# Energy Conservation Program: Energy Conservation Standards for Compressors > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2016-11337 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** May 19, 2016 - **Citation:** 81 FR 31680 ## Text DEPARTMENT OF ENERGY 10 CFR Parts 429 and 430 [Docket Number EERE-2013-BT-STD-0040] RIN 1904-AC83 Energy Conservation Program: Energy Conservation Standards for Compressors AGENCY: Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Notice of proposed rulemaking (NOPR) and announcement of public meeting. SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment. EPCA also authorizes DOE to establish standards for certain other types of industrial equipment, including compressors. Such standards must be technologically feasible and economically justified, and must save a significant amount of energy. In this document, DOE proposes energy conservation standards for compressors and announces a public meeting to receive comment on the proposed standards and associated analyses and results. DATES: Meeting: DOE will hold a public meeting on Monday, June 20, 2016 from 1:00 p.m. to 5:00 p.m. in Washington, DC. The test procedure portion will be held in the morning. The meeting will also be broadcast as a webinar. See section VIII, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants. 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 July 18, 2016. See section VIII, “Public Participation,” for details. Comments regarding the likely competitive impact of the proposed standard should be sent to the Department of Justice contact listed in the ADDRESSES section before June 20, 2016. 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. Instructions: Any comments submitted must identify the NOPR on Energy Conservation Standards for compressors, and provide docket number EERE-2013-BT-STD-0040 and/or regulatory information number (RIN) 1904-AC83. Comments may be submitted using any of the following methods: 1. Federal eRulemaking Portal: www.regulations.gov . Follow the instructions for submitting comments. 2. Email: AirCompressors2013STD0040@ee.doe.gov . Include the docket number and/or RIN in the subject line of the message. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption. 3. 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. 4. 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. No telefacsimilies (faxes) will be accepted. For detailed instructions on submitting comments and additional information on the rulemaking process, see section VIII of this document (“Public Participation”). 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 . EPCA requires the Attorney General to provide DOE with a written determination of whether the proposed standard is likely to lessen competition. The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the proposed standard. Interested persons may contact the Division at energy.standards@usdoj.gov before June 20, 2016. Please indicate in the “Subject” line of your email the title and Docket Number of this rulemaking notice. Docket: The docket, which includes 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 publicly available, such as those containing information that is exempt from public disclosure. A link to the docket Web page can be found at: https://www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0040 . This Web page contains a link to the docket for this document 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 VIII, “Public Participation,” for further information on how to submit comments through www.regulations.gov . FOR FURTHER INFORMATION CONTACT: James Raba, 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) 586-8654. Email: compressors@ee.doe.gov . Peter Cochran, U.S. Department of Energy, Office of the General Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC, 20585-0121. Telephone: (202) 586-9496. Email: Peter.Cochran@hq.doe.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 . SUPPLEMENTARY INFORMATION: Table of Contents I. Synopsis 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 1. Current Standards 2. History of Standards Rulemaking for Compressors III. General Discussion A. Definition of Covered Equipment B. Scope of the Energy Conservation Standards in This Rulemaking 1. Equipment System Boundary 2. Compressed Gas 3. Compression Principle 4. Driver Type a. Combustion Engines b. Motor Phase Count c. Styles of Electric Motor 5. Equipment Capacity 6. Full-load Operating Pressure C. Test Procedure D. Technological Feasibility 1. General 2. Maximum Technologically Feasible Levels E. Compliance Date 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 Equipment e. Impact of Any Lessening of Competition f. Need for National Energy Conservation g. Other Factors 2. Rebuttable Presumption H. Compressor Industry Recommendation 1. Summary 2. Specific Provisions IV. Methodology and Discussion of Related Comments A. Market and Technology Assessment 1. Equipment Classes a. Compression Principle b. Lubricant Presence c. Cooling Method d. Motor Speed e. Motor Phase Count f. List of Proposed Equipment Classes 2. European Union Regulatory Action a. Specific Suggested Requirements b. Next Steps 3. Technology Options a. Multi-Staging b. Air-End Improvement c. Auxiliary Component Improvement B. Screening Analysis 1. Screened-Out Technologies 2. Remaining Technologies C. Engineering Analysis 1. Summary of Significant Data Sources a. CAGI Data Sheets b. Lot 31—European Union Ecodesign Preparatory Study on Compressors c. Confidential Manufacturer Equipment Data d. Online Retailer Price Data 2. Harmonization With Lot 31 3. Representative Equipment 4. Design Options and Available Energy Efficiency Improvements 5. Efficiency Levels a. Direct From Lot 31 b. Developed From CAGI Database c. Scaled From Other Equipment Classes, Using U.S. Data 6. Manufacturer Selling Price a. Direct Scaling From Lot 31 b. Scaling With U.S. MSP Data c. MSPs for Water-Cooled Equipment d. New Relationships From U.S. Data 7. Manufacturer Production Cost 8. Other Analytical Outputs D. Markups Analysis E. Energy Use Analysis 1. Applications 2. Annual Hours of Operation 3. Load Profiles 4. Capacity Control Strategies 5. Compressor Sizing F. Life-Cycle Cost and Payback Period Analysis 1. Equipment Cost 2. Installation Cost 3. Annual Energy Consumption 4. Energy Prices 5. Repair and Maintenance Costs 6. Equipment Lifetime 7. Discount Rates 8. Efficiency Distribution in the No-New-Standards Case 9. Payback Period Analysis G. Shipments Analysis H. National Impact Analysis 1. Equipment Efficiency Trends 2. National Energy Savings 3. Net Present Value Analysis I. Consumer Subgroup Analysis J. Manufacturer Impact Analysis 1. Overview 2. GRIM Analysis a. GRIM Key Inputs b. GRIM Scenarios 3. Manufacturer Interviews a. Conversion Requirements b. Engineering Constraints and Development Cycle Times c. Relationship to the Draft European Union Energy Efficiency Standards d. Unfair Advantages for Replacement Technologies e. Uncertainty of Compliance Cost for Reciprocating Equipment K. Emissions Analysis L. Monetizing Carbon Dioxide and Other Emissions Impacts 1. Social Cost of Carbon a. Monetizing Carbon Dioxide Emissions b. Development of Social Cost of Carbon Values c. Current Approach and Key Assumptions 2. Social Cost of Other Air Pollutants 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 2. Economic Impacts on Manufacturers a. Industry Cash Flow Analysis Results b. Impacts on Employment c. Impacts on Manufacturing Capacity d. Impacts on Subgroups of Manufacturers 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 Utility or Performance of Equipment 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. Conclusion 1. Benefits and Burdens of TSLs Considered for Compressor Standards 2. Summary of Annualized Benefits and Costs of the Proposed Standards VI. Certification Requirements VII. Procedural Issues and Regulatory Review A. Review Under Executive Orders 12866 and 13563 B. Review Under the Regulatory Flexibility Act 1. Description on Estimated Number of Small Entities Regulated a. Methodology for Estimating the Number of Small Entities b. Compressor Industry Structure and Nature of Competition c. Manufacturer Participation 2. Description and Estimate of Compliance Requirements 3. Duplication, Overlap, and Conflict With Other Rules and Regulations 4. Significant Alternatives to the Rule C. Review Under the Paperwork Reduction Act 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 VIII. Public Participation A. Attendance at the Public Meeting B. Procedure for Submitting Prepared General Statements for Distribution C. Conduct of the Public Meeting D. Submission of Comments E. Issues on Which DOE Seeks Comment IX. Approval of the Office of the Secretary I. Synopsis of the Proposed Rule Title III of the Energy Policy and Conservation Act of 1975, as amended (“EPCA” or, in context, “the Act”), sets forth a variety of provisions designed to improve energy efficiency. (42 U.S.C. 6291, et seq. ) Part C of Title III, which for editorial reasons was re-designated as Part A-1 upon incorporation into the U.S. Code (42 U.S.C. 6311-6317), establishes the “Energy Conservation Program for Certain Industrial Equipment.” EPCA provides that DOE may include a type of industrial equipment as covered equipment if it determines that to do so is necessary to carry out the purposes of Part A-1. (42 U.S.C. 6312(b)). DOE has proposed such a determination for compressors, the subject of this document (see section II.A for further discussion). EPCA authorizes DOE to prescribe energy conservation standards for those types of industrial equipment which the Secretary classifies as covered equipment. (42 U.S.C. 6311(2) and 6312). 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) and 6316(a)). Furthermore, the new or amended standard must result in a significant conservation of energy. (42 U.S.C. 6295(o)(3)(B) and 6316(a)). In accordance with the relevant EPCA provisions, DOE proposes new energy conservation standards for compressors. The proposed standards, which are expressed in terms of package isentropic efficiency ( i.e., a parameter used to measure the degree of degradation of energy in steady-flow devices), or the ratio of the theoretical isentropic power required for a compression process to the actual power required for the same process, are shown in Table I.1. Table I.2 through Table I.5 provide mathematical coefficients required to calculate package isentropic efficiency in Table I.1. For “Fixed-speed compressor” equipment classes, the relevant Package Isentropic Efficiency is Full-Load Package Isentropic Efficiency; for “Variable-speed compressor” equipment classes, the relevant Package Isentropic Efficiency is Part-Load Package Isentropic Efficiency. Both Full- and Part-Load Package Isentropic Efficiency are determined in accordance with the test methods proposed in the April 2016 Compressors Test Procedure Notice of Proposed Rulemaking (“test procedure NOPR”) 81 FR 27220. 1 These proposed standards, if adopted, would apply to all compressors listed in Table I.1 and manufactured in, or imported into, the United States starting five years after the publication of the final rule for this rulemaking. 1 See https://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/78 . V 1 denotes the full-load actual volume flow rate 2 of the compressor, in actual cubic feet per minute (“acfm”). 3 Standard levels are expressed as a function of full-load actual volume flow rate for each equipment class, and may be calculated by inserting values from rightmost two columns into the second leftmost column. Doing so will yield an efficiency-denominated function of actual volume flow rate in acfm. 2 The test procedure NOPR defines a term “actual volume flow rate” to characterize compressor output flow as “the volume flow rate of air, compressed and delivered at the standard discharge point, referred to conditions of total temperature, total pressure and composition prevailing at the standard inlet point.” It also proposes a procedure for identifying a compressor's full-load actual volume flow rate. 3 Actual cubic feet per minute (“acfm”) is an industry convention that describes the actual volume of air emerging from a compressor, but expressed as though the air were allowed to expand to ambient conditions at the compressor inlet. Table I.1—Proposed Energy Conservation Standards for Compressors Equipment class Minimum package isentropic efficiency η Regr (package isentropic efficiency reference curve) d (percentage loss reduction) Rotary; Lubricated; Air-cooled; Fixed-speed η Regr + (1− η Regr ) * (d/100) −0.00928 * ln(.472 * V 1 ) 2 + 0.139 * ln(.472 * V 1 ) + 0.271 −15 Rotary; Lubricated; Air-cooled; Variable-speed η Regr + (1− η Regr ) * (d/100) −0.0155 * ln(.472 * V 1 ) 2 + 0.216 * ln(.472 * V 1 ) + 0.00905 −10 Rotary; Lubricated; Water-cooled; Fixed-speed .0235 + η Regr + (1− η Regr ) * (d/100) −0.00928 * ln(.472 * V 1 ) 2 + 0.139 * ln(.472 * V 1 ) + 0.271 −15 Rotary; Lubricated; Water-cooled; Variable-speed .0235 + η Regr + (1− η Regr ) * (d/100) −0.0155 * ln(.472 * V 1 ) 2 + 0.216 * ln(.472 * V 1 ) + 0.00905 −15 Rotary; Lubricant-free; Air-cooled; Fixed-speed η Regr + (1− η Regr ) * (d/100) A 1 * ln(.472 * V 1 ) 2 + B 1 * ln(.472 * V 1 ) + C 1 −11 Rotary; Lubricant-free; Air-cooled; Variable-speed η Regr + (1− η Regr ) * (d/100) A 2 * ln(.472 * V 1 ) 2 + B 2 * ln(.472 * V 1 ) + C 2 −13 Rotary; Lubricant-free; Water-cooled; Fixed-speed A 3 * ln(.472 * V 1 ) 2 + B 3 * ln(.472 * V 1 ) + C 3 + η Regr + (1− η Regr ) * (d/100) A 1 * ln(.472 * V 1 ) 2 + B 1 * ln(.472 * V 1 ) + C 1 −11 Rotary; Lubricant-free; Water-cooled; Variable-speed A 4 * ln(.472 * V 1 ) 2 + B 4 * ln(.472 * V 1 ) + C 4 + η Regr + (1− η Regr ) * (d/100) A 2 * ln(.472 * V 1 ) 2 + B 2 * ln(.472 * V 1 ) + C 2 −13 Table I.2—Coefficients for Proposed Energy Conservation Standards for Rotary, Lubricant-free, Air- and Water-Cooled, Fixed-Speed Compressors Full-load actual volume flow rate range (actual cubic feet per minute (acfm)) A 1 B 1 C 1 0 ≤ V 1 ≤ 161 −0.00928 0.139 0.191 161 ≤ V 1 ≤ 2125 0.00281 0.0344 0.417 2125 ≤ V 1 −0.00928 0.139 0.271 Table I.3—Coefficients for Proposed Energy Conservation Standards for Rotary, Lubricant-Free, Air- and Water-Cooled, Variable-Speed Compressors Full-Load Actual Volume Flow Rate Range (acfm) A 2 B 2 C 2 0 ≤ V 1 ≤ 102 −0.0155 0.216 −0.0984 102 ≤ V 1 ≤ 1426 0.000 0.0958 0.134 1426 ≤ V 1 −0.0155 0.216 0.00905 Table I.4—Coefficients for Proposed Energy Conservation Standards for Rotary, Lubricant-Free, Water-Cooled, Fixed-Speed Compressors Full-Load Actual Volume Flow Rate Range (acfm) A 3 B 3 C 3 0 ≤ V 1 . 70 Compressed Air Challenge, U.S. DOE, Compressed Air System Controls, 1998, at . 5. Compressor Sizing In the Framework Document, DOE requested information on compressor sizing. CAGI noted that demand of operation dictates whether an installed system is adequate, inadequate, or oversized, but was unsure whether there are data available as to the number of systems that may be potentially oversized at the point of sale. (CAGI, No. 0014 at p. 210) Kaeser commented that they often see oversizing—specifically multiple units running at varying part-load levels. Kaeser stated that this is more of an issue of how compressors are controlled. (Kaeser Compressors, No. 0014 at p. 212-213) DOE was unable to find any information quantifying the degree of oversizing at the point of sale. In addition, DOE was unable to find information quantifying the frequency that compressors are misconfigured or oversized in the field, so DOE assumed that compressors were perfectly sized for this analysis. DOE seeks data on the degree that compressors are over- or under-sized for an intended application. Specifically, DOE requests data on the degree that air compressors are operated at duty points other than their intended design point. This is identified as Issue 35 in section VIII.E, “Issues on Which DOE Seeks Comment.” Additionally, Scales commented that air compressors are often set to operate at an elevated pressure, which increases input power as well as compressed air output. (W. Scales, No. 0020 at p. 1) DOE was unable to find any information quantifying the impacts of operating air compressors at pressures other than at their specified design point. DOE requests information and data on the degree that a compressor's pressure can be set above or below its design point. Additionally, DOE requests information and data on air compressor efficiency when it is operated above the design point pressure. This is identified as Issue 36 in section VIII.E, “Issues on Which DOE Seeks Comment.” Chapter 7 of the NOPR TSD provides details on DOE's energy use analysis for air compressors. F. Life-Cycle Cost and Payback Period Analysis DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual end users of potential energy conservation standards for air compressors. The effect of new or amended energy conservation standards on individual end users usually involves a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure end-user impacts: • The LCC (life-cycle cost) is the total end user expense of an appliance or equipment over the life of that equipment, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the equipment. • The PBP (payback period) is the estimated amount of time (in years) it takes end users to recover the increased purchase cost (including installation) of more-efficient equipment through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect. For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-standards case, which reflects the estimated efficiency distribution of air compressors in the absence of new or amended energy conservation standards. In contrast, the PBP for a given efficiency level is measured relative to the baseline equipment. For each considered efficiency level in each equipment class, DOE calculated the LCC and PBP for a nationally representative set of air compressors. DOE used data from NYSERDA and NW databases, Lot 31 and acquired system assessments to define each air compressor's application, load profile, annual hours or operation, and combination of employed controls. 71 72 73 For each of these air compressors, DOE determined the energy consumption and the appropriate electricity price, thus capturing the variability in energy consumption and energy prices associated with the use of air compressors. 71 Washington State University Extension Energy Program (WSU) and Applied Proactive Technologies (APT). Database of Motor Nameplate and Field Measurement Data. New York State Energy Research and Development Authority (NYSERDA) (2011). 72 Strategic Energy Group, Northwest Industrial Motor Database Summary (2009). 73 Van Holsteijn en Kemna B.V. (VHK). Ecodesign Preparatory Study on Electric Motor Systems/Compressors; 2014; Prepared for the European Commission by Van Holsteijn en Kemna B.V. (VHK); ENER/C3/413-2010-LOT 31-SI2.612161, available at http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0040-0031 . Inputs to the calculation of total installed cost include equipment costs—which includes MPCs, manufacturer markups, retailer and distributor markups, and sales taxes—and installation costs. Inputs to the calculation of operating expenses include annual energy consumption, energy prices and price projections, repair and maintenance costs, equipment lifetimes, and discount rates. DOE created distributions of values for equipment lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability. The computer model DOE uses to calculate the LCC and PBP relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and air compressor end user sample. The model calculated the LCC and PBP for equipment at each efficiency level for 10,000 end users per simulation run. DOE calculated the LCC and PBP for all end users as if each were to purchase a new equipment in the expected year of compliance with a new standard. DOE has tentatively determined that any standards would apply to air compressors manufactured five years after the date on which any standard is published. 74 At this time, DOE estimates publication of a final rule in the second half of 2016. Therefore, for purposes of its analysis, DOE used 2022 as the first full year of compliance with any standards for compressors. 74 EPCA specifies that the provisions of subsections (l) through (s) of section 42 U.S.C. 6295 shall apply to any other type of industrial equipment which the Secretary classifies as covered equipment, which includes compressors. (42 U.S.C. 6316(a)) Subsection (l)(2) of 42 U.S.C. 6295 states that any new or amended standard for any other type of consumer product which the Secretary classifies as a covered product shall not apply to products manufactured within five years after the publication of a final rule establishing such standard. DOE believes that this five-year lead time also applies to other types of industrial equipment, such as compressors. Table IV. 33 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the NOPR TSD and its appendices. 75 Edison Electric Institute (EEI), Typical Bills and Average Rates Report Summer, and Winger (2014). Table IV. 33—Summary of Inputs and Methods for the LCC and PBP Analysis * Inputs Source/method Equipment Cost Derived by multiplying MPCs by manufacturer and retailer markups and sales tax, as appropriate. Used historical data to derive a price scaling index to forecast equipment costs. Installation Costs Baseline installation cost determined with data from stakeholders. Assumed no change with efficiency level. Annual Energy Use The total annual energy use multiplied by the hours per year. Average number of hours based on field data. Energy Prices Electricity: Marginal prices derived from EEI 75 Energy Price Trends Based on AEO 2015 price forecasts. Repair and Maintenance Costs Assumed no change with efficiency level. Equipment Lifetime Assumed average life time of 12.5 years for rotary, and 8.4 for reciprocating air compressors. Discount Rates Approach involves identifying all possible debt or asset classes that might be used to purchase air compressors. Primary data source was the Damodaran Online. Compliance Date Late 2021. * References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the NOPR TSD. 1. Equipment Cost To calculate end user equipment costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described in section IV.D (along with sales taxes). DOE used different markups for baseline equipment and higher-efficiency equipment because DOE applies an incremental markup to the increase in MSP associated with higher-efficiency equipment. The markup is the percentage increase in price as the air compressor equipment passes through distribution channels. As explained in section IV.D, DOE assumed that compressors are delivered by the manufacturer through one of four distribution channels. The overall markups used in the LCC analysis are weighted averages of all of the relevant distribution channel markups. To project an equipment price trend for the NOPR, DOE derived an inflation-adjusted index of the Producer Price Index for air and gas compressor equipment manufacturers over the period 1984-2013. 76 These data show a slight decrease from 1989 through 2004. Since 2004, however, there has been an increase in the price index. Given the relatively slow global economic activity in 2009 through 2013, the extent to which the future trend can be predicted based on the last decade is uncertain. Because the observed data do not provide a firm basis for projecting future cost trends for compressor equipment, DOE used a constant price assumption as the default trend to project future compressor prices from 2022. Thus, prices projected for the LCC and PBP analysis are equal to the 2014 values for each efficiency level in each equipment class. 76 Series ID PCU333911333911; http://www.bls.gov/ppi/. DOE requests comments on the most appropriate trend to use for real (inflation-adjusted) compressor prices. This is identified as Issue 37 in section VIII.E, “Issues on Which DOE Seeks Comment.” 2. Installation Cost Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the equipment. In the Framework Document, DOE requested information on whether installation costs would be expected to change with efficiency. CAGI responded that there might be an added cost of installation related to efficiency (CAGI, No.0009 at p.8), but CAGI did not provide any rationale for this increase. In the absence of data to indicate at what efficiency level DOE may need to consider an increase in installation costs, or other drivers that would trigger higher installation costs for more efficient equipment, DOE has not included an estimate for installation costs for this analysis. DOE requests comment on whether any of the efficiency levels considered in this NOPR might lead to an increase in installation costs and, if so, data regarding the magnitude of the increased cost for each relevant efficiency level. This is identified as Issue 38 in section VIII.E, “Issues on Which DOE Seeks Comment.” 3. Annual Energy Consumption For each sampled compressor, DOE determined the energy consumption for an air compressor at different efficiency levels using the approach described above in section IV.E of this document. 4. Energy Prices DOE derived average and marginal annual non-residential (commercial and industrial) electricity prices using data from EIA's Form EIA-861 database (based on “Annual Electric Power Industry Report”), 77 EEI Typical Bills and Average Rates Reports, 78 and information from utility tariffs. Electricity tariffs for non-residential end users can be very complex, with the principal difference from residential rates being the incorporation of demand charges. The presence of demand charges means that two end users with the same monthly electricity consumption may have very different bills, depending on their peak demand. For the NOPR analysis DOE used marginal electricity prices to estimate the impact of demand charges for end users of air compressors. The methodology of use to calculate the marginal electricity rates can be found in appendix 8B of the NOPR TSD. 77 Available at: www.eia.doe.gov/cneaf/electricity/page/eia861.html. 78 Edison Electric Institute. Typical Bills and Average Rates Report. Winter 2014 published April 2014, Summer 2014 published October 2014: Washington, DC (Last accessed June 2, 2015.) http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx . To estimate energy prices in future years, DOE multiplied the average national energy prices by the forecast of annual change in national-average commercial and industrial energy price in the Reference case from AEO 2015, which has an end-year of 2040. 79 To estimate price trends after 2040, DOE used the average annual rate of change in prices from 2020 to 2040. 79 U.S. Department of Energy-Energy Information Administration, Annual Energy Outlook 2015 with Projections to 2040 (Available at: ). 5. Repair and Maintenance Costs Commenting on the framework document, Kaeser stated that the cost of repair for more efficient compressors depends on whether it is fixed-speed or variable-speed, and that comparing more efficient fixed-speed to less efficient fixed-speed shows no variation in costs. (Kaeser Compressors, No. 0014 at p. 236-237) CAGI commented in response to the Framework document that VSDs can have higher repair and troubleshooting costs based on issues of cleanliness of the operating site and electrical noise/interference. (CAGI, No. 0006 at p. 8) For this analysis DOE is considering separate equipment classes for compressors using fixed-speed drives and VSDs, so they are not considered as potential replacements for one another in the LCC analysis. Based on the comments from Kaeser, DOE does not expect repair or maintenance costs to change with increased efficiency, so DOE did not estimate either repair or maintenance costs. 6. Equipment Lifetime DOE defines “equipment lifetime” as the age when a given air compressor is retired from service. DOE presented several average equipment lifetimes estimates in the framework document. In response, CAGI commented that well-cared-for compressors can have lifetimes spanning decades, while Kaeser commented that very old equipment exists, but some equipment may experience much shorter lifetimes. (CAGI, No. 0009 at p.8; Kaeser Compressors, No. 0014 at p. 228) CAGI further noted that there are many variables that could affect equipment lifetime, such as quality of installation, operating environment, quality of replacement parts, and qualifications of maintenance technicians. (CAGI, No. 0014 at p. 238) While no stakeholder directly commented on the lifetimes presented, Kaeser stated they were reasonable as an average over the entire market. (Kaeser Compressors, No. 0014 at p. 229) For the NOPR, DOE based equipment lifetimes on new information published in the Lot31 study. 80 DOE calculated a distribution of lifetimes shown in Table IV.34. DOE also used a distribution of mechanical lifetime in hours to allow a negative correlation between annual operating hours and lifetime in years—air compressors with more annual operating hours tend to have shorter lifetimes. Chapter 8 of the NOPR TSD contains a detailed discussion of equipment lifetimes. 80 Ecodesign Preparatory Study on Electric Motor Systems/Compressors; 2014; Prepared for the European Commission by Van Holsteijn en Kemna B.V. (VHK); ENER/C3/413-2010-LOT 31-SI2.612161; http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0040-0031 . Table IV. 34—Air Compressor Lifetimes (years) Minimum Average Maximum Rotary 4 12.5 36 Reciprocating 1 8.4 25 DOE seeks comment on these minimum, average, and maximum equipment lifetimes, and whether or not they are appropriate for all equipment classes. This is identified as Issue 39 in section VIII.E, “Issues on Which DOE Seeks Comment.” 7. Discount Rates The discount rate is the rate at which future expenditures are discounted to estimate their present value. The weighted average cost of capital is commonly used to estimate the present value of cash flows to be derived from a typical company project or investment. Most companies use both debt and equity capital to fund investments, so the cost of capital is the weighted-average cost to the firm of equity and debt financing. DOE estimated the cost of equity using the capital asset pricing model, which assumes that the cost of equity for a particular company is proportional to the systematic risk faced by that company. The primary source of data for this analysis was Damodaran Online, a widely used source of information about company debt and equity financing for most types of firms. 81 DOE estimated a separate weighted average cost of capital for each business sector that purchases compressors. More details regarding DOE's estimates of end user discount rates are provided in chapter 8 of the NOPR TSD. 81 Damodaran Online, The Data Page: Cost of Capital by Industry Sector, 2001-2013. (Last accessed March, 2014.) See: http://pages.stern.nyu.edu/~adamodar/ . 8. Efficiency Distribution in the No-New-Standards Case To accurately estimate the share of end users that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution ( i.e., market shares) of equipment efficiencies that end users purchase in the no-new-standards case ( i.e., the case without new energy conservation standards). To estimate the efficiency distribution of air compressors for 2021, DOE examined the frequency of efficiencies made available under CAGI's voluntary testing program for each equipment class (CAGI database), and the distribution of efficiencies of shipments of commercial and industrial pumps provided, 82 scaled to the capacity range of compressors. DOE found the distribution for both samples to be similar, with the distribution of efficiencies of shipments for pumps skewed slightly toward higher efficiencies. For the NOPR analysis, DOE used the re-scaled distribution of pump efficiencies, as it is based on the efficiencies of shipments of a durable industrial product, rather than the frequency of efficiency of an entry in a catalog, and thus better reflects end user choice. The estimated market shares for the no-new-standards case efficiency distribution for air compressors are shown in Table IV.35. See chapter 8 of the NOPR TSD for further information on the derivation of the efficiency distributions. 82 U.S. Department of Energy. Energy Efficiency and Renewable Energy Office. Energy Conservation Program: Energy Conservation Standards for Pumps; Notice of proposed rulemaking (NOPR), 2015. See: http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-STD-0031-0040 . Table IV. 35—Distribution of Efficiencies in the No-New-Standards Case EL Average of probability (%) 0 11.50 1 15.50 2 15.90 3 18.40 4 11.30 5 22.40 6 5.10 9. Payback Period Analysis The payback period is the amount of time it takes the end user to recover the additional installed cost of more-efficient equipment, compared to baseline equipment, through energy cost savings. Payback periods are expressed in years. Payback periods that exceed the life of the equipment mean that the increased total installed cost is not recovered in reduced operating expenses. The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the equipment and the change in the first-year annual operating expenditures relative to the baseline. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed. As noted above, EPCA, as amended, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the end user of purchasing equipment complying with an energy conservation standard level will be less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii) and 6316(a)) For each considered efficiency level, DOE determined the value of the first year's energy savings by calculating the energy savings in accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price forecast for the year in which compliance with the new standards would be required. G. Shipments Analysis DOE uses forecasts of annual equipment shipments to calculate the national impacts of potential energy conservation standards on energy use, NPV, and future manufacturer cash flows. 83 The shipments model takes an accounting approach, tracking market shares of each equipment class and the vintage of units in the stock. Stock accounting uses equipment shipments as inputs to estimate the age distribution of in-service equipment stocks for all years. The age distribution of in-service equipment stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock. 83 DOE uses data on manufacturer shipments as a proxy for national sales, as aggregate data on sales are lacking. In general one would expect a close correspondence between shipments and sales. In its proposed Coverage Determination and subsequent Framework Document, DOE considered using the shipment data available from the U.S. Census Bureau. In reference to the shipments found in the Census data, CAGI commented that air compressors used for actual commercial and industrial applications are significantly lower, being a fraction of the referenced number (CAGI, EERE-2012-BT-DET-0033-0003, pg. 7). In response, DOE sought, and received, recent shipments data for rotary compressors from a number of stakeholders and subject matter experts. DOE was able to find only limited shipments data for reciprocating compressors, so DOE continued to use the data from the U.S. Census Bureau. 84 DOE aggregated these data into its shipments estimate for 2013 (see chapter 9 of the NOPR TSD). 84 U.S. Department of Commerce, Census Bureau, Manufacturing and Construction Division, Series MA333P(10)-1, Stationary Air Compressors, Reciprocating, Single and Double Acting (333912110T), 2011. DOE seeks comment on the total 2013 shipments by equipment class. This is identified as Issue 40 in section VIII.E, “Issues on Which DOE Seeks Comment.” The 2013 shipments estimates were disaggregated by compressor capacity in actual cubic feet per minute (ACFM). To project future shipments of air compressors, DOE scaled the 2013 values using particular forecasts from AEO 2015. DOE understands that air compressors are used widely in both commercial, and manufacturing and industrial sectors. However, DOE was not able to locate and information indication what fraction of equipment was used in either sector. For this analysis DOE assumed that industrial/manufacturing processes will require a greater volume of compressed air than commercial processes. With higher electrical loads in the industrial/manufacturing sector than the commercial sector, DOE assumed that compressors greater than 50 ACFM capacity are mainly used in manufacturing, so DOE used the forecast for value of manufacturing shipments for this category. DOE assumed compressors equal to or less than 50 ACFM capacity are mainly used in commercial buildings, so DOE used the forecast for commercial floor space for this category. DOE seeks comment on its assumption that air compressors with a capacity of no more than 50 ACFM are used in commercial applications, and air compressors greater than 50 ACFM are used in industrial applications. This is identified as Issue 41 in section VIII.E, “Issues on Which DOE Seeks Comment.” For rotary equipment classes DOE then used CAGI test data for air compressors collected directly from manufacturers to distribute shipments into the different lubrication and cooling type equipment classes. For reciprocating compressors DOE was unable to locate any information on the fractions of equipment shipped that are single-phase or three-phase. DOE assumed an equal division of shipments between single-phase and three-phase reciprocating compressors for equipment rated less than or equal to 10-hp, 85 while any reciprocating shipments above 10-hp were considered to be three-phase equipment. The equipment classes and their estimated market shares are shown in Table IV.36. DOE used the same shares for all years in the projection. 85 For this analysis DOE considers 10-hp is the upper nominal power limit for single-phase electric motors and air compressors driven by these motors, For this analysis DOE approximated as 10-hp as 50 ACFM to match available shipment data to the equipment class capacities defined in the engineering analysis. Equipment class capacities are chapter 5 of the TSD. Table IV. 36—Share of Shipments by Equipment Class Equipment class Description Market share (%) RP_FS_L_AC Rotary Screw, Fixed-Speed, Lubricated, Air Cooled 1.62 RP_FS_L_WC Rotary Screw, Fixed-Speed, Lubricated, Water-Cooled 0.29 RP_FS_LF_AC Rotary Screw, Fixed-Speed, Lubricant Free, Air Cooled 0.06 RP_FS_LF_WC Rotary Screw, Fixed-Speed, Lubricant Free, Water-Cooled 0.04 RP_VS_L_AC Rotary Screw, Variable-speed, Lubricated, Air Cooled 0.34 RP_VS_L_WC Rotary Screw, Variable-speed, Lubricated, Water-Cooled 0.06 RP_VS_LF_AC Rotary Screw, Variable-speed, Lubricant Free, Air Cooled 0.01 RP_VS_LF_WC Rotary Screw, Variable-speed, Lubricant Free, Water-Cooled 0.02 R1_FS_L_XX Reciprocating 1-phase, Fixed-Speed, Lubricated, Air Cooled 44.02 R3_FS_L_XX Reciprocating 3-phase, Fixed-Speed, Lubricated, Air Cooled 53.54 DOE seeks comment on the share of shipments by equipment class, and how these shares may change over time. This is identified as Issue 42 in section VIII.E, “Issues on Which DOE Seeks Comment.” DOE recognizes that an increase in equipment price resulting from energy efficiency standards may affect end user decision-making regarding whether to purchase a new compressor, a refurbished one, or repair the existing failed unit. DOE has not found any information in the literature that indicates a demand price elasticity for commercial and industrial firms. For the NOPR, it used a medium elasticity of −0.5 for commercial customers, and a lower elasticity (−0.25) for industrial customers. 86 DOE used a lower elasticity for industrial customers because these customers are likely to place greater value on the reliability and efficiency provided by new equipment, over the alternative of purchasing used equipment. 86 A price elasticity of -0.5 means that for every 1 percent increase in price, the demand for the product ( i.e., shipments) would decline by 0.5 percent. An elasticity of 1 indicates very high elasticity of demand, whereas an elasticity of zero indicates no elasticity of demand. Elasticities are considered constant over time. DOE seeks comment on whether the assumed price elasticities are reasonable for air compressors. This is identified as Issue 43 in section VIII.E, “Issues on Which DOE Seeks Comment.” H. National Impact Analysis The NIA assesses the national energy savings (NES) and the national net present value (NPV) from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels. (“Consumer” in this context refers to consumers of the equipment being regulated.) DOE calculates the NES and NPV for the potential standard levels considered based on projections of annual equipment shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses. 87 For the present analysis, DOE forecasted the energy savings, operating cost savings, equipment costs, and NPV of consumer benefits over the lifetime of air compressors sold from 2022 through 2051. 87 For the NIA, DOE adjusts the installed cost data from the LCC analysis to exclude sales tax, which is a transfer. DOE evaluates the impacts of potential standards for compressors by comparing a case without such standards with standards-case projections. For the no-new-standards case, DOE considers historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. For the standards cases, DOE considers how a given standard would likely affect the market shares of equipment with efficiencies greater than the standard. DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs. Table IV.37 summarizes the inputs and methods DOE used for the NIA analysis for the NOPR. Discussion of these inputs and methods follows the table. See chapter 10 of the NOPR TSD for further details. Table IV. 37—Summary of Inputs and Methods for the National Impact Analysis Inputs Method Shipments Annual shipments from shipments model. Compliance Date of Standard Late 2021. Efficiency Trends No-new-standards case: constant market shares. Annual Energy Consumption per Unit Annual weighted-average values are a function of energy use at each TSL. Total Installed Cost per Unit Annual weighted-average values are a function of cost at each TSL. Incorporates projection of future equipment prices based on historical data. Annual Energy Cost per Unit Annual weighted-average values as a function of the annual energy consumption per unit and energy prices. Repair and Maintenance Cost per Unit Annual values do not change with efficiency level. Energy Prices AEO 2015 forecasts (to 2040) and extrapolation thereafter. Energy Site-to-Primary Conversion A time-series conversion factor based on AEO 2015. Discount Rate Three and seven percent. Present Year 2015. 1. Equipment Efficiency Trends A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.8 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered equipment classes for the first full year of anticipated compliance with an amended standard. Several stakeholders commented that manufacturers will continue to increase the efficiency of air compressors in the absence of standards. (CAGI, No. 0014 at p. 247-251; Kaeser Compressors, No. 0014 at p. 252-253; Ingersoll-Rand, No. 0014 at p. 254) Data on the number of air compressor designs by efficiency is available for 2006 through 2014 from manufacturer performance test reports. These data show that in some years the number of higher-efficiency designs increases, indicating a potential average improvement in efficiency. However, DOE has no data indicating what percentage of shipments are attributed to these more-efficient air compressors, so no clear trend toward more efficient air compressors could be determined. Thus, DOE assumed no change in efficiency in the no-new-standards case. DOE seeks comment on its assumption of no change over time in the market share of more efficient equipment in the no-new-standards case. This is identified as Issue 44 in section VIII.E, “Issues on Which DOE Seeks Comment.” For each standards case, DOE used a “roll-up” scenario to establish the market shares by efficiency level for the year that compliance would be required with new standards ( i.e., late 2021). In this case, equipment efficiencies in the no-new-standards case that were above the standard level under consideration would not be affected. After the compliance year, DOE maintained consistency with the no-new-standards case and assumed no change in efficiency. DOE seeks information on any projected change in equipment efficiencies over time, specifically whether or not the market shares of air compressors by efficiency would change after the publication of a new standard. This is identified as Issue 45 in section VIII.E, “Issues on Which DOE Seeks Comment.” 2. National Energy Savings The national energy savings analysis involves a comparison of national energy consumption of the considered equipment between each potential standards case (TSL) and the no-new-standards case. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new-standards case and for each higher efficiency standard. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy ( i.e., the energy consumed by power plants to generate site electricity) using annual conversion factors derived from AEO 2015. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis. In 2011, 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 which DOE explained its determination that EIA's National Energy Modeling System (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). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector 88 that EIA uses to prepare its Annual Energy Outlook. The approach used for deriving FFC measures of energy use and emissions is described in appendix 10A of the NOPR TSD. 88 For more information on NEMS, refer to The National Energy Modeling System: An Overview, DOE/EIA-0581 (98) (Feb.1998) (Available at: http://www.eia.gov/oiaf/aeo/overview/ ). 3. Net Present Value Analysis The inputs for determining the NPV of the total costs and benefits experienced by consumers are: (1) Total annual installed cost; (2) total annual operating costs; and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the forecast period. DOE used a discount factor based on real discount rates of 3 percent and 7 percent to discount future costs and savings to present values. As discussed in section IV.F.1of this document, DOE did not find a firm bases to project a trend in air compressor prices, so DOE used constant real prices as the default. To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of different product price forecasts on the consumer NPV for the considered TSLs for air compressors. In addition to the default price trend, DOE considered two equipment price sensitivity cases—(1) a high price decline case based on Air and Gas Compressor Manufacturer historical Producer Price Index (PPI) series 89 and (2) a low price decline case based on AEO 2015 industrial equipment price trend. The derivation of these price trends and the results of these sensitivity cases are described in appendix 10C of the NOPR TSD. 89 U.S. Department of Labour, Bureau of Labor Statistics, Air & gas compressors, ex. compressors for ice making, refrigeration, or a/c equipment, Series ID: PCU33391233391211Z The operating cost savings are energy cost savings, which are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the forecast of annual national-average residential energy price changes in the Reference case from AEO 2015, which has an end year of 2040. To estimate price trends after 2040, DOE used the average annual rate of change in prices from 2020 to 2040. As part of the NIA, DOE also analyzed scenarios that used inputs from the AEO 2015 Low Economic Growth and High Economic Growth cases. Those cases have higher and lower energy price trends compared to the Reference case. NIA results based on these cases are presented in appendix 10C of the NOPR TSD. In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. DOE uses discount factors based on both a 3-percent and a 7-percent real discount rate, in accordance with guidance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis. 90 The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a consumer's perspective. The 7-percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the “social rate of time preference,” which is the rate at which society discounts future consumption flows to their present value. 90 United States Office of Management and Budget. Circular A-4: Regulatory Analysis,” (Sept. 17, 2003), section E (Available at: www.whitehouse.gov/omb/memoranda/m03-21.html ). I. Consumer Subgroup Analysis In analyzing the potential impact of new or amended energy conservation standards on consumers, DOE evaluates the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this NOPR, DOE analyzed the impacts of the considered standard levels on small business consumers. DOE used the LCC and PBP spreadsheet model to estimate the impacts of the considered efficiency levels on this subgroup. Chapter 11 in the NOPR TSD describes the consumer subgroup analysis. J. Manufacturer Impact Analysis 1. Overview DOE performed an MIA to estimate the financial impacts of energy conservation standards on manufacturers of compressors and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of forecasted industry cash flows, the industry net present value (INPV), investments in research and development (R&D) and manufacturing capital, and domestic manufacturing employment. Additionally, the MIA seeks to determine how new energy conservation standards might affect manufacturing capacity and industry competition, as well as how standards contribute to the overall regulatory burden facing manufacturers. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers. The quantitative part of the MIA primarily relies on the Government Regulatory Impact Model (GRIM), an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, unit production costs, equipment shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant equipment. The key GRIM output is the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital. The model uses standard accounting principles to estimate the impacts of new energy conservation standards on a given industry by comparing changes in INPV between a base case and the various standards cases (TSLs). To capture the uncertainty relating to manufacturer pricing strategy following amended standards, the GRIM estimates a range of possible impacts under different markup scenarios. The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard's impact on manufacturing capacity, R&D capacity, competition within the industry, cumulative impact of other regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the NOPR TSD. DOE conducted the MIA for this rulemaking in three-phases. In Phase 1 of the MIA, DOE prepared a profile of the compressor industry using publicly available information, such as Securities and Exchange Commission (SEC) 10-K reports, 91 market research tools ( e.g., Hoovers 92 ), corporate annual reports, the U.S. Census Bureau's 2013 Annual Survey of Manufacturers (ASM), 93 and industry trade association membership directories ( e.g., CAGI), as well as information obtained through DOE's engineering analysis and market and technology assessment prepared for this rulemaking. 91 U.S. Securities and Exchange Commission, Annual 10-K Reports (Various Years) (Available at: www.sec.gov ). 92 Hoovers Inc., Company Profiles, Various Companies (Available at: www.hoovers.com/ ). 93 U.S. Census Bureau, Annual Survey of Manufacturers: General Statistics: Statistics for Industry Groups and Industries (2013) (Available at: http://www.census.gov/manufacturing/asm/index.html ). In Phase 2 of the MIA, DOE prepared a framework industry cash-flow analysis to quantify the potential impacts of new energy conservation standards on manufacturers. In general, energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) Creating a need for increased investment; (2) raising production costs per unit; and (3) altering revenue due to higher per-unit prices and changes in sales volumes. To quantify these impacts, DOE uses the GRIM to estimate a series of annual cash flows starting with the announcement of the standard and extending over a 30-year period following the compliance date of the standard. Inputs to the GRIM include annual expected revenues, costs of sales, SG&A expenses, R&D expenses, taxes, and capital expenditures. In addition, DOE developed interview guides to distribute to manufacturers of compressors in order to develop and refine key GRIM inputs, including product and capital conversion costs, and to gather additional information on the anticipated effects of energy conservation standards on revenues, direct employment, capital assets, industry competitiveness, and subgroup impacts. In Phase 3 of the MIA, DOE conducted structured, detailed interviews with manufacturers. During these interviews, DOE discussed engineering, manufacturing, procurement, and financial topics to validate assumptions used in the GRIM and to identify key issues or concerns. A copy of the manufacturer interview guide is provided in appendix 12B of NOPR TSD. Additionally, see section IV.J.3 for a description of the key issues raised by manufacturers during the interviews. As part of Phase 3, DOE also evaluated subgroups of manufacturers that may be disproportionately impacted by amended standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, niche players, and/or manufacturers exhibiting a cost structure that largely differs from the industry average. DOE identified one compressor manufacturer subgroup for which average cost assumptions may not hold: small businesses. The small business subgroup is discussed in section VII.B, “Review under the Regulatory Flexibility Act,” and in chapter 12 of the NOPR TSD. 2. GRIM Analysis As discussed previously, DOE uses the GRIM to quantify the changes in cash flow that result in a higher or lower industry value due to energy conservation standards. The GRIM analysis uses a discounted cash-flow methodology that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM models changes in MPCs, distributions of shipments, investments, and manufacturer margins that could result from new energy conservation standards. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2015 (the base year of the analysis) and continuing to 2051. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. DOE applied a discount rate of 8.7 percent, derived from industry financials and then modified according to feedback received during manufacturer interviews. In the GRIM, DOE calculates cash flows using standard accounting principles and compares changes in INPV between the base case and each TSL (the standards case). The difference in INPV between the base case and a standards case represents the financial impact of the energy conservation standard on manufacturers. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the NOPR TSD. a. GRIM Key Inputs i. Manufacturer Production Costs Manufacturer production costs (MPCs) are those incurred by the manufacturer to produce a covered compressor. The cost includes raw materials and purchased components, production labor, factory overhead, and production equipment depreciation. Changes in the MPCs of the analyzed equipment can affect revenues, gross margins, and industry cash flows. In the MIA, DOE used the MPCs for each efficiency level calculated in the engineering analysis, as described in section IV.C.7 and further detailed in chapter 5 of the NOPR TSD. ii. Manufacturer Markups Manufacturer selling prices (MSPs) include direct manufacturing production costs and all non-production costs ( i.e., SG&A, R&D, and interest), along with profit. To calculate the MSPs in the GRIM, DOE applied non-production cost markups to the MPCs estimated in the engineering analysis for each equipment class and efficiency level. For the MIA, DOE modeled a baseline markup for the compressor industry in both the base case and the standards case. With a baseline markup, DOE applied a uniform “gross margin percentage” for each equipment class, across all efficiency levels. This assumes that manufacturers would be able to maintain the same amount of profit as a percentage of revenues at all efficiency levels within an equipment class. As production costs increase with efficiency, the absolute dollar markup will increase as well. As discussed in section IV.C.7, DOE estimated the average non-production cost baseline markup—which includes SG&A expenses, R&D expenses, interest, and profit—to be 1.35 for lubricated rotary compressors, 1.40 for lubricant-free rotary compressors, and 1.26 for reciprocating compressors. Jenny commented that markups data only based on publicly available information may not be accurate and may not contain key pricing and costing information. (Jenny, No. 0005 at p. 4) DOE agrees. To develop its estimated baseline markups, DOE used both publicly available financial information as well as comments and data received directly from manufacturers during confidential interviews. iii. Shipments Forecast The GRIM estimates manufacturer revenues based on total unit shipment forecasts and the distribution of shipments by equipment class. Changes in sales volumes and efficiency mix over time can significantly affect manufacturer finances. For this analysis, the GRIM uses the NIA's annual shipment forecasts derived from the shipments analysis from 2015 (the base year) to 2051 (the end year of the analysis period). See chapter 9 of the NOPR TSD for additional details. iv. Product and Capital Conversion Costs Energy conservation standards can cause manufacturers to incur conversion costs to make necessary changes to their production facilities and bring equipment designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each equipment class. For the purpose of the MIA, DOE classified these conversion costs into two major groups: (1) Product conversion costs; and (2) capital conversion costs. Product conversion costs are investments in research, development, testing, and marketing, focused on making equipment designs comply with the energy conservation standard. Capital conversion costs are investments in property, plant, and equipment to adapt or change existing production facilities so that compliant equipment designs can be fabricated and assembled. Ultimately, for the MIA, DOE modeled two standards-case conversion cost scenarios to represent uncertainty regarding the potential impacts on manufacturers following the implementation of energy conservation standards. These scenarios are discussed further in section IV.J.2.b. v. Financial Parameters DOE estimated eight key financial parameters for use in the GRIM. Table IV.38 describes these parameters and summarizes DOE's estimated values. DOE notes that each estimate represents an industry average value. Jenny commented that “deriving baseline information from publicly traded companies is problematic at best . . . a very high percentage of compressors sold in the US come from small, privately held companies.” (Jenny, No. 0005 at p. 5) To estimate the financial parameters outlined in Table IV.38, DOE first created estimates based on publicly available financial information for manufacturers of compressors. DOE then revised its initial estimates based on discussions with both private and public compressor companies. Table IV.38 presents the financial parameters incorporated into the GRIM, which reflect data from both public and private compressor manufacturing companies. Table IV.38—Industry Average Financial Parameters for Rotary and Reciprocating Compressor Manufacturers Financial parameter Definition Estimated industry average value % Income Tax Rate Corporate effective income tax paid (percentage of earnings before taxes, EBT) 25.0 Discount Rate Weighted average cost of capital (inflation-adjusted weighted average of corporate cost of debt and return on equity) 8.7 Working Capital Current assets less current liabilities (percentage of revenues) 17.3 Net Property, Plant & Equipment Fixed assets, or long-lived assets, including building, machinery, and equipment less accumulated depreciation (percentage of revenues) 11.4 SG&A Selling, general, and administrative expenses (percentage of revenues) 17.2 R&D Research and development expenses (percentage of revenues) 2.1 Depreciation Amortization of fixed assets (percentage of revenues) 3.0 Capital Expenditures Outlay of cash to acquire or improve capital assets (percentage of revenues, not including acquisition or sale of business units) 3.2 DOE requests comment on its estimates of average industry financial parameters. This is identified as Issue 46 in section VIII.E, “Issues on Which DOE Seeks Comment.” b. GRIM Scenarios i. Conversion Cost Scenarios As mentioned previously, DOE modeled two standards-case conversion cost scenarios to represent uncertainty regarding the potential impacts on manufacturers following the implementation of energy conservation standards: (1) A low conversion cost scenario; and (2) a high conversion cost scenario. Specifically, the two scenarios explore uncertainty in conversion cost, as it relates to the draft EU minimum energy efficiency standards for compressors. During confidential interviews, multiple manufactures indicated that they sell similar equipment in the U.S. and the EU. They also indicated that if the EU adopted the draft standard for compressors, the efficiency of some equipment sold in the U.S. would be improved by windfall. As such, if the EU adopts its draft standard, which would be phased in from 2018 to 2020, 94 a significant amount of globally marketed equipment would already exhibit improved efficiency, regardless of a DOE standard. However, because the EU standard is currently in draft stage, and is not yet adopted, DOE chose to use a scenario analysis to evaluate its potential impacts on conversion cost. 94 See Draft EU Compressors Regulation, Article 3 at p. 4, available at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0040-0031 . DOE notes that conversion costs only vary between the scenarios for lubricated rotary equipment, as lubricant-free rotary equipment is not proposed for coverage in the EU (but may be evaluated for future coverage—see section IV.A.2.b), and DOE is unaware of any reciprocating compressor models sold in both the EU and the United States. The low conversion cost scenario assumes that manufacturers active in the EU market will not face additional product conversion costs to adapt to a U.S. standard that is at or below the draft EU level (EL 3 and TSL 3). If the U.S. standard is above the draft EU level, these manufacturers would still incur full redesign costs. In the high conversion cost scenario, all manufacturers face full product conversion costs, regardless of an EU regulation. DOE notes that Manufacturers that are not active in the EU market will face the same conversion costs, regardless of the scenario. To evaluate the magnitude of each product and capital conversion cost scenario, DOE relied on cost estimates provided by representative manufacturers as well as estimates and appraisals provided by consultants familiar with compressor and general industrial manufacturing. DOE first determined conversion costs for the high scenario. To find industry-wide conversion costs for each equipment class, DOE first estimated the average cost per manufacturer to redesign all covered equipment in its portfolio; this corresponds to the conversion costs needed to reach the max-tech efficiency level. For each equipment class, DOE then multiplied the per-manufacturer conversion costs by the number of manufacturers active in the equipment class with a market share greater than three percent. DOE believes its per-manufacturer conversion cost estimates were sufficiently conservative such that this method yields an estimate of total industry conversion costs to reach the max-tech efficiency level for each equipment class. Next, DOE scaled the max-tech conversion costs down to each efficiency level considered in this NOPR. To do this, DOE multiplied the max-tech conversion costs by the percentage of models in each equipment class that fail at each efficiency level. For rotary equipment classes, DOE estimated the percentage of models failing at each efficiency level using the CAGI database. For reciprocating equipment classes, no product data was available to help estimate the percentage of models failing at each efficiency level. In the absence of direct data, failure rates for rotary compressor equipment were used as a proxy. DOE selected this approach as efficiency levels for reciprocating and rotary compressors were established using similar methods, and each efficiency level represents the same relative efficiency, with respect to baseline and max-tech (as discussed in section IV.C.5). Specifically, for all equipment classes, DOE established efficiency levels at baseline (EL 0), max-tech (EL 6), and a d-value of zero (EL 3). DOE also established two intermediary efficiency levels between the baseline and a d-value of zero (ELs 1 and EL 2), and two efficiency levels between the d-value of zero level and max-tech (ELs 4 and 5). Furthermore, DOE believes that rotary and reciprocating equipment may have similar distributions of efficiency, with respect to baseline and max-tech, as indicated by graphical data presented in the Lot 31 study. 95 95 See Lot 31 Study, figures 1-1 through 1-3 at pp. 26-28 available at: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0040-0031 . DOE requests comment on the use of failure rates for rotary compressor equipment as a proxy for reciprocating equipment failure rates. This is identified as Issue 47 in section VIII.E, “Issues on Which DOE Seeks Comment.” To estimate conversion costs for the low scenario, DOE reduced the lubricated rotary product conversion costs by 31.25-percent at each efficiency level at or below the draft EU level. The value of 31.25-percent represents DOE's estimate of the percentage of U.S. lubricated rotary models that are offered for sale in the EU and may be redesigned to meet the draft EU level. Table IV.39 and Table IV.40 present the resulting product and capital conversion costs at each efficiency level, for three major groupings of equipment classes. Due to commonality in design and components, DOE is presenting the conversion costs for the following equipment classes in aggregate: (1) Rotary, lubricated, fixed-speed and variable-speed, air and water cooled; (2) rotary, lubricant-free, VSD, fixed-speed and variable-speed, air and water cooled; and (3) reciprocating, 1- and 3- phase. Complete results by equipment class, as well as details on the calculation of industry aggregate product and capital conversion costs are found in chapter 12 of the NOPR TSD. A comparison of industry financial impacts under the two conversion cost scenarios is presented in section V.B.2.a of this document. Table IV.39—Aggregate Industry Product Conversion Cost, Excluding Compliance and Testing Costs,** at Each Efficiency Level [In $Millions] All values in millions of dollars Scenario EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 RP_FS_L_AC RP_VS_L_AC Low 16 57 144 269 333 424 RP_FS_L_WC RP_VS_L_WC High 24 84 210 269 333 424 RP_FS_LF_AC RP_VS_LF_AC RP_FS_LF_WC RP_VS_LF_WC Not Applicable 10 27 59 75 92 112 R3_FS_L_XX R1_FS_L_XX Not Applicable 2 5 13 17 21 27 * Due to commonality in design and components, DOE is presenting conversion costs in three aggregated equipment class groups. Complete results by equipment class are available in chapter 12 of the NOPR TSD. ** Note that compliance and testing cost estimates are presented separately, later in this section. Table IV.40—Aggregate Industry Capital Conversion Cost at Each Efficiency Level All values in millions of dollars EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 RP_FS_L_AC 8 29 73 92 113 143 RP_VS_L_AC RP_FS_L_WC RP_VS_L_WC Rotary, Non-Lubricated, FS & VSD, AC & WC* 3 9 20 26 32 38 RP_FS_LF_AC 1 3 8 10 12 16 RP_VS_LF_AC RP_FS_LF_WC RP_VS_LF_WC * Due to commonality in design and components, DOE is presenting conversion costs in three aggregated equipment class groups. Complete results by equipment class are available in chapter 12 of the NOPR TSD. DOE also estimated the magnitude of the aggregate industry compliance testing costs needed to conform to new energy conservation standards. Although compliance testing costs are a subset of product conversion costs, DOE estimated these costs separately. DOE pursued this approach because no energy conservation standards currently exist for compressors; as such, all basic models 96 will be required to be tested and certified to comply with new energy conservation standards regardless of the level of such a standard. As a result, the industry-wide magnitude of these compliance testing costs will be constant, regardless of the selected standard level. 96 In the test procedure NOPR, DOE proposes to define the term “basic model” as “all units of a class of compressors manufactured by one manufacturer, having the same primary energy source, the same compressor motor nominal horsepower, and essentially identical electrical, physical, and functional (or pneumatic) characteristics that affect energy consumption and energy efficiency.” DOE notes that new energy conservation standards will require every model offered for sale to be tested according to the sampling plan proposed in the test procedure NOPR. This proposed sampling plan specifies that a minimum of two units must be tested to certify a basic model as compliant. DOE estimated the industry-wide magnitude of compliance testing by multiplying the estimated number of models currently in each equipment class by the cost to test each model, and doubling this value to account for the minimum sample size of two units per basic model. DOE estimated the total number of rotary models in the industry by scaling the model counts in the CAGI database by CAGI's estimated market share. The number of reciprocating models was estimated using data collected from manufacturer Web sites. DOE estimated the cost to test each model to the method proposed in the test procedure NOPR from discussions with third-party compressor test labs as well as information gathered during confidential manufacturer interviews. Table IV.41 presents DOE's estimates of aggregate industry compliance testing costs for each equipment class. Complete details on the calculation of aggregate industry compliance testing costs are found in chapter 12 of the NOPR TSD. Table IV.41—Aggregate Industry Compliance Testing Cost Equipment class Aggregate industry compliance testing cost ($Millions) RP_FS_L_AC 4.72 RP_VS_L_AC 2.48 RP_FS_L_WC 0.95 RP_VS_L_WC 0.50 RP_FS_LF_AC 2.16 RP_VS_LF_AC 1.34 RP_FS_LF_WC 0.46 RP_VS_LF_WC 0.24 R1_FS_L_XX 5.57 R3_FS_L_XX 25.1 In general, DOE assumes that all conversion-related investments occur between the year of publication of the final rule and the year by which manufacturers must comply with the standard. DOE requests feedback on its conversion cost methodology, including quantitative estimates and qualitative descriptions of the capital and product conversion costs manufacturers would incur in order to comply with amended energy conservation standards. This is identified as Issue 48 in section VIII.E, “Issues on Which DOE Seeks Comment.” 3. Manufacturer Interviews As part of the MIA, DOE discussed potential impacts of standards with nine compressor manufacturers. The interviewed manufacturers account for approximately 70 percent of the domestic rotary compressor market and approximately 20 percent of the domestic reciprocating compressor market. In interviews, DOE asked manufacturers to describe their major concerns about this rulemaking. This section highlights manufacturer statements that helped shaped DOE's understanding of the potential impacts of an energy conservation standard on the industry. a. Conversion Requirements Manufacturers raised concerns over potentially significant conversion costs, particularly at higher efficiency levels. Several manufacturers of rotary equipment indicated that if U.S. standards exceed the levels proposed in the draft EU Lot 31 compressors standards, adequate capital may not be available to fund the redesigns and manufacturing equipment needed to maintain their current product portfolios. At higher efficiency levels, namely those that remove more than 75-percent of models from the market, many indicated they would consider closing manufacturing facilities rather than make the investments necessary to comply with such efficiency standards. b. Engineering Constraints and Development Cycle Times The primary efficiency-improving technology option discussed in this NOPR is compressor package redesign. A compressor package redesign relies on the expertise of many highly trained engineers to redesign a compressor to higher efficiency levels, while still meeting other performance and reliability criteria. Many manufacturers of rotary equipment expressed concern surrounding insufficient availability of engineering resources required to redesign a high volume of compressor packages during a short time period. Manufacturers indicated that most experienced compressor design engineers are already employed within the industry, which limits their ability to rapidly expand their research and development teams if faced with a high volume of required compressor redesigns. Consequently, manufacturers typically commented that at standard levels at or above the equivalent of TSL 3, these engineering constraints could create time delays in complying with new standards. DOE notes that manufacturers typically discussed this constraint with respect to a three-year compliance period. Some manufacturers indicated that a longer compliance period, such as the five-year compliance period proposed in this document, may ease their concern over engineering constraints, as their existing engineering teams would be able to accomplish more redesigns if given more time. Under business-as-usual conditions most manufacturers indicated that a typical lubricated rotary compressor redesign would last between 18 and 24 months. This timeframe is expected to extend if R&D teams are faced with large numbers of concurrent redesigns. c. Relationship to the Draft European Union Energy Efficiency Standards Some manufacturers emphasized the importance of harmonizing U.S. energy conservation standards with proposed EU standards for compressors. Some manufacturers have already begun preparations for the proposed EU standard. These manufacturers stated that harmonized standards would promote regulatory consistency and would enable them to better coordinate product redesigns and reduce conversion costs. If U.S. and EU standards are not harmonized, these manufacturers noted they would either have to carry a greater number of equipment lines to comply with efficiency standards in both domestic and European markets, or sell a single set of high efficiency equipment in both markets. The former adds complexity and cost. The latter may put the manufacturer at a competitive disadvantage in the market regulated to a lower efficiency. Conversely, some manufacturers expressed concern that the proposed EU standard levels are too aggressive, and they indicated that such a level in the U.S. could result in adverse impacts to manufacturers. d. Unfair Advantages for Replacement Technologies Many manufacturers of rotary equipment expressed concerns that energy conservation standards on rotary compressors of 200-hp or greater may provide unfair advantages to competing technologies such as dynamic compressors (also known as centrifugal compressors). These manufacturers contend that both technologies are already competitive above 200-hp and both offer certain advantages to the end user. Increased prices resulting from a standard on only rotary equipment could push more end users to choose dynamic compressors, which would remain unregulated and unchanged in price. Furthermore, these manufacturers believe that coverage of only rotary compressors will unfairly burden them with costs and expenses not seen by their dynamic compressor competition. e. Uncertainty of Compliance Cost for Reciprocating Equipment Some manufacturers of reciprocating equipment indicated that most reciprocating equipment in the U.S. market are not currently tested or labeled for efficiency. These manufacturers expressed two concerns related to this issue: (1) Many manufacturers do not currently know the efficiency of their equipment, and therefore cannot estimate the impact of the standard and the cost to their organization; and (2) many manufacturers do not currently have test facilities and will be required to either build facilities or utilize third-party test labs, both of which are new and unfamiliar costs to them. K. Emissions Analysis The emissions analysis consists of two components. The first component estimates the effect of potential energy conservation standards on power sector and site (where applicable) combustion emissions of CO 2 , NO X , SO 2 , and Hg. The second component estimates the impacts of potential standards on emissions of two additional greenhouse gases, CH 4 and N 2 O, as well as the reductions to emissions of all species due to “upstream” activities in the fuel production chain. These upstream activities comprise extraction, processing, and transporting fuels to the site of combustion. The associated emissions are referred to as upstream emissions. The analysis of power sector emissions uses marginal emissions factors that were derived from data in AEO 2015, as described in section IV.M. The methodology is described in chapter 13 and chapter 15 of the NOPR TSD. Combustion emissions of CH 4 and N 2 O are estimated using emissions intensity factors from the EPA GHG Emissions Factors Hub. 97 The FFC upstream emissions are estimated based on the methodology described in chapter 15 of the NOPR TSD. The upstream emissions include both emissions from fuel combustion during extraction, processing, and transportation of fuel, and “fugitive” emissions (direct leakage to the atmosphere) of CH 4 and CO 2 . 97 Available at: http://www2.epa.gov/climateleadership/center-corporate-climate-leadership-ghg-emission-factors-hub . The emissions intensity factors are expressed in terms of physical units per megawatt hour (MWh) or million British thermal units (MMBtu) of site energy savings. Total emissions reductions are estimated using the energy savings calculated in the national impact analysis. The AEO 2015 projections incorporate the projected impacts of existing air quality regulations on emissions. AEO 2015 generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of October 31, 2014. DOE's estimation of impacts accounts for the presence of the emissions control programs discussed in the following paragraphs. SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap-and-trade programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous States and the District of Columbia (DC). (42 U.S.C. 7651 et seq. ) SO 2 emissions from 28 eastern States and DC were also limited under the Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR created an allowance-based trading program that operates along with the Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit, but it remained in effect. 98 In 2011, EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the DC Circuit issued a decision to vacate CSAPR, 99 and the court ordered EPA to continue administering CAIR. On April 29, 2014, the U.S. Supreme Court reversed the judgment of the DC Circuit and remanded the case for further proceedings consistent with the Supreme Court's opinion. 100 On October 23, 2014, the DC Circuit lifted the stay of CSAPR. 101 Pursuant to this action, CSAPR went into effect (and CAIR ceased to be in effect) as of January 1, 2015. 98 See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). 99 See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182). 100 See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610 (2014). The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain States due to their impacts in other downwind States was based on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. 101 See Georgia v. EPA, Order (D.C. Cir. filed October 23, 2014) (No. 11-1302). EIA was not able to incorporate CSAPR into AEO 2015, so it assumes implementation of CAIR. Although DOE's analysis used emissions factors that assume that CAIR, not CSAPR, is the regulation in force, the difference between CAIR and CSAPR is not significant for the purpose of DOE's analysis of emissions impacts from energy conservation standards. The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap-and-trade system, but it concluded that negligible reductions in power sector SO 2 emissions would occur as a result of standards. Beginning in 2016, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO 2 (a non-HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal-fired power plants to comply with the MATS requirements for acid gas. AEO 2015 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2016. Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, emissions will be far below the cap established by CAIR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulated EGU. 102 Therefore, DOE believes that energy conservation standards will generally reduce SO 2 emissions in 2016 and beyond. 102 DOE notes that the Supreme Court recently remanded EPA's 2012 rule regarding national emission standards for hazardous air pollutants from certain electric utility steam generating units. See Michigan v. EPA (Case No. 14-46, 2015). DOE has tentatively determined that the remand of the MATS rule does not change the assumptions regarding the impact of energy efficiency standards on SO 2 emissions. Further, while the remand of the MATS rule may have an impact on the overall amount of mercury emitted by power plants, it does not change the impact of the energy efficiency standards on mercury emissions. DOE will continue to monitor developments related to this case and respond to them as appropriate. CAIR established a cap on NO X emissions in 28 eastern States and the District of Columbia. 103 Energy conservation standards are expected to have little effect on NO X emissions in those States covered by CAIR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions from other facilities. However, standards would be expected to reduce NO X emissions in the States not affected by the caps, so DOE estimated NO X emissions reductions from the standards considered in this NOPR for these States. 103 CSAPR also applies to NO X and it supersedes the regulation of NO X under CAIR. As stated previously, the current analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR with regard to DOE's analysis of NO X emissions is slight. The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE's energy conservation standards would likely reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on AEO 2015, which incorporates the MATS. L. Monetizing Carbon Dioxide and Other Emissions Impacts As part of the development of this proposed rule, DOE considered the estimated monetary benefits from the reduced emissions of CO 2 and NO X that are expected to result from each of the TSLs considered. In order to make this calculation analogous to the calculation of the NPV of consumer benefit, DOE considered the reduced emissions expected to result over the lifetime of equipment shipped in the forecast period for each TSL. This section summarizes the basis for the monetary values used for CO 2 and NO X emissions and presents the values considered in this NOPR. 1. Social Cost of Carbon The SCC is an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year. It is intended to include (but is not limited to) climate-change-related changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services. Estimates of the SCC are provided in dollars per metric ton of CO 2 . A domestic SCC value is meant to reflect the value of damages in the United States resulting from a unit change in CO 2 emissions, while a global SCC value is meant to reflect the value of damages worldwide. Under section 1(b)(6) of Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent permitted by law, “assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO 2 emissions into cost-benefit analyses of regulatory actions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts. As part of the interagency process that developed these SCC estimates, technical experts from numerous agencies met on a regular basis to consider public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions. The main objective of this process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. In this way, key uncertainties and model differences transparently and consistently inform the range of SCC estimates used in the rulemaking process. a. Monetizing Carbon Dioxide Emissions When attempting to assess the incremental economic impacts of CO 2 emissions, the analyst faces a number of challenges. A report from the National Research Council 104 points out that any assessment will suffer from uncertainty, speculation, and lack of information about: (1) Future emissions of GHGs; (2) the effects of past and future emissions on the climate system; (3) the impact of changes in climate on the physical and biological environment; and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and monetize the harms associated with climate change will raise questions of science, economics, and ethics and should be viewed as provisional. 104 National Research Council, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, National Academies Press: Washington, DC (2009). Despite the limits of both quantification and monetization, SCC estimates can be useful in estimating the social benefits of reducing CO 2 emissions. The agency can estimate the benefits from reduced (or costs from increased) emissions in any future year by multiplying the change in emissions in that year by the SCC values appropriate for that year. The NPV of the benefits can then be calculated by multiplying each of these future benefits by an appropriate discount factor and summing across all affected years. It is important to emphasize that the interagency process is committed to updating these estimates as the science and economic understanding of climate change and its impacts on society improves over time. In the meantime, the interagency group will continue to explore the issues raised by this analysis and consider public comments as part of the ongoing interagency process. b. Development of Social Cost of Carbon Values In 2009, an interagency process was initiated to offer a preliminary assessment of how best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in how benefits are evaluated across Federal agencies, the Administration sought to develop a transparent and defensible method, specifically designed for the rulemaking process, to quantify avoided climate change damages from reduced CO 2 emissions. The interagency group did not undertake any original analysis. Instead, it combined SCC estimates from the existing literature to use as interim values until a more comprehensive analysis could be conducted. The outcome of the preliminary assessment by the interagency group was a set of five interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33, $19, $10, and $5 per metric ton of CO 2 . These interim values represented the first sustained interagency effort within the U.S. government to develop an SCC for use in regulatory analysis. The results of this preliminary effort were presented in several proposed and final rules. c. Current Approach and Key Assumptions After the release of the interim values, the interagency group reconvened on a regular basis to generate improved SCC estimates. Specially, the group considered public comments and further explored the technical literature in relevant fields. The interagency group relied on three integrated assessment models commonly used to estimate the SCC: The FUND, DICE, and PAGE models. These models are frequently cited in the peer-reviewed literature and were used in the last assessment of the Intergovernmental Panel on Climate Change (IPCC). Each model was given equal weight in the SCC values that were developed. Each model takes a slightly different approach to model how changes in emissions result in changes in economic damages. A key objective of the interagency process was to enable a consistent exploration of the three models, while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of the literature was conducted to select three sets of input parameters for these models: Climate sensitivity, socio-economic and emissions trajectories, and discount rates. A probability distribution for climate sensitivity was specified as an input into all three models. In addition, the interagency group used a range of scenarios for the socio-economic parameters and a range of values for the discount rate. All other model features were left unchanged, relying on the model developers' best estimates and judgments. In 2010, the interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the three integrated assessment models, at discount rates of 2.5-, 3-, and 5-percent. The fourth set, which represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, was included to represent higher-than-expected impacts from climate change further out in the tails of the SCC distribution. The values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7-percent to 23-percent should be used to adjust the global SCC to calculate domestic effects, 105 although preference is given to consideration of the global benefits of reducing CO 2 emissions. Table IV.42 presents the values in the 2010 interagency group report, 106 which is reproduced in appendix 14A of the NOPR TSD. 105 It is recognized that this calculation for domestic values is approximate, provisional, and highly speculative. There is no a priori reason why domestic benefits should be a constant fraction of net global damages over time. 106 Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, United States Government (February 2010) (Available at: www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf ). Table IV.42—Annual SCC Values From 2010 Interagency Report, 2010-2050 [2007$ per metric ton CO 2 ] Year Discount rate 5% Average 3% Average 2.5% Average 3% 95th percentile 2010 4.7 21.4 35.1 64.9 2015 5.7 23.8 38.4 72.8 2020 6.8 26.3 41.7 80.7 2025 8.2 29.6 45.9 90.4 2030 9.7 32.8 50.0 100.0 2035 11.2 36.0 54.2 109.7 2040 12.7 39.2 58.4 119.3 2045 14.2 42.1 61.7 127.8 2050 15.7 44.9 65.0 136.2 The SCC values used for this document were generated using the most recent versions of the three integrated assessment models that have been published in the peer-reviewed literature, as described in the 2013 update from the interagency working group (revised July 2015). 107 Table IV.43 shows the updated sets of SCC estimates from the latest interagency update in 5-year increments from 2010 to 2050. The full set of annual SCC values between 2010 and 2050 is reported in appendix 14B of the NOPR TSD. The central value that emerges is the average SCC across models at the 3-percent discount rate. However, for purposes of capturing the uncertainties involved in regulatory impact analysis, the interagency group emphasizes the importance of including all four sets of SCC values. 107 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 July 2015) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf ). Table IV.43—Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050 [2007$ per metric ton CO 2 ] Year Discount rate 5% Average 3% Average 2.5% Average 3% 95th percentile 2010 10 31 50 86 2015 11 36 56 105 2020 12 42 62 123 2025 14 46 68 138 2030 16 50 73 152 2035 18 55 78 168 2040 21 60 84 183 2045 23 64 89 197 2050 26 69 95 212 It is important to recognize that a number of key uncertainties remain, and that current SCC estimates should be treated as provisional and revisable because they will evolve with improved scientific and economic understanding. The interagency group also recognizes that the existing models are imperfect and incomplete. The National Research Council report mentioned previously points out that there is tension between the goal of producing quantified estimates of the economic damages from an incremental ton of carbon and the limits of existing efforts to model these effects. There are a number of analytical challenges that are being addressed by the research community, including research programs housed in many of the Federal agencies participating in the interagency process to estimate the SCC. The interagency group intends to periodically review and reconsider those estimates to reflect increasing knowledge of the science and economics of climate impacts, as well as improvements in modeling. 108 108 In November 2013, OMB announced a new opportunity for public comment on the interagency technical support document underlying the revised SCC estimates. 78 FR 70586. In July 2015 OMB published a detailed summary and formal response to the many comments that were received. https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions . It also stated its intention to seek independent expert advice on opportunities to improve the estimates, including many of the approaches suggested by commenters. In summary, in considering the potential global benefits resulting from reduced CO 2 emissions, DOE used the values from the 2013 interagency report (revised July 2015), adjusted to 2015$ using the implicit price deflator for gross domestic product (GDP) from the Bureau of Economic Analysis. For each of the four sets of SCC cases specified, the values for emissions in 2015 were $12.2, $40.0, $62.3, and $117 per metric ton avoided (values expressed in 2015$). DOE derived values after 2050 based on the trend in 2010-2050 in each of the four cases. DOE multiplied the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value of the stream of monetary values, DOE discounted the values in each of the four cases using the specific discount rate that had been used to obtain the SCC values in each case. 2. Social Cost of Other Air Pollutants As noted previously, DOE has estimated how the considered energy conservation standards would decrease power sector NO X emissions in those 22 States not affected by the CAIR. DOE estimated the monetized value of net NO X emissions reductions using benefit per ton estimates from the Regulatory Impact Analysis for the Clean Power Plan Final Rule, published in August 2015 by EPA's Office of Air Quality Planning and Standards. 109 The report includes high and low values for NO X (as PM 2.5 ) for 2020, 2025, and 2030 discounted at 3 percent and 7 percent; these values are presented in chapter 14 of the NOPR TSD. DOE primarily relied on the low estimates to be conservative. 110 DOE assigned values for 2021-2024 and 2026-2029 using, respectively, the values for 2020 and 2025. DOE assigned values after 2030 using the value for 2030. DOE developed values specific to the end-use category for compressors using a method described in appendix 14-C. 109 Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis . See Tables 4A-3, 4A-4, and 4A-5 in the report. 110 For the monetized NO X benefits associated with PM 2.5 , the related benefits are primarily based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009), which is the lower of the two EPA central tendencies. Using the lower value is more conservative when making the policy decision concerning whether a particular standard level is economically justified. If the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2012), the values would be nearly two-and-a-half times larger. (See chapter 14 of the NOPR TSD for citations for the studies mentioned above.) DOE multiplied the emissions reduction (tons) in each year by the associated $/ton values, and then discounted each series using discount rates of 3-percent and 7-percent as appropriate. DOE will continue to evaluate the monetization of avoided NO X emissions and will make any appropriate updates of the current analysis for the final rulemaking. DOE is evaluating appropriate monetization of avoided SO 2 and Hg emissions in energy conservation standards rulemakings. DOE has not included monetization of those emissions in the current analysis. M. Utility Impact Analysis The utility impact analysis estimates several effects on the electric power generation industry that would result from the adoption of new or amended energy conservation standards. The utility impact analysis DOE estimates the changes in installed electrical capacity and generation that would result for each TSL. The analysis is based on published output from the NEMS, associated with AEO 2015. NEMS produces the AEO Reference case, as well as a number of side cases that estimate the economy-wide impacts of changes to energy supply and demand. DOE uses published side cases that incorporate efficiency-related policies to estimate the marginal impacts of reduced energy demand on the utility sector. These marginal factors are estimated based on the changes to electricity sector generation, installed capacity, fuel consumption and emissions in the AEO Reference case and various side cases. Details of the methodology are provided in the appendices to Chapters 13 and 15 of the NOPR TSD. The output of this analysis is a set of time-dependent coefficients that capture the change in electricity generation, primary fuel consumption, installed capacity and power sector emissions due to a unit reduction in demand for a given end use. These coefficients are multiplied by the stream of electricity savings calculated in the NIA to provide estimates of selected utility impacts of new or amended energy conservation standards. N. Employment Impact Analysis DOE considers employment impacts in the domestic economy as one factor in selecting a proposed standard. Employment impacts from new or amended energy conservation standards include both direct and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the equipment subject to standards, their suppliers, and related service firms. The MIA addresses those impacts. Indirect employment impacts are changes in national employment that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more-efficient appliances. Indirect employment impacts from standards consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, caused by: (1) Reduced spending by end users on energy; (2) reduced spending on new energy supply by the utility industry; (3) increased consumer spending on new equipment to which the new standards apply; and (4) the effects of those three factors throughout the economy. One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department's Bureau of Labor Statistics (BLS). 111 BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy. 112 There are many reasons for these differences, including wage differences and the fact that the utility sector is more capital-intensive and less labor-intensive than other sectors. Energy conservation standards have the effect of reducing consumer utility bills. Because reduced consumer expenditures for energy likely lead to increased expenditures in other sectors of the economy, the general effect of efficiency standards is to shift economic activity from a less labor-intensive sector ( i.e., the utility sector) to more labor-intensive sectors ( e.g., the retail and service sectors). Thus, the BLS data suggest that net national employment may increase due to shifts in economic activity resulting from energy conservation standards. 111 Data on industry employment, hours, labor compensation, value of production, and the implicit price deflator for output for these industries are available upon request by calling the Division of Industry Productivity Studies (202-691-5618) or by sending a request by email to dipsweb@bls.gov . 112 See Bureau of Economic Analysis, Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II), U.S. Department of Commerce (1992). DOE estimated indirect national employment impacts for the standard levels considered in this NOPR using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 3.1.1 (ImSET). 113 ImSET is a special-purpose version of the “U.S. Benchmark National Input-Output” (I-O) model, which was designed to estimate the national employment and income effects of energy-saving technologies. The ImSET software includes a computer-based I-O model having structural coefficients that characterize economic flows among 187 sectors most relevant to industrial, commercial, and residential building energy use. 113 J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies, PNNL-18412, Pacific Northwest National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf ). DOE notes that ImSET is not a general equilibrium forecasting model, and understands the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run for this rule. Therefore, DOE generated results for near-term timeframes, where these uncertainties are reduced. For more details on the employment impact analysis, see chapter 16 of the NOPR TSD. V. Analytical Results and Conclusions The following section addresses the results from DOE's analyses with respect to the considered energy conservation standards for compressors. It addresses the TSLs examined by DOE, the projected impacts of each of these levels if adopted as energy conservation standards for compressors, and the standards levels that DOE is proposing to adopt in this NOPR. Additional details regarding DOE's analyses are contained in the NOPR TSD supporting this document. A. Trial Standard Levels DOE analyzed the benefits and burdens of six TSLs for compressors. These TSLs were developed by combining specific efficiency levels for each of the equipment classes analyzed by DOE. Table V.1 presents the TSLs and the corresponding efficiency levels for compressors. DOE presents the results for the TSLs in this document, while the results for all efficiency levels that DOE analyzed are in the NOPR TSD. For the rotary lubricated equipment classes, the TSLs increase directly with the analyzed ELs, from EL 1 through max-tech (EL 6). TSL 3 is of significance for these equipment classes because it represents a combination of efficiency levels that are equivalent to the draft EU second tier minimum energy efficiency requirement for rotary lubricated compressors. 114 114 For more information regarding the draft regulation see: http://www.regulations.gov/#!documentDetail;D=EERE-2013-BT-STD-0040-0031. For rotary lubricant-free equipment classes, DOE evaluated an efficiency levels at the baseline for TSLs 1 through 5. This equipment exhibits low potential for national energy savings, which is demonstrated at TSL 6, the max-tech TSL for lubricant free equipment. At this TSL, the equipment contributes 0.1 quad of energy savings, which is less than 5-percent of the total energy savings for the TSL. Low potential national energy savings were compounded by significant burden to manufacturers at this TSL. Complete economic results for lubricant free equipment are discussed further in section V.B of this document and the TSD. At the “new standards at baseline” efficiency level for rotary lubricant-free equipment classes, which is evaluated in TSLs 1 through 5, DOE analyzed the impacts of establishing new standards for this equipment at the baseline efficiency levels discussed and established in section IV.C.5 of this document and chapter 5 of the NOPR TSD. In a “new standards at baseline” scenario, DOE expects no impacts to the end user and no product redesign or capital conversion costs to the manufacturing industry. DOE accounts for the testing and compliance costs encountered by the manufacturers of this equipment in the MIA. These costs are reflected in the results presented in section V.B.2 of this document. DOE notes that the “new standards at baseline” scenario will not result in national energy savings that can be captured in the NIA. A standard at baseline will, however, prevent potential new, less efficient equipment from the entering the market and potentially increasing future national energy consumption. As discussed previously, the burdens on the manufacturing industry that result from such a standard are assessed in the MIA. For reciprocating equipment classes, the NPV of consumer benefits was negligible or negative for at least one of the classes 115 at all efficiency levels; as such, DOE chose not to evaluate new standards for this equipment in TSLs 1 through 5, and evaluated new standards only at TSL 6, the max-tech level. Complete economic results for reciprocating compressors are discussed further in section V.B, and chapters eight [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2016-11337. Public record. Not legal advice.