Energy Conservation Program for Consumer Products: Energy Conservation Standards for Hearth Products

Federal RegisterFeb 9, 2015

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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2014-BT-STD-0036]

RIN 1904-AD35

Energy Conservation Program for Consumer Products: Energy Conservation Standards for Hearth Products

AGENCY:

Office of Energy Efficiency and Renewable Energy, Department of Energy.

ACTION:

Notice of proposed rulemaking and announcement of public meeting.

SUMMARY:

The Energy Policy and Conservation Act of 1975 (EPCA), as amended, sets forth various provisions designed to improve energy efficiency for consumer products and certain commercial and industrial equipment. In addition to specifying a list of covered residential products and commercial equipment, EPCA contains provisions that enable the Secretary of Energy to classify additional types of consumer products as covered products. The U.S. Department of Energy (DOE) has previously published a proposed determination of coverage to classify gas-fired hearth products as covered consumer products under the applicable provisions in EPCA. In this document, DOE proposes an energy conservation standard for hearth products following its notice of proposed coverage determination. This proposed rule also announces a public meeting to receive comment on the proposed standard and associated analyses and results.

DATES:

Comments:

DOE will accept comments, data, and information regarding this notice of proposed rulemaking (NOPR) before and after the public meeting, but no later than April 10, 2015. See section VII, “Public Participation,” for details.

Meeting:

DOE will hold a public meeting on Wednesday, March 23, 2015, from 9 a.m. to 4 p.m., in Washington, DC. The meeting will also be broadcast as a webinar. See section VII, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.

ADDRESSES:

The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW., Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at (202) 586-2945. Please note that foreign nationals visiting DOE Headquarters are subject to advance security screening procedures. Any foreign national wishing to participate in the meeting should advise DOE as soon as possible by contacting Ms. Edwards at the phone number above to initiate the necessary procedures. Please also note that any person wishing to bring a laptop computer or tablet into the Forrestal Building will be required to obtain a property pass. Visitors should avoid bringing laptops, or allow an extra 45 minutes. Persons may also attend the public meeting via webinar. For more information, refer to section VII, “Public Participation,” near the end of this notice.

Instructions:

Any comments submitted must identify the NOPR for Energy Conservation Standards for Hearth Products, and provide docket number EERE-2014-BT-STD-0036 and/or regulatory information number (RIN) number 1904-AD35. Comments may be submitted using any of the following methods:

Federal eRulemaking Portal: www.regulations.gov.

Follow the instructions for submitting comments.

Email: HearthHeatingProd2014STD0036@ee.doe.gov.

Include the docket number and/or RIN in the subject line of the message. Submit electronic comments in Word Perfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form on encryption.

Postal Mail:

Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC, 20585-0121. If possible, please submit all items on a compact disc (CD), in which case it is not necessary to include printed copies.

Hand Delivery/Courier:

Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Office, 950 L'Enfant Plaza, SW., Suite 600, Washington, DC, 20024. Telephone: (202) 586-2945. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule may be submitted to Office of Energy Efficiency and Renewable Energy through the methods listed above and by email to

Chad_S_Whiteman@omb.eop.gov.

No telefacsimilies (faxes) will be accepted. For detailed instructions on submitting comments and additional information on the rulemaking process, see section VII of this document (Public Participation).

Docket:

The docket, which will include all relevant

Federal Register

notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at

www.regulations.gov.

All documents in the docket are listed in the

www.regulations.gov

index. However, some documents listed in the index may not be publically available, such as those containing information that is exempt from public disclosure.

A link to the docket Web page can be found at:

http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=84

. This Web page contains a link to the docket for this notice on the

www.regulations.gov

site. The

www.regulations.gov

Web page contains simple instructions on how to access all documents, including public comments, in the docket. See section VII, “Public Participation,” for further information on how to submit comments through

www.regulations.gov.

For further information on how to submit a comment, review other public comments and the docket, or participate in the public meeting, contact Ms. Brenda Edwards at (202) 586-2945 or by email:

Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT:

Mr. John Cymbalsky, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, DC, 20585-0121. Telephone: (202) 287-1692. Email:

HearthHeatingProd2014STD0036@ee.doe.gov.

Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 5869507. Email:

Eric.Stas@hq.doe.gov.

For information on how to submit or review public comments, contact Ms. Brenda Edwards at (202) 586-2945 or by email:

Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Proposed Rule

A. Benefits and Costs to Consumers

B. Impact on Manufacturers

C. National Benefits and Costs

D. Conclusion

II. Introduction

A. Authority

B. Background

III. General Discussion

A. Scope of Coverage

B. Prescriptive Requirement for Standby Mode

C. Product Classes

D. Test Procedure

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. Savings in Operating Costs Compared to Increase in Price (LCC and PBP)

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Any Lessening of Competition

f. Need for National Energy Conservation

g. Other Factors

2. Rebuttable Presumption

H. Compliance Date

I. Standby Mode and Off Mode

IV. Methodology

A. Market and Technology Assessment

1. Consideration of Products for Inclusion in This Rulemaking

2. Product Classes

3. Technology Assessment

B. Screening Analysis

C. Engineering Analysis

1. Representative Products for Analysis

2. Design Options Analyzed

3. Cost-Assessment Methodology

a. Teardown Analysis

b. Cost Model

c. Manufacturing Production Cost

d. Cost Comparison

e. Manufacturer Markups

f. Manufacturer Interviews

4. Results

D. Markups Analysis

E. Energy Use Analysis

F. Life-Cycle Cost and Payback Period Analysis

1. Installed Cost

2. Inputs to Operating Costs

a. Energy Consumption

b. Energy Prices

c. Maintenance and Repair Costs

d. Product Lifetime

e. Discount Rates

f. Base-Case Efficiency Distribution

3. Inputs to Payback Period Analysis

G. Shipments Analysis

H. National Impact Analysis

1. National Energy Savings

2. Net Present Value of Consumer Benefit

I. Consumer Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model

a. Government Regulatory Impact Model Key Inputs

b. Government Regulatory Impact Model Scenarios

c. Manufacturer Interviews

K. Emissions Analysis

L. Monetizing Carbon Dioxide and Other Emissions Impacts

1. Social Cost of Carbon

2. Valuation of Other Emissions Reductions

M. Utility Impact Analysis

N. Employment Impact Analysis

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period

b. Consumer Subgroup Analysis

c. Rebuttable Presumption Payback Period

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results

b. Direct Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Subgroups of Manufacturers

e. Cumulative Regulatory Burden

3. National Impact Analysis

a. Significance of Energy Savings

b. Net Present Value of Consumer Costs and Benefits

c. Indirect Impacts on Employment

4. Impact on Product Utility or Performance

5. Impact of Any Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors

8. Summary of National Economic Impacts

C. Proposed Standard

1. Benefits and Burdens of the Trial Standard Level Considered for Hearth Products

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

H. Review Under the Treasury and General Government Appropriations Act, 1999

I. Review Under Executive Order 12630

J. Review Under the Treasury and General Government Appropriations Act, 2001

K. Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

VII. Public Participation

A. Attendance at the Public Meeting

B. Procedure for Submitting Requests To Speak and Prepared General Statements for Distribution

C. Conduct of the 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

Title III, Part B

of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified), established the Energy Conservation Program for Consumer Products Other Than Automobiles.

In addition to specifying a list of covered residential products and commercial equipment, EPCA contains provisions that enable the Secretary of Energy to classify additional types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) In a proposed determination of coverage published in the

Federal Register

on December 31, 2013, DOE proposed to classify hearth products as covered consumer products under EPCA. 78 FR 79638.

For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A.

All references to EPCA in this document refer to the statute as amended through the American Energy Manufacturing Technical Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).

Pursuant to EPCA, any new or amended energy conservation 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)) Furthermore, the new or amended standard must result in a significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) The statute also provides that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including new proposed energy conservation standards. (42 U.S.C. 6295(m)(1))

In accordance with these and other statutory provisions discussed in this notice, DOE proposes a new energy conservation standard for hearth products. The proposed standard is a prescriptive design requirement for standby mode operation that would disallow the use of continuously-burning pilots (

i.e.,

“standing pilots” or “constant-burning pilots”) in hearth products. The proposed standard, if adopted, would apply to all hearth products, as defined in section IV.A, that are manufactured in, or imported into, the United States on and after the date 5 years after the publication of the final rule for this rulemaking. The proposed design standard would eliminate all standby mode gas consumption for hearth products as defined in the proposed determination rulemaking (78 FR 79638). DOE considered a combination of factors in developing its proposal to disallow continuously burning pilot lights, rather than other possibilities such as proposing to regulate active mode energy consumption with a performance standard or other prescriptive requirements. The rationale for this tentative decision to focus on standby mode energy consumption by the standing pilot is further explained in section III.B of this NOPR.

A. Benefits and Costs to Consumers

Table I.1 presents DOE's evaluation of the economic impacts of the proposed standard on consumers of hearth products, as measured by the average life-cycle cost (LCC) savings and the simple payback period (PBP).

The average LCC savings to consumers are positive and estimated at $165 over the lifetime of the average hearth product, and the PBP is estimated at 2.9 years, which is below the average hearth product lifetime of approximately 15 years.

As noted above, these impacts result from the removal of a continuously-burning pilot in units that would otherwise have them, which reduces the standby mode fossil fuel energy consumption of hearth products.

The average LCC savings are measured relative to the base-case efficiency distribution, which depicts the hearth product market in the compliance year (see section III.H). The simple PBP, which is designed to compare specific hearth product efficiency levels, is measured relative to the baseline (see section IV.C.1).

See section IV.F.2.d for the derivation of the average hearth product lifetime.

Impacts of match-lit hearth products were not included in the analysis. For more details, see section IV.A.1.

Table I.1—Impacts of Proposed Hearth Product Energy Conservation Standard on Consumers of Hearth Products

Product

Simple

average

LCC

savings

2013$

Simple

payback

period

years

Hearth Products

165

2.9

B. Impact on Manufacturers

The industry net present value (INPV) is the sum of the discounted cash flows for the industry from the base year through the end of the analysis period (2014 to 2050). Using a real discount rate of 8.7 percent, DOE estimates that the base case INPV for manufacturers of gas hearth products is $125.3 million in 2013$.

Under the proposed design standard, DOE expects that INPV impacts may range from a loss of 2.6 percent of INPV to a gain of 0.4 percent.

All monetary values in this document are expressed in 2013 dollars; discounted values are discounted to 2014 unless explicitly stated otherwise.

C. National Benefits and Costs

DOE's analyses indicate that the proposed energy conservation standard for hearth products would save a significant amount of energy in the form of reduced natural gas consumption during stand-by mode. The lifetime energy savings for hearth products purchased in the 30-year period that begins in the first full year of compliance with an amended standard (2021-2050), relative to the base case without amended standards, amount to 0.69 quads

of full-fuel-cycle (FFC) energy.

This represents a savings of about 77 percent relative to the energy use of the hearth product ignition systems in the base case, which reflects the existing market share of electronic ignition systems.

A quad is equal to 10

British thermal units (Btu).

The reported savings are net savings after accounting for the slight increase in electricity use resulting from the proposed standard.

The cumulative net present value (NPV) of total consumer costs and savings for the proposed hearth products standard ranges from $1.03 billion to $3.12 billion at 7-percent and 3-percent discount rates, respectively. This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product costs for hearth products purchased in 2021-2050.

In addition, the proposed hearth products standard would have significant environmental benefits. The energy savings described above are expected to result in cumulative emission reductions of 37.0 million metric tons (Mt)

of carbon dioxide (CO

), 486 thousand tons of methane (CH

), 125 thousand tons of nitrogen oxides (NO

), and 0.01 thousand tons of nitrous oxide (N

O).

Projected emissions show an increase of 4.26 thousand tons of sulfur dioxide (SO

) and 0.01 tons of mercury (Hg) due to higher electricity use associated with the shift to electronic ignition in the subject hearth products.

The cumulative reduction in CO

emissions through 2030 amounts to 11.1 Mt, which is equivalent to the emissions resulting from the annual electricity use of 1.5 million homes.

A metric ton is equivalent to 1.1 short tons. Results for emissions other than CO

are presented in short tons.

The emissions reductions primarily concern reduction in combustion emissions from standing pilots. DOE calculated emissions reductions relative to the

Annual Energy Outlook 2014

(

AEO 2014

) Reference case, which generally represents current legislation and environmental regulations, including recent government actions for which implementing regulations were available as of October 31, 2013. The impacts on mercury emissions are expected to be negligible.

DOE calculated power sector emissions impacts relative to the

Annual Energy Outlook 2014

(

AEO 2014

Environmental Protection Agency. EPA GHG calculator (Last Accessed; December 23, 2014) (Available at:

http://www.epa.gov/cleanenergy/energy-resources/calculator.html#results

The value of the CO

reduction is calculated using a range of values per metric ton of CO

(otherwise known as the Social Cost of Carbon, or SCC) developed by a recent Federal interagency process.

The derivation of the SCC values is discussed in section IV.L. Using discount rates appropriate for each set of SCC values (see Table I.2), DOE estimates the present monetary value of the CO

emissions reduction is between $0.2 billion and $3.4 billion, with a value of $1.1 billion using the central SCC case represented by $40.5/t in 2015. Additionally, DOE estimates the present monetary value of the NO

emissions reduction to be $0.06 billion to $0.15 billion at 7-percent and 3-percent discount rates, respectively.

Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866,

Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised November 2013) (Available at:

http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).

DOE is investigating valuation of avoided Hg and SO

emissions.

Table 1.2 summarizes the national economic benefits and costs expected to result from the proposed standard for hearth products.

Table I.2—Summary of National Economic Benefits and Costs of Proposed Energy Conservation Standard for Hearth Products (TSL 1)*

Category

Present value

Billion 2013$

Discount rate

Benefits

Consumer Operating Cost Savings

1.536

4.128

Reduction Monetized Value ($12.0/t case) **

0.226

Reduction Monetized Value ($40.5/t case) **

1.098

Reduction Monetized Value ($62.4/t case) **

1.763

2.5

Reduction Monetized Value ($119/t case) **

3.405

3 (95th percentile)

Reduction Monetized Value (at $2,684/ton) **

0.058

0.148

Total Benefits †

2.693

5.373

Costs

Consumer Incremental Installed Costs

0.505

1.004

Total Net Benefits

Including Emissions Reduction Monetized Value †

2.187

4.369

* This table presents the costs and benefits associated with hearth products shipped in 2021-2050. These results include benefits to consumers that accrue after 2050 from the products purchased in 2021-2050. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule.

** The CO

values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NO

is the average of high and low values found in the literature.

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with a 3-percent discount rate ($40.5/t in 2015).

The benefits and costs of today's proposed energy conservation standard, for hearth products sold in 2021-2050, can also be expressed in terms of annualized values. The annualized monetary values are the sum of: (1) The annualized national economic value of the benefits from consumer operation of products that meet the proposed new or amended standards (consisting primarily of operating cost savings from using less energy, minus increases in product purchase and installation costs, which is another way of representing consumer NPV), and (2) the annualized monetary value of the benefits of emission reductions, including CO

emission reductions.

To convert the time-series of costs and benefits into annualized values, DOE calculated a present value in 2014, the year used for discounting the NPV of total consumer costs and savings. For the benefits, DOE calculated a present value associated with each year's shipments in the year in which the shipments occur (2020, 2030,

etc.

), and then discounted the present value from each year to 2014. The calculation uses discount rates of 3 and 7 percent for all costs and benefits except for the value of CO

reductions, for which DOE used case-specific discount rates. Using the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in the compliance year that yields the same present value.

Although combining the values of operating savings and CO

emission reductions provides a useful perspective, two issues should be considered. First, the national operating savings are domestic U.S. consumer monetary savings that occur as a result of market transactions, whereas the value of CO

reductions is based on a global value. Second, the assessments of operating cost savings and CO

savings are performed with different methods that use different time frames for analysis. The national operating cost savings is measured for the lifetime of hearth products shipped in 2021-2050. The SCC values, on the other hand, reflect the present value of some future climate-related impacts resulting from the emission of one ton of carbon dioxide in each year. These impacts continue well beyond 2100.

Estimates of annualized benefits and costs of the proposed standard are shown in Table I.3. The results under the primary estimate are as follows. Using a 7-percent discount rate for benefits and costs other than CO

reduction (for which DOE used a 3-percent discount rate along with the average SCC series that uses a 3-percent discount rate ($40.5/t in 2015)), the cost of the hearth products standards proposed in this rule is $61.1 million per year in increased equipment costs, while the estimated benefits are $186 million per year in reduced equipment operating costs, $67 million per year in CO

reductions, and $7.0 million per year in reduced NO

emissions. In this case, the net benefit would amount to $199 million per year. Using a 3-percent discount rate for all benefits and costs and the average SCC series that uses a 3-percent discount rate ($40.5/t in 2015), the estimated cost of the hearth products standards proposed in this rule is $61.2 million per year in increased equipment costs, while the estimated benefits are $251 million per year in reduced equipment operating costs, $67 million per year in CO

reductions, and $9.0 million per year in reduced NO

emissions. In this case, the net benefit would amount to $266 million per year.

Table I.3—Annualized Benefits and Costs of Proposed Energy Conservation Standards for Hearth Products (TSL 1)

Discount rate

Primary

estimate *

Low net benefits

estimate *

High net benefits

estimate *

million 2013$/year

Benefits

Consumer Operating Cost Savings

186

251

175

235

195.

265.

Reduction Monetized Value ($12.0/t case) **

20.

Reduction Monetized Value ($40.5/t case) **

67.

Reduction Monetized Value ($62.4/t case) **

2.50%

98.

Reduction Monetized Value ($119/t case) **

207

207.

Reduction Monetized Value (at $2,684/ton) **

7.00

8.99

7.00

8.99

7.00.

8.99.

Total Benefits †

7% plus CO

range

212 to 400

202 to 389

222 to 410.

260

249

269.

3% plus CO

range

280 to 468

264 to 452

294 to 482.

327

311

341.

Costs

Consumer Incremental Equipment Costs

61.1

61.2

61.1

61.2

61.1.

61.2.

Net Benefits

Total †

7% plus CO

range

151 to 339

141 to 328

161 to 349.

199

188

208.

3% plus CO

range

219 to 407

203 to 390

233 to 420.

266

250

280.

* This table presents the annualized costs and benefits associated with hearth products shipped in 2021-2050. These results include benefits to consumers that accrue after 2050 from the products purchased in 2021-2050. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Net Impacts, and High Net Impacts Estimates utilize projections of energy prices from the

AEO 2014

Reference case, Low Estimate, and High Estimate, respectively. Incremental product costs are the same for each Estimate.

** The CO

is the average of high and low values found in the literature.

† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.5/t in 2015). In the rows labeled “7% plus CO

range” and “3% plus CO

range,” the operating cost and NO

benefits are calculated using the labeled discount rate, and those values are added to the full range of CO

values.

D. Conclusion

DOE has tentatively concluded that the proposed standard represents the maximum improvement in energy efficiency that is technologically feasible and economically justified, and would result in significant conservation of energy. DOE further notes that products achieving the proposed standard are already commercially available. Based on the analyses described previously, DOE has tentatively concluded that the benefits of the proposed standards to the Nation (energy savings, positive NPV of consumer benefits, consumer LCC savings, and emission reductions) would outweigh the burdens (loss of INPV for manufacturers and LCC increases for some consumers).

Based on consideration of the public comments DOE receives in response to this notice and related information collected and analyzed during the course of this rulemaking, DOE may adopt the standard proposed in this notice, or some combination of options that incorporate the proposed standard in part.

II. Introduction

The following section briefly discusses the statutory authority underlying today's proposal, as well as some of the relevant historical background related to the establishment of standards for hearth products.

A. Authority

Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified) established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program designed to improve energy efficiency for consumer products and certain commercial and industrial equipment. In addition to specifying a list of covered residential products and commercial equipment, EPCA, as amended, contains provisions that enable the Secretary of Energy to classify additional types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) Specifically, for a given product to be classified as a covered product, the Secretary must determine that:

(A) Classifying the product as a covered product is necessary or appropriate for the purposes of carrying out EPCA; and

(B) The average annual per-household energy use by products of such type is

likely to exceed 100 kilowatt-hours (or its Btu equivalent) per year.

(42 U.S.C. 6292(b)(1)(A) and (B))

For the Secretary to prescribe an energy conservation standard pursuant to 42 U.S.C. 6295(o) and (p) for covered products added pursuant to 42 U.S.C. 6292(a)(20) and (b)(1), the Secretary must also determine that:

(A) The average household energy use of the type (or class) of products has exceeded 150 kWh (or its Btu equivalent) per household for any 12-month period;

(B) The aggregate 12-month household energy use of the type (or class) of products has exceeded 4.2 TWh;

(D) Application of a labeling rule under 42 U.S.C. 6294 is unlikely to be sufficient to induce manufacturers to produce, and consumers and other persons to purchase, covered products of such type (or class) that achieve the maximum energy efficiency that is technologically feasible and economically justified.

(42 U.S.C. 6295(l)(1)(A)-(D))

DOE notes that a drafting error arose at the time Congress adopted the amendments to EPCA contained in the Energy Independence and Security Act of 2007 (EISA 2007), Public Law 110-140. As part of the EISA 2007 amendments, Congress added metal halide lamp fixtures to the list of specifically enumerated covered products at 42 U.S.C. 6292(a)(19) and shifted the provision for the Secretary to classify “any other type” of a consumer product as a covered product to 42 U.S.C. 6292(a)(20). However, Congress did not similarly amend the criteria and other requirements for setting energy conservation standards for “other” covered products in 42 U.S.C. 6295(l)(1) and (2). The provisions in 42 U.S.C. 6295(l) continued to refer to standards for “any type” of covered product, while continuing to refer to 42 U.S.C. 6292(a)(20). Clearly, the provisions at 42 U.S.C. 6295(l) were intended to apply more broadly than to metal halide lamp fixtures, so DOE continues to apply this provision as if the drafting error had not occurred. To do otherwise would render the provision at 42 U.S.C. 6295(l) a nullity, thereby thwarting DOE's ability to set energy conservation standards for newly covered products, an outcome which Congress could not have intended.

Pursuant to EPCA, DOE's energy conservation program for covered products consists essentially of four parts: (1) Testing; (2) labeling; (3) establishing Federal energy conservation standards; and (4) certification and enforcement procedures. The Federal Trade Commission (FTC) is primarily responsible for labeling, and DOE implements the remainder of the program.

DOE must follow specific statutory criteria for prescribing standards for covered products, including hearth products. As indicated previously, 42 U.S.C. 6295(o) and (p) contain specific criteria for establishing or amending energy conservation standards for covered products. Any new or amended standard for a covered product 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 (3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard: (1) For certain products, including hearth products, if no test procedure has been established for the product,

or (2) if DOE determines by rule that the proposed standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified, after receiving comments on the proposed standard, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination by, to the greatest extent practicable, considering the following seven factors:

As discussed in section III.D, DOE is not prescribing a test procedure because it is unnecessary for the prescriptive energy conservation standards that were considered for this NOPR.

(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;

(2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard;

(3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard;

(4) Any lessening of the utility or the performance of the covered products likely to result from the standard;

(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard;

(6) The need for national energy and water conservation; and

(7) Other factors the Secretary of Energy (Secretary) considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

EPCA, as codified, also contains what is known as an “anti-backsliding” provision, which prevents 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. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of evidence that the standard is likely to result in the unavailability in the United States of any covered product type (or class) with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4))

Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))

Additionally, 42 U.S.C. 6295(q)(1) specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. DOE must specify a different standard level for a type or class of covered product that has the same function or intended use, if DOE determines that products within such group: (A) Consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature that other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE must consider such factors as the utility to the consumer of the 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 may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions set forth under 42 U.S.C. 6297(d).

In addition, pursuant to other amendments contained in EISA 2007, any final rule for new or amended

energy conservation standards promulgated after July 1, 2010 is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B))

Finally, it is noted that under 42 U.S.C. 6295(m), the agency must periodically review established energy conservation standards for a covered product. Under this requirement, such review must be conducted no later than 6 years from the issuance of any final rule establishing or amending a standard for a covered product.

B. Background

DOE has not previously conducted an energy conservation standards rulemaking for hearth products. Consequently, there are currently no Federal energy conservation standards for hearth products.

On December 31, 2013, DOE published a notice of proposed determination (NOPD) of coverage to classify hearth products as covered products under EPCA. 78 FR 79638. In the proposed determination of coverage, DOE presented its preliminary findings relating to the energy use of hearth products to determine whether they could be classified as a type of covered product under the requirements of 42 U.S.C. 6292(b)(1)(A) and (B), and whether they would meet the criteria for DOE to prescribe an energy conservation standard under 42 U.S.C. 6295(l)(1)(A)-(D). (See section II.A for a discussion of these statutory criteria.) DOE also proposed to define a “hearth product” as “a gas-fired appliance that simulates a solid-fueled fireplace or presents a flame pattern (for aesthetics or other purpose) and that may provide space heating directly to the space in which it is installed.” 78 FR 79638, 79640 (Dec. 31, 2013). The proposed determination is still pending, but as discussed in section IV.A, DOE is using the proposed definition to delineate the scope of this NOPR. In addition, DOE has considered some of the comments submitted in response to the proposed coverage determination, which are relevant to the development of proposed energy conservation standards for hearth products and addresses those comments as applicable in this NOPR.

III. General Discussion

A. Scope of Coverage

In the December 2013 NOPD, DOE proposed to adopt a definition of hearth product that means a gas-fired appliance that simulates a solid-fueled fireplace or presents a flame pattern (for aesthetics or other purpose) and that may provide space heating directly to the space in which it is installed.

Based upon the scope arising from this proposed definition and after making the necessary energy use calculations, DOE tentatively determined that hearth products would meet the relevant statutory criteria so as to justify coverage as a consumer product under EPCA, and provided the relevant justifications in the notice. 78 FR 79638, 79640-41 (Dec. 31, 2013). In the December 2013 NOPD, DOE provided examples of several common hearth product types that would be covered under the proposed definition, including vented decorative hearth products, vented heater hearth products, vented gas logs, gas stoves, outdoor hearth products, and vent-less hearth products.

Id.

at 79640.

DOE used the definition proposed in the December 2013 NOPD (as stated above) to determine the scope of this NOPR.

In setting forth new energy conservation standards for any type of covered product, EPCA requires DOE to determine that: (1) The product consumes more than 150 kilowatt-hours (or its Btu equivalent) per household in any 12 month period occurring before such a determination; (2) the aggregate energy use within the United States was more than 4,200,000,000 kilowatt-hours (kWh) (or its Btu equivalent) in any 12 month period occurring before such a determination; (3) substantial improvement in energy efficiency for the products is technologically feasible; and (4) the application of labeling is not likely to be sufficient for manufacturers to produce or for consumers to purchase products that would achieve the maximum energy efficiency which is technologically feasible and economically justified. (42 U.S.C. 6295(l)(1)(A)-(D))

With regards to the first and second criteria, DOE has estimated the average household consumption to be 7.5 million Btu (equal to 2,198 kWh), and aggregate national energy use to be 95 trillion Btu (equal to 27,800,000,000 kWh) for currently-installed hearth products. (Details on these calculations can be found in chapter 7 of the NOPR TSD.) With regard to the third criterion, DOE found that several technologies are available to substantially improve the energy efficiency (or reduce the overall energy consumption) of hearth products in standby-mode. These technologies are discussed in section IV.C.2. Finally, with regard to the last criterion, DOE found through product literature review and manufacturer interviews that labeling is already often included in manuals that suggest users extinguish the pilot light when the product is not in use. However, for products such as those that include a millivolt gas valve, the user must allow the standing pilot to remain on so that the valve can be activated or deactivated by a thermostat or remote control. Further, regardless of instructions in the manual, DOE understands that a significant percentage of consumers allow the standing pilot light to burn year-round. DOE has, therefore, tentatively determined that the application of labeling is not sufficient to result in the maximum energy savings that would be technologically feasible and economically justified (

i.e.,

the savings achievable through the proposal presented, in this NOPR). In summary, DOE has tentatively determined that hearth products, under the proposed definition, meet all the criteria for establishing energy conservation standards under EPCA.

The purpose of this NOPR is to propose energy conservation standards for products that, together with the December 2013 proposed coverage determination, would establish coverage and energy conservation standards for hearth products. DOE has not previously conducted an energy conservation standards rulemaking for hearth products. If, after public comment, DOE issues a final determination of coverage for this type of product, DOE would consider adoption of the energy conservation standards for hearth products proposed in this NOPR.

DOE received several comments in response to the December 2013 NOPD that pertained to the definition and broad range of hearth product types. DOE notes that in general, these comments pertain to the determination of coverage process, not the energy conservation standards process, and so DOE will respond in full to these comments as part of the determination of coverage process. However, DOE acknowledges that certain comments on the December 2013 NOPD do have relevance for this NOPR and addresses them below and in section III.C in relevant part.

Multiple commenters in response to the December 2013 NOPD stated that the proposed definition for “hearth product” is too broad, and that a

reasonable energy conservation standard regulation could not be achieved for a definition that encompassed such a wide variety of products. (Hearth, Patio and Barbecue Association (HPBA), No. 5 at p. 6; National Propane Gas Association (NPGA), No. 7 at p. 2; RH Peterson, No. 8 at p. 2; Rasmussen, No. 9 at p. 2; Hearth & Home Technologies (HHT), No. 11 at p. 1; Empire, No. 12 at p. 1; Air-Conditioning, Heating, and Refrigeration Institute (AHRI), No. 15 at p. 2; Wolf Steel, No. 4 at p. 2; American Public Gas Association (APGA), No. 14 at p. 2) In response, DOE acknowledges that the hearth products market is broad and encompasses a wide range of products. DOE recognizes this as one product market and has proposed a definition accordingly. Nevertheless, DOE has chosen to conduct its analyses for this rulemaking using hearth product groups that have similar characteristics. For details about the physical characteristics of each product group for analysis, see chapter 5 of the NOPR TSD.

DOE seeks additional comment regarding its proposed definition for hearth products found in the December 2013 NOPD and this is identified as Issue 1 in section VII.E “Issues on Which DOE Seeks Comment.”

B. Prescriptive Requirement for Standby Mode

As discussed previously, this NOPR proposes to adopt a prescriptive design requirement that would reduce hearth product energy consumption in standby mode. This design requirement would not affect energy consumption or efficiency in active mode. EPCA defines “active mode” energy consumption as the condition in which an appliance is connected to a main power source, has been activated, and provides one or more main functions. (42 U.S.C. 6295(gg)(1)(A)(i)) DOE notes that when the main burner of a hearth product is off, the product can no longer be considered in active mode. EPCA defines “off mode” as the condition in which the product is connected to its main power source and is not providing any standby or active mode function. (42 U.S.C. 6295(gg)(1)(A)(ii)) DOE has tentatively concluded that this occurs for hearth products when the main burner is not lit and, for models with continuously-burning pilots, when the pilot light is not lit.

EPCA defines “standby mode” energy consumption as the condition in which an appliance is connected to a main power source (in this case natural gas or propane connection) and facilitates the activation of other modes (including active mode) by remote switch, internal sensor, or timer, or serves other continuous functions. (42 U.S.C. 6295(gg)(1)(A)(iii)) DOE notes that the standing pilot may serve several continuous functions. The continuous pilot may provide a safety function by proving gas is lit before opening the valve for the main burner. In the case of an unvented hearth product, the standing pilot provides a means for ensuring that oxygen levels in the room remain at a safe level through incorporation of an oxygen depletion sensor. In the case of a millivolt gas valve, a standing pilot facilitates activation of active mode using a remote control; this is accomplished by the pilot light heating a thermopile, which produces a voltage difference, thereby allowing use with electronic controls. Therefore, DOE has concluded that the standing pilot qualifies as standby mode energy use.

DOE estimated the average annual amount of energy consumed by the main burner and by the standing pilot for each hearth product group.

18, 19

These estimates can be found in Table III.1. Active mode operation may use fossil fuels more intensively, but standby mode uses fossil fuels over significantly more hours on an annual basis.

Description of the hearth product groups can be found in chapter 5 of the NOPR TSD.

These values are calculated as the main burner operating hours multiplied by the average input capacity and the standing pilot operating hours multiplied by the average pilot light input rate, respectively. The operating hours can be found in chapter 7 of the NOPR TSD.

Table III.1—Average Annual Energy Use in Active Mode (Main Burner) and Standby Mode (Standing Pilot)

Hearth product analysis group

Main

burner energy

consumption

(MMBtu/yr)

Standing

pilot energy

consumption

(MMBtu/yr)

Vented Fireplaces, Inserts, and Stoves

5.19

3.99

Unvented Fireplaces, Inserts, and Stoves

4.47

3.52

Vented Gas Log Sets

8.31

3.13

Unvented Gas Log Set

4.53

2.29

Outdoor

7.02

3.52

Weighted Average

5.28

3.54

As shown in Table III.1, the standing pilot energy consumption makes up a significant portion of the overall energy consumption for hearth products. Further, the energy savings that can be achieved through disallowing standing pilot lights is greater than the savings that could be achieved through increasing the active mode efficiency via a performance standard. An active mode performance standard would only partially reduce the active mode energy consumption, whereas a prescriptive requirement to remove the standing pilot could be applied to all hearth product types and would reduce the standing pilot energy consumption to zero.

DOE also considered whether a maximum energy use performance standard would be appropriate for hearth products in active mode. DOE recognizes that hearth products are available for a wide range of input capacities depending on the consumer's needs. In general, the gas input is proportional to the size of the hearth product. A performance standard for hearth products that establishes a maximum energy use would likely eliminate certain sizes of hearth products from the market and could negatively impact the utility of the product.

DOE considered several individual technologies that could potentially reduce the energy consumption of hearth products as discussed in section IV.A.3. All of the technology options identified, except for the electronic ignition, pertain to active mode energy use. Based on manufacturer feedback, DOE tentatively concluded that five of the technologies considered (air-to-fuel ratio, burner port design, simulated log design, burner pan media or bead type, and reflective combustion zone surfaces) would result in immeasurable

or negligible active mode energy savings. Two of the considered technologies—the circulating fan and the condensing heat exchanger—would only apply to a subset of hearth products. Also, these two technology options may only be implemented in those types of units that incorporate an enclosure to house the components (

i.e.,

they would not be applicable for gas log sets and certain types of outdoor hearths).

DOE has tentatively determined that all standby fossil fuel consumption would be eliminated by disallowing the use of standing pilots.

When turning on a gas hearth appliance, a pilot light is first ignited before gas flows to the main burner and is lighted. The pilot light generally may be constant-burning (“standing”) or intermittent. In the case of a standing pilot, the pilot light continues to consume gas even when the main burner is not consuming gas, unless the consumer chooses to shut off gas to the pilot as well.

See section III.I for discussion of electrical standby consumption for hearth products.

The standby mode operation and energy use of hearth products are functions of ignition type. Ignition types for all hearth products fall under three categories: (1) Match-lit; (2), constant-burning or “standing” pilot; and (3) electronic ignition. For match-lit ignition systems, in order to ignite the burner, the user must manually turn on the gas flow and light the main burner with a match, lighter, or other device. After use, the user should manually turn off the gas valve, thereby reducing the fuel flow to zero when the product is not in operation. Therefore, match-lit products do not consume energy when not in active mode. For products with electronic ignitions, the most common approach is an intermittent pilot ignition. In this system, upon a call for the burner to ignite (either from the user or a thermostat), a spark lights a pilot, which in turn ignites the main burner. When the main burner shuts off, the pilot also shuts off, and, thus, any energy use in standby mode is electrical. DOE has tentatively determined this electrical consumption is

de minimis.

For constant-burning pilots, the user must manually light the pilot each time it is extinguished, either manually with a match or through the use of a piezo-igniter. Then the pilot in turn lights the main burner. However, in this case, the pilot remains on after the main burner shuts off, awaiting future calls to ignite the burner. Therefore, hearth products with standing pilots continue to use gas typically at a rate between 700 and 1,200 Btu/h when the pilot light is not extinguished. Since match-lit hearth products consume no energy in standby mode and off mode and since the electrical consumption of electronic ignitions has been tentatively determined to be

de minimis,

disallowing the use of constant-burning pilot ignition systems would effectively eliminate all standby mode energy use for these products. These characteristics are common to the standby mode operation across all hearth products.

Therefore, while an energy efficiency performance standard for active mode and the technology options to achieve efficiency improvements could result in only a fractional reduction of energy consumption for a subset of hearth products, disallowing the standing pilot ignition type would eliminate all standby fossil fuel use for hearth products. Of the three general ignition types for hearth products—match-lit, standing pilot, and electronic ignition—only the standing pilot ignition systems contribute substantially to standby mode energy, so disallowing their use would effectively eliminate standby mode energy consumption of hearth products.

DOE also considered performance standards for standby mode. Since the standing pilot light is used for several functions, reducing the allowable use during standby mode would hinder these products from providing these functions. (Note: Electronic ignitions are capable of providing the same functions as standing pilot ignition systems, and so disallowing standing pilots will not eliminate this utility from the market.) DOE is also unaware, as stated in section IV.A.3, of technologies for substantially reducing the consumption of pilot lights. Additionally, DOE has determined that a design requirement would be more effective and easier to implement than a performance standard addressing standby mode. A performance standard would likely also require a test procedure to be established and would increase manufacturer burden due to testing requirements.

In summary, DOE has tentatively concluded the following:

(1) A potential maximum energy use performance standard for active mode would likely restrict the sizes of available hearth products, eliminating part of the market.

(2) The technology options available for reducing the active mode energy consumption of hearth products either result in immeasurable or negligible energy savings, or only apply to a subset of hearth products resulting in limited opportunity for energy savings;

(3) A prescriptive requirement that disallows the use of standing pilot ignition systems would eliminate all standby mode fossil fuel use,

which represents a large fraction of the overall energy use for hearth products;

(4) An performance standard for standby mode would be less effective than a prescriptive requirement disallowing standing pilot ignitions, and would result in more manufacturer burden due to testing requirements; and

(5) There are no technology options available to substantially reduce the energy consumption of pilot lights other than removing them; and

(6) There is no associated public health or safety issue associated with replacing any constant-burning pilot with an intermittent pilot ignition system for the hearth products identified in this proposal. (DOE also requests comment on this assumption and this is identified as Issue 2 in section VII.E “Issues on Which DOE Seeks Comment.”)

For the reasons cited above, DOE has focused the analysis for this NOPR on a prescriptive requirement for standby mode energy use that would disallow the use of a constant-burning pilot light. DOE recognizes that an equivalent performance standard and test procedure could be proposed such that would measure the standby mode gas consumption and ensure it is zero. However, such a standard and accompanying test procedure would be unduly burdensome, since confirming that a hearth product does not have the components necessary for a standing pilot light ensures that there is no standby mode gas consumption.

C. Product Classes

In evaluating and establishing energy conservation standards, DOE generally divides covered products into classes by the type of energy used or by capacity or other performance-related feature that justifies a different standard for products having such feature. (See 42 U.S.C. 6295(q)) In deciding whether a feature justifies a different standard, DOE must consider factors such as the utility of the feature to users.

Id.

DOE may also consider other factors it deems appropriate when determining product classes.

Id.

DOE normally establishes different energy conservation standards for different product classes based on these criteria.

According to the proposed definition of “hearth product” in the December 2013 NOPD, a hearth product is a gas-fired appliance that simulates a solid-fueled fireplace or presents a flame pattern. 78 FR 79638, 79640 (Dec. 31, 2013). In the proposed definition, DOE

acknowledges that hearth products may serve one or more functions to the consumer, stating that a hearth product under the proposed definition “presents a flame pattern (for aesthetics or other purpose)” and “

may

provide space heating.”

Id.

DOE also suggested several examples of product types that would be covered under such a definition, including vented decorative hearth products, vented heater hearth products, vented gas logs, gas stoves, outdoor hearth products, and vent-less hearth products.

DOE also received several comments that suggested an efficiency metric is unachievable or disadvantageous for decorative products or gas log sets. (HPBA, No. 5 at p. 9; American Gas Association (AGA), No. 6 at p. 2; RH Peterson, No. 8 at p. 3; Rasmussen, No. 9 at p. 2; Wolf Steel, No. 4 at p. 1; AHRI, No. 15 at p. 3-4) Wolf Steel also suggested labeling requirements that would clearly identify decorative and heater products. (Wolf Steel, No. 4 at p.4)

In addition to the December 2013 NOPD comments, DOE also examined current product offerings and product literature, performed teardown analyses (described in section IV.C.3.a), and conducted manufacturer interviews in an effort to better understand the market and feature sets unique to various hearth products to determine whether capacity or performance-related features would justify different standards. Based on this analysis, DOE has tentatively concluded the following and seeks comment (Issue 3 in section VII.E) regarding these conclusions:

(1) Within the hearth industry, there is no universally accepted definition or set of defining features or other physical characteristics for what constitutes different categories of hearth products. The distinction between products is sometimes, though not always, defined by whether the product is vented or unvented. However, even within these groupings, the same product is sometimes certified to multiple ANSI standards and in other cases apparently are certified to different ANSI standards. For example, unvented gas log sets are sometimes certified to the ANSI Z21.60 decorative gas-fired appliance standard

in addition to the ANSI Z21.11.2 unvented heater standard.

Vented products are often advertised with an AFUE or thermal efficiency rating, and may be certified to either or both the ANSI Z21.88 vented heater fireplace standard

or the ANSI Z21.50 vented fireplace standard.

Latest version is ANSI Z21.60-2012,

Decorative gas appliances for installation in solid-fuel burning fireplaces

(Available at:

http://shop.csa.ca/en/canada/gas-fired-domestic-and-commercial-heating-equipment-and-air-conditioning/ansi-z2160-2012csa-226-2012/invt/27019512012

Latest version is ANSI Z21.11.2-2013,

Gas-fired room heaters, volume II, unvented room heaters

(Available at:

http://shop.csa.ca/en/canada/gas-fired-domestic-and-commercial-heating-equipment-and-air-conditioning/ansi-z21112-2013/invt/27017312013

Latest version is ANSI Z21.88-2014,

Vented gas fireplace heaters

(Available at:

http://shop.csa.ca/en/canada/gas-fired-domestic-and-commercial-heating-equipment-and-air-conditioning/ansi-z2188-2014csa-233-2014/invt/27016252014

Latest version is ANSI Z21.50-2014,

Vented gas fireplaces

(Available at:

http://shop.csa.ca/en/canada/gas-fired-domestic-and-commercial-heating-equipment-and-air-conditioning/ansi-z2150-2014csa-222-2014-/invt/27020142014

(2) Hearth products encompass a wide range of configurations to serve size, space, and other constraints. Fireplaces, freestanding stoves, and gas log sets vary widely in their physical characteristics, as well as input capacities.

(3) Gas log sets are installed in existing fireboxes and masonry fireplaces. Therefore, the manufacturer of a gas log set has virtually no control over an array of factors that would affect the efficiency of their product, including the firebox size, shape, material, and in the case of vented gas logs, the amount of draft.

DOE acknowledges that these issues represent challenges in establishing product classes (because differentiating between different types is often difficult due to the similarities of different types of hearths) or in developing an efficiency metric that would apply for all hearth products.

In comments in response to the December 2013 NOPD, HPBA stated “under EPCA, a `covered product' is a type of product defined by a common functional utility and for which a common efficiency descriptor can be applied.” HPBA further stated: “the premise that a `covered product' must be defined by a common functional utility is the only premise that makes sense in EPCA's context, because the `efficiency' of a product can be determined only by reference to its function.” (HPBA, No. 5 at p. 7)

While DOE considered product classes in light of the issues presented above, these considerations pertain to the active mode operation of hearth products. As discussed in section III.B, DOE has tentatively concluded that a prescriptive requirement for standby mode (

i.e.,

requiring the removal of standing pilot ignition systems) would have the most energy savings potential and would apply across all types of hearth products. Thus, DOE's analysis focused on standby mode. DOE found considerable similarity across hearth products in their standby mode functionality, components, and energy use.

In summary, when DOE analyzed the hearth market to consider whether to establish product classes based on standby mode energy consumption, it found that there is a substantial similarity among hearth products of all types, in that the primary mechanism of energy consumption in standby mode is a constant-burning pilot. Therefore, DOE has tentatively concluded that the establishment of product classes is not necessary for the energy conservation standards proposed by this NOPR.

D. Test Procedure

In this NOPR, DOE is proposing to adopt a prescriptive design requirement for hearth products. Specifically, DOE is proposing to disallow the use of a continuously-burning pilot light in these products. DOE typically establishes test procedures by which products must be tested in order to certify compliance with an energy conservation standard. Because this proposed standard is a design requirement and not a performance standard (

i.e.,

minimum efficiency or maximum energy consumption), DOE has tentatively concluded that a test procedure is not required in order to determine compliance with the standard.

EPCA states, in relevant part, that an amended or new standard may not be adopted if a test procedure has not been established for the relevant product type or class. (42 U.S.C. 6295(o)(3)(A)) However, later sections of EPCA acknowledge that DOE may establish prescriptive design requirements that by nature would not require a test procedure. For determining compliance with standards, EPCA requires use of the test procedures and criteria prescribed in 42 U.S.C. 6293, except for design standards. (42 U.S.C. 6295(s)) EPCA also states that a test procedure need not be prescribed if one cannot be designed to reasonably measure energy efficiency, energy use, water use, or annual operating cost, and not be unduly burdensome to conduct. (42 U.S.C. 6293(d)(1)) EPCA requires that a determination be published in the

Federal Register

providing justification for such case.

Id.

DOE contends that any test procedure to determine whether a hearth product has a continuously-burning pilot would be unduly burdensome to conduct in light of fact that the proposed standard is in the form of a prescriptive design requirement. While a test could be

conducted to measure standby mode fuel consumption (which would indicate the presence of a continuously-burning pilot if such consumption is greater than zero), such a test procedure is not required since removing standing pilots will effectively reduce standby mode gas consumption to zero. Further, determining whether a continuously-burning pilot is present on the unit can be easily assessed without testing through a review of operating instructions and physical inspection. Therefore, DOE has tentatively concluded that adoption of a test procedure is not required for establishing the proposed energy conservation standards for hearth products since that standard is based upon a design requirement. If DOE were to consider a performance standard for hearth products in the future, the agency would develop an appropriate test procedure at that time.

E. Technological Feasibility

1. General

In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency or reducing energy use are technologically feasible. DOE considers technologies incorporated in commercially-available products or in working prototypes to be technologically feasible. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(i).

After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) Practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; and (3) adverse impacts on health or safety. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its analysis any proprietary technology that is a unique pathway to achieving a certain efficiency level. Section IV.B of this notice discusses the results of the screening analysis for hearth products, particularly the designs DOE considered, those it screened out, and those that are the basis for the trial standard levels (TSLs) in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the NOPR technical support document (TSD).

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (max-tech) improvements in energy use for hearth products, using the design parameters for the least energy-intensive products available on the market or in working prototypes. The max-tech level that DOE determined for this rulemaking are described in section IV.C of this proposed rule and in chapter 5 of the NOPR TSD.

F. Energy Savings

1. Determination of Savings

For each TSL, DOE projected energy savings from the products that are the subject of this rulemaking purchased in the 30-year period that begins in the year of compliance with standards (2021-2050).

The savings are measured over the entire lifetime of products purchased in the 30-year analysis period.

DOE quantified the energy savings attributable to each TSL as the difference in energy consumption between the new standards case and the base case. The base case represents a projection of energy consumption in the absence of energy conservation standards, and it considers market forces and policies that affect demand for more-efficient products.

DOE also presents a sensitivity analysis that considers impacts for products shipped in a 9-year period.

In the past, DOE presented energy savings results for only the 30-year period that begins in the year of compliance. In the calculation of economic impacts, however, DOE considered operating cost savings measured over the entire lifetime of products purchased in the 30-year period. DOE has chosen to modify its presentation of national energy savings to be consistent with the approach used for its national economic analysis.

DOE used its national impact analysis (NIA) spreadsheet model to estimate energy savings from potential standards for the products that are the subject of this rulemaking. The NIA spreadsheet model (described in section IV.H of this notice) calculates energy savings in site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings on an annual basis in terms of primary (source) energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. To calculate the primary energy savings, DOE derives annual conversion factors from the model used to prepare the Energy Information Administration's (EIA) most recent

Annual Energy Outlook

(

AEO

DOE also estimates full-fuel-cycle (FFC) energy savings, as discussed in DOE's statement of policy and notice of policy amendment. 76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 (August 17, 2012). The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy conservation standards. DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.H.1.

2. Significance of Savings

To adopt energy conservation standards for a covered product, DOE must determine that such action would result in “significant” energy savings. (42 U.S.C. 6295(o)(3)(B)) Although the term “significant” is not defined in the Act, the U.S. Court of Appeals for the District of Columbia Circuit, in

Natural Resources Defense Council

Herrington,

768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended “significant” energy savings in the context of EPCA to be savings that were not “genuinely trivial.” The energy savings for all of the trial standard levels considered in this rulemaking, including the proposed standards (presented in section V.C), are nontrivial, and, therefore, DOE considers them “significant” within the meaning of section 325 of EPCA.

G. Economic Justification

1. Specific Criteria

EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.

a. Economic Impact on Manufacturers and Consumers

In determining the impacts of a potential energy conservation standard

on manufacturers, DOE conducts a manufacturer impact analysis (MIA), as discussed in section IV.J. DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include: (1) INPV, which values the industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.

For individual consumers, measures of economic impact include the changes in LCC and PBP associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national net present value of the economic impacts applicable to a particular rulemaking. DOE also evaluates the LCC impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a national standard.

b. Savings in Operating Costs Compared to Increase in Price (LCC and PBP)

EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analyses.

The LCC is the sum of the purchase price of a product (including its installation) and the operating expense (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC analysis requires a variety of inputs, such as product prices, product energy consumption, energy prices, maintenance and repair costs, product lifetime, and consumer discount rates. To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribution of values, with probabilities attached to each value. For its analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with amended standards.

The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost due to a more-stringent standard by the change in annual operating cost for the year that standards are assumed to take effect.

The LCC savings for the considered energy conservation levels are calculated relative to a base case that reflects projected market trends in the absence of new or amended standards. DOE identifies the percentage of consumers estimated to receive LCC savings or experience an LCC increase, in addition to the average LCC savings associated with a particular standard level. In contrast, the PBP is measured relative to the baseline product. DOE's LCC and PBP analysis is discussed in further detail in section IV.F.

c. Energy Savings

Although significant conservation of energy is a separate statutory requirement for adopting an energy conservation standard, EPCA requires DOE, in determining the economic justification of a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section IV.H, DOE uses the NIA spreadsheet to project national energy savings.

d. Lessening of Utility or Performance of Products

In establishing product classes and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards proposed in this notice would not reduce the utility or performance of the products under consideration in this rulemaking. DOE seeks comment regarding this tentative conclusion in Issue 4 of section VII.E “Issues on Which DOE Seeks Comment.”

e. Impact of Any Lessening of Competition

EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this proposed rule to the Attorney General with a request that the Department of Justice (DOJ) provide its determination on this issue. DOE will publish and respond to the Attorney General's determination in the final rule.

f. Need for National Energy Conservation

DOE also considers the need for national energy conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from new or amended standards are likely to provide improvements to the security and reliability of the nation's energy system. Reductions in the demand for electricity also may result in reduced costs for maintaining the reliability of the nation's electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the nation's needed power generation capacity, as discussed in section IV.M.

New or amended standards also are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases associated with energy production. DOE conducts an emissions analysis to estimate how standards may affect these emissions, as discussed in section IV.K. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L.

g. Other Factors

EPCA allows the Secretary of Energy, in determining whether a standard is economically justified, to consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To the extent interested parties submit any relevant information regarding economic justification that does not fit into the other categories described previously,

DOE could consider such information under “other factors.”

2. Rebuttable Presumption

As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effects that proposed energy conservation standards would have on the payback period for consumers. These analyses include, but are not limited to, the 3-year payback period contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section V.B.1.c of this proposed rule.

H. Compliance Date

EPCA typically establishes a lead time between the publication of new or amended energy conservation standards and the date by which manufacturers must comply with that standard. As specifically relates to hearth products, EPCA requires that any new or amended standard for a consumer product which the Secretary classifies as a covered product under 42 U.S.C. 6292(b) shall not apply to products manufactured within five years after the publication of a final rule establishing such standard. (42 U.S.C. 6295(l)(2)) Accordingly, presuming DOE makes a final coverage determination, compliance with any standard for hearth products would be required five years after publication of the final rule.

I. Standby Mode and Off Mode

As discussed in section II.A of this NOPR, any final rule for amended or new energy conservation standards that is published on or after July 1, 2010 must address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) As previously stated, DOE considers the use of a continuously-burning pilot light to be standby mode energy consumption, and that disallowing use of the constant-burning pilot ignition systems would eliminate gas consumption for hearth products in standby mode.

In addition, DOE has tentatively determined that there is no off mode gas consumption for a hearth product's ignition module. As indicated in section III.B, this energy conservation standards rulemaking not only addresses but focuses on standby mode fossil fuel energy use.

DOE notes that in some instances, certain hearth product ignition modules may also have some ancillary electrical energy consumption in standby mode and/or off mode (see chapter 7 of the TSD). However, DOE has tentatively determined that such standby mode and off mode electrical energy consumption is

de minimis,

and consequently, DOE did not analyze energy conservation standards to regulate electrical standby mode and off mode energy consumption. DOE seeks comment on this assumption, which is identified as Issue 5 in section VII.E, “Issues on Which DOE Seeks Comment.”

IV. Methodology

This section addresses the analyses DOE has performed for this rulemaking with regard to hearth products. Separate subsections will address each component of DOE's analyses.

DOE used three spreadsheet tools to estimate the impact of today's proposed standards. The first spreadsheet calculates LCCs and PBPs of potential standards. The second provides shipments forecasts and then calculates national energy savings and net present value impacts of potential standards. Finally, DOE assessed manufacturer impacts, largely through use of the Government Regulatory Impact Model (GRIM). All three spreadsheet tools are available online at the rulemaking portion of DOE's Web site:

www1.eere.energy.gov/buildings/appliance_standards/product.aspx?productid=83.

Additionally, DOE estimated the impacts on utilities and the environment that would be likely to result from potential standards for hearth products. DOE used the most recent version of EIA's National Energy Modeling System (NEMS) for the utility and environmental analyses.

NEMS simulates the energy sector of the U.S. economy. EIA uses NEMS to prepare its

Annual Energy Outlook,

a widely-known energy forecast for the United States. NEMS offers a sophisticated picture of the effect of standards, because it accounts for the interactions between the various energy supply and demand sectors and the economy as a whole.

For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is

National Energy Modeling System: An Overview,

DOE/EIA-0581(2009) (October 2009) (Available at:

http://www.eia.gov/oiaf/aeo/overview/

A. Market and Technology Assessment

DOE develops information that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this hearth products rulemaking include: (1) A determination of the scope of the rulemaking and product classes; (2) manufacturers and industry structure; (3) quantities and types of products sold and offered for sale; (4) retail market trends; (5) regulatory and non-regulatory programs; and (6) technologies or design options that could improve the energy efficiency of the product(s) under examination. The key findings of DOE's market assessment are summarized below. See chapter 3 of the NOPR TSD for further discussion of the market and technology assessment.

1. Consideration of Products for Inclusion in This Rulemaking

In section III.A, DOE presented the scope of coverage for the rulemaking. Presently, hearth products are not covered consumer products. Section III.A discusses the scope and coverage for this rulemaking in the context of the notice of proposed coverage determination published in the

Federal Register

on December 31, 2013 (December 2013 NOPD). 78 FR 79638.

There is no statutory definition of “hearth product.” In the December 2013 NOPD, DOE proposed to adopt a definition of hearth product that means a gas-fired appliance that simulates a solid-fueled fireplace or presents a flame pattern (for aesthetics or other purpose) and that may provide space heating directly to the space in which it is installed.

In the December 2013 NOPD, DOE provided examples of several common hearth product types that would be covered under the proposed definition, including vented decorative hearth products, vented heater hearth products, vented gas logs, gas stoves, outdoor hearth products, and vent-less hearth

products.

Id.

For purposes of analysis, DOE separated hearth products into product groups. For more details on the product groups DOE used for its analysis, see chapter 5 of the NOPR TSD.

DOE recognizes that match-lit hearth products would be covered under the proposed definition for “hearth product.” However, since these products do not include a standing pilot ignition system, they would not be affected by the proposed prescriptive standard. Therefore, DOE did not include match-lit products in its analysis, and accordingly, the results of the analysis do not reflect impacts on match-lit products.

2. Product Classes

As discussed in section III.C, EPCA contains criteria that DOE follows when establishing product classes for setting different energy conservation standards for covered product types. (42 U.S.C. 6295(q)) DOE has tentatively concluded that, based on the information presented in section III.C, separate hearth product classes are not necessary for the prescriptive design requirement disallowing the use of standing pilots that is proposed in this NOPR.

In comments on the December 2013 NOPD, HPBA stated that there is no basis to assume that a ban on standing pilot lights could reasonably be implemented for the diverse range of products at issue. (HPBA, No. 5 at p. 9) With regards to this comment as it applies to product classes, it is unclear why a prescriptive requirement banning standing pilots could not be implemented across hearth product types. As previously stated, DOE surveyed product literature, performed teardown analyses, and conducted manufacturer interviews which revealed that the key components of electronic ignitions are shared by multiple product types. DOE found that alternatives to constant-burning pilot lights, namely match-lit and electronic ignition, were offered on all types of hearth systems, and that some of the alternatives (specifically electronic ignitions) would meet the safety requirements of those local jurisdictions where such requirements apply. Such evidence supports the conclusion that alternatives to constant-burning pilot lights are technologically feasible across the broad range of hearth products on the market. However, DOE also found that the implementation of alternatives to a constant-burning pilot are not implemented uniformly across all hearth types, given their slightly different characteristics. Thus, alternatives could be relatively more or less expensive to implement depending on the type of hearth product.

As shown in the engineering analysis of section IV.C below, while the prescriptive requirement would apply to all hearth products without establishing classes, DOE chose to analyze the most common hearth styles separately to more accurately assess the potential impacts of imposing a prescriptive requirement that would disallow the use of standing pilot ignition systems.

3. Technology Assessment

In a technology assessment, DOE identifies technologies and designs that could be used to improve the energy efficiency or performance of covered equipment. For this NOPR, DOE conducted a technology assessment to identify technologies or designs that could reduce the fuel consumption of hearth products. DOE has summarized the technologies and designs identified in Table IV.1. DOE seeks comment on its list of available technologies to reduce fuel consumption for hearth products; this is identified as Issue 6 in section VII.E, “Issues on Which DOE Seeks Comment.” See chapter 3 of the NOPR TSD for a detailed description of each technology option.

Table IV.1—Technologies DOE Considered for Hearth Products

Technology option

Description

Air-to-fuel ratio

Change in air-to-fuel ratio to achieve fuel savings.

Burner port design

Size, shape, and pattern of burner ports to reduce fuel consumption.

Simulated log design

Log style or size that allows use of less fuel for flame pattern.

Pan burner media/bead type

Sand, silica, or other media that achieves taller/more attractive flame with less fuel.

Reflective walls and/or other components inside combustion zone

Increase apparent size of flames without requiring additional fuel input. Potentially allows for the use of burners with smaller inputs.

Circulating blower

Circulate heated air more effectively.

Electronic ignition

Removes need for continuous standing pilot.

Condensing heat exchanger

Transfers more heat from flue gas into ambient air.

After identifying all potential technology options for reducing the energy consumption of hearth products, DOE performed the screening analysis (see section IV.B of this NOPR and chapter 4 of the NOPR TSD) on these technologies to determine which could be considered further in the analysis and which should be eliminated.

During manufacturer interviews, DOE inquired about these technologies or design considerations with regard to their prevalence and potential to achieve energy savings. With regard to the air-to-fuel ratio, burner port design, simulated log design, pan burner media, or reflective components, manufacturers found that these options resulted in either immeasurable or negligible energy savings. DOE received several responses during its manufacturer interviews that the design considerations DOE listed would have little or no bearing on reducing the input needed to achieve the required flame pattern. Manufacturers also indicated that an energy conservation standard based on one or more of these design options may inhibit hearth product manufacturers from providing a variety of overall aesthetic options. For these reasons, DOE did not consider these design options in the screening analysis.

B. Screening Analysis

DOE uses the following four screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking:

Technological feasibility.

DOE will consider technologies incorporated in commercial products or in working prototypes to be technologically feasible.

Practicability to manufacture, install, and service.

If mass production and reliable installation and servicing of a technology in commercial products could be achieved on the scale necessary to serve the relevant market at the time of the compliance date of the

standard, then DOE will consider that technology practicable to manufacture, install, and service.

Adverse impacts on product utility or product availability.

If DOE determines a technology would have a significant adverse impact on the utility of the product to significant subgroups of consumers, or would result in the unavailability of any covered product type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not consider this technology further.

Adverse impacts on health or safety.

If DOE determines that a technology would have significant adverse impacts on health or safety, it will not consider this technology further.

10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b).

DOE considered several design options to assess their potential to reduce the fuel consumption of the products that are the subject of this rulemaking, both in active mode and in standby mode. In the end, three technology options were considered in the screening analysis: (1) electronic ignition; (2), condensing heat exchangers; and (3) circulating blowers. All technologies considered in the technology assessment are listed in Table IV.1.See chapter 3 of the NOPR TSD for a detailed description of each technology option.

DOE has tentatively concluded that the electronic ignition, condensing heat exchanger, and circulating blower would not be screened out by any of the four screening criteria listed above. DOE notes that these technologies are currently commercially available for hearth products as well as other residential products and commercial equipment, and that their use does not pose any significant health or safety hazard.

With regards to impact of the electronic ignition on product availability, DOE notes that an electronic ignition provides the same functionality as a millivolt standing pilot gas valve, specifically the ability to be used with a remote control or thermostat. DOE has also tentatively determined that electronic ignition components are available for a wide range of gas-fired equipment beyond hearth products, and that the ability of hearth manufacturers to comply with the standard will not be restricted for lack of available components.

DOE seeks comment regarding the tentative conclusions reached in its screening analysis including impacts on product availability or product utility. This is Issue 4 in section VII.E “Issues on Which DOE Seeks Comment.”

C. Engineering Analysis

This engineering analysis determines the change in manufacturing cost of hearth products associated with a prescriptive design requirement that disallows the use of a standing pilot. This relationship between manufacturer selling price and reduced energy consumption serves as the basis for cost-benefit calculations for individual consumers, manufacturers, and the Nation. DOE has identified the following three methodologies to generate the manufacturing costs needed for the engineering analysis: (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 relative costs of achieving increases in energy efficiency levels, without regard to the particular design options used to achieve such increases; and (3) the cost-assessment (or reverse-engineering) approach, which provides “bottom-up” manufacturing cost assessments for both standing pilot models and electronic ignition models, based on detailed data as to costs for parts and material, labor, shipping/packaging, and investment.

For this NOPR, DOE conducted the engineering analysis for hearth products using a combination of the design-option approach and the cost-assessment approach. DOE selected hearth models that represented a range of hearth configurations (

e.g.,

vented fireplaces, vented fireplace inserts, unvented fireplace inserts, vented gas log sets, and unvented gas log sets). In light of the analytical focus on a prescriptive requirement for standby mode energy consumption (as discussed in section III.B) representative models were chosen that would allow a direct comparison between standing pilot and electronic ignition systems. DOE gathered additional information using reverse-engineering methodologies, product information from manufacturer catalogs and manuals, and discussions with manufacturers and other experts on hearth products.

DOE generated a bill of materials (BOM) by disassembling products representing a range of hearth configurations, including vented and unvented fireplaces, inserts, and stoves, vented and unvented gas log sets, and outdoor products. The BOMs describe the product in detail, including all manufacturing steps required to make and/or assemble each part. Subsequently, DOE developed a cost model that converted the BOMs into manufacturer production costs (MPCs). By applying derived manufacturer markups to the MPCs, DOE calculated the manufacturer selling prices.

DOE seeks comment on its general approach to the engineering analysis. This is Issue 7 in section VII.E, “Issues on Which DOE Seeks Comment.” See chapter 5 of the NOPR TSD for additional details about the engineering analysis.

1. Representative Products for Analysis

For the engineering analysis, DOE reviewed the most common types of hearth products. Within each hearth type, DOE chose units for analysis that represent a cross-section of the hearth products market. As discussed in section IV.C.2 below, DOE eliminated the circulating blower and condensing heat exchanger technology options prior to the engineering analysis, since this rulemaking is focused on the standby mode energy use as described in section III.B. Consequently, the remaining technology—electronic ignition—became the main focus of DOE's analysis. DOE selected representative products for analysis that allowed DOE to determine whether any differences existed in ignition systems between hearth product types. DOE assumed that, should standing pilot ignitions be disallowed, manufacturers would convert standing pilot models to electronic ignition models rather than match-lit in order to provide the same level of safety, comfort, and functionality.

In order to inform the model selection process, DOE first surveyed product literature to determine whether clear differences in ignition systems existed between hearth products. Parts lists contained in installation and operation manuals for hearth products revealed that the key purchased components for electronic ignition systems—gas valves, pilot assemblies, and digital or analog control modules—are common across various hearth products, particularly for indoor fireplaces, fireplace inserts, stoves, and gas log sets. DOE also is aware that while gas log sets share these ignition components with other hearth product types, the nature of a gas log set (lacking a firebox or cabinet), means these components (particularly the gas valve and control module on electronic ignition systems) are more difficult to conceal. DOE seeks comment on the availability of these components and their applicability across hearth product

configurations. This is identified as Issue 8 in section VII.E, “Issues on Which DOE Seeks Comment.”

DOE selected units that represented the hearth configurations in Table IV.2.

Table IV.2—Representative Hearth Categories for Engineering Analysis

Hearth product analysis category

Standing pilot valve

Electronic ignition system

Vented Fireplaces, Inserts, and Stoves

Millivolt

Intermittent Pilot Ignition.

Millivolt

Intermittent Pilot Ignition.

Unvented Fireplaces, Inserts, and Stoves

Millivolt

Intermittent Pilot Ignition.

Vented Gas Log Sets

Manual

Intermittent Pilot Ignition.

Unvented Gas Logs Sets

Manual

Intermittent Pilot Ignition.

Outdoor Hearth Products

Manual

Intermittent Pilot Ignition (Hot Wire).

Manual

Intermittent Pilot Ignition.

As stated in section IV.A.2, DOE is aware of the industry claim that different hearth products serve different functions and differ in design. However, this engineering analysis is limited to a determination of the difference in manufacturer production cost between ignition styles (standing pilot and electronic ignition). DOE has tentatively determined that there is no difference in ignition components between various types of vented hearth products. DOE believes that the same gas valves, control modules, and pilot assemblies are used interchangeably between vented fireplaces, inserts, and stoves. Therefore, the engineering analysis determined one MPC that would apply globally to vented fireplaces, inserts, and stoves. DOE seeks comment on the assumption that vented fireplaces, inserts, and stoves are equivalent in terms of ignition component costs. This is identified as Issue 9 in section VII.E, “Issues on Which DOE Seeks Comment.”

Unvented hearth products differ from their vented counterparts in several respects; with regards to the ignition components, unvented hearth products require an oxygen depletion sensor. The oxygen depletion sensor consists of a thermocouple and a precisely calibrated pilot light. DOE analyzed a separate unvented fireplace, insert, and stove category and an unvented gas log set category in order to account for any potential cost difference for these components.

In addition, DOE considered that there are two main standing pilot valve types: manual and millivolt. The manual valve requires the user to manually open and close the valve and is, therefore, smaller, simpler, and cheaper. The millivolt gas valve uses a thermopile to generate a voltage difference such that the valve can be coupled with additional control systems, for example a remote control or thermostat. Since gas log sets are subject to physical space constraints that fireplaces, inserts, and stoves are not, DOE selected gas log sets with manual valves as representative of gas log sets with standing pilots. DOE selected models with millivolt gas valves as being representative of the fireplace, insert and stove vented and unvented categories.

The pilot light on manual or millivolt valves may be ignited using a match or using a piezo-electric or battery-powered sparker. Because the standing pilot can be ignited manually without the use of a sparker, and because the function of the pilot is not affected by how it is initially lit, DOE does not consider this sparker an integral component to the ignition system for the purposes of this analysis. Therefore, DOE did not include these costs in its analysis of the cost of a standing pilot ignition.

2. Design Options Analyzed

As indicated in section III.B, in light of the greater energy savings possible from a design requirement disallowing standing pilot ignitions as opposed to a performance standard, this rulemaking is focused on standby mode energy consumption. However, two of the three technologies that passed the screening analysis in Section IV.B (the condensing heat exchanger and circulating fan) are technologies that affect the active mode energy consumption of a subset of hearth products. DOE therefore eliminated the condensing heat exchanger and circulating fan prior to conducting its engineering analysis. Rather, DOE focused its engineering analysis on the impacts of a prescriptive design requirement to remove the standing pilot ignition system and replace it with a system that does not use a continuously burning pilot.

For each of the representative products, DOE estimated manufacturer production costs for standing pilot ignitions and electronic ignitions. DOE has tentatively determined that the pilot light is a feature that can potentially be present on any type of hearth product and is the primary mode of energy consumption for those hearth products. Neither public comment nor the manufacturer interview process revealed additional design options that could replace a standing pilot or substantially reduce the fuel consumption of the pilot light, save for a match-lit burner. (However, a match-lit burner would not comply with the American National Standards Institute (ANSI) safety standards, and, thus, was not considered as a direct replacement for standing pilot ignition systems.) DOE has also tentatively concluded that a performance standard for standby mode as opposed to a design requirement would be impractical, since DOE found that there were no additional design options that would reduce the fuel consumption of a pilot light. In addition, a performance standard would increase burden on manufacturers, as it would require testing to demonstrate compliance with such standard.

As previously stated, hearth products currently are not covered products. They would become covered products should the December 2013 NOPD result in a positive final determination of coverage. Therefore, there is currently no minimum efficiency standard in place for DOE to use as a baseline for comparison. In terms of standby mode operation, DOE has tentatively determined that the standing pilot ignition system represents the baseline design in terms of energy consumption. A standing pilot consumes the most energy during standby mode operation; match-lit and intermittent pilots both represent reductions in energy consumption compared to the standing pilot.

DOE understands that in those jurisdictions where match-lit systems are permissible, and particularly for gas log sets, match-light remains a viable

alternative to a standing pilot. A match-lit burner does not have an ignition system, and so DOE understands that the manufacturing cost of a match-lit burner is less than either a standing pilot or electronic ignition system. However, DOE recognizes that many jurisdictions require ANSI safety standard certification, and as such, a match-lit burner is not permissible. Since a match-lit system cannot serve as a replacement to current standing pilot models in these jurisdictions, electronic ignition would be the only viable alternative. The analysis, therefore, assumes that the representative change in cost for hearth products resulting from this proposed standard would be that associated with a change from a standing pilot to electronic ignition.

EPCA requires DOE to determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for each class of covered products. (42 U.S.C. 6295(o)) As described previously (see section IV.A.2 and IV.B), none of the technologies identified by DOE to improve active mode efficiency could be applied to all hearth products, so DOE's analysis focused on reducing the standby mode energy consumption as providing the greatest opportunity for energy savings. In the case of a standing pilot, the maximum reduction in energy use possible is removal of the standing pilot entirely, and switching to either a match-lit or electronic ignition system. Both of these possibilities would be compliant with the proposed requirement to disallow the use of standing pilot ignition systems. This is the scenario DOE has chosen to analyze (see Table IV.2); as noted above, DOE is unaware of any other design options on the market that would substantially reduce the energy consumption of hearth products during standby operation.

3. Cost-Assessment Methodology

DOE identified intermittent pilot ignition as the relevant design option for reducing standing pilot energy consumption, as determined in the market assessment. Next, DOE selected products for the physical teardown analysis that represented the most common configurations of hearth products. DOE gathered the information from the physical teardown analysis to create bills of materials using a reverse engineering methodology. DOE then calculated the manufacturer production cost (MPC) for complete hearth products utilizing both design options, standing pilot and intermittent pilot ignition systems.

During the preparation and refining of the cost-efficiency comparison and MPCs for this NOPR, DOE also held interviews with manufacturers to gain insight into the hearth industry. DOE used the information gathered from these interviews, along with the information gathered through additional teardown analysis, to refine assumptions in the cost model. Next, DOE converted the MPCs into MSPs using publicly-available industry financial data, in addition to manufacturers' feedback. Further information on the analysis methodology is presented in subsections (a) through (g) of this section. For additional detail, see chapter 5 of the NOPR TSD.

a. Teardown Analysis

To assemble bills of materials (BOMs) and to calculate the manufacturing costs of the different components in hearth products, DOE disassembled several hearth products into their base components and estimated the materials, processes, and labor required for the manufacture of each individual component, a process referred to as a “physical teardown.” Using the data gathered from the physical teardowns, DOE characterized each component according to its weight, dimensions, material, quantity, and the manufacturing processes used to fabricate and assemble it. The teardown analysis for this engineering analysis included 14 physical teardowns.

DOE used the teardown analysis to create detailed, structured BOMs for each hearth type or style. The BOMs incorporate all materials, components, and fasteners (classified as either raw materials or purchased parts and assemblies), and characterize the materials and components by weight, manufacturing processes used, dimensions, material, and quantity. The BOMs from the teardown analysis were then used as inputs placed into the cost model to calculate the MPC for the representative product for each product type and for each ignition type. See chapter 5 of the NOPR TSD for more details on the teardown analysis.

b. Cost Model

The cost model is a computer spreadsheet that converts the materials and components in the BOMs into dollar values based on the price of materials, average labor rates associated with manufacturing and assembling, and the cost of overhead and depreciation. To convert the information in the BOMs to dollar values for the NOPR analysis, DOE collected information on labor rates, tooling costs, raw material prices, and other factors. For purchased parts, the cost model estimates the purchase price based on volume-variable price quotations and discussions with manufacturers. For fabricated parts, the prices of raw metal materials (

e.g.,

tube, sheet metal) are estimated on the basis of 5-year averages (from July 2009 to June 2014).

The cost of transforming the intermediate materials into finished parts is estimated and confirmed through manufacturer interviews. Chapter 5 of the NOPR TSD describes DOE's cost model and definitions, assumptions, and estimates.

Raw material prices were obtained from American Metals Market (Available at:

www.amm.com

) (Last accessed June 2014).

c. Manufacturing Production Cost

Once the cost estimate for each teardown unit was finalized, DOE totaled the cost of materials, labor, and direct overhead used to manufacture a product in order to calculate the manufacturer production cost for the NOPR. The total cost of the product was broken down into two main costs: (1) The full manufacturer production cost or MPC; and (2) the non-production cost, which includes selling, general, and administration (SG&A) expenses; the cost of research and development; and interest from borrowing for operations or capital expenditures. DOE estimated the MPC for both ignition designs (

i.e.,

standing pilot and intermittent pilot). After DOE incorporates all of the assumptions into the cost model, DOE calculates the different percentages of each aspect of production cost (

i.e.

materials, labor, depreciation, and overhead) that make up the total production cost. DOE uses these production cost percentages in the MIA (see section IV.J).

d. Cost Comparison

The result of this engineering analysis is a typical MPC for a unit with standing pilot in each product group and the added incremental cost of converting a standing pilot ignition to an electronic ignition. DOE determined five of these MPCs and incremental costs, each corresponding to one of the five hearth product groups DOE selected for analysis. Section IV.C.4 of this NOPR and chapter 5 of the NOPR TSD contain the MPCs and incremental costs.

e. Manufacturer Markups

DOE uses MSPs to conduct its downstream economic analyses. DOE calculated the MSPs by multiplying the manufacturer production cost by a mark-up and adding the product's

shipping cost. The production price of the product is marked up to ensure that manufacturers can make a profit on the sale of the equipment. DOE gathered information from manufacturer interviews to determine the mark-up used by different manufacturers. Using this information, DOE calculated an average mark-up of 1.45 for hearth products. DOE requests comments on the proposed mark-up, and this is identified as Issue 10 in section VII.E, “Issues on Which DOE Seeks Comment.”

f. Manufacturer Interviews

Throughout the rulemaking process, DOE seeks feedback and insight from interested parties to improve the information used in its analyses. DOE interviewed manufacturers as a part of the NOPR manufacturer impact analysis (see section IV.J). During the confidential interviews, DOE sought feedback on all aspects of its analyses for hearth products. For the engineering analysis, DOE discussed the analytical assumptions, estimates, and purchased part prices with manufacturers. DOE considered all the information manufacturers provided when refining the cost model and assumptions. However, DOE incorporated equipment and manufacturing process figures into the analysis as averages in order to avoid disclosing sensitive information about individual manufacturers' products or manufacturing processes. More details about the manufacturer interviews are contained in chapter 12 of the NOPR TSD.

4. Results

The results from the engineering analysis are shown in Table IV.3. The cost model calculates an MPC for an associated annual production volume. As described in section IV.C.3.b, the cost model calculates manufacturer overhead and depreciation costs on a per-unit basis. Therefore, given the same number of employees, tooling, and equipment, a higher annual production volume will generally result in a lower MPC. Additionally, purchased parts scale non-linearly with volume: at low volumes, purchase part prices increase exponentially. Production volumes varied significantly across the segments of the hearth products industry. Replacing a standing pilot ignition system with an intermittent pilot ignition system largely means switching out one set of purchased part components with another. Purchased part component prices are dependent upon the volumes in which they are purchased, and as a result, the annual production volume for a given market segment could have a large impact on the cost of changing from a standing pilot ignition system to an intermittent pilot ignition system. As part of the confidential manufacturer interview process, DOE asked manufacturers to confirm costs and quantities particularly for purchase parts associated with the ignition system. DOE notes that this feedback is crucial in obtaining MPCs that accurately reflect typical industry values. Accordingly, DOE is seeking further feedback on the derived MPCs found in Table IV.3. This is Issue 10 in section VII.E, “Issues on Which DOE Seeks Comment.”

Table IV.3—Estimated Typical Manufacturer Production Costs

Product category

Representative

production

volume

Standing pilot MPC

Added electronic

ignition system

(EIS) cost

Vented Fireplaces, Inserts, Stoves

10,000

$322

$28

Unvented Fireplaces, Inserts, Stoves

2,000

281

Vented Gas Log Sets

2,000

190

Unvented Gas Log Sets

5,000

208

Outdoor

3,000

210

The “Standing Pilot MPC” represents the cost to the manufacturer of the complete hearth product with a typical standing pilot ignition. The “Added EIS Cost” represents the incremental cost to the manufacturer of replacing the standing pilot ignition components with an electronic ignition. DOE has not included remote control or other user control features as part of either ignition system. While DOE acknowledges many electronic ignition systems are sold with a remote control and receiver, DOE does not consider these components necessary to the intermittent function of the pilot light. Therefore, DOE has not considered remote controls or remote control receivers in the “Added EIS Cost.”

The standing pilot MPC derived for vented fireplaces, inserts and stoves is higher than for unvented for several reasons. The representative models used for the vented category are direct vent. These units typically include a glass viewing pane with spring-loaded clamps holding the viewing pane in place. They also include blowers that regulate airflow and moderate surface temperatures so that the unit can be installed flush against combustible building materials. Again, DOE estimates that the MPC of similarly-sized vented units are the same. DOE makes this assumption because product advertising and literature and manuals indicated that key components to the ignitions systems are shared across product types and throughout industry.

In the case of gas log sets, the analysis used standing pilot models with manual gas valves. These valves are less expensive than millivolt gas valves, and so the difference between standing pilot and electronic ignition system is higher for gas log sets than for fireplaces, inserts, and stoves.

The results from the engineering analysis were used in the LCC analysis to determine consumer prices for hearth products using both design options, standing pilot and electronic ignition. Using the manufacturer markup, DOE calculated the MSPs of the representative hearth products from the MPCs developed using the cost model.

Again, DOE seeks comment on the MPCs estimated for hearth products and this is identified as Issue 10 in section VII.E “Issues on Which DOE Seeks Comment.” Chapter 5 of the NOPR TSD provides the full list of MPCs and MSPs for each analyzed representative product group.

D. Markups Analysis

DOE uses distribution channel markups (

e.g.,

manufacturer markups, retailer markups, distributor markups, contractor markups) and sales taxes (where appropriate) to convert the manufacturer production cost estimates from the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis and in the manufacturer impact analysis. The markups are multipliers that are applied to the purchase cost at each stage in the distribution channel for hearth products. Before developing markups,

DOE defines key market participants and identifies distribution channels.

DOE characterized two distribution channels to describe how hearth products pass from the manufacturer to consumers: (1) Replacement market and (2) new construction. The replacement market channel is characterized as follows:

Manufacturer ➞ Wholesaler ➞ Mechanical contractor ➞ Consumer

The new construction distribution channel is characterized as follows:

Manufacturer ➞ Wholesaler ➞ Mechanical contractor ➞ General contractor ➞ Consumer

The derivation of the manufacturer mark-up is discussed in section IV.C.3.e. To develop mark-ups for the parties involved in the distribution of the product, DOE utilized several sources, including: (1) The Heating, Air-Conditioning & Refrigeration Distributors International (HARDI) 2013 Profit Report

to develop wholesaler mark-ups; (2) the Air Conditioning Contractors of America's (ACCA) 2005 financial analysis for the heating, ventilation, air-conditioning, and refrigeration (HVACR) contracting industry

to develop mechanical contractor mark-ups, and (3) U.S. Census Bureau 2007 Economic Census data

for the residential and commercial building construction industry to develop general contractor mark-ups.

Heating, Air Conditioning & Refrigeration Distributors International 2013 Profit Report (Available at:

http://www.hardinet.org/Profit-Report

) (Last accessed April 10, 2013).

Air Conditioning Contractors of America (ACCA),

Financial Analysis for the HVACR Contracting Industry: 2005

(Available at:

http://www.acca.org/store/product.php?pid=142

) (Last accessed April 10, 2013).

U.S. Census Bureau,

2007 Economic Census Data

(Available at:

http://www.census.gov/econ/

) (Last accessed April 10, 2013).

For wholesalers and contractors, DOE develops baseline and incremental mark-ups based on the product mark-ups at each step in the distribution chain. The baseline mark-up relates the change in the manufacturer selling price of baseline models to the change in the consumer purchase price. The incremental mark-up relates the change in the manufacturer selling price of higher-efficiency models (the incremental cost increase) to the change in the consumer purchase price.

In addition to the mark-ups, DOE derived State and local taxes from data provided by the Sales Tax Clearinghouse.

These data represent weighted-average taxes that include county and city rates. DOE derived shipment-weighted-average tax values for each region considered in the analysis.

Sales Tax Clearinghouse Inc., State Sales Tax Rates Along with Combined Average City and County Rates, 2013 (Available at:

http://thestc.com/STrates.stm

) (Last accessed May 27, 2014).

Chapter 6 of the NOPR TSD provides further detail on the estimation of markups.

E. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual energy consumption of pilot lights in residential hearth products in use in the United States in representative homes and to assess the energy savings potential in switching from standing pilot lights to intermittent pilot lights. DOE used information from teardowns and manufacturer literature to establish a representative input capacity for each hearth product pilot light option. These input capacities are consistent with comments received from stakeholders during the previous rulemaking.

DOE estimated the annual energy consumption of hearth product pilot lights across a range of climate zones for a sample of houses that use hearth products. The annual energy consumption includes the natural gas used by the standing pilot or the electricity used by the intermittent pilot. The annual energy consumption of hearth product pilot lights is used in subsequent analyses, including the LCC and PBP analysis and the national impacts analysis.

Docket Number EERE-2011-BT-STD-0047.

The energy use analysis seeks to capture the range of operating conditions for hearth products in the field (

i.e.,

as they are actually used by consumers). To determine the field energy use of hearth product pilot lights, DOE established a sample of households using hearth products from the Energy Information Administration's (EIA) 2009 Residential Energy Consumption Survey (RECS 2009).

DOE included in the sample all households who reported having a fireplace fueled by natural gas or liquefied petroleum gas (LPG).

U.S. Department of Energy: Energy Information Administration,

Residential Energy Consumption Survey: 2009 RECS Survey Data

(2013) (Available at:

http://www.eia.gov/consumption/residential/data/2009/

) (Last accessed March, 2013).

DOE derived a range of possible operating hours for hearth products from field studies.

35 36

The hearth product operating hours for each household were sampled based on typical behavior patterns and household-specific characteristics, such as heating load, length of heating season, and primary heating appliance. DOE established three ranges that correspond to three modes of consumer behavior: (1) Consumers who closely monitor the standing pilot light operation and only use it when starting the hearth product; (2) consumers who leave the standing pilot light on for the entirety of the heating season but turn it off for the remainder of the year; or (3) consumers who leave the standing pilot light on for the entire year. DOE represented each of these three modes with a continuous distribution of standing pilot operating hours. The field data suggest that more than half of natural gas-fired hearth product users leave the pilot on year round.

Hayden, A.C.S. Fireplace Pilots Take Gas Use Sky High.

Home Energy Magazine

(Jan. 1997). (Available at:

http://www.homeenergy.org/show/article/nav/hvac/page/28/id/1264

Menkedick, John, Pam Hartford, Shawna Collins, Shawn Shumaker, and Darlene Wells, Hearth Products Meter Study (1995-1997), Rep. no. GRI-97/0298, Gas Research Institute (1997).

DOE used the household location data from RECS 2009 to establish the length of the heating season for each household by accounting for the National Oceanic and Atmospheric Administration (NOAA) weather data for that location.

To establish the maximum standing pilot operating hours during the heating season, DOE estimated the burner operating hours (BOH) of the hearth product from the annual space heating fuel use reported in RECS 2009. (Note that the pilot light remains on when the main burner is operating.)

National Oceanic and Atmospheric Administration, NNDC Climate Data Online (2009) (Available at:

http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp

) (Last accessed July 29, 2014).

RECS 2009 data also provided other information about the household that was used to further refine the analysis, such as primary heating appliance type, whether the hearth product was the primary heating appliance, fuel type of primary heating appliance, whether the hearth product was vented or vent-less, and whether the house has a chimney.

The pilot light operating hours, coupled with the data on fuel use per hour from the engineering analysis, allowed for the calculation of hearth products' pilot light annual energy usage. The average energy use of a hearth product's standing pilot is approximately 3.6 million Btu per year. To estimate the annual electricity used by an intermittent pilot, DOE used the representative burner input and the average duty cycle length to calculate the number of cycles, and a conservative estimate of 30 seconds on-time per ignition. DOE coupled the above value with the representative input of 50 W to derive electricity consumption. The average energy use of the intermittent

pilot option is less than one kWh per year.

In the RECS 2009 sample, 23 percent of households with hearth products used liquefied petroleum gas (LPG). Because LPG is a relatively expensive fuel, DOE understands that this subset of users closely monitors pilot light operation. Therefore, for households with LPG-fired hearth products, DOE assumed the pilot operating hours to be approximately equal to the hearth product BOH.

DOE seeks comment regarding its assumptions and methodology used in determining pilot light energy use and this is identified as Issue 11 in section VII.E “Issues on Which DOE Seeks Comment.”

In evaluating the energy savings of the considered efficiency measure, DOE considered the heat input of the pilot light into the conditioned space. Eliminating the gas pilot would mean that some of the heat would not contribute to heating the home, which would mean that the main heating system would need to operate somewhat more, and the air conditioning system would operate slightly less in cases where the pilot is left on year-round. DOE based its analysis for vented hearth products on a report from the Canadian Centre for Housing Technology,

which quantified the fraction of energy consumed by the standing pilot light that is delivered into the conditioned space as useful heat. DOE used this study to estimate the ratio of energy consumed by the standing pilot light to the heat delivered to the conditioned space for each vented hearth product group. For unvented hearth products, DOE assumed that the majority of the heat from the pilot is input into the space. For outdoor units, none of the energy consumed by the pilot is considered useful heat. The additional energy use of the heating system was calculated for each sample household based on its estimated heating load and heating equipment. The reduction in air conditioning energy use was calculated in a similar manner. Inclusion of the indirect effects on heating and cooling systems reduces the gross savings from eliminating the standing pilot by approximately 20 percent on average.

Armstrong M.M., Swinton, M.C. and Szadkowski, F., Assessment of the Impact of a Natural Gas Fireplace on Heating Energy Consumption and Room Temperatures at the Canadian Centre for Housing Technology (March 31, 2010) Canada Mortgage and Housing Corporation (Available at:

http://chic.cmhc-schl.gc.ca/uhtbin/cgisirsi.exe/?ps=Ey6u7UxnJz/CHIC/17510006/60/502/X

It is important to note that DOE is proposing a prescriptive standard to eliminate the use of standing pilots in hearth products. As such, it would only reduce standby energy use, and would have no effect on hearth products' active-mode energy consumption. Therefore, the standard, if adopted, would not be expected to affect consumer usage of the product, and, thus, no rebound effect was applied to the energy use of hearth products.

DOE projected that household weights and household characteristics in 2021, the first full year of compliance with any new energy conservation standards for hearth products, would be the same as in RECS 2009. To characterize future new homes, DOE used a subset of RECS 2009 homes that were built after 2000.

DOE adjusted the energy use estimated for 2009 to normalize for weather by using 10-year heating degree-day (HDD) data from NOAA for each geographical region.

Historical monthly HDD data from NOAA for each geographical region was used to disaggregate the total energy use into monthly amounts, which allows DOE to apply monthly energy prices in the LCC and PBP analysis. See chapter 7 in the NOPR TSD for additional detail on the energy analysis for hearth product ignition devices.

National Oceanic and Atmospheric Administration, NNDC Climate Data Online (2009) (Available at:

http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp

) (Last accessed July 29, 2014).

DOE requests comment on the extent of assumed pilot light usage, specifically the percentages of consumers who operate their hearth product's standing pilot: (a) Year-round; (b) during the heating season; and (c) only when operating the unit. DOE also requests comment on the pilot operating hours of LPG-fired hearth products and determination of heat input from the pilot light into the conditioned space. This is Issue 12 in section VII.E, “Issues on Which DOE Seeks Comment.”

F. Life-Cycle Cost and Payback Period Analysis

In determining whether an energy conservation standard is economically justified, DOE considers the economic impact of potential standards on consumers. The effect of new or amended standards on individual consumers usually includes a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts:

• LCC (life-cycle cost) is the total consumer cost of an appliance or product, generally over the life of the appliance or product. The LCC calculation includes total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs), operating costs (energy, repair, and maintenance costs), equipment lifetime, and discount rate. Future operating costs are discounted to the time of purchase and summed over the lifetime of the appliance or product.

• PBP (payback period) measures the amount of time it takes consumers to recover the assumed higher purchase price of a more energy-efficient product through reduced operating costs. Inputs to the payback period calculation include the installed cost to the consumer and the first-year operating costs.

DOE analyzed the net effect of potential hearth product standards on consumers by calculating the LCC and PBP for each household for each considered pilot option. DOE measured the PBP and the change in LCC when switching from standing pilot to intermittent pilot in each hearth product type.

DOE performed the LCC and PBP analysis using a spreadsheet model combined with Crystal Ball (a commercially-available software program used to conduct stochastic analysis using Monte Carlo simulation and probability distributions) to account for uncertainty and variability among the input variables (

e.g.,

energy prices, installation cost, and repair and maintenance costs). It uses weighting factors to account for distributions of shipments to different building types and States to generate LCC savings by potential standard level. Each Monte Carlo simulation consists of 10,000 LCC and PBP calculations using input values that are either sampled from probability distributions and household samples or characterized with single point values. The analytical results include a distribution of 10,000 data points showing the range of LCC savings and PBPs for a given standards level relative to the base-case forecast (

i.e.,

without new energy conservation standards). In performing an iteration of the Monte Carlo simulation for a given consumer, the probability that a hearth product type and pilot option is chosen is based on the existing market share. If the chosen pilot light for the consumer is intermittent, the LCC calculation reveals that a consumer is not impacted by the standard level. Similarly, for those consumers who diligently operate their standing pilot lights, the LCC calculation results in either a net cost or no impact, depending on the specific simulation round. By accounting for consumers who already purchase more-efficient products or operate their units efficiently, DOE avoids overstating the

potential benefits from increasing product energy conservation.

EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the 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)) DOE determines the value of the first year's energy savings by calculating the quantity of those savings in accordance with the applicable DOE test procedure and multiplying that amount by the average energy price forecast for the year in which compliance with the amended standards would be required. Since there is no DOE test procedure for hearth products, DOE based its rebuttable pay back analysis on the average energy use and costs calculated in the LCC analysis.

As discussed in section IV.E, DOE developed nationally representative household samples from 2009 RECS. For each sampled household, DOE determined the energy consumption of the hearth product pilot light and the appropriate energy prices in the area where the household is located.

DOE calculated the LCC and PBP for all hearth product consumers as if each were to purchase the product in the year that compliance with amended standards is required. At the time of preparation of the NOPR analysis, the expected issuance date for the final rule was in December 2015. For newly-covered products, EPCA prescribes a five-year period between the standard's publication date and the compliance date (42 U.S.C. 6295(l)(2)), which leads to a compliance date in December 2020. For purposes of its analysis, DOE modeled hearth products purchased on or after this date as if they operated for a full year beginning on January 1, 2021 and continuing thereafter.

As noted above, DOE's LCC and PBP analyses generate values that calculate the payback period for consumers of potential energy conservation standards, which includes, but is not limited to, the three-year payback period contemplated under the rebuttable presumption test. 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).

1. Installed Cost

The primary inputs for establishing the total installed cost are the baseline consumer product price, standard-level consumer price increases, and installation costs (labor and material cost). Baseline consumer prices and standard-level consumer price increases were determined by applying mark-ups to manufacturer selling price estimates, including sales tax where appropriate. The installation cost is added to the consumer price to arrive at a total installed cost.

DOE found that the historic real (

i.e.,

adjusted for inflation) producer price index (PPI) for floor and wall furnaces, unit heaters, infrared heaters, and mechanical stokers from 1999 to 2013 has been relatively flat.

Hearth products are generally similar to the products in this PPI. In the absence of any data indicating a trend in hearth product prices, DOE elected to use a constant future price trend. DOE requests feedback on the assumption of a constant future price trend for hearth products. This is identified as Issue 13 in section VII.E, “Issues on Which DOE Seeks Comment.”

Series ID: PCU3334143334147 (Available at:

http://www.bls.gov/ppi/

Because the pilot light is a component of the hearth product, the installation costs for most installations was $0. In a fraction of installations, the intermittent pilot could necessitate an electrical connection, although many intermittent pilots are battery powered, and many hearth products already have electrical connections. For the cases where a new electrical connection is needed, DOE assumed a percentage of these needed electrical connection retrofits, with the probability increasing the older the house is. Similar assumptions were made for electrical grounding. For these cases needing retrofits, labor and material information was obtained from RS Means 2013 Residential Cost Data.

DOE requests feedback on the installation and retrofit assumptions regarding electrical connections and grounding. This is identified as Issue 14 in section VII.E, “Issues on Which DOE Seeks Comment.”

RS Means Company Inc.,

RS Means Residential Cost Data

(2013) (Available at:

http://rsmeans.reedconstructiondata.com/

2. Inputs to Operating Costs

The primary inputs for calculating the operating costs are product energy consumption, product efficiency, energy prices and forecasts, maintenance and repair costs, product lifetime, and discount rates. DOE uses discount rates to determine the present value of lifetime operating expenses. The discount rate used in the LCC analysis represents the rate from an individual consumer's perspective. Much of the data used for determining consumer discount rates comes from the Federal Reserve Board's triennial Survey of Consumer Finances.

Available at

www.federalreserve.gov/econresdata/scf/scfindex.htm.

a. Energy Consumption

For each sample household, DOE determined the energy consumption for the hearth product ignition devices using the approach described in section IV.E. As noted previously, because the proposed standard concentrates on reduction in standby mode energy consumption, DOE does not anticipate a rebound effect in terms of consumer usage.

b. Energy Prices

Using the most current data from EIA on average energy prices in various States and regions,

43 44 45

DOE assigned an appropriate energy price to each household in the sample, depending on its location (see chapter 8 of the NOPR TSD for details). Average electricity and natural gas prices from the EIA data were adjusted using seasonal marginal price factors to derive monthly marginal electricity and natural gas prices. For a detailed discussion of the development of marginal energy price factors, see appendix 8-C of the NOPR TSD.

U.S. Department of Energy—Energy Information Administration,

Form EIA-826 Database Monthly Electric Utility Sales and Revenue Data

(2013) (Available at

: http://www.eia.doe.gov/cneaf/electricity/page/eia826.html

U.S. Department of Energy—Energy Information Administration,

Natural Gas Navigator

(2013) (Available at:

http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm

U.S. Department of Energy—Energy Information Administration,

2012 State Energy Consumption, Price, and Expenditure Estimates (SEDS)

(2013) (Available at:

http://www.eia.doe.gov/emeu/states/_seds.html

To estimate future prices, DOE used the projected annual changes in average residential natural gas, LPG, and electricity prices in the Reference case projection in

AEO 2014.

c. Maintenance and Repair Costs

Repair costs are associated with repairing or replacing components in the hearth product that have failed,

whereas maintenance costs are routine annual costs associated with maintaining the proper operation of the equipment. DOE's review of product literature suggests that that no maintenance is required for the ignition device. DOE estimated that a 7 percent failure rate for ignition systems in hearth products based on repair rates for residential furnace ignition systems.

DOE estimated separate repair costs for each ignition system option as a function of the manufacturer price estimated in the engineering analysis (section IV.C). Due to the increased price of the intermittent pilot, the cost of repairing these units was approximately 44 percent higher than for units with standing pilots. See chapter 8 of the NOPR TSD for details. DOE requests feedback on the repair cost assumptions. This is identified as Issue 15 in section VII.E, “Issues on Which DOE Seeks Comment.”

Jakob, F.E., J.J. Crisafulli, J.R. Menkedick, R.D. Fischer, D.B. Philips, R.L. Osbone, J.C. Cross, G.R. Whitacre, J.G. Murray, W.J. Sheppard, D.W. DeWirth, and W.H. Thrasher, Assessment of Technology for Improving the Efficiency of Residential Gas Furnaces and Boilers, Volume I and II—Appendices (September 1994) Gas Research Institute. AGA Laboratories. Report No. GRI-94/0175.

d. Product Lifetime

Product lifetime is the age at which an appliance is retired from service. DOE assumed that the lifetime of the ignition device is identical to the lifetime of the hearth product. DOE conducted an analysis of hearth product lifetimes using a combination of data on shipments and the hearth product stock (see section IV.G) and RECS 2009 data on the age of the hearth products in homes. The data allowed DOE to develop a survival function, which provides a range from minimum to maximum lifetime, as well as an average lifetime. The average lifetime estimated for hearth products is 16 years. Chapter 8 of the NOPR TSD provides further details on the methodology and sources DOE used to develop hearth product lifetimes. DOE requests feedback on the lifetime assumptions. This is identified as Issue 16 in section VII.E, “Issues on Which DOE Seeks Comment.”

e. Discount Rates

In the calculation of LCC, DOE applies discount rates to estimate the present value of future operating costs. The discount rate used in the LCC analysis represents the rate from an individual consumer's perspective.

To establish discount rates for consumers, DOE's approach involved identifying all relevant household debt or asset classes in order to approximate a consumer's opportunity cost of funds related to appliance energy cost savings and maintenance costs. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board's Survey of Consumer Finances (SCF) for 1995, 1998, 2001, 2004, 2007, and 2010.

Using the SCF and other sources, DOE then developed a distribution of rates for each type of debt and asset by income group to represent the rates that may apply in the year in which amended standards would take effect. DOE assigned each sample household a specific discount rate drawn from one of the distributions. The average rate across all types of household debt and equity and income groups, weighted by the shares of each class, is 4.2 percent.

The Federal Reserve Board, Survey of Consumer Finances 1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010 (Available at:

http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html

See chapter 8 in the NOPR TSD for further details on the development of discount rates for the LCC analysis.

f. Base-Case Efficiency Distribution

To estimate the share of consumers affected by a potential energy conservation standard, DOE's LCC and PBP analysis considers the projected distribution (

i.e.,

market shares) of product efficiencies that consumers will purchase in the first compliance year in the base case (

i.e.,

the case without amended energy conservation standards).

For each of the hearth product groups, DOE estimated current market shares of the two pilot system types based on model information and manufacturer interviews. Because there are no data indicating trends in the market shares, DOE used the current shares to represent the market in 2021 (see Table IV.4).

Table IV.4—Base-Case Efficiency Distribution for Hearth Product Groups in 2021

Product group

Pilot system market share

Standing pilot

(percent)

Intermittent pilot

(percent)

Vented Fireplaces, Inserts, Stoves

42%

58%

Unvented Fireplaces, Inserts, Stoves

Vented Gas Log Sets

Unvented Gas Log Sets

Outdoor

For further information on DOE's estimation of the base-case efficiency distributions for hearth products, see chapter 8 of the NOPR TSD. DOE requests feedback on the base-case efficiency distribution. This is identified as Issue 17 in section VII.E, “Issues on Which DOE Seeks Comment.”

3. Inputs to Payback Period Analysis

The PBP is the amount of time it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. The simple PBP does not account for changes in operating expense over time or the time value of money. Payback periods are expressed in years. Payback periods that exceed the life of the product mean that the increase in total installed cost is not recovered in reduced operating expenses.

The inputs to the PBP calculation are the total installed cost of the product to the customer for each efficiency level and the average annual operating expenditures for each efficiency level. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed.

under the test procedure in place for that standard. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered standard level, DOE determined the value of the first year's energy savings by calculating the quantity of those savings in accordance with the applicable DOE test procedure and multiplying that amount by the average energy price forecast for the year in which compliance with the amended standard would be required.

The results of DOE's PBP analysis are presented in section V.B.1.

G. Shipments Analysis

DOE uses forecasts of product shipments to calculate the national impacts of potential new or amended energy conservation standards on energy use, NPV, and future manufacturer cash flows. Historical data indicate that shipments of hearth products are very sensitive to overall economic activity. Because DOE observed a strong correlation between housing starts and hearth product shipments, it used a 10-year average of the ratio of hearth product shipments to housing starts, along with the forecasted housing starts from

AEO 2014,

to project future hearth product shipments.

To estimate the impact of the considered standard on future hearth product shipments, DOE applied the same product price elasticity as it has used in many previous rulemakings for consumer products (see chapter 9 of the NOPR TSD). This elasticity relates an incremental increase in the price of hearth products to a decrease in shipments.

Regarding the potential for consumers to switch to other products, DOE recognizes that hearth products are purchased for the convenience of natural gas as a fuel source (as opposed to wood) and realistic flame characteristics (relative to electric-powered units). For this reason, DOE assumed that fuel switching among these products due to the imposition of the design standard would be negligible. DOE requests comment on this assumption, and this is identified as Issue 18 in Section VII.E, “Issues on Which DOE Seeks Comment.”

DOE requests feedback on the methodology for hearth product shipment projections. This is identified as Issue 19 in section VII.E, “Issues on Which DOE Seeks Comment.” For details on the shipments analysis, see chapter 9 of the NOPR TSD.

H. National Impact Analysis

The NIA assesses the national energy savings (NES) and the net present value (NPV) from a national perspective of total consumer costs and savings expected to result from new or amended energy conservation standards at specific efficiency levels. DOE determined the NPV and NES for the potential standard levels considered for the hearth product types analyzed.

To make the analysis more accessible and transparent to all interested parties, DOE used a computer spreadsheet model (as opposed to probability distributions) to calculate the energy savings and the national consumer costs and savings from each TSL.

The NIA calculations are based on the annual energy consumption and total installed cost data from the energy use analysis and the LCC analysis. In the NIA, DOE forecasted the lifetime energy savings, energy cost savings, installed product costs, and NPV of consumer benefits over the lifetime of hearth products sold from 2021 through 2050.

DOE's use of spreadsheet models provides interested parties with access to the models within a familiar context. In addition, the TSD and other documentation that DOE provides during the rulemaking help explain the models and how to use them, and interested parties can review DOE's analyses by changing various input quantities within the spreadsheet.

A key component of the NIA is the trend in energy efficiency forecasted for the base case (without new or amended standards) and each of the standards cases. Section IV.F.2.f describes how DOE developed a base-case energy efficiency distribution for hearth products for the first full year of compliance (2021). DOE projected base-case efficiency assuming a constant efficiency distribution over the 30-year period. Historical trends of data for this product are not available, especially regarding the necessary ignition details. Therefore, DOE has estimated current standing pilot shipments and assumed those would be constant during the 30-year period starting from compliance (2021-2050).

To estimate the impact that energy conservation standards for hearth products (

i.e.,

a design requirement) may have in the year compliance becomes required, DOE used a “roll-up” scenario: (1) Products with efficiencies in the base case that do not meet a potential standard level would “roll up” to meet that standard level, and (2) products at efficiencies above the standard level under consideration would not be affected. After the year of compliance, all hearth products would utilize electronic ignition devices. For further details about the NIA efficiency distributions, see chapter 10 of the NOPR TSD.

1. National Energy Savings

To develop the NES, DOE calculates annual energy consumption of the considered products for the base case and then compares that to each potential standards case (TSL). DOE calculates the annual energy consumption for each case using the appropriate per-unit annual energy use data multiplied by the projected hearth product shipments for each year. As explained in section IV.E, DOE did not include a rebound effect for hearth products.

To estimate the national energy savings expected from appliance standards, DOE used a multiplicative factor to convert site electricity consumption (at the home) into primary energy consumption (the energy required to convert and deliver the site electricity). These conversion factors account for the energy used at power plants to generate electricity. The factors vary over time due to changes in generation sources (

i.e.,

the power plant types projected to provide electricity to the country) projected in

AEO 2014.

The factors that DOE developed are marginal values, which represent the response of the electricity sector to an incremental decrease in consumption associated with potential appliance standards. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis.

In response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use full-fuel-cycle (FFC) measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (August 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in the

Federal Register

in which DOE explained its determination that NEMS is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). The FFC factors incorporate losses in production and delivery in the case of natural gas (including fugitive emissions) and energy used to produce and deliver the fuels used by power plants. The approach used for this NOPR is described in appendix 10-B of the NOPR TSD.

2. Net Present Value of Consumer Benefit

The inputs for determining NPV are: (1) Total annual installed cost; (2) total annual savings in operating costs; (3) a discount factor to calculate the present value of costs and savings; (4) present value of costs; and (5) present value of savings. To develop the national NPV of consumer benefits from potential energy conservation standards, DOE calculates annual operating costs (energy costs and repair and mai

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