment of their total production
volumes. Depending on the manufacturer, front-loading production
capacity may need to be substantially expanded to meet the demand that
top-loading production lines currently meet. This expansion could
possibly affect capacity until new production lines come on-line to
service demand. In addition, manufacturers stated that the higher
prices of front-loading washers could lead to a decrease in shipments.
This could lead to a permanently lower production capacity as machines
are repaired and the equipment lifetime of existing washers is
extended. DOE research suggests that the proposed efficiency standards
can be achieved by all manufacturers using existing platforms and
technologies; hence, there appears little reason for the market to
wholly transition to front-loading CCWs.
d. Impacts on Subgroups of Manufacturers
Using average cost assumptions to develop an industry cash flow
estimate is not adequate for assessing differential impacts among
subgroups of manufacturers. Lower-volume manufacturers, niche players,
or manufacturers exhibiting a cost structure that differs significantly
from the industry average could be affected differently than their
competitors. DOE used the results of the industry characterization to
group manufacturers exhibiting similar characteristics.
As outlined earlier, an LVM that concentrates on building laundry
equipment will be affected disproportionately by any energy efficiency
regulation regarding CCWs. This business is focused on the commercial
laundry market segment and its total production volume is many times
lower than its diversified competitors. Due to this combination of
market concentration and size, it is at risk of material harm to its
business, depending on the TSL chosen.
The LVM indicated that it could not manufacture top-loading CCWs
above an MEF of 1.42 (TSL 1). If DOE sets a standard above TSL 1, the
LVM would be forced to design a new top-loading washer, offer only
front-loading washers, or choose to exit the CCW market altogether. Due
to its small size, the investment required for the LVM to design a more
efficient top-loading washer would put the company at a competitive
disadvantage. If the LVM no longer were to offer a top-loading washer
and would have to expand its front-loading production lines, it would
likely cease CCW production altogether, resulting in significant
impacts to the industry. Currently, the LVM's top-loading washers
account for 70 percent of its CCW shipments. Shifting all top-loading
CCWs to front-loading washers at current production volumes would
require substantial investments that the company may not be able to
justify. In addition, the LVM historically derived over 85 percent of
its total clothes washer revenue from CCWs, so its sales in the RCW
market would be too low to justify continuing any top-loading clothes
washer manufacturing. While the LVM currently manufactures a front-
loading clothes washer, it does so at a cost disadvantage compared to
its competitors. The potential investment and risk required to develop
a cost-competitive clothes washer that deviates significantly from its
traditional top-loader agitator design could be too great for the LVM's
current owners. The LVM could decide to exit the market rather than
take this risk, which could cause employment impacts in the CCW
industry. As stated in section III.G, DOE reevaluated the CCW energy
conservation standards proposed in the October 2008 NOPR in response to
comments received from interested parties. DOE believes that the energy
conservation standards proposed in today' supplemental notice greatly
lessens the potential disadvantages faced by the LVM. Further details
of the separate analysis of the impacts on the LVM are found in chapter
13 of the TSD accompanying this supplemental notice.
3. National Impact Analysis
a. Significance of Energy Savings
To estimate the energy savings through 2043 that would be expected
to result from amended energy conservation standards, DOE compared the
energy consumption of equipment under the base case to energy
consumption of this equipment under the TSLs. Table V.14 shows the
forecasted national energy savings at each TSL for CCWs. Summing the
energy savings for all equipment classes across each TSL considered in
this rulemaking would result in significant energy and water savings,
with the
[[Page 57778]]
amount of savings increasing with higher efficiency standards. Chapter
11 of the TSD accompanying this supplemental notice provides additional
details on the NES values reported below, as well as discounted NES
results (and discounted national water savings results) based on
discount rates of 3 and 7 percent. DOE reports both undiscounted and
discounted values of energy savings. Discounted energy savings
represent a policy perspective wherein energy savings farther in the
future are less significant than energy savings closer to the
present.\39\
---------------------------------------------------------------------------
\39\ Consistent with Executive Order 12866, ``Regulatory
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), DOE follows the
guidance of OMB regarding methodologies and procedures for
regulatory impact analysis that affect more than one agency. In
reporting energy and environmental benefits from energy conservation
standards, DOE will report both discounted and undiscounted (i.e.,
zero discount-rate) values.
Table V.14--Summary of Cumulative National Energy and Water Savings for Commercial Clothes Washers
----------------------------------------------------------------------------------------------------------------
Top-loading Front-loading Total
-----------------------------------------------------------------------------
National National National
TSL National water National water National water
energy savings energy savings energy savings
savings (trillion savings (trillion savings (trillion
(quads) gallons) (quads) gallons) (quads) gallons)
----------------------------------------------------------------------------------------------------------------
1................................. 0.04 0.00 0.00 0.00 0.04 0.00
2................................. 0.04 0.00 0.00 0.01 0.04 0.01
3................................. 0.10 0.14 0.00 0.01 0.10 0.14
4................................. 0.10 0.14 0.01 0.03 0.11 0.16
5................................. 0.10 0.14 0.02 0.07 0.12 0.21
----------------------------------------------------------------------------------------------------------------
b. Net Present Value
The NPV analysis is a measure of the cumulative benefit or cost of
energy conservation standards to the Nation. In accordance with the
OMB's guidelines on regulatory analysis (OMB Circular A-4, section E,
Sept. 17, 2003), DOE calculated NPV using both a 7-percent and a 3-
percent real discount rate. The 7-percent rate is an estimate of the
average before-tax rate of return on private capital in the U.S.
economy, and reflects the returns on 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. DOE also used the 3-percent rate to
capture the potential effects of standards on private consumption
(e.g., through higher prices for equipment and the 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 (i.e., yield on Treasury notes minus 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.15 shows the forecasted NPV at
each TSL for CCWs.
Table V.15--Summary of Cumulative Net Present Value for Commercial Clothes Washers
[Impacts for units sold from 2013 to 2043]
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV (billion 2008$)
-------------------------------------------------------------------------------------
Top-loading Front-loading 7% Discount 3%
TSL -------------------------------------------------------------------- rate Discount
7% Discount 3% Discount 7% Discount 3% Discount Total rate
rate rate rate rate
------------------------------------------------------------------------------------------------------------------------------------------------ ----------
1......................................... 0.01 0.07 0.00 0.01 0.01 0.08
2......................................... 0.01 0.07 0.01 0.03 0.02 0.10
3......................................... 0.34 0.86 0.01 0.03 0.36 0.89
4......................................... 0.34 0.86 0.07 0.17 0.41 1.03
5......................................... 0.34 0.86 0.17 0.39 0.51 1.25
--------------------------------------------------------------------------------------------------------------------------------------------------------
c. Impacts on Employment
In addition to considering the direct employment impacts for the
manufacturers of equipment covered by this rulemaking (discussed
above), DOE develops estimates of the indirect employment impacts of
proposed standards in the economy in general. As noted previously, DOE
expects energy conservation standards for equipment subject of this
rulemaking to reduce energy bills for consumers, with the resulting net
savings being redirected to other forms of economic activity. DOE also
realizes that these shifts in spending and economic activity could
affect the demand for labor. To estimate these effects, DOE used an
input/output model of the U.S. economy using BLS data (described in
section III.H). (See the TSD accompanying this supplemental notice,
chapter 15.)
This input/output model suggests today's proposed standards are
likely to slightly increase the net demand for labor in the economy.
Neither the BLS data nor the input/output model DOE uses includes the
quality or wage level of the jobs. As Table V.16 shows, DOE estimates
that net indirect employment impacts from today's proposed standards
are likely to be small. 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.
[[Page 57779]]
Table V.16--Net National Change in Indirect Employment at Commercial
Clothes Washer Manufacturers
------------------------------------------------------------------------
Net national
TSL change in jobs in
2043 (thousands)
------------------------------------------------------------------------
1.................................................... 0.07
2.................................................... 0.08
3.................................................... 0.46
4.................................................... 0.52
5.................................................... 0.62
------------------------------------------------------------------------
4. Impact on Utility or Performance of Equipment
For the reasons stated above in section II.G.1.d, DOE believes that
for purposes of 42 U.S.C. 6295(o)(2)(B)(i)(IV), none of the efficiency
levels considered in this notice reduces the utility or performance of
equipment under consideration in this rulemaking.
5. Impact of Any Lessening of Competition
In weighing the promulgation of any proposed standards, DOE is
required to consider any lessening of competition that is likely to
result from the adoption of those standards. The determination of the
likely competitive impacts stemming from a proposed standard is made by
the Attorney General, who transmits this determination, along with an
analysis of the nature and extent of the impact, to the Secretary of
Energy. (See 42 U.S.C. 6295(o)(2)(B)(i)(VI) and (B)(ii).)
DOE carefully considered the determination received from DOJ in
response to the October 2008 NOPR, and accordingly chose efficiency
levels for this SNOPR that appear achievable by all CCW manufacturers
using existing equipment platforms and technologies. As such, there
should be minimal impact on the CCW market and hence its manufacturers.
To assist the Attorney General in making a determination for this
SNOPR, DOE has provided DOJ with copies of this notice and the TSD for
review. DOE will consider DOJ's comments on today's SNOPR in preparing
the final rule.
DOE notes that if, based on the public comments received and its
further consideration of this issue, it were to establish a single
equipment class in setting standards for CCWs, DOE intends to give
considerable weight to the potential adverse effects of a single
equipment class efficiency standard on competition in the CCW market.
That is, DOE does not intend to set a standard that produced
significant adverse impacts on competition in this market.
6. Need of the Nation To Conserve Energy
Improving the energy efficiency of CCWs, where economically
justified, would likely improve the security of the Nation's energy
system by reducing overall demand for energy. Reduced electricity
demand may also improve the reliability of the electricity system. As a
measure of this reduced demand, DOE expects the energy savings from the
adopted standards to eliminate the need for approximately 0.010
gigawatts (GW) of generating capacity by 2043.
Enhanced energy savings from higher standards for CCWs also
produces environmental benefits in the form of reduced emissions of air
pollutants and greenhouse gases associated with energy production, and
with building use of fossil fuels at sites where CCWs are used. Table
V.17 provides DOE's estimate of cumulative CO2,
NOX, and Hg emissions reductions that would result from the
TSLs considered in this rulemaking. The expected energy savings from
new standards for CCWs may also reduce the cost of maintaining
nationwide emissions standards and constraints. In the environmental
assessment (chapter 16 of the TSD accompanying this supplemental
notice), DOE reports estimated annual changes in CO2,
NOX, and Hg emissions attributable to each TSL.
Table V.17--Summary of Emissions Reductions for Commercial Clothes Washers
[Cumulative for Equipment Sold from 2013 to 2043]
----------------------------------------------------------------------------------------------------------------
TSL
Emissions ----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
CO2 (Mt)....................................... 2.36 2.39 5.07 5.66 6.11
NOX (kt)....................................... 1.43 1.45 3.04 3.39 3.66
Hg (t)......................................... 0-0.01 0-0.01 0-0.03 0-0.03 0-0.03
----------------------------------------------------------------------------------------------------------------
Mt = million metric tons.
kt = thousand metric tons.
t = metric tons.
As discussed in section III.J of this supplemental notice, DOE does
not report SO2 emissions reductions from power plants
because reductions from an energy conservation standard would not
affect the overall level of SO2 emissions in the United
States due to the emissions caps for SO2.
NOX emissions from 28 eastern States and D.C. are
limited under CAIR, Although CAIR 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 December 23, 2008, opinion in North
Carolina v. EPA. North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008).
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.
For the 28 eastern States and D.C. where CAIR is in effect, no
NOX emissions reductions will occur due to the permanent
cap. Under caps, physical emissions reductions in those States would
not result from the energy conservation standards under consideration
by DOE, but standards might have produced an environmentally related
economic impact in the form of lower prices for emissions allowance
credits, if large enough. However, DOE determined that in the present
case, such standards would not produce 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. In contrast, new or amended energy conservation standards
would reduce NOX emissions in those 22 States that are not
affected by CAIR. As a result, the NEMS-BT does forecast NOX
emissions reductions from energy sources in those 22 States from the
CCW standards considered in today's SNOPR.
[[Page 57780]]
In the October 2008 NOPR, however, DOE provided a different
estimate of NOX reductions because DOE assumed that the CAIR
rule had been vacated. This is because the CAIR rule was vacated by the
D.C. Circuit in its July 11, 2008 decision in North Carolina v.
Environmental Protection Agency. 531 F.3d 896 (D.C. Cir. 2008). As
noted above, the D.C. Circuit, in a December 23, 2008, opinion, decided
to allow the CAIR rule to remain in effect until it is replaced by a
rule consistent with the court's earlier opinion, but this decision
came well after the publish date of the October 2008 NOPR..Thus, for
the October 2008 NOPR, DOE established a range of NOX
reductions based on low and high emission rates (in kt of
NOX emitted per TWh of electricity generated) derived from
the AEO 2008. DOE anticipated that, in the absence of the CAIR's
trading program, the new or amended conservation standards would reduce
NOX emissions nationwide, not just in 22 States.
As noted in section III.J, DOE was able to estimate the changes in
Hg emissions associated with an energy conservation standard as
follows. DOE notes that the NEMS-BT model used as an integral part of
today's rulemaking does not estimate Hg emissions reductions due to new
energy conservation standards, as it assumed that Hg emissions would be
subject to EPA's CAMR. 70 FR 28606 (May 18, 2005). CAMR would have
permanently capped emissions of mercury for new and existing coal-fired
plants in all States by 2010. As with SO2 and
NOX, DOE assumed that under such a system, energy
conservation standards would have resulted in no physical effect on
these emissions, but might have resulted in an environmentally related
economic benefit in the form of a lower price for emissions allowance
credits if those credits were large enough. DOE estimated that the
change in the Hg emissions from energy conservation standards would not
be large enough to influence allowance prices under CAMR.
On February 8, 2008, the D.C. Circuit issued its decision in New
Jersey v. Environmental Protection Agency to vacate CAMR. 517 F.3d 574
(D.C. Cir. 2008). In light of this development and because the NEMS-BT
model could not be used to directly calculate Hg emissions reductions,
DOE used the Hg emission rates discussed below to calculate emissions
reductions in the October 2008 NOPR. This same methodology is used for
today's SNOPR as well due to the continued fluid environment ``* * *
with many States planning to enact new laws or make existing laws more
stringent.'' EIA AEO 2009 (March 2009), p. 18. The NEMS-BT has only
rough estimates of Hg emissions, and it was felt that the range of
emissions used in the NOPR remain appropriate given these
circumstances.
Therefore, rather than using the NEMS-BT model, DOE established a
range of Hg 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 Hg emission
rate from AEO 2008 for the October 2008 NOPR. (Under this scenario,
gas-fired power plant generation would remain unaffected and that no
future reductions in the rate of Hg emissions from such sources would
occur.) Because power plant emission rates are a function of local
regulation, scrubbers, and the Hg 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 the April update to AEO 2009. As
noted previously, because virtually all Hg emitted from electricity
generation is from coal-fired power plants, DOE based the emission rate
on the tons of Hg 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 Hg 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 0.03 to 0.27 percent of the national base-case emissions forecast
by NEMS-BT, depending on the TSL.
In the October 2008 NOPR, DOE proposed accounting for the monetary
value of CO2 emission reductions associated with standards.
DOE proposed to use the range $0 to $20 per ton for reductions in the
year 2007 in 2007$. 73 FR 62034, 62110 (Oct. 17, 2008). These estimates
were intended to represent the lower and upper bounds of the costs and
benefits likely to be experienced in the United States. The lower bound
was based on an assumption of no benefit and the upper bound was based
on an estimate of the mean value of worldwide impacts due to climate
change that was reported by the Intergovernmental Panel on Climate
Change (IPCC) in its ``Fourth Assessment Report.''
For today's SNOPR, DOE is relying on a new set of values recently
developed by an interagency process that conducted a thorough review of
existing estimates of the social cost of carbon (SCC). The SCC is
intended to be a monetary measure of the incremental damage resulting
from greenhouse gas (GHG) emissions, including, but not limited to, net
agricultural productivity loss, human health effects, property damages
from sea level rise, and changes in ecosystem services. Any effort to
quantify and to monetize the harms associated with climate change will
raise serious questions of science, economics, and ethics. But with
full regard for the limits of both quantification and monetization, the
SCC can be used to provide estimates of the social benefits of
reductions in GHG emissions.
For at least three reasons, any single estimate of the SCC will be
contestable. First, scientific and economic knowledge about the impacts
of climate change continues to grow. With new and better information
about relevant questions, including the cost, burdens, and possibility
of adaptation, current estimates will inevitably change over time.
Second, some of the likely and potential damages from climate change--
for example, the value society places on adverse impacts on endangered
species--are not included in all of the existing economic analyses.
These omissions may mean that the best current estimates are too low.
Third, controversial ethical judgments, including those involving the
treatment of future generations, play a role in judgments about the SCC
(see in particular the discussion of the discount rate, below).
To date, regulations have used a range of values for the SCC. For
example, a regulation proposed by the U.S. Department of Transportation
(DOT) in 2008 assumed a value of $7 per ton CO2 (2006$) for
2011 emission reductions (with a range of $0-14 for sensitivity
analysis). Regulation finalized by DOE used a range of $0-$20 (2007$).
Both of these ranges were designed to reflect the value of damages to
the United States resulting from carbon emissions, or the ``domestic''
SCC. In the final Model Year 2011 Corporate Average Fuel Economy rule,
DOT used both a domestic SCC value of $2/t CO2 and a
[[Page 57781]]
global SCC value of $33/t CO2 (with sensitivity analysis at
$80/tCO2), increasing at 2.4 percent per year thereafter.
In recent months, a variety of agencies have worked to develop an
objective methodology for selecting a range of interim SCC estimates to
use in regulatory analyses until improved SCC estimates are developed.
The following summary reflects the initial results of these efforts and
proposes ranges and values for interim social costs of carbon used in
this rule. It should be emphasized that the analysis described below is
preliminary. These complex issues are of course undergoing a process of
continuing review. Relevant agencies will be evaluating and seeking
comment on all of the scientific, economic, and ethical issues before
establishing final estimates for use in future rulemakings.
The interim judgments resulting from the recent interagency review
process can be summarized as follows: (a) DOE and other Federal
agencies should consider the global benefits associated with the
reductions of CO2 emissions resulting from efficiency
standards and other similar rulemakings, rather continuing the previous
focus on domestic benefits; (b) these global benefits should be based
on SCC estimates (in 2007$) of $55, $33, $19, $10, and $5 per ton of
CO2 equivalent emitted (or avoided) in 2007; (c) the SCC
value of emissions that occur (or are avoided) in future years should
be escalated using an annual growth rate of 3 percent from the current
values); and (d) domestic benefits are estimated to be approximately 6
percent of the global values. These interim judgments are based on the
following considerations.
1. Global and domestic estimates of SCC. Because of the distinctive
nature of the climate change problem, estimates of both global and
domestic SCC values should be considered, but the global measure should
be ``primary.'' This approach represents a departure from past
practices, which relied, for the most part, on measures of only
domestic impacts. As a matter of law, both global and domestic values
are permissible; the relevant statutory provisions are ambiguous and
allow the agency to choose either measure. (It is true that Federal
statutes are presumed not to have extraterritorial effect, in part to
ensure that the laws of the United States respect the interests of
foreign sovereigns. But use of a global measure for the SCC does not
give extraterritorial effect to Federal law and hence does not intrude
on such interests.)
It is true that under OMB guidance, analysis from the domestic
perspective is required, while analysis from the international
perspective is optional. The domestic decisions of one nation are not
typically based on a judgment about the effects of those decisions on
other nations. But the climate change problem is highly unusual in the
sense that it involves (a) a global public good in which (b) the
emissions of one nation may inflict significant damages on other
nations and (c) the United States is actively engaged in promoting an
international agreement to reduce worldwide emissions.
In these circumstances, the global measure is preferred. Use of a
global measure reflects the reality of the problem and is expected to
contribute to the continuing efforts of the United States to ensure
that emission reductions occur in many nations.
Domestic SCC values are also presented. The development of a
domestic SCC is greatly complicated by the relatively few region- or
country-specific estimates of the SCC in the literature. One potential
estimate comes from the DICE (Dynamic Integrated Climate Economy,
William Nordhaus) model. In an unpublished paper, Nordhaus (2007)
produced disaggregated SCC estimates using a regional version of the
DICE model. He reported a U.S. estimate of $1/tCO2 (2007
value, 2007$), which is roughly 11 percent of the global value.
An alternative source of estimates comes from a recent EPA modeling
effort using the FUND (Climate Framework for Uncertainty, Negotiation
and Distribution, Center for Integrated Study of the Human Dimensions
of Global Change) model. The resulting estimates suggest that the ratio
of domestic to global benefits varies with key parameter assumptions.
With a 3-percent discount rate, for example, the U.S. benefit is about
6 percent of the global benefit for the ``central'' (mean) FUND
results, while, for the corresponding ``high'' estimates associated
with a higher climate sensitivity and lower global economic growth, the
U.S. benefit is less than 4 percent of the global benefit. With a 2-
percent discount rate, the U.S. share is about 2 to 5 percent of the
global estimate.
Based on this available evidence, a domestic SCC value equal to 6
percent of the global damages is used in this rulemaking. This figure
is in the middle of the range of available estimates from the
literature. It is recognized that the 6 percent figure is approximate
and highly speculative and alternative approaches will be explored
before establishing final values for future rulemakings.
2. Filtering existing analyses. There are numerous SCC estimates in
the existing literature, and it is legitimate to make use of those
estimates to produce a figure for current use. A reasonable starting
point is provided by the meta-analysis in Richard Tol, ``The Social
Cost of Carbon: Trends, Outliers, and Catastrophes, Economics: The
Open-Access, Open-Assessment E-Journal,'' Vol. 2, 2008-25. http://www.economics-ejournal.org/economics/journalarticles/2008-25 (2008).
With that starting point, it is proposed to ``filter'' existing SCC
estimates by using those that (1) are derived from peer-reviewed
studies; (2) do not weight the monetized damages to one country more
than those in other countries; (3) use a ``business as usual'' climate
scenario; and (4) are based on the most recent published version of
each of the three major integrated assessment models (IAMs): FUND, DICE
and PAGE (Policy Analysis of the Greenhouse Effect).
Proposal (1) is based on the view that those studies that have been
subject to peer review are more likely to be reliable than those that
have not been. Proposal (2) is based on a principle of neutrality and
simplicity; it does not treat the citizens of one nation differently on
the basis of speculative or controversial considerations. Proposal (3)
stems from the judgment that as a general rule, the proper way to
assess a policy decision is by comparing the implementation of the
policy against a counterfactual state where the policy is not
implemented. A departure from this approach would be to consider a more
dynamic setting in which other countries might implement policies to
reduce GHG emissions at an unknown future date, and the United States
could choose to implement such a policy now or in the future.
Proposal (4) is based on three complementary judgments. First, the
FUND, PAGE, and DICE models now stand as the most comprehensive and
reliable efforts to measure the damages from climate change. Second,
the latest versions of the three IAMs are likely to reflect the most
recent evidence and learning, and hence they are presumed to be
superior to those that preceded them. It is acknowledged that earlier
versions may contain information that is missing from the latest
versions. Third, any effort to choose among them, or to reject one in
favor of the others, would be difficult to defend at this time. In the
absence of a clear reason to choose among them, it is reasonable to
base the SCC on all of them.
The agency is keenly aware that the current IAMs fail to include
all relevant information about the likely impacts
[[Page 57782]]
from greenhouse gas emissions. For example, ecosystem impacts,
including species loss, do not appear to be included in at least two of
the models. Some human health impacts, including increases in food-
borne illnesses and in the quantity and toxicity of airborne allergens,
also appear to be excluded. In addition, there has been considerable
recent discussion of the risk of catastrophe and of how best to account
for worst-case scenarios. It is not clear whether the three IAMs take
adequate account of these potential effects.
3. Use a model-weighted average of the estimates at each discount
rate. At this time, there appears to be no scientifically valid reason
to prefer any of the three major IAMs (FUND, PAGE, and DICE).
Consequently, the estimates are based on an equal weighting of
estimates from each of the models. Among estimates that remain after
applying the filter, the average of all estimates within a model is
derived. The estimated SCC is then calculated as the average of the
three model-specific averages. This approach ensures that the interim
estimate is not biased towards specific models or more prolific
authors.
4. Apply a 3-percent annual growth rate to the chosen SCC values.
SCC is assumed to increase over time, because future emissions are
expected to produce larger incremental damages as physical and economic
systems become more stressed as the magnitude of climate change
increases. Indeed, an implied growth rate in the SCC is produced by
most studies that estimate economic damages caused by increased GHG
emissions in future years. But neither the rate itself nor the
information necessary to derive its implied value is commonly reported.
In light of the limited amount of debate thus far about the appropriate
growth rate of the SCC, applying a rate of 3 percent per year seems
appropriate at this stage. This value is consistent with the range
recommended by IPCC (2007) and close to the latest published estimate
(Hope, 2008).
For climate change, one of the most complex issues involves the
appropriate discount rate. OMB's current guidance offers a detailed
discussion of the relevant issues and calls for discount rates of 3
percent and 7 percent. It also permits a sensitivity analysis with low
rates for intergenerational problems. (``If your rule will have
important intergenerational benefits or costs you might consider a
further sensitivity analysis using a lower but positive discount rate
in addition to calculating net benefits using discount rates of 3 and 7
percent.'') The SCC is being developed within the general context of
the current guidance.
The choice of a discount rate, especially over long periods of
time, raises highly contested and exceedingly difficult questions of
science, economics, philosophy, and law. See, e.g., William Nordhaus,
``The Challenge of Global Warming (2008); Nicholas Stern, The Economics
of Climate Change'' (2007); ``Discounting and Intergenerational
Equity'' (Paul Portney and John Weyant, eds., 1999). Under imaginable
assumptions, decisions based on cost-benefit analysis with high
discount rates might harm future generations--at least if investments
are not made for the benefit of those generations. (See Robert Lind,
``Analysis for Intergenerational Discounting,'' id. at 173, 176-177.)
At the same time, use of low discount rates for particular projects
might itself harm future generations, by ensuring that resources are
not used in a way that would greatly benefit them. In the context of
climate change, questions of intergenerational equity are especially
important.
Reasonable arguments support the use of a 3-percent discount rate.
First, that rate is among the two figures suggested by OMB guidance,
and hence it fits with existing National policy. Second, it is standard
to base the discount rate on the compensation that people receive for
delaying consumption, and the 3-percent rate is close to the risk-free
rate of return, proxied by the return on long term inflation-adjusted
U.S. Treasury Bonds. (In the context of climate change, it is possible
to object to this standard method for deriving the discount rate.)
Although these rates are currently closer to 2.5 percent, the use of 3
percent provides an adjustment for the liquidity premium that is
reflected in these bonds' returns.
At the same time, other arguments support use of a 5-percent
discount rate. First, that rate can also be justified by reference to
the level of compensation for delaying consumption, because it fits
with market behavior with respect to individuals' willingness to trade
off consumption across periods as measured by the estimated post-tax
average real returns to private investment (e.g., the S&P 500). In the
climate setting, the 5-percent discount rate may be preferable to the
riskless rate because it is based on risky investments and the return
to projects to mitigate climate change is also risky. In contrast, the
3-percent riskless rate may be a more appropriate discount rate for
projects where the return is known with a high degree of confidence
(e.g., highway guardrails).
Second, 5 percent, and not 3 percent, is roughly consistent with
estimates implied by reasonable inputs to the theoretically derived
Ramsey equation, which specifies the optimal time path for consumption.
That equation specifies the optimal discount rate as the sum of two
components. The first reflects the fact that consumption in the future
is likely to be higher than consumption today (even accounting for
climate impacts), so diminishing marginal utility implies that the same
monetary damage will cause a smaller reduction of utility in the
future. Standard estimates of this term from the economics literature
are in the range of 3 to 5 percent. The second component reflects the
possibility that a lower weight should be placed on utility in the
future, to account for social impatience or extinction risk, which is
specified by a pure rate of time preference (PRTP). A conventional
estimate of the PRTP is 2 percent. (Some observers believe that a
principle of intergenerational equity suggests that the PRTP should be
close to zero.) It follows that discount rate of 5 percent is within
the range of values which are able to be derived from the Ramsey
equation, albeit at the low end of the range of estimates usually
associated with Ramsey discounting.
It is recognized that the arguments above--for use of market
behavior and the Ramsey equation--face objections in the context of
climate change, and of course there are alternative approaches. In
light of climate change, it is possible that consumption in the future
will not be higher than consumption today, and if so, the Ramsey
equation will suggest a lower figure. Some people have suggested that a
very low discount rate, below 3 percent, is justified in light of the
ethical considerations calling for a principle of intergenerational
neutrality. See Nicholas Stern, ``The Economics of Climate Change''
(2007); for contrary views, see William Nordhaus, The A Question of
Balance (2008); Martin Weitzman, ``Review of the Stern Review on the
Economics of Climate Change.'' Journal of Economic Literature, 45(3):
703-724 (2007). Additionally, some analyses attempt to deal with
uncertainty with respect to interest rates over time; a possible
approach enabling the consideration of such uncertainties is discussed
below. Richard Newell and William Pizer, ``Discounting the Distant
Future: How Much do Uncertain Rates Increase Valuations?'' J. Environ.
Econ. Manage. 46 (2003) 52-71.
The application of the methodology outlined above yields estimates
of the SCC that are reported in Table V18. These estimates are reported
separately
[[Page 57783]]
using 3-percent and 5-percent discount rates. The cells are empty in
rows 10 and 11 because these studies did not report estimates of the
SCC at a 3-percent discount rate. The model-weighted means are reported
in the final or summary row; they are $33 per t CO2 at a 3-
percent discount rate and $5 per t CO2 with a 5-percent
discount rate.
Table V.18--Global Social Cost of Carbon (SCC) Estimates ($/t CO2 in 2007 (2006$)), Based on 3% and 5% Discount
Rates*
----------------------------------------------------------------------------------------------------------------
Model Study Climate scenario 3% 5%
----------------------------------------------------------------------------------------------------------------
1................................ FUND............... Anthoff et al. 2009 FUND default....... 6 -1
2................................ FUND............... Anthoff et al. 2009 SRES A1b........... 1 -1
3................................ FUND............... Anthoff et al. 2009 SRES A2............ 9 -1
4................................ FUND............... Link and Tol 2004.. No THC............. 12 3
5................................ FUND............... Link and Tol 2004.. THC continues...... 12 2
6................................ FUND............... Guo et al. 2006.... Constant PRTP...... 5 -1
7................................ FUND............... Guo et al. 2006.... Gollier discount 1. 14 0
8................................ FUND............... Guo et al. 2006.... Gollier discount 2. 7 -1
FUND Mean.......... 8.25 0
9................................ PAGE............... Wahba & Hope 2006.. A2-scen............ 57 7
10............................... PAGE............... Hope 2006.......... ................... ...... 7
11............................... DICE............... Nordhaus 2008...... ................... ...... 8
----------------------------------------------------------------------------------------------------------------
Summary Model-weighted Mean 33 5
----------------------------------------------------------------------------------------------------------------
* The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008),
Hope (2008), and Anthoff et al. (2009), that are based on the most recent published version of FUND, PAGE, or
DICE and use business-as-usual climate scenarios. All values are based on the best available information from
the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all
estimates included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3-percent
annual growth rate in the SCC, and adjusted for inflation using GDP deflator.
DOE has conducted analyses at $33 and $5 per ton as these represent
the estimates associated with the 3 percent and 5 percent discount
rates, respectively. The 3 percent and 5 percent estimates have
independent appeal and at this time a clear preference for one over the
other is not warranted. Thus, DOE has also included--and centered its
current attention on--the average of the estimates associated with
these discount rates, which is $19. (Based on the $19 global value, the
domestic value would be $1.14 per ton of CO2 equivalent.)
It is true that there is uncertainty about interest rates over long
time horizons. Recognizing that point, Newell and Pizer have made a
careful effort to adjust for that uncertainty. See Newell and Pizer,
supra. This is a relatively recent contribution to the literature.
There are several concerns with using this approach in this
context. First, it would be a departure from current OMB guidance.
Second, an approach that would average what emerges from discount rates
of 3 percent and 5 percent reflects uncertainty about the discount
rate, but based on a different model of uncertainty. The Newell-Pizer
approach models discount rate uncertainty as something that evolves
over time; in contrast, one alternative approach would assume that
there is a single discount rate with equal probability of 3 percent and
5 percent.
Table V.19 reports on the application of the Newell-Pizer
adjustments. The precise numbers depend on the assumptions about the
data generating process that governs interest rates. Columns (1a) and
(1b) assume that ``random walk'' model best describes the data and uses
3-percent and 5-percent discount rates, respectively. Columns (2a) and
(2b) repeat this, except that it assumes a ``mean-reverting'' process.
As Newell and Pizer report, there is stronger empirical support for the
random walk model.
Table V.19--Global Social Cost of Carbon Estimates ($/t CO2 in 2007 in 2006$),* Using Newell & Pizer Adjustment for Future Discount Rate Uncertainty**
--------------------------------------------------------------------------------------------------------------------------------------------------------
Random-walk Mean-reverting
model model
Model Study Climate scenario -----------------------------------
3% 5% 3% 5%
--------------------------------------------------------------------------------------------------------------------------------------------------------
(1a) (1b) (2a) (2b)
-----------------------------------
1..................................... FUND.................... Anthoff et al. 2009..... FUND default............ 10 0 7 -1
2..................................... FUND.................... Anthoff et al. 2009..... SRES A1b................ 2 0 1 -1
3..................................... FUND.................... Anthoff et al. 2009..... SRES A2................. 15 0 10 -1
4..................................... FUND.................... Link and Tol 2004....... No THC.................. 20 6 13 4
5..................................... FUND.................... Link and Tol 2004....... THC continues........... 20 4 13 2
6..................................... FUND.................... Guo et al. 2006......... Constant PRTP........... 9 0 6 -1
7..................................... FUND.................... Guo et al. 2006......... Gollier discount 1...... 14 0 14 0
8..................................... FUND.................... Guo et al. 2006......... Gollier discount 2...... 7 -1 7 -1
FUND Mean............... 12 1 9 0
9..................................... PAGE.................... Wahba & Hope 2006....... A2-scen................. 97 13 63 8
10.................................... PAGE.................... Hope 2006............... ........................ ....... 13 ....... 8
11.................................... DICE.................... Nordhaus 2008........... ........................ ....... 15 ....... 9
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57784]]
Summary Model-weighted Mean..... 55 10 36 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The sample includes all peer reviewed, non-equity-weighted estimates included in Tol (2008), Nordhaus (2008), Hope (2008), and Anthoff et al. (2009),
that are based on the most recent published version of FUND, PAGE, or DICE and use business-as-usual climate scenarios. All values are based on the
best available information from the underlying studies about the base year and year dollars, rather than the Tol (2008) assumption that all estimates
included in his review are 1995 values in 1995$. All values were updated to 2007 using a 3-percent annual growth rate in the SCC, and adjusted for
inflation using GDP deflator.
** Assumes a starting discount rate of 3 percent. Newell and Pizer (2003) based adjustment factors are not applied to estimates from Guo et al. (2006)
that use a different approach to account for discount rate uncertainty (rows 7-8).
The resulting estimates of the social cost of carbon are
necessarily greater. When the adjustments from the random walk model
are applied, the estimates of the social cost of carbon are $10 and
$55, with the 3 percent and 5 percent discount rates, respectively. The
application of the mean-reverting adjustment yields estimates of $6 and
$36. Since the random walk model has greater support from the data, DOE
also conducted analyses with the value of the SCC set at $10 and $55.
In summary, DOE considered in its decision process for this notice
of proposed rulemaking the potential global benefits resulting from
reduced CO2 emissions valued at $5, $10, $19, $30 and $55
per metric ton, and has also presented the domestic benefits derived
using a value of $1.14 per metric ton. All of these unit values
represent emissions that are valued in 2007$. The final net present
values for cumulative emissions reductions are reported in 2008$ so
that they can be compared with other rulemaking analyses in the same
dollar units.
Table V. and Table V.21 present the resulting estimates of the
potential range of NPV benefits associated with reducing CO2
emissions.
Table V.20--Estimates of Value of CO2 Emissions Reductions Under Commercial Clothes Washer Trial Standard Levels at 7-Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of CO2 emission reductions (million 2008$)
Estimated -----------------------------------------------------------------------------
cumulative CO2 Domestic Global
TSL emission -----------------------------------------------------------------------------
reductions $1.14/ton
(Mt) CO2 $5/ton CO2 $10/ton CO2 $19/ton CO2 $33/ton CO2 $55/ton CO2
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................................... 2.36 1 6 12 22 39 65
2......................................................... 2.39 1 6 12 23 40 66
3......................................................... 5.07 3 13 25 48 84 140
4......................................................... 5.66 3 14 28 54 93 156
5......................................................... 6.11 3 15 31 58 101 168
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.21--Estimates of Value of CO2 Emissions Reductions under Commercial Clothes Washer Trial Standard Levels at 3-Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of CO2 emission reductions (million 2008$)
Estimated -----------------------------------------------------------------------------
cumulative CO2 Domestic Global
TSL emission -----------------------------------------------------------------------------
reductions $1.14/ton
(Mt) CO2 $5/ton CO2 $10/ton CO2 $19/ton CO2 $33/ton CO2 $55/ton CO2
--------------------------------------------------------------------------------------------------------------------------------------------------------
1......................................................... 2.36 3 13 26 49 84 141
2......................................................... 2.39 3 13 26 49 86 143
3......................................................... 5.07 6 28 55 105 182 303
4......................................................... 5.66 7 31 61 117 202 337
5......................................................... 6.11 8 33 66 126 219 364
--------------------------------------------------------------------------------------------------------------------------------------------------------
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
world economy continues to evolve rapidly. Thus, any value placed in
this rulemaking on reducing CO2 emissions is subject to
likely change.
DOE, together with other Federal agencies, is reviewing various
methodologies for estimating the monetary value of reductions in
CO2 and other GHG 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. benefits, as well as global benefits (and costs). Given
the complexity of the many issues involved, this review is ongoing.
However, consistent with DOE's legal obligations,
[[Page 57785]]
and taking into account the uncertainty involved with this particular
issue, DOE has included in today's SNOPR the most recent values and
analyses employed in a rulemaking by another Federal agency.
DOE also investigated the potential monetary benefit of reduced
NOX and Hg emissions from the TSLs it considered. As
previously stated, DOE's initial analysis assumed the presence of
nationwide emission caps on SO2 and Hg, and caps on
NOX emissions in the 28 States covered by CAIR. In the
presence of these caps, DOE concluded that negligible 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 SNOPR TSD for further details.
As noted above, standards would not produce an economic impact in
the form of lower prices for NOX emissions allowance credits
in the 28 eastern States and D.C. covered by the CAIR cap. However, new
or amended energy conservation standards would reduce NOX
emissions in those 22 States that are not affected by CAIR. DOE
estimated the monetized value of NOX emissions reductions
resulting from each of the TSLs considered for today's SNOPR 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 $4,441 per ton in 2007$). Refer to the
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, for
additional information.
For Hg emissions reductions, DOE estimated the national monetized
values resulting from the TSLs considered for today's SNOPR based on
environmental damage estimates from the literature. DOE determined that
the impact of Hg emissions from power plants on humans is considered
highly uncertain. However, DOE identified two estimates of the
environmental damage of Hg 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 Hg of U.S. power plant origin ($1.3 billion
per year in year 2000$), which works out to $32.6 million per ton
emitted per year (2007$).\40\ The low-end estimate is $0.66 million per
ton emitted (in 2004$) or $0.73 million per ton in 2007$. DOE derived
this estimate from an evaluation of mercury control that used different
methods and assumptions from the first study but was also based on the
present value of the lifetime earnings of children exposed.\41\
---------------------------------------------------------------------------
\40\ Trasande, L., et al., ``Applying Cost Analyses to Drive
Policy that Protects Children,'' 1076 Ann. N.Y. Acad. Sci. 911
(2006).
\41\ 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.22 and Table V.23 present the resulting estimates of the
potential range of present value benefits associated with reduced
national NOX and Hg emissions from the TSLs DOE considered.
The final net present values for cumulative emissions reductions are
reported in 2008$ so that they can be compared with other rulemaking
analyses in the same dollar units.
Table V.22--Estimates of Value of Reductions of Hg and NOX Under Trial Standard Levels at a 7-Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
cumulative NOX Value of estimated NOX Estimated cumulative Hg Value of estimated Hg
Commercial clothes washer TSL emission emission reductions (million emission reductions (t) emission reductions (million
reductions (kt) 2008$) 2008$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................... 1.43 0.19 to 1.96.................. 0 to 0.013.................... 0 to 0.12.
2..................................... 1.45 0.19 to 1.99.................. 0 to 0.013.................... 0 to 0.12.
3..................................... 3.04 0.41 to 4.17.................. 0 to 0.029.................... 0 to 0.27.
4..................................... 3.39 0.45 to 4.64.................. 0 to 0.032.................... 0 to 0.30.
5..................................... 3.66 0.49 to 5.01.................. 0 to 0.035.................... 0 to 0.33.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table V.23--Estimates of Value of Reductions of Hg and NOX Under Trial Standard Levels at a 3-Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
cumulative NOX Value of estimated NOX Estimated cumulative Hg Value of estimated Hg
Commercial clothes washer TSL emission emission reductions (million emission reductions (t) emission reductions (million
reductions (kt) 2008$) 2008$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................... 1.43 0.38 to 3.92.................. 0 to 0.013.................... 0 to 0.25.
2..................................... 1.45 0.39 to 3.98.................. 0 to 0.013.................... 0 to 0.26.
3..................................... 3.04 0.81 to 8.36.................. 0 to 0.029.................... 0 to 0.56.
4..................................... 3.39 0.91 to 9.31.................. 0 to 0.032.................... 0 to 0.63.
5..................................... 3.66 0.98 to 10.04................. 0 to 0.035.................... 0 to 0.68.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 57786]]
Table V.24--Estimates of Adding NPV of Customer Savings to NPV of Low- and High-End Global Monetized Benefits
from CO2 NOX, and Hg Emissions Reductions for All TSLs at 3- and 7-Percent Discount Rates
----------------------------------------------------------------------------------------------------------------
CO2 value of $5/metric ton CO2 value of $55/metric ton
CO2* billion 2008$ and low CO2* billion 2008$ and high
values for NOX and Hg** values for NOX and Hg***
TSL ---------------------------------------------------------------
7-percent 3-percent 7-percent 3-percent
discount rate discount rate discount rate discount rate
----------------------------------------------------------------------------------------------------------------
1............................................... 0.03 0.17 0.09 0.30
2............................................... 0.05 0.21 0.11 0.34
3............................................... 0.73 1.81 0.86 2.09
4............................................... 0.83 2.09 0.98 2.41
5............................................... 1.04 2.53 1.20 2.87
----------------------------------------------------------------------------------------------------------------
* These values per ton represent the global negative externalities of CO2. The unit values are in 2007$ while
cumulative NPV is in 2008$.
** Low Value corresponds to a value of $432 per ton of NOX emissions in 2007$ and no effect on Hg emissions. The
unit values are in 2007$ while cumulative NPV is in 2008$.
*** High Value corresponds to a value of $4,441 per ton of NOX emissions in 2007$ and $32.6 million per ton of
Hg emissions in 2007$. The unit values are in 2007$ while cumulative NPV is in 2008$.
Table V.25--Estimates of Adding NPV of Customer Savings to NPV of Low- and High-End Monetized Benefits from CO2
Emissions Reductions for All TSLs at 3- and 7-Percent Discount Rates
----------------------------------------------------------------------------------------------------------------
CO2 value of $5/metric ton CO2 value of $55/metric ton
CO2* billion 2008$ CO2* billion 2008$
TSL ---------------------------------------------------------------
7-percent 3-percent 7-percent 3-percent
discount rate discount rate discount rate discount rate
----------------------------------------------------------------------------------------------------------------
1............................................... 0.02 0.09 0.08 0.22
2............................................... 0.03 0.11 0.09 0.24
3............................................... 0.37 0.92 0.50 1.19
4............................................... 0.42 1.06 0.57 1.37
5............................................... 0.53 1.28 0.68 1.61
----------------------------------------------------------------------------------------------------------------
* These values per ton represent the global negative externalities of CO2. The unit values are in 2007$ while
cumulative NPV is in 2008$.
The NPV of the monetized benefits associated with emissions
reductions can be viewed as a complement to the NPV of the consumer
savings calculated for each TSL considered in this rulemaking. Table
V.24 presents the NPV values for CCWs that would result if DOE were to
apply the low- and high-end estimates of the potential benefits
resulting from reduced CO2, NOX and Hg emissions
to the NPV of consumer savings calculated for each TSL considered in
this rulemaking, at both a 7- and 3-percent discount rate. Table V.24
presents the NPV values for CCWs that would result if DOE were to apply
the low- and high-end estimates of the potential global benefits
resulting from reduced CO2 emissions only to the NPV of
consumer savings calculated for each TSL considered in this rulemaking,
at both a 7- and 3-percent discount rate. For CO2, only the
range of global benefit values are used, $5 and $55 in 2007$, although
the actual benefit estimates are provided in 2008$.
Although comparing the value of consumer savings to the values of
emission reductions provides a valuable perspective, please note the
following: (1) The national consumer savings are domestic U.S. consumer
monetary savings found in market transactions while the values of
emission reductions are based on ranges of estimates of imputed
marginal social costs, which, in the case of CO2, are meant
to reflect global benefits; and (2) the assessments of consumer savings
and emission-related benefits are performed with different computer
models, leading to different time frames for the analyses. The present
value of national consumer savings is measured for the period 2015-2065
(31 years from 2015 to 2045 inclusive, plus the longest lifetime of the
equipment shipped in the 31st year). However, the timeframes of the
benefits associated with the emission reductions differ. For example,
the value of CO2 emission reductions is meant to reflect the
present value of all future climate related impacts, even those beyond
2065.
DOE seeks comment on the above presentation of NPV values and on
the consideration of GHG emissions in future energy efficiency
standards rulemakings, including alternative methodological approaches
to including GHG emissions in its analysis. More specifically, DOE
seeks comment on both how it integrates monetized GHG emissions or
Social Cost of Carbon values, as well as other monetized benefits or
costs, into its analysis and models, and also on suggested alternatives
to the current approach.
Table V.26 presents the estimated wastewater discharge reductions
due to the TSLs for CCWs. In chapter 16 of the TSD accompanying this
notice, DOE reports annual changes in wastewater discharge attributable
to each TSL.
[[Page 57787]]
Table V.26--Summary of Wastewater Discharge Reductions
[Cumulative Reductions for Equipment Sold from 2013 to 2043]
----------------------------------------------------------------------------------------------------------------
TSL
----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Wastewater Discharge Reduction (trillion 0.00 0.01 0.14 0.16 0.21
gallons)......................................
----------------------------------------------------------------------------------------------------------------
C. Proposed Standards
1. Overview
Under 42 U.S.C. 6295(o)(2)(A) and 6316(a), EPCA requires that any
new or amended energy conservation standard for any type (or class) of
covered product or equipment be designed to achieve the maximum
improvement in energy efficiency that the Secretary determines is
technologically feasible and economically justified. In determining
whether a standard is economically justified, the Secretary must
determine whether the benefits of the standard exceed its burdens to
the greatest extent practicable, in light of the following seven
factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products or equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products or equipment in the type (or class)
compared to any increase in the price, initial charges, or maintenance
expenses for the covered products or equipment that are likely to
result from the imposition of the standard;
(3) The total projected amount of energy (or, as applicable, water)
savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered
products or equipment likely to result from the imposition of the
standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i) and 6316(a))
The new or amended standard also must ``result in significant
conservation of energy.''
(42 U.S.C. 6295(o)(3)(B) and 6316(a))
In selecting the proposed energy conservation standards for CCWs
for consideration in today's SNOPR, DOE started by examining the
maximum technologically feasible levels, and determined whether those
levels were economically justified. If DOE determined that the maximum
technologically feasible level was not justified, DOE then analyzed the
next lower TSL to determine whether that level was economically
justified. DOE repeated this procedure until it identified an
economically justified TSL.
To aid the reader in understanding the benefits and/or burdens of
each TSL, the following tables summarize the quantitative analytical
results for each TSL, 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.
In addition to the quantitative results, DOE also considers other
burdens and benefits that affect economic justification.
In sum, today's proposed standard levels for the equipment that is
the subject of this rulemaking reflect DOE's careful balancing of the
relevant statutory factors under EPCA. After considering public
comments on this SNOPR, DOE will publish a final rule that either
adopts the proposed TSL, one of the higher or lower TSLs, or some value
in between.
2. Conclusion
Table V.27 presents a summary of the quantitative results for each
CCW TSL.
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First, DOE considered TSL 5, the max-tech level. TSL 5 would likely
save 0.12 quads of energy and 0.21 trillion gallons of water through
2043, an amount DOE
[[Page 57790]]
considers significant. For the Nation as a whole, DOE projects that TSL
5 would result in a net increase of $0.51 billion in NPV, using a
discount rate of 7 percent. The emissions reductions at TSL 5 are 6.11
Mt of CO2, 3.66 kt of NOX, and 0 t to 0.03 t of
Hg. At TSL 5, the estimated benefit of reducing CO2
emissions based on global estimates of the value of CO2
ranges from $15 million to $168 million at a 7-percent discount rate
and $33 million to $364 million at a 3-percent discount rate. Total
generating capacity in 2043 is estimated to decrease compared to the
reference case by 0.012 GW under TSL 5.
At TSL 5, DOE projects that the average top-loading CCW consumer
would experience a decrease in LCC of $179 in multi-family applications
and $190 in laundromats. DOE also estimates an LCC decrease for an
overwhelming majority of consumers in the Nation that purchase top-
loading CCWs--85 percent of consumers in multi-family applications and
96 percent of consumers in laundromats. The median payback period of
the average consumer at TSL 5 in multi-family applications and in
laundromats is projected to be 4.6 years and 2.8 years, respectively.
At TSL 5, DOE projects that the average front-loading CCW consumer
would experience a decrease in LCC of $203 in multi-family applications
and $216 in laundromats. DOE also estimates an LCC decrease for an
overwhelming majority of consumers that purchase front-loading CCWs--99
percent of consumers in multi-family applications and 100 percent of
consumers in laundromats. The median payback period of the average
consumer at TSL 5 in multi-family applications and in laundromats is
projected to be 2.9 years and 1.6 years, respectively.
At TSL 5, DOE estimated the projected change in INPV ranges from a
total decrease of $20.4 million for both equipment classes to a total
decrease of $23.0 million. At TSL 5, DOE recognizes the risk of very
large negative impacts if manufacturers' expectations about reduced
shipments are realized. TSL 5 could result in a net loss as high as
37.3 percent in INPV to CCW manufacturers. Also, DOE is especially
sensitive to the potentially severe impacts to the LVM of CCWs. Because
the LVM's clothes washer revenue is so dependent on CCW sales, DOE is
concerned that TSL 5 will cause material harm to the LVM.
Although DOE recognizes the increased economic benefits that could
result from TSL 5, DOE has tentatively concluded that the benefits of a
Federal standard at TSL 5 would be outweighed by the potential for
disincentivizing consumers from purchasing more efficient front-loading
CCWs. At TSL 5, front-loading CCWs are highly efficient but have a
purchase price estimated to be $497 more expensive than top-loading
CCWs. With such a large price differential between the two types of
CCWs, and with less than 2 percent of the front-loading market at TSL
5, DOE is concerned that significant numbers of potential consumers of
front-loading CCWs would choose to purchase a less efficient top-
loading unit.
As described in section III.E.2.c, DOE did analyze the impacts of
increased purchase prices for each equipment class but independently of
the other. Because the price impacts for more efficient top-loaders are
higher than those for more efficient front-loaders, DOE estimated that
top-loading CCW sales would decrease slightly more rapidly than for
front-loaders. But DOE was not able to estimate the cross price
elasticity of demand between the two equipment classes to determine
whether consumers of front-loading CCWs would switch to less expensive
top-loaders.
If potential front-loading CCW consumers did decide to switch to
less expensive top-loading washers, the NES and NPV realized from TSL 5
would be diminished. DOE notes that in developing the energy savings
and water savings estimates for TSL 5, the agency effectively held
constant the ratio of front-loading to top-loading CCW shipments across
the various TSLs. Particularly at TSL 3 to TSL 5, the differences in
these estimates are small, especially at a 7-percent discount rate. DOE
requests comment as to whether it should account for the cross price
elasticity of demand between the two equipment classes when calculating
the anticipated energy and water savings at the different TSLs. DOE
also seeks relevant data or other information on this topic. DOE
believes that the values currently in Table V.27 represent the high end
of the potential energy and water savings for these TSLs. Taking into
account price elasticity of demand could affect the anticipated energy
and water savings of the various TSLs, and it could potentially result
in a change in the TSL with the highest projected energy/water savings
level.
In addition, TSL 5 would adversely impact manufacturers' INPV to a
significant extent. Not only does the industry face a potential,
significant loss in industry INPV, but manufacturers would also need to
make significant capital investments for both types of CCWs in order to
produce both top-loading and front-loading washers at the maximum
technologically feasible levels. After carefully considering the
analysis and weighing the benefits and burdens of TSL 5, the Secretary
has reached the following initial conclusion: At TSL 5, the benefits of
energy savings, economic benefit, and emissions reductions would be
outweighed by the potential for giving consumers less incentive to
purchase high efficiency front-loading CCWs and the large capital
conversion costs that could result in a substantial reduction in INPV
for manufacturers.
Next, DOE considered TSL 4. TSL 4 would likely save 0.11 quads of
energy and 0.16 trillion gallons of water through 2043, an amount DOE
considers significant. For the Nation as a whole, DOE projects that TSL
4 would result in a net increase of $0.41 billion in NPV, using a
discount rate of 7 percent. The emissions reductions at TSL 4 are 5.66
Mt of CO2, 3.39 kt of NOX, and 0 t to 0.03 t of
Hg. At TSL 4, the estimated benefits of reducing CO2
emissions based on global estimates of the value of CO2
ranges from $14 million to $156 million at a 7-percent discount rate
and $31 million to $337 million at a 3-percent discount rate. Total
generating capacity in 2043 is estimated to decrease compared to the
reference case by 0.011 GW under TSL 4.
At TSL 4, top-loading CCWs have the same efficiency as at TSL 5.
Therefore, top-loading CCW consumers will experience the same LCC
impacts and payback periods as TSL 5. At TSL 4 for front-loading CCWs,
DOE projects that the average front-loading CCW consumer would
experience a decrease in LCC of $91 in multi-family applications and
$93 in laundromats. DOE also estimates an LCC decrease for an
overwhelming majority of consumers that purchase front-loading CCWs--76
percent of consumers in multi-family applications and 77 percent of
consumers in laundromats. The median payback period of the average
consumer at TSL 4 in multi-family applications and in laundromats is
projected to be 3.0 years and 1.8 years, respectively.
DOE estimated the projected change in INPV ranges from a decrease
of $7.8 million to a decrease of $10.2 million. At TSL 4, DOE
recognizes the risk of very large negative impacts if manufacturers'
expectations about reduced shipments are realized. TSL 4 could result
in a net loss as high as 16.6 percent in INPV to CCW manufacturers.
Also, DOE is especially sensitive to the potentially severe impacts to
the LVM. Since the LVM's clothes washer revenue is so dependent on CCW
sales, DOE is concerned that TSL 4 will materially harm the LVM.
[[Page 57791]]
Although DOE recognizes the increased economic benefits that could
result from TSL 4, DOE has the same concerns regarding TSL 4 as for TSL
5. Namely, DOE has concerns as to the potential of TSL 4 to give
consumers less incentive to purchase more efficient front-loading
washers. At TSL 4, front-loading CCWs are highly efficient but have a
purchase price estimated to be $454 more expensive than top-loading
washers. With such a price differential between the two types of CCWs,
and with less than 4 percent of the front-loading market currently
meeting TSL 4, DOE is concerned that a significant number of potential
consumers of front-loading CCWs would be more likely choose to purchase
a top-loading CCW, which is less efficient. If potential front-loading
CCW consumers did decide to switch to top-loading models, the NES and
NPV realized from TSL 4 would be diminished. In addition, TSL 4 would
adversely impact manufacturers' INPV to a significant extent. Not only
does the industry face a potential loss in industry INPV, but
manufacturers would also need to make significant capital investments
for both types of CCWs in order to produce both top-loading washers at
the maximum technologically feasible level and front-loading washers at
a level which only 3 percent of the market currently meets. After
carefully considering the analysis and weighing the benefits and
burdens of TSL 4, the Secretary has reached the following initial
conclusion: At TSL 4, the benefits of energy savings, economic benefit,
and emissions reductions would be outweighed by the potential for
giving consumers less incentive to purchase high efficiency front-
loading CCWs and the large capital conversion costs that could result
in a substantial reduction in INPV for manufacturers.
Next, DOE considered TSL 3. TSL 3 would likely save 0.10 quads of
energy and 0.14 trillion gallons of water through 2043, an amount DOE
considers significant. For the Nation as a whole, DOE projects that TSL
3 would result in a net increase of $0.36 billion in NPV, using a
discount rate of 7 percent. The emissions reductions at TSL 3 are 5.07
Mt of CO2, 3.04 kt of NOX, and 0 t to 0.03 t of
Hg. The estimated benefits of reducing CO2 emissions based
on global estimates of the value of CO2 ranges from $13
million to $140 million at a 7-percent discount rate and $28 million to
$303 million at a 3-percent discount rate. Total generating capacity in
2043 is estimated to decrease compared to the reference case by 0.010
GW under TSL 3.
At TSL 3, top-loading CCWs have the same efficiency as at TSL 5.
Therefore, top-loading CCW consumers would experience the same LCC
impacts and payback periods as TSL 5. At TSL 3 for front-loading CCWs,
DOE projects that the average front-loading CCW consumer would
experience a decrease in LCC of $19 in multi-family applications and
$22 in laundromats. DOE also estimates an LCC decrease for all
consumers that do not already purchase front-loading CCWs with an
efficiency meeting TSL 3. The median payback period of the average
consumer at TSL 3 in multi-family applications and in laundromats is
projected to be 0.4 years and 0.2 years, respectively.
DOE estimated the projected change in INPV ranges from a decrease
of $4.8 million to a decrease of $7.0 million. At TSL 3, DOE recognizes
the risk of very large negative impacts if manufacturers' expectations
about reduced shipments are realized. In TSL 3 could result in a net
loss as high as 11.4 percent in INPV to CCW manufacturers. Also, DOE is
especially sensitive to the potential adverse impacts to the LVM. Since
the LVM's clothes washer revenue is so dependent on CCW sales, DOE is
concerned that TSL 3 could disproportionately impact the LVM.
DOE recognizes the increased economic benefits that could result
from TSL 3. DOE still has concerns of the potential for giving
consumers less incentive to purchase more efficient front-loading
washers, but at TSL 3, the price difference between front-loading and
top-loading CCWs drops to $414. However, given that DOE projects that
the average front-loading CCW consumer would experience an LCC savings
at TSL 3, DOE believes that most front-loading CCW consumers not
already purchasing washers at TSL 3 would likely continue to purchase a
front-loading unit if standards are set at TSL 3. DOE notes that TSL 3
adversely impacts manufacturers' INPV, but because such a large percent
of the front-loading market is at TSL 3, manufacturers would likely not
need to make significant capital investments for front-loading CCWs.
Product development and conversion expenses and capital investments
would only be required in order to produce higher efficiency top-
loading washers at TSL 3.
After considering the analysis and weighing the benefits and the
burdens, DOE has tentatively concluded that the benefits of a TSL 3
standard outweigh the burdens. In particular, the Secretary has
tentatively concluded that TSL 3 saves a significant amount of energy
and is technologically feasible and economically justified. Therefore,
DOE today proposes to adopt the energy conservation standards for CCWs
at TSL 3. Table V.28 lists today's proposed energy conservation
standards for CCWs. DOE's proposal to amend energy conservation
standards for CCWs at TSL 3 reflects its tentative conclusion that this
standard level would minimize the potential adverse impacts on the LVM
and, therefore, would also minimize the adverse impacts on CCW market
competition. However, DOE will carefully consider DOJ's review of
today's proposed standards for CCWs and any public comment received on
these impacts before issuing its final rule for this equipment. It is
DOE's intent to set a standard that will not produce significant
adverse impacts on competition in this market. In proposing the
standards in today's notice, DOE has also taken into consideration
DOJ's determination on the standards proposed in the October 2008 NOPR.
Table V.28--Proposed Energy Conservation Standards for Commercial
Clothes Washers
------------------------------------------------------------------------
Proposed energy conservation
Equipment class standards
------------------------------------------------------------------------
Top-loading............................ 1.60 Modified Energy Factor/8.5
Water Factor.
Front-loading.......................... 2.00 Modified Energy Factor/5.5
Water Factor.
------------------------------------------------------------------------
DOE seeks comment on the proposed standards. This is identified as
Issue 7 in section VII.E of today's supplemental notice (Issues on
Which DOE Seeks Comment.)
DOE also calculated the annualized values for certain benefits and
costs at the various TSLs. Table V.29 shows the annualized values. DOE
used a two-step calculation process to convert the time-series of costs
and benefits into annualized values. First, DOE calculated a present
value for the time-series of costs and benefits using a discount rate
of either three or seven percent. From the present value, DOE then
calculated the fixed annual payment over the analysis time period (2013
to 2043) that yielded the same present value. The fixed annual payment
is the annualized value. Although DOE calculated annualized values,
this does not imply that the time-series of cost and benefits from
which the annualized values were determined are a steady stream of
payments.
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VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
Today's regulatory action has been determined to be a ``significant
regulatory action'' under section 3(f)(1) of Executive Order 12866,
``Regulatory Planning and Review.'' 58 FR 51735 (Oct. 4, 1993).
Accordingly, this action was subject to review under the Executive
Order by the Office of Information and Regulatory Affairs (OIRA) in the
Office of Management and Budget.
The Executive Order requires each agency to identify the problem
the agency intends to address that warrants new agency action
(including, where applicable, the failures of private markets or public
institutions), as well as to assess the significance of that problem in
evaluating whether any new regulation is warranted. E.O. 12866, section
1(b)(1).
The October 2008 NOPR evaluated the market failure that the
proposed rule would address. 73 FR 62034, 62122-23 (Oct. 17, 2008).
DOE's analysis for CCWs explicitly quantifies and accounts for the
percentage of consumers that already purchase more efficient equipment
and takes these consumers into account when determining the national
energy savings associated with various TSLs. The analysis suggests that
accounting for the market value of energy savings alone (i.e.,
excluding any possible additional ``externality'' benefits such as
those noted below) would produce enough benefits to yield net benefits
across a wide array of equipment and circumstances. In the October 2008
NOPR, DOE requested additional data (including the percentage of
consumers purchasing more efficient CCWs and the extent to which
consumers will continue to purchase more efficient equipment), in order
to test the existence and extent of these consumer actions. 73 FR
62034, 62123 (Oct. 17, 2008). DOE received no such data from interested
parties in response to the October 2008 NOPR.
DOE believes that there is a lack of consumer information and/or
information processing capability about energy efficiency opportunities
in the home appliance market. If this is the case, DOE would expect the
energy efficiency for CCWs to be randomly distributed across key
variables such as
[[Page 57794]]
energy prices and usage levels. DOE has estimated the percentage of
consumers that already purchase more efficient CCWs. However, DOE does
not correlate the consumer's usage pattern and energy price with the
efficiency of the purchased equipment. In the October 2008 NOPR, DOE
sought data on the efficiency levels of existing CCWs by how often they
are used (e.g., how many times or hours the equipment is used) and
their associated energy prices (and/or geographic regions of the
country). Id. DOE received no such data from interested parties in
response to the October 2008 NOPR. Therefore, DOE was unable to test
for today's supplemental rule the extent to which purchasers of CCWs
behave as if they are unaware of the costs associated with their energy
consumption.
A related issue is asymmetric information (one party to a
transaction has more and better information than the other) and/or high
transactions costs (costs of gathering information and effecting
exchanges of goods and services). In many instances, the party
responsible for an appliance purchase may not be the one who pays the
cost to operate it. For example, home builders in large-scale
developments often make decisions about appliances without input from
home buyers and do not offer options to upgrade those appliances. Also,
apartment owners normally make decisions about appliances, but renters
often pay the utility bills. If there were no transactions costs, it
would be in the home builders' and apartment owners' interest to
install appliances that buyers and renters would choose. For example,
one would expect that a renter who knowingly faces higher utility bills
from low efficiency appliances would be willing to pay less in rent,
and the apartment owner would indirectly bear the higher utility cost.
However, this information is not readily available, and it may not be
in the renter's interest to take the time to develop it, or, in the
case of the landlord who installs a high efficiency appliance, to
convey that information to the renter.
To the extent that asymmetric information and/or high transactions
costs are problems, one would expect to find certain outcomes for
appliance energy efficiency. For example, all things being equal, one
would not expect to see higher rents for apartments with high
efficiency appliances. Conversely, if there were symmetric information,
one would expect appliances with higher energy efficiency in rental
units where the rent includes utilities compared to those where the
renter pays the utility bills separately. Similarly, for single-family
homes, one would expect higher energy efficiency levels for replacement
units than for appliances installed in new construction. Within the new
construction market, one would expect to see appliances with higher
energy efficiency levels in custom-built homes (where the buyer has
more say in appliance choices) than in comparable homes built in large-
scale developments.
The above issues pertaining to asymmetric information and/or high
transaction costs seem to be less relevant to the CCW market. For
example, as discussed in section III.D.10, DOE concluded that a split
incentive is unlikely between route operators and multi-family property
owners. Because split incentives are likely not applicable to the CCW
market, the probability that asymmetric information exists where one
party (e.g., a route operator) has more and better information than the
other (e.g., a multi-family property owner) is low. Further, because
DOE received no data from interested parties in response to the October
2008 NOPR on the issue of asymmetric information and/or high
transactions costs, DOE was unable to conclusively determine for
today's supplemental notice the extent to which asymmetric information
and/or high transaction costs are a market failure in the CCW market.
In addition, this rulemaking is likely to yield certain external
benefits resulting from improved energy efficiency of CCWs that are not
captured by the users of such equipment. These benefits include
externalities related to environmental protection and energy security
that are not reflected in energy prices, such as reduced emissions of
greenhouse gases. The TSLs which DOE evaluated resulted in
CO2, NOX, and Hg emissions reductions. DOE also
determined a range of possible monetary benefits associated with the
emissions reductions. DOE considered both the emissions reductions and
their possible monetary benefit in determining the economic feasibility
of the TSLs.
DOE conducted a regulatory impact analysis (RIA) for review by the
Office of Information and Regulatory Affairs (OIRA) at OMB. DOE
presented to OIRA the draft supplemental notice and other documents
prepared for this rulemaking, including the RIA, and has included these
documents in the rulemaking record. They are available for public
review in the Resource Room of the Building Technologies Program, 950
L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024, (202) 586-9127,
between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal
holidays.
The RIA is contained as chapter 17 in the TSD prepared for the
rulemaking. 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 the feasible policy alternatives to
this regulation; (3) a quantitative comparison of the impacts of the
alternatives; and (4) the national economic impacts of today's proposed
standards. DOE performed an RIA solely for CCWs for today's
supplemental notice.
The RIA calculates the effects of feasible policy alternatives to
energy conservation standards for CCWs and provides a quantitative
comparison of the impacts of the alternatives. DOE evaluated each
alternative in terms of its ability to achieve significant energy
savings at reasonable costs, and compared it to the effectiveness of
today's proposed standards. DOE analyzed these alternatives using a
series of regulatory scenarios as input to the NIA spreadsheets for the
two equipment classes, which it modified to allow inputs for voluntary
measures. For more details on how DOE modified the NIA spreadsheets to
determine the impacts due to the various non-regulatory alternatives to
standards, refer to chapter 17 of the TSD accompanying this notice.
As shown in Table VI.1 below, DOE identified the following major
policy alternatives for achieving increased energy efficiency in
conventional CCWs:
(1) No new regulatory action;
(2) Financial incentives;
(3) Consumer rebates;
(4) Consumer tax credits;
(5) Manufacturer tax credits;
(6) Voluntary energy efficiency targets;
(7) Bulk government purchases;
(8) Early replacement; and
(9) Today's proposed approach (national performance and
prescriptive standards).
[[Page 57795]]
Table VI.1--Non-Regulatory Alternatives to Commercial Clothes Washer Standards
----------------------------------------------------------------------------------------------------------------
Net present value** (billion
Energy Water savings 2008$)
Policy alternatives savings* (trillion -------------------------------
(quads) gallons) 7% Discount 3% Discount
rate rate
----------------------------------------------------------------------------------------------------------------
No new regulatory action........................ 0 0 0 0
Consumer rebates................................ 0.06 0.07 0.18 0.47
Consumer tax credits............................ 0.01 0.01 0.03 0.08
Manufacturer tax credits........................ 0.00 0.01 0.02 0.06
Voluntary energy efficiency targets***.......... 0.02 0.02 0.06 0.15
Early replacement............................... 0.01 0.01 0.11 0.17
Bulk government purchases***.................... 0.00 0.01 0.02 0.04
Today's standards at TSL 3...................... 0.10 0.14 0.36 0.89
----------------------------------------------------------------------------------------------------------------
* Energy savings are in source quads.
** Net present value is the value in the present of a time series of costs and savings. DOE determined the net
present value from 2013 to 2043 in billions of 2008 dollars.
*** Voluntary energy efficiency target and bulk government purchase alternatives are not considered for front-
loading washers because the percentage of the market at TSL 3 (today's proposed standard) is well over the
market adoption target level that each alternative strives to attain.
The net present value amounts shown in Table VI.1 refer to the NPV
for consumers. The costs to the government of each policy (such as
rebates or tax credits) are not included in the costs for the NPV
since, on balance, consumers would be both paying for (through taxes)
and receiving the benefits of the payments. The following paragraphs
discuss each of the policy alternatives listed in Table VI.1. (See the
chapter 17 of the SNOPR TSD.)
No New Regulatory Action. The case in which no regulatory action is
taken with regard to CCWs constitutes the ``base case'' (or ``No
Action'') scenario. In this case, between 2013 and 2043, CCWs are
expected to use 0.97 quads of primary energy along with 2.2 trillion
gallons of water. Since this is the base case, energy savings and NPV
are zero by definition.
Consumer Rebates. Consumer rebates cover a portion of the
incremental installed cost difference between equipment meeting
baseline efficiency levels and those meeting higher efficiency levels,
which generally result in a higher percentage of consumers purchasing
more efficient models. DOE utilized market penetration curves from a
study that analyzed the potential of energy efficiency in
California.\42\ The penetration curves are a function of benefit-cost
ratio (i.e., lifetime operating costs savings divided by increased
total installed costs) to estimate the increased market share of more
efficient equipment given incentives by a rebate program. Using
specific rebate amounts, DOE calculated, for the considered equipment,
the benefit-cost ratio of the more efficient appliance with and without
the rebate to project the increased market penetration of the equipment
due to a rebate program.
---------------------------------------------------------------------------
\42\ Rufo, M. and F. Coito, California's Secret Energy Surplus:
The Potential for Energy Efficiency (prepared for The Energy
Foundation and The Hewlett Foundation by Xenergy, Inc.) (2002).
---------------------------------------------------------------------------
For CCWs meeting TSL 3, DOE estimated that the percentage of
consumers purchasing the more efficient equipment due to consumer
rebates would increase annually by 49.0 percent for top-loading washers
and 4.0 percent for front-loading washers. DOE selected the rebate
amount using data from rebate programs for CCWs conducted by 24 gas,
electric, and water utilities and other agencies. DOE estimated that
the impact of this policy would be to permanently transform the market
so that the increased market share seen in the first year of the
program would be maintained throughout the forecast period. At the
estimated participation rates, consumer rebates would be expected to
provide 0.06 quads of national energy savings, 74 billion gallons of
national water savings, and an NPV of $0.18 billion (at a 7-percent
discount rate).
Although DOE estimated that consumer rebates would provide national
benefits for CCW consumers, these benefits would be smaller than the
benefits resulting from national performance standards at today's
proposed levels. Thus, DOE rejected consumer rebates as a policy
alternative to national performance standards.
Consumer Tax Credits. Consumer tax credits cover a percentage of
the incremental installed cost difference between equipment meeting
baseline efficiency levels and those with higher efficiencies. Consumer
tax credits are considered a viable non-regulatory market
transformation program as evidenced by the inclusion of Federal
consumer tax credits in EPACT 2005 for various residential appliances.
(Section 1333 of EPACT 2005; codified at 26 U.S.C. 25C) DOE reviewed
the market impact of tax credits offered by the Oregon Department of
Energy (ODOE) (ODOE, No. 35 at p. 1) and Montana Department of Revenue
(MDR) (MDR, No. 36 at p. 1) to estimate the effect of a national tax
credit program. To help estimate the impacts from such a program, DOE
also reviewed analyses prepared for the California Public Utilities
Commission,\43\ the Northwest Energy Efficiency Alliance,\44\ and the
Energy Foundation/Hewlett Foundation.\45\ For each the equipment
considered for this rulemaking, DOE estimated that the market effect of
a tax credit program would gradually increase over a time period until
it reached its maximum impact. Once the tax credit program attained its
maximum effect, DOE assumed the impact of the policy would be to
permanently transform the market at this level.
---------------------------------------------------------------------------
\43\ Itron and KEMA, 2004/2005 Statewide Residential Retrofit
Single-Family Energy Efficiency Rebate Evaluation (prepared for the
California Public Utilities Commission, Pacific Gas And Electric
Company, San Diego Gas and Electric Company, Southern California
Edison, Southern California Gas Company, CPUC-ID 1115-04)
(2007).
\44\ KEMA, Consumer Product Market Progress Evaluation Report 3
(prepared for Northwest Energy Efficiency Alliance, Report
07-174) (2007).
\45\ Rufo, M., and F. Coito, op. cit.
---------------------------------------------------------------------------
For CCWs, DOE estimated that consumer tax credits would induce an
increase of 1.3 percent in 2013 in the purchase of equipment meeting
TSL 3 and eventually increase to a maximum of 5.8 percent in 2020 for
both top-loading and front-loading washers.\46\ At the estimated
participation rates, consumer tax credits would be expected to provide
0.01 quads of national energy
[[Page 57796]]
savings, 13 billion gallons of national water savings, and an NPV of
$0.03 billion (at a 7-percent discount rate).
---------------------------------------------------------------------------
\46\ Because DOE was not able to identify consumer tax credit
programs specific to CCWs, increased market penetrations for
residential clothes washers were used to estimate the impact from a
tax credit program providing incentives for more efficient CCWs.
---------------------------------------------------------------------------
DOE estimated that while consumer tax credits would yield national
benefits for CCW consumers, these benefits would be much smaller than
the benefits from today's proposed national performance standards.
Thus, DOE rejected consumer tax credits as a policy alternative to
national performance standards.
Manufacturer Tax Credits. Manufacturer tax credits are considered a
viable non-regulatory market transformation program as evidenced by the
inclusion of Federal tax credits in EPACT 2005 for manufacturers of
residential appliances. (Section 1334 of EPACT 2005; codified at 26
U.S.C. 45M) Similar to consumer tax credits, manufacturer tax credits
would effectively result in lower equipment prices to consumers by an
amount that covered part of the incremental price difference between
equipment meeting baseline efficiency levels and those meeting higher
efficiency levels. Because these tax credits go to manufacturers
instead of consumers, research indicates that fewer consumers would be
affected by a manufacturer tax credit program than by consumer tax
credits.\47\ \48\ Although consumers would benefit from price
reductions passed through to them by the manufacturers, research
demonstrates that approximately half the consumers who would benefit
from a consumer tax credit program would be aware of the economic
benefits of more efficient technologies included in an appliance
manufacturer tax credit program. In other words, research estimates
that half of the effect from a consumer tax credit program is due to
publicly available information or promotions announcing the benefits of
the program. This effect, referred to as the ``announcement effect,''
is not part of a manufacturer tax credit program. Therefore, DOE
estimated that the effect of a manufacturer tax credit program would be
only half of the maximum impact of a consumer tax credit program.
---------------------------------------------------------------------------
\47\ K. Train, Customer Decision Study: Analysis of Residential
Customer Equipment Purchase Decisions (prepared for Southern
California Edison by Cambridge Systematics, Pacific Consulting
Services, The Technology Applications Group, and California Survey
Research Services) (1994).
\48\ Lawrence Berkeley National Laboratory, End-Use Forecasting
Group. Analysis of Tax Credits for Efficient Equipment (1997).
Available at http://enduse.lbl.gov/Projects/TaxCredits.html. (Last
accessed April 24, 2008.)
---------------------------------------------------------------------------
As described earlier in section III.E.2 on the NIA, DOE analyzed
the impact of recent Federal manufacturer tax credits on increased
sales of high efficiency CCWs. DOE determined that the tax credits have
increased the market share of front-loading washers from approximately
20 percent in the year 2005 to its current market share of 30 percent.
For purposes of conducting the NIA, DOE estimated that the tax credits
would permanently transform the market so that front-loading washers
would continue to comprise 30 percent of the market over the entire
forecast period, even though the tax credits are set to expire after
2010. For purposes of analyzing the impact of manufacturer tax credits
for the RIA, DOE estimated the percentage of consumers purchasing
equipment at TSL 3 would be expected to increase by 2.9 percent for
both top-loading and front-loading washers. This additional increase of
2.9 percent is relative to the base case (i.e., the case without new
efficiency standards) which is comprised of a 30 percent market share
of front-loading washers and a 70 percent market share of top-loading
washers. DOE assumed that the impact of the manufacturer tax credit
policy would be to permanently transform the market so that the
increased market share seen in the first year of the program would be
maintained throughout the forecast period.
At the above estimated participation rates, manufacturer tax
credits would provide 0.005 quads of national energy savings, 9 billion
gallons of national water savings, and an NPV of $0.02 billion (at a 7-
percent discount rate) for CCWs.
DOE estimated that while manufacturer tax credits would yield
national benefits for CCW consumers, these benefits would be much
smaller than the benefits from national performance standards. Thus,
DOE rejected manufacturer tax credits as a policy alternative to
today's proposed national performance standards.
Voluntary Energy Efficiency Targets. DOE estimated the impact of
voluntary energy efficiency targets by reviewing the historical and
projected market transformation performance of past and current ENERGY
STAR programs.
To estimate the impacts from a voluntary energy efficiency program
targeting the adoption of top-loading CCWs meeting TSL 3, DOE evaluated
the potential impacts of expanding the Federal government's existing
ENERGY STAR program for CCWs. DOE modeled the voluntary efficiency
program based on the ENERGY STAR program's experience with RCWs.\49\
\50\ Over the period spanning 2007-2025, ENERGY STAR projected that the
market share of RCWs meeting target efficiency levels due to ENERGY
STAR will increase to a maximum of 28 percent. DOE estimated that an
expanded voluntary program would increase their market share by half of
these projected annual amounts for the existing ENERGY STAR program,
reaching a maximum of 14 percent increased market share. For CCWs, DOE
assumed that the impacts of the existing ENERGY STAR program were
already incorporated in the base case, and applied the same pattern of
market share increase from an expanded voluntary program to CCWs
beginning in 2013. After attaining its maximum market share of 14
percent in the year 2030, DOE's analysis maintained that market share
throughout the remainder of the forecast period. DOE estimated that an
expanded program of voluntary energy efficiency targets would be
expected to provide 0.02 quads of national energy savings, 24 billion
gallons of national water savings, and an NPV of $0.06 billion (at a 7-
percent discount rate). Although this program would provide national
benefits, they were estimated to be smaller than the benefits resulting
from today's proposed national performance standards. Thus, DOE
rejected the use of voluntary energy efficiency targets as a policy
alternative to national performance standards.
---------------------------------------------------------------------------
\49\ Data were not available on the market impacts of the CCW
program.
\50\ Sanchez et al., op. cit.
---------------------------------------------------------------------------
DOE did not analyze the potential impacts of voluntary energy
efficiency targets for front-loading CCWs because a vast majority of
equipment already meets today's proposed standards. In the case of
front-loading CCWs, over 96 percent of the market meets TSL 3. The
ENERGY STAR program typically targets equipment where a maximum of
approximately 25 percent of the existing market meets the target
efficiency level.\51\ Since the market for front-loading CCWs is well
above the 25 percent threshold, DOE did not consider this approach for
this equipment class.
---------------------------------------------------------------------------
\51\ Sanchez, M. and A. Fanara, ``New Product Development: The
Pipeline for Future ENERGY STAR Growth,'' Proceedings of the 2000
ACEEE Summer Study on Energy Efficiency in Buildings (2000) Vol 6,
pp 343-354.
---------------------------------------------------------------------------
Early Replacement. The early replacement policy alternative
envisions a program to replace old, inefficient units with models
meeting efficiency levels higher than baseline equipment. Under an
early replacement program, State governments or electric and gas
utilities would provide financial incentives to consumers to retire the
appliance early in order to hasten the adoption of more efficient
equipment. For all of the considered equipment,
[[Page 57797]]
DOE modeled this policy by applying a 4-percent increase in the
replacement rate above the natural rate of replacement for failed
equipment. DOE based this percentage increase on program experience
with the early replacement of appliances in the State of
Connecticut.\52\ DOE assumed the program would continue for as long as
it would take to ensure that the eligible existing stock in the year
that the program began (2013) was completely replaced.
---------------------------------------------------------------------------
\52\ Nexus.and RLW Analytics, Impact, Process, and Market Study
of the Connecticut Appliance Retirement Program: Overall Report,
Final. (Submitted to Northeast Utilities--Connecticut Light and
Power and the United Illuminating Company by Nexus Market Research,
Inc. and RLW Analytics, Inc.) (2005).
---------------------------------------------------------------------------
For CCWs, this policy alternative would replace old, inefficient
top-loading and front-loading units with models meeting the efficiency
levels in TSL 3. DOE estimated that such an early replacement program
would be expected to provide 0.01 quads of national energy savings, 9
billion gallons of national water savings, and an NPV of $0.11 billion
(at a 7-percent discount rate).
Although DOE estimated that the above early replacement programs
for CCWs would provide national benefits, they would be much smaller
than the benefits resulting from national performance standards. Thus,
DOE rejected early replacement incentives as a policy alternative to
national performance standards.
Bulk Government Purchases. Under this policy alternative, the
government sector would be encouraged to shift their purchases to
equipment that meets the target efficiency levels above baseline
levels. Aggregating public sector demand could provide a market signal
to manufacturers and vendors that some of their largest customers
sought suppliers with equipment that met an efficiency target at
favorable prices. This program also could induce ``market pull''
impacts through manufacturers and vendors achieving economies of scale
for high-efficiency equipment. Under such a program, DOE would assume
that Federal, State, and local government agencies would administer it.
At the Federal level, such a program would add more efficient equipment
for which the Federal Energy Management Program (FEMP) has energy
efficient procurement specifications.
For CCWs, this program would encourage the government sector to
shift its purchases to top-loading units that meet the efficiency
levels in TSL 3. DOE estimated that this policy would apply to multi-
family buildings that are government-owned. Based on a technology
review prepared for FEMP by Pacific Northwest National Laboratory
(PNNL), approximately 7000 CCWs (representing a 3.2 percent market
share) were purchased in the year 2000 for Federal buildings.\53\ Based
on research of the effectiveness of bulk government purchasing
programs, DOE estimated that the market share of more efficient CCWs in
Federally owned multi-family buildings would increase at a rate of 8
percent per year over a 10-year period (2013-2022) and remain at the
2022 level for the remainder of the forecast period. DOE estimated that
bulk government purchases would be expected to provide 0.003 quads of
national energy savings, 7 billion gallons of national water savings,
and an NPV of $0.02 billion (at a 7-percent discount rate), benefits
which would be much smaller than those estimated for today's proposed
national performance standards. Thus, DOE rejected bulk government
purchases as a policy alternative to national performance standards.
---------------------------------------------------------------------------
\53\ Pacific Northwest National Laboratory, Assessment of High-
Performance, Family-Sized Commercial Clothes Washers (DOE/EE-
0218)(2000).
---------------------------------------------------------------------------
DOE did not analyze the potential impacts of bulk government
purchases for front-loading CCWs because the vast majority of equipment
already meets today's proposed standards. In the case of front-loading
CCWs, over 96 percent of the market meets TSL 3. FEMP procurement
specifications typically promote equipment in the top 25 percent of the
existing equipment offerings in terms of efficiency. Since most of the
front-loading CCWs sold in the base case already comply with such
specifications, DOE was not able to consider this program as a source
of data for top-loading CCWs.
National Performance Standards (TSL 3). As indicated in the
paragraphs above, none of the alternatives DOE examined would save as
much energy as today's proposed energy conservation standards.
Therefore, DOE will adopt the efficiency levels listed in section V.C.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis 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 (Aug. 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of General Counsel's
Web site: http://www.gc.doe.gov.
DOE reviewed today's supplemental notice under the provisions of
the Regulatory Flexibility Act and the procedures and policies
published on February 19, 2003. 68 FR 7990. A regulatory flexibility
analysis examines the impact of the rule on small entities and
considers alternative ways of reducing negative impacts. DOE identified
producers of all equipment covered by this rulemaking that have
manufacturing facilities located within the United States. DOE then
looked at publicly available data and contacted manufacturers, where
needed, to determine if they meet the SBA's definition of a small
manufacturing facility.
For the manufacturers of equipment covered by this rulemaking, the
SBA has set two size thresholds that define which entities are ``small
businesses'' for the purposes of the statute. See http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf. Because
all CCW manufacturers also produce RCWs, limits for both categories are
presented in Table VI.2. DOE used these small business definitions to
determine whether any small entities would be required to comply with
the rule. (65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR
53533, 53544 (September 5, 2000) and codified at 13 CFR part 121.) The
size standards are listed by NAICS code and industry description.
[[Page 57798]]
Table VI.2--SBA and NAICS Classification of Small Businesses Potentially Affected by This Rule
----------------------------------------------------------------------------------------------------------------
Industry description Revenue limit Employee limit NAICS
----------------------------------------------------------------------------------------------------------------
Residential Laundry Equipment Manufacturing..................... N/A 1,000 335224
Commercial Laundry Equipment Manufacturing...................... N/A 500 333312
----------------------------------------------------------------------------------------------------------------
The CCW industry consists of three principal competitors that make
up almost 100 percent of the market share. Two of them are high-volume,
diversified appliance manufacturers, while the third is a focused
laundry equipment manufacturer. Before issuing this SNOPR, DOE
interviewed all major CCW manufacturers. Because all CCW manufacturers
also make RCWs, DOE also considered whether a CCW manufacturer could be
considered a small business entity in that industry. None of the CCW
manufacturers fall into any small business category. As a result, DOE
certifies that today's SNOPR would not have a significant impact on a
substantial number of small entities and that a regulatory flexibility
analysis is not required.
C. Review Under the Paperwork Reduction Act
DOE stated in the October 2008 NOPR that this rulemaking would
impose no new information and recordkeeping requirements, and that OMB
clearance is not required under the Paperwork Reduction Act (44 U.S.C.
3501 et seq.). 73 FR 62034, 62130 (Oct. 17, 2008). DOE received no
comments on this in response to the October 2008 NOPR. Therefore, for
today's supplemental notice DOE has concluded that Office of Management
and Budget clearance is not required under the PRA.
D. Review Under the National Environmental Policy Act
DOE has prepared a draft environmental assessment (EA) of the
impacts of the supplemental notice pursuant to the National
Environmental Policy Act of 1969 (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 National
Environmental Policy Act (10 CFR part 1021). This assessment includes
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. The draft EA has been
incorporated into the TSD; the environmental impact analyses are
contained primarily in chapter 16 of that document. Before issuing a
final rule for CCWs, DOE will consider public comments and, as
appropriate, determine whether to issue a finding of no significant
impact as part of a final EA or to prepare an environmental impact
statement (EIS) for this rulemaking.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have Federalism
implications. The Executive Order requires agencies to examine the
constitutional and statutory authority supporting any action that would
limit the policymaking discretion of the States and to carefully assess
the necessity for such actions. The Executive Order also requires
agencies to have an accountable process to ensure meaningful and timely
input by State and local officials in the development of regulatory
policies that have Federalism implications. On March 14, 2000, DOE
published a statement of policy describing the intergovernmental
consultation process it will follow in the development of such
regulations. 65 FR 13735. DOE has examined today's supplemental notice
and has determined that it would not have a substantial direct effect
on the States, on the relationship between the national government and
the States, or on the distribution of power and responsibilities among
the various levels of government. EPCA governs and prescribes Federal
preemption of State regulations as to energy conservation for the
equipment that is the subject of today's supplemental notice. States
can petition DOE for exemption from such preemption to the extent, and
based on criteria, set forth in EPCA. (42 U.S.C. 6297(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 (Feb. 7, 1996)) imposes on Federal
agencies the general duty to adhere to the following requirements: (1)
Eliminate drafting errors and ambiguity; (2) write regulations to
minimize litigation; and (3) provide a clear legal standard for
affected conduct rather than a general standard and promote
simplification and burden reduction. 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, to the extent
permitted by law, today's supplemental notice meets the relevant
standards of Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
DOE reviewed this regulatory action under title II of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4) (UMRA), which 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 for inflation), section 202 of UMRA requires an agency
to publish a written statement assessing the costs, benefits, and other
effects of the rule on the national economy. (2 U.S.C. 1532(a), (b))
The UMRA also requires a Federal agency to develop an effective process
to permit timely input by elected officers of State, local, and Tribal
governments on a 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
[[Page 57799]]
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). Although today's
supplemental notice does not contain a Federal intergovernmental
mandate, it may impose expenditures of $100 million or more on the
private sector, although DOE believes such expenditures are likely to
be less than $50 million.
Section 202 of UMRA authorizes an agency to respond to the content
requirements of UMRA in any other statement or analysis that
accompanies the supplemental notice. 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 supplemental notice and the
``Regulatory Impact Analysis'' section of the SNOPR 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 42 U.S.C. 6295(h) and (o), 6313(e), and 6316(a),
today's supplemental notice would establish energy conservation
standards for CCWs 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'' section of the TSD for today's supplemental notice.
H. Review Under the Treasury and General Government Appropriations Act,
1999
DOE determined that, for this rulemaking, it need not prepare a
Family Policymaking Assessment under section 654 of the Treasury and
General Government Appropriations Act, 1999 (Pub. L. 105-277). Id. DOE
received no comments concerning section 654 in response to the October
2008 NOPR, and, therefore, takes no further action in today's
supplemental notice with respect to this provision.
I. Review Under Executive Order 12630
DOE determined, under Executive Order 12630, ``Governmental Actions
and Interference with Constitutionally Protected Property Rights,'' 53
FR 8859 (March 18, 1988), that the October 2008 NOPR would not result
in any takings which might require compensation under the Fifth
Amendment to the U.S. Constitution. 73 FR 62034, 62131 (Oct. 17, 2008).
DOE received no comments concerning Executive Order 12630 in response
to the October 2008 NOPR, and, today's supplemental notice, which
adopts no new requirements, also would not result in any takings which
might require compensation under the Fifth Amendment. Therefore, DOE
takes no further action in today's supplemental notice with respect to
this Executive Order.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516 note) provides for 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 guidelines were published at 67 FR 8452 (Feb. 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE
has reviewed this 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 the
OIRA a Statement of Energy Effects for any significant energy action.
For the October 2008 NOPR, DOE determined that the proposed rule, which
set energy conservation standards for commercial clothes washers, was
not a ``significant energy action'' within the meaning of Executive
Order 13211. 73 FR 62034, 62132 (Oct. 17, 2008). The rule was also not
designated as such by OIRA. Accordingly, it did not prepare a Statement
of Energy Effects on that proposed rule. DOE received no comments on
this issue in response to the October 2008 NOPR. As with the October
2008 NOPR, DOE has concluded that today's supplemental notice is not a
significant energy action within the meaning of Executive Order 13211,
and OIRA has not designated the rule as such. As a result, DOE has not
prepared a Statement of Energy Effects on the rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, the OMB, in consultation with the Office of
Science and Technology, issued its Final Information Quality Bulletin
for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 2005). The purpose
of the Bulletin is to enhance the quality and credibility of the
Government's scientific information. The Bulletin establishes that
certain scientific information shall be peer reviewed by qualified
specialists before it is disseminated by the Federal Government. As
indicated in the October 2008 NOPR, this includes influential
scientific information related to agency regulatory actions, such as
the analyses in this rulemaking. 73 FR 62034, 62132 (Oct. 17, 2008).
As more fully set forth in the October 2008 NOPR, DOE held formal
in-progress peer reviews of the types of analyses and processes that
DOE has used to develop the energy conservation standards in today's
supplemental notice, and issued a report on these peer reviews. Id.
VII. Public Participation
A. Attendance at Public Meeting
DOE will hold a public meeting on November 16, 2009 from 9 a.m.
until 5 p.m., in Washington, DC. The public meeting will be held at
Room 1E-245. To attend the public meeting, please notify Ms. Brenda
Edwards at (202) 586-2945 or [email protected]. 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 this 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.
Such persons may hand-deliver requests to speak, along with a compact
disc (CD) in WordPerfect, Microsoft Word, PDF, or text (ASCII) file
format to the address shown in the
[[Page 57800]]
ADDRESSES section at the beginning of this SNOPR between the hours of 9
a.m. and 4 p.m., Monday through Friday, except Federal holidays.
Requests may also be sent by mail or e-mail to:
[email protected].
Persons requesting to speak should briefly describe the nature of
their interest in this rulemaking and provide a telephone number for
contact. DOE requests persons scheduled to be heard to submit an
advance copy of their statements at least two weeks before the public
meeting. At its discretion, DOE may permit any person who cannot supply
an advance copy of their statement to participate, if that person has
made advance alternative arrangements with the Building Technologies
Program. The request to give an oral presentation should ask for such
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 section 336 of EPCA, 42 U.S.C.
6306. A court reporter will be present to record the proceedings and
prepare a transcript. 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 on the proceedings as well as on any aspect of
the 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 the discussion of specific topics. 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 this 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 the proper conduct of the public meeting.
DOE will make the entire record of this proposed rulemaking,
including the transcript from the public meeting, available for
inspection at the U.S. Department of Energy, Resource Room of the
Building Technologies Program, 950 L'Enfant Plaza, SW., Suite 600,
Washington, DC, 20024, (202) 586-2945, between 9 a.m. and 4 p.m.,
Monday through Friday, except Federal holidays. Any person may buy a
copy of the transcript from the transcribing reporter.
D. Submission of Comments
DOE will accept comments, data, and information regarding the
proposed rule before or after the public meeting, but no later than the
date provided at the beginning of this SNOPR. Information submitted
should be identified by docket number EE-2006-STD-0127 and/or RIN 1904-
AB93. Comments, data, and information submitted to DOE's e-mail address
for this rulemaking should be provided in WordPerfect, Microsoft Word,
PDF, or text (ASCII) file format. Interested parties should avoid the
use of special characters or any form of encryption and, wherever
possible, comments should carry the electronic signature of the author.
Comments, data, and information submitted to DOE via mail or hand
delivery/courier should include one signed original paper copy. No
telefacsimiles (faxes) will be accepted.
Pursuant to 10 CFR 1004.11, any person submitting information that
he or she believes to be confidential and exempt by law from public
disclosure should submit two copies: One copy of the document including
all the information believed to be confidential, and one 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 public interest.
E. Issues on Which DOE Seeks Comment
DOE is particularly interested in receiving comments and views of
interested parties concerning:
(1) Whether the method of ``loading'' clothes washers, or any other
characteristic commonly associated with traditional ``top-loading'' or
``front-loading'' clothes washers, are ``features'' within the meaning
of 42 U.S.C. 6295(o)(4) in EPCA and whether the availability of such
feature(s) would likely be affected by eliminating the separate classes
for these equipment types previously established by DOE;
(2) The revised efficiency levels, including the revised max-tech
level for top-loading CCWs;
(3) Technological feasibility of the proposed max-tech CCW,
including washing and rinsing performance measures for CCWs and
population data for water heating CCWs;
(4) The determination of short- and long-run price elasticities of
demand and cross price elasticities for top-loading vs. front-loading
CCWs and used vs. front-loading CCWs;
(5) The determination of manufacturer impacts, including the
effects of manufacturer tax credits and competitive concerns;
(6) The determination of environmental impacts; and
(7) The newly proposed energy conservation standards.
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 430
Administrative practice and procedure, Energy conservation,
Household appliances.
Issued in Washington, DC, on October 27, 2009.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and Renewable Energy.
For the reasons stated in the preamble, chapter II, subchapter D,
of title 10 of the Code of Federal Regulations, part 431 is proposed to
be amended to read as set forth below:
[[Page 57801]]
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. Section 431.156 of subpart I is revised to read as follows:
Sec. 431.156 Energy and water conservation standards and effective
dates.
Each CCW manufactured on or after [INSERT DATE 3 YEARS AFTER FINAL
RULE FEDERAL REGISTER PUBLICATION], shall have a modified energy factor
no less than and a water factor no greater than:
------------------------------------------------------------------------
Modified
energy Water
Equipment class factor (cu. factor
ft./kWh/ (gal./cu.
cycle) ft./cycle)
------------------------------------------------------------------------
Top-Loading................................... 1.60 8.5
Front-Loading................................. 2.00 5.5
------------------------------------------------------------------------
[The following letter from the Department of Justice will not
appear in the Code of Federal Regulations.]
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