Energy Conservation Program: Energy Conservation Standards for Residential Central Air Conditioners and Heat Pumps

Federal RegisterJan 6, 2017

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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2014-BT-STD-0048]

RIN 1904-AD37

Energy Conservation Program: Energy Conservation Standards for Residential Central Air Conditioners and Heat Pumps

AGENCY:

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

ACTION:

Direct final rule.

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, including residential central air conditioners and heat pumps. EPCA also requires the U.S. Department of Energy (DOE) to periodically determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would save a significant amount of energy. In this direct final rule, DOE adopts amended energy conservation standards for residential central air conditioners and heat pumps.

DATES:

The effective date of this rule is May 8, 2017 unless adverse comment is received by April 26, 2017. If adverse comments are received that DOE determines may provide a reasonable basis for withdrawal of the direct final rule, a timely withdrawal of this rule will be published in the

Federal Register.

If no such adverse comments are received, compliance with the amended standards in this final rule will be required for central air conditioners and heat pumps as specified in this final rule starting on January 1, 2023.

ADDRESSES:

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, such as those containing information that is exempt from public disclosure, may not be publicly available.

A link to the docket Web page for residential central air conditioners and heat pumps can be found at:

www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/72.

The

www.regulations.gov

Web page contains instructions on how to access all documents, including public comments, in the docket.

For further information on how to submit a comment or review other public comments and the docket, contact the Appliance and Equipment Standards staff at (202) 586-6636 or by email:

Appliance_Standards_Public_Meetings@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT:

Mr. Antonio Bouza, 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) 586-4563. Email:

ApplianceStandardsQuestions@ee.doe.gov.

Ms. Johanna Jochum, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 287-6307. Email:

Johanna.Jochum@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Direct Final 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 the Current CAC/HP Rulemaking

3. 2015-2016 ASRAC Working Group Recommended Standard Levels

III. General Discussion

A. Regulatory Approach

B. Compliance Dates

C. Regional Standards

D. Alternative Refrigerants

E. Standby Mode and Off Mode

F. Test Procedure

G. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

H. Energy Savings

1. Determination of Savings

2. Significance of Savings

I. Economic Justification

1. Specific Criteria

a. Economic Impact on Manufacturers and Consumers

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

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Any Lessening of Competition

f. Need for National Energy Conservation

g. Other Factors

2. Rebuttable Presumption

IV. Methodology

A. Market and Technology Assessment

1. Definition and Scope of Coverage

2. Product Classes

3. Technology Options

B. Screening Analysis

C. Engineering Analysis

1. Representative Capacities

2. Efficiency Levels

3. Manufacturer Production Costs

4. Tabulated Results

D. Markups Analysis

E. Energy Use Analysis

1. General Approach

2. Split-System Central Air Conditioner: Blower-Coil to Coil-Only Efficiency Adjustment

3. Split-System Central Air Conditioner: Coil-Only Efficiency Adjustment

4. Split-System Central Air Conditioner: Coil-Only Installations

5. Fan Energy Use During Continuous Operation

6. Other Issues

F. Life-Cycle Cost and Payback Period Analysis

1. Inputs to Installed Cost

a. Equipment Cost

b. Installation Cost

2. Inputs to Operating Costs

a. Energy Consumption

b. Energy Prices

c. Maintenance and Repair Costs

d. Product Lifetime

e. Discount Rates

f. Product Efficiency in the No-New-Standards Case

3. Inputs to Payback Period Analysis

G. Shipments Analysis

1. Model Structure

2. Inputs and Method

H. National Impact Analysis

1. Efficiency Trends

2. Product Cost Trend

3. Accounting for Repaired Units

4. National Energy Savings

5. Net Present Value of Consumer Benefit

I. Consumer Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model

a. Government Regulatory Impact Model Key Inputs

b. Government Regulatory Impact Model Scenarios

K. Emissions Analysis

L. Monetizing Carbon Dioxide and Other Emissions Impacts

1. Social Cost of Carbon

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 Period

2. Economic Impacts on Manufacturers

a. Industry Cash-Flow Analysis Results

b. Direct Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Subgroups of Manufacturers

e. Cumulative Regulatory Burden

3. National Impact Analysis

a. Significance of Energy Savings

b. Net Present Value of Consumer Costs and Benefits

c. Indirect Impacts on Employment

4. Impact on Product Utility or Performance

5. Impact of Any Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

8. Summary of National Economic Impacts

C. Conclusion

1. Benefits and Burdens of TSLs Considered for Central Air Conditioner and Heat Pump Standards

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

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

M. Congressional Notification

VII. Approval of the Office of the Secretary

I. Synopsis of the Direct Final Rule

Title III, Part B

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

These products include central air conditioners (CACs) and heat pumps (HPs), the subject of this rulemaking. (42 U.S.C. 6292(a)(3))

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

All references to EPCA in this document refer to the statute as amended through the Energy Efficiency Improvement Act of 2015 (EEIA 2015), Public Law 114-11 (April 30, 2015).

Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) The statute also provides that not later than six years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended or a notice of proposed rulemaking including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) Once complete, this rulemaking will satisfy these statutory requirements.

In light of the above and under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for residential central air conditioners and heat pumps. The amendments outlined in this document reflect the culmination of a DOE rulemaking that included the following notices and stakeholder comments thereon: November 2014 request for information (RFI) (79 FR 65603 (Nov. 5, 2014)); August 2015 notice of data availability (NODA) (80 FR 52206 (August 28, 2015)); and the 2015-2016 Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) central air conditioners and heat pumps working group negotiations, hereinafter referred to as “the Negotiations” (80 FR 40938 (July 14, 2015)). See section II.B.2 for a detailed history of the current rulemaking.

The consensus reached by the CAC/HP ASRAC Working Group, hereinafter referred to as “the CAC/HP Working Group,” on amended energy conservation standards is outlined in the ASRAC Working Group Term Sheet, hereinafter referred to as “the Term Sheet.” (ASRAC Working Group Term Sheet, Docket No. EERE-2014-BT-STD-0048, No. 0076) After carefully considering the Term Sheet, DOE determined that the recommendations contained therein are compliant with 42 U.S.C. 6295(o), as required by 42 U.S.C. 6295(p)(4)(A)(i) for the issuance of a direct final rule. As required by 42 U.S.C. 6295(p)(4)(A)(i), DOE is simultaneously publishing a NOPR proposing that the identical standard levels contained in this direct final rule be adopted. Consistent with the statute, DOE is providing a 110-day public comment period on the direct final rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any comments received provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o), DOE will continue the rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A for more details on DOE's statutory authority.

This direct final rule documents DOE's analyses to objectively and independently evaluate the energy savings potential, technological feasibility, and economic justification of the standard levels recommended in the Term Sheet, as per the requirements of 42 U.S.C. 6295(o).

DOE conducted separate test procedure rulemakings simultaneously with the energy conservation standard rulemaking to amend the DOE central air conditioners and heat pumps test procedure. The amended DOE CAC/HP test procedure and associated rulemakings are discussed in detail in section III.F. As per the request of the CAC/HP Working Group, the analyses documented in this direct final rule are based on the DOE test procedure at the time of the 2015-2016 Negotiations. Efficiency levels selected on the basis of these analyses were then translated to efficiency levels based on the amended test procedure. This methodology was first advocated by Carrier/United Technologies Corporation (UTC) and adopted by stakeholders during the Negotiations. (ASRAC Public Meeting, No. 87 at p. 48) This methodology is also reflected in the Term Sheet. Recommendation #8 of the Term Sheet includes standard levels based on the test procedure at the time of the 2015-2016 Negotiations. (ASRAC Term Sheet, No. 76 at pp. 4-5) The standard levels established by this direct final rule are translated levels based on the test procedure established by the test procedure final rule issued by DOE on November 30, 2016, hereinafter referred to as the “November 2016 test procedure final rule,” (which is codified in 10 CFR part 430, subpart B, appendix M1).

(Docket No. EERE-2016-BT-TP-0029)

The test procedure final rule issued by DOE on November 30, 2016 is accessible via the DOE Web site at:

http://energy.gov/eere/buildings/downloads/issuance-2016-11-30-energy-conservation-program-test-procedures-central-air.

Ultimately, DOE found that the standard levels recommended in the Term Sheet would result in significant energy savings and are technologically feasible and economically justified. Table I-1 documents the amended standards for central air conditioners and heat pumps based on the DOE test procedure at the time of the 2015-2016 Negotiations. The amended standards correspond to the recommended trial standard level (TSL) (as described in section V.A) and are expressed in terms of Seasonal Energy Efficiency Ratio (SEER), Energy Efficiency Ratio (EER), and Heating Seasonal Performance Factor (HSPF). The amended standards are the same as those recommended by the Working Group. These amended standards apply to all central air conditioners and heat pumps listed in Table I-1 and manufactured in, or imported into, the United States starting on January 1, 2023. The amended

standards listed in the table below result in less energy consumption than the current standards, which remain in effect until January 1, 2023.

Table I-1—Amended Energy Conservation Standards for Residential Central Air Conditioners and Heat Pumps Based on the DOE Test Procedure at the Time of the 2015-2016 Negotiations (Recommended TSL)

Product class

National

SEER

HSPF

Southeast *

SEER

Southwest **

SEER

EER

Split-System Air Conditioners with a Certified Cooling Capacity <45,000 Btu/h

* * * 12.2/10.2

Split-System Air Conditioners with a Certified Cooling Capacity ≥45,000 Btu/h

14.5

* * * 11.7/10.2

Split-System Heat Pumps

8.8

Single-Package Air Conditioners †

11.0

Single-Package Heat Pumps †

8.0

Space-Constrained Air Conditioners †

Space-Constrained Heat Pumps †

7.4

Small-Duct High-Velocity Systems †

7.2

* Southeast includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the District of Columbia, and the U.S. territories.

** Southwest includes the states of Arizona, California, Nevada, and New Mexico.

*** The 10.2 EER amended energy conservation standard applies to split-system air conditioners with a seasonal energy efficiency ratio greater than or equal to 16.

† The energy conservation standards for single-package, small-duct high-velocity and space-constrained product classes remain unchanged from current levels.

DOE notes that the amended standard levels presented in Table I-1 are in terms of the test procedure that was in place at the time of the CAC/HP Working Group Negotiations. That test procedure did not include the amendments adopted in the November 2016 TP final rule, which are outlined in section III.F. In section V.C, the amended standard levels are translated to and presented in terms of the test procedure established by the November 2016 test procedure final rule. Accordingly, the standard levels included in the regulatory text of this direct final rule are presented in terms of the test procedure established by the November 2016 test procedure final rule.

DOE is not amending the off mode standards for central air conditioners and heat pumps at this time. The June 2011 direct final rule included the first standards for off mode electric power consumption, with a compliance date of January 1, 2015. 76 FR 37408 (June 27, 2011); 10 CFR 430.32(c)(5). However, DOE subsequently issued an enforcement policy statement on July 8, 2014 regarding off mode standards for central air conditioners and heat pumps specifying that DOE would not assert its civil penalty authority for violation of the off mode standard until 180 days following publication of a final rule establishing a test method for measuring off mode electrical power consumption.

DOE established this test method in a final rule published on June 8, 2016 (“June 2016 test procedure final rule”). 81 FR 36992. As a result, the standards for off mode will be enforceable beginning on December 5, 2016. DOE finds it is not feasible to consider amending standards for which compliance has yet to begin.

Available at:

http://energy.gov/sites/prod/files/2014/07/f17/EnforcementPolicyStatement-cacoffmode.pdf

(Last accessed July 1, 2016).

A. Benefits and Costs to Consumers

Table I-2 presents DOE's evaluation of the economic impacts of the energy conservation standards on consumers of central air conditioners and heat pumps, as measured by the average life-cycle cost (LCC) savings and the simple payback period (PBP).

The average LCC savings are positive for all product classes. The PBP for each product class falls well below the average lifetime of the product, which is estimated to be 21 years for central air conditioners and 15 years for heat pumps (see section IV.G of this document).

The average LCC savings are measured relative to the estimated efficiency distribution in the no-new-standards case, which depicts the market in the compliance year in the absence of amended standards (see section IV.F.3.f). The simple PBP, which is designed to compare specific efficiency levels, is measured relative to the baseline model (see section IV.C.2).

Table I-2—Impacts of Amended Energy Conservation Standards on Consumers of Residential Central Air Conditioners and Heat Pumps (Recommended TSL)

Product class

Average LCC savings

(2015$)

Simple payback period

(years)

Split-System Air Conditioners *

N: $43

N: 10.5.

HD: $150

HD: 7.6.

HH: $39

HH: 7.7.

Split-System Heat Pumps

$131

4.9.

Packaged Air Conditioners **

N/A

N/A.

Packaged Heat Pumps **

N/A

N/A.

Space-Constrained Air Conditioners **

N/A

N/A.

Small-Duct High-Velocity Air Conditioners **

N/A

N/A.

* N = Northern region; HD = Hot-dry region; HH = Hot-humid region.

** The standard levels for Packaged Air Conditioners, Packaged Heat Pumps, Space-Constrained Air Conditioners, and Small-Duct High-Velocity Air Conditioners are at the baseline level in the Recommended TSL, so there is no impact on consumers.

DOE's analysis of the impacts of the amended standards on consumers is described in further detail in section IV.F of this document.

B. Impact on Manufacturers

The industry net present value (INPV) is the sum of the discounted cash flows to the industry from the base year through the end of the 30-year analysis period.

Using a real discount rate of 11.0 percent,

DOE estimates that the INPV for manufacturers of residential central air conditioners and heat pumps is $4,496.1 million in 2015$. Under the amended standards, DOE expects the change in INPV to range from approximately -15.4 percent to -2.5 percent, which corresponds to approximately -$692.3 million to -$114.2 million (in 2015$). In order to bring products into compliance with proposed standards, DOE expects the industry to incur $342.6 million in conversion costs.

In contrast to the NIA, which uses an end date of 2050 for TSLs 1, 3 and 4, and an end date of 2052 for TSL 2, the MIA maintains the same end date (2050) for all TSLs. This is done to enable clear comparison of INPV impacts across TSLs. See chapter 12 of the direct final rule TSD for a more detailed discussion of this assumption.

DOE estimated preliminary financial metrics, including the industry discount rate, based on publicly available financial information, including Securities and Exchange Commission (“SEC”) filings and S&P bond ratings. DOE presented the preliminary financial metrics to manufacturers in MIA interviews. DOE adjusted those values based on feedback from manufacturers. The complete set of financial metrics and more detail about the methodology can be found in chapter 12 of the final rule TSD. Additionally, DOE provides a sensitivity analysis based on an alternative discount rate in chapter 12 of the TSD. Using an 8% discount rate, the change in INPV ranges from -16.6 to -1.3 percent at the adopted level.

DOE's analysis of the impacts of the amended standards on manufacturers is described in further detail in sections IV.J and V.B.2 of this direct final rule.

C. National Benefits and Costs

All monetary values in this document are expressed in 2015 dollars and, where appropriate, are discounted to 2016 unless explicitly stated otherwise.

DOE's analyses indicate that the energy conservation standards being adopted in this direct final rule for central air conditioners and heat pumps would save a significant amount of energy. Relative to the case without amended standards (referred to as the “no-new-standards case”), the lifetime energy savings for central air conditioners and heat pumps purchased in the 30-year period that begins in the anticipated first full year of compliance with the amended standards (2023-2052) amount to 3.2 quadrillion British thermal units (Btu), or “quads.”

This represents a savings of 2.6 percent relative to the energy use of these products in the no-new-standards case.

The quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy savings includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy efficiency standards. For more information on the FFC metric, see section IV.H.4.

The cumulative national net present value (NPV) of total consumer costs and savings for the amended standards for central air conditioners and heat pumps ranges from $2.5 billion (at a 7-percent discount rate) to $12.2 billion (at a 3-percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product and installation costs for central air conditioners and heat pumps purchased in 2023-2052.

In addition, the standards for central air conditioners and heat pumps that are being adopted in this direct final rule are expected to yield significant environmental benefits. DOE estimates the standards to result in cumulative emission reductions (over the same period as for energy savings) of 188.3 million metric tons (Mt)

of carbon dioxide (CO

), 100.8 thousand tons of sulfur dioxide (SO

), 350.3 thousand tons of nitrogen oxides (NO

), 842.4 thousand tons of methane (CH

), 2.114 thousand tons of nitrous oxide (N

O), and 0.372 tons of mercury (Hg).

The cumulative reduction in CO

emissions through 2030 amounts to 13.3 Mt, which is equivalent to the emissions resulting from the annual electricity use of 1.2 million homes.

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

are presented in short tons.

DOE calculated emissions reductions relative to the no-new-standards case, which reflects key assumptions in the

Annual Energy Outlook 2015

(

AEO 2015

) Reference case.

AEO 2015

generally represents current legislation and environmental regulations for which implementing regulations were available as of October 31, 2014.

The value of the CO

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

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

The derivation of the SCC values is discussed in section IV.L. Using discount rates appropriate for each set of SCC values (see Table I.3), DOE estimates the present monetary value of the CO

emissions reduction (not including CO

equivalent emissions of other gases with global warming potential) is between $1.1 billion and $16.9 billion with a value of $5.5 billion using the central SCC case represented by $40.6/t in 2015. DOE also estimates the present monetary value of the NO

emissions reduction to be $0.2 billion at a 7-percent discount rate and $0.5 billion at a 3-percent discount rate.

DOE is investigating appropriate valuation of the reduction in other emissions, and did not include any such values in this rulemaking.

United States Government-Interagency Working Group on Social Cost of Carbon,

Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866

(May 2013; Revised July 2015) (Available at:

https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf)

DOE estimated the monetized value of NO

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. (Available at:

http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.

) See section IV.L.2 for further discussion. The U.S. Supreme Court has stayed the rule implementing the Clean Power Plan until the current litigation against it concludes.

Chamber of Commerce, et al.

EPA, et al.,

Order in Pending Case, 577 U.S. ___((2016). However, the benefit-per-ton estimates established in the Regulatory Impact Analysis for the Clean Power Plan are based on scientific studies that remain valid irrespective of the legal status of the Clean Power Plan. DOE is primarily using a national benefit-per-ton estimate for NO

emitted from the Electricity Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.,

2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.,

2011), the values would be nearly two-and-a-half times larger.

Table I-3 summarizes the economic benefits and costs expected to result from the amended energy conservation standards for central air conditioners and heat pumps.

Table I-3—Summary of Economic Benefits and Costs of Amended Energy Conservation Standards for Central Air Conditioners and Heat Pumps (Recommended TSL) *

Category

Present value

(billion 2015$)

Discount rate

(%)

Benefits

Consumer Operating Cost Savings

8.6

24.4

Reduction (using mean SCC at 5% discount rate) **

1.1

Reduction (using mean SCC at 3% discount rate) **

5.5

Reduction (using mean SCC at 2.5% discount rate) **

8.9

2.5

Reduction (using 95th-percentile SCC at 3% discount rate) **

16.9

Reduction †

0.2

0.5

Total Benefits ††

14.3

30.5

Costs

Consumer Incremental Installed Costs

6.1

12.3

Total Net Benefits

Including CO

and NO

Emissions Reduction Monetized Value ††

8.2

18.2

* This table presents the costs and benefits associated with central air conditioners and heat pumps shipped in 2023-2052. These results include benefits to consumers which accrue after 2052 from the products purchased in 2023-2052. The incremental installed costs include incremental equipment cost as well as installation costs. The CO

reduction benefits are global benefits due to actions that occur nationally.

** 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 integrated assessment models, at discount rates of 5%, 3%, and 2.5%. For example, for 2015 emissions, these values are $12.4/t, $40.6/t, and $63.2/t, in 2015$, respectively. The fourth set ($118/t in 2015$ for 2015 emissions), which represents the 95th percentile of the SCC distribution calculated using a 3% discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the SCC distribution. The SCC values are emission year specific. See section IV.L.1 of this document for more details.

† DOE estimated the monetized value of NO

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. (Available at:

http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis

.) See section IV.L.2 for further discussion.

DOE

is primarily using a national benefit-per-ton estimate for NO

emitted from the Electricity Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.,

2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.,

2011), the values would be nearly two-and-a-half times larger.

†† Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with a 3-percent discount rate ($40.6/t in 2015).

The benefits and costs of the amended energy conservation standards, for central air conditioners and heat pumps sold in 2023-2052, can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are the sum of: (1) The national economic value of the benefits in reduced operating costs, minus (2) the increases in product purchase and installation costs, plus (3) the value of the benefits of CO

and NO

emission reductions, all annualized.

To convert the time-series of costs and benefits into annualized values, DOE calculated a present value in 2016, the year used for discounting the NPV of total consumer costs and savings. For the benefits, DOE calculated a present value associated with each year's shipments in the year in which the shipments occur (

e.g.,

2020 or 2030), and then discounted the present value from each year to 2016. The calculation uses discount rates of 3 and 7 percent for all costs and benefits except for the value of CO

reductions, for which DOE used case-specific discount rates, as shown in Table I-4. Using the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in the compliance year, that yields the same present value.

The national operating savings are domestic private U.S. consumer monetary savings that occur as a result of purchasing the covered products. The national operating cost savings is measured for the lifetime of central air conditioners and heat pumps shipped in 2023-2052. The CO

reduction is a benefit that accrues globally due to decreased domestic energy consumption that is expected to result from this rule. Because CO

emissions have a very long residence time in the atmosphere, the SCC values in future years reflect future CO

-emissions impacts that continue well beyond 2100 through 2300.

Estimates of annualized benefits and costs of the amended standards are shown in Table I-4. The results under the primary estimate are as follows. Using a 7-percent discount rate for benefits and costs other than CO

reduction (for which DOE used a 3-percent discount rate along with the average SCC series that uses a 3-percent discount rate ($40.6/t in 2015)),

the estimated cost of the central air conditioners and heat pumps standards adopted in this rule is $741 million per year in increased equipment costs, while the estimated benefits are $1,041 million per year in reduced equipment operating costs, $337 million per year in CO

reductions, and $22 million per year in reduced NO

emissions. In this case, the net benefit amounts to $659 million per year. Using a 3-percent discount rate for all benefits and costs and the average SCC series that uses a 3-percent discount rate ($40.6/t in 2015), the estimated cost of the central air conditioners and heat pumps standards being adopted in this rule is $747 million per year in increased equipment costs, while the estimated benefits are $1,488 million per year in reduced equipment operating costs, $337 million per year in CO

reductions, and $32 million per year in reduced NO

emissions. In this case, the net benefit would amount to $1,110 million per year.

DOE used a 3-percent discount rate because the SCC values for the series used in the calculation were derived using a 3-percent discount rate (see section IV.L).

Table I-4—Annualized Benefits and Costs of Amended Energy Conservation Standards for Central Air Conditioners and Heat Pumps (Recommended TSL)

Discount rate

(%)

Primary

estimate *

Low-net-benefits estimate *

High-net-benefits estimate *

(million 2015$/year)

Benefits

Consumer Operating Cost Savings

1,041

1,005

1,147.

1,488

1,425

1,653.

Reduction (using mean SCC at 5% discount rate) **

100

100.

Reduction (using mean SCC at 3% discount rate) **

337

337.

Reduction (using mean SCC at 2.5% discount rate) **

2.5

494

494.

Reduction (using 95th-percentile SCC at 3% discount rate ) **

1,027

1,027.

Reduction †

49.

73.

Total Benefits ††

7 plus CO

range

1,163 to 2,090

1,127 to 2,054

1,296 to 2,223.

1,400

1,364

1,533.

3 plus CO

range

1,620 to 2,547

1,557 to 2,484

1,826 to 2,753.

1,857

1,794

2,063.

Costs

Consumer Incremental Installed Costs

741

784

723.

747

799

725.

Net Benefits

Total ††

7 plus CO

range

422 to 1,349

342 to 1,269

573 to 1,500.

659

580

810.

3 plus CO

range

873 to 1,800

757 to 1,684

1,100 to 2,028.

1,110

994

1,338.

* This table presents the annualized costs and benefits associated with central air conditioners and heat pumps shipped in 2023-2052. These results include benefits to consumers which accrue after 2052 from the products purchased in 2023-2052. The incremental installed costs include incremental equipment cost as well as installation costs. The CO

reduction benefits are global benefits due to actions that occur nationally. The Primary, Low-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from the

AEO 2015

Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect a modest decline rate for projected product prices in the Primary Estimate, a constant rate in the Low-Net-Benefits Estimate, and a higher decline rate in the High-Net-Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.1. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.

** The CO

reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC values are emission year specific. See section IV.L.1 for more details

† DOE estimated the monetized value of NO

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. (Available at:

http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis

.) See section IV.L.2 for further discussion. For the Primary Estimate and Low-Net-Benefits Estimate, DOE used a national benefit-per-ton estimate for NO

emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski

et al.,

2009). For the High-Net-Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele

et al.,

2011); these are nearly two-and-a-half times larger than those from the ACS study.

†† Total Benefits for both the 3% and 7% cases are presented using only the average SCC with a 3-percent discount rate. In the rows labeled “7% plus CO

range” and “3% plus CO

range,” the operating cost and NO

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

values.

DOE's analysis of the national impacts of the adopted standards is described in further detail in section IV.H of this direct final rule.

D. Conclusion

DOE has determined that the statement containing recommendations with respect to energy conservation standards for central air conditioners and heat pumps was submitted jointly by interested persons that are fairly representative of relevant points of view, in accordance with 42 U.S.C. 6295(p)(4)(A). After considering the analysis and weighing the benefits and burdens, DOE has determined that the recommended standards are in accordance with 42 U.S.C. 6295(o), which contains the criteria for prescribing new or amended standards. Specifically, the Secretary has determined that the adoption of the recommended standards would result in the significant conservation of energy and is technologically feasible and economically justified. In determining whether the recommended standards are economically justified, the Secretary has determined that the benefits of the recommended standards exceed the burdens. Namely, the Secretary has concluded that the recommended standards, when considering the benefits of energy savings, positive NPV of consumer benefits, emission reductions, the estimated monetary value of the emissions reductions, and positive average LCC savings, would yield benefits outweighing the negative impacts on some consumers and on manufacturers, including the conversion

costs that could result in a reduction in INPV for manufacturers.

Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for residential central air conditioners and heat pumps. Consistent with this authority, DOE is also publishing elsewhere in this

Federal Register

a notice of proposed rulemaking proposing standards that are identical to those contained in this direct final rule. See 42 U.S.C. 6295(p)(4)(A)(i).

II. Introduction

The following sections briefly discuss the statutory authority underlying this direct final rule, as well as the historical background related to the establishment of standards for residential central air conditioners and heat pumps.

A. Authority

Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified) established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program covering most major household appliances (collectively referred to as “covered products”), which includes the residential central air conditioners and heat pumps that are the subject of this rulemaking. (42 U.S.C. 6292(a)(3))

Pursuant to EPCA, DOE's energy conservation program for covered products consists essentially of four parts: (1) Testing; (2) labeling; (3) the establishment of Federal energy conservation standards; and (4) certification and enforcement procedures. The Federal Trade Commission (FTC) is primarily responsible for labeling, and DOE implements the remainder of the program. Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product prior to the adoption of a new or amended energy conservation standard. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for central air conditioners and heat pumps appear at title 10 of the Code of Federal Regulations (CFR) part 430, subpart B, appendix M and M1.

The National Appliance Energy Conservation Act of 1987 (NAECA; Pub. L. 100-12) included amendments to EPCA that established the original energy conservation standards for central air conditioners and heat pumps. (42 U.S.C. 6295(d)(1)-(2)) EPCA, as amended, also requires DOE to conduct two cycles of rulemakings to determine whether to amend the energy conservation standards for central air conditioners and heat pumps. (42 U.S.C. 6295(d)(3)) The first cycle culminated in a final rule published in the

Federal Register

on August 17, 2004 (the August 2004 Rule), which prescribed energy conservation standards for central air conditioners and heat pumps manufactured or imported on and after January 23, 2006. 69 FR 50997. DOE completed the second of the two rulemaking cycles by issuing a direct final rule on June 6, 2011 (2011 Direct Final Rule), which was published in the

Federal Register

on June 27, 2011. 76 FR 37408. The 2011 Direct Final Rule (June 2011 DFR) amended standards for central air conditioners and heat pumps manufactured on or after January 1, 2015.

EPCA requires DOE to periodically review its already established energy conservation standards for a covered product. Not later than six years after issuance of any final rule establishing or amending a standard, DOE must publish a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including new proposed standards. (42 U.S.C. 6295(m)(1)) Pursuant to this requirement, the next review that DOE would need to conduct must occur no later than six years from the issuance of the 2011 direct final rule. This direct final rule fulfills that requirement.

DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including residential central air conditioners and heat pumps. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and (3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard: (1) For certain products, including residential central air conditioners and heat pumps, if no test procedure has been established for the product, or (2) if DOE determines by rule that the proposed standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified, after receiving comments on the proposed standard, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination by, to the greatest extent practicable, considering the following seven factors:

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

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

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

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

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

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

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

DOE notes that the current energy conservation standards for central air conditioners and heat pumps (set forth at 10 CFR 430.32(c)) contain requirements for seasonal energy efficiency ratio (SEER), heating seasonal performance factor (HSPF), energy efficiency ratio (EER), and average off mode power consumption. Standards based upon the latter two metrics were newly adopted in the June 27, 2011 DFR for the reasons stated in that rulemaking. 76 FR 37408. As discussed below in section II.B.1 and section II.B.3, DOE has chosen to specify performance standards based on EER and SEER for only the southwest region of the country. Pursuant to its mandate under 42 U.S.C. 6295(m)(1), this DOE rulemaking has considered amending the existing energy conservation standards for central air conditioners and heat pumps, and DOE is adopting the amended standards contained in this direct final rule.

EPCA, as codified, also contains what is known as an “anti-backsliding”

provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of evidence that the standard is likely to result in the unavailability in the United States of any covered product type (or class) or performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4))

Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE generally considers these criteria as part of its analysis but consistently conducts a more thorough analysis of a given standard's projected impacts that extends beyond this presumption.

Additionally, 42 U.S.C. 6295(q)(1) specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. In this case, DOE must specify a different standard level for a type or class of covered product that has the same function or intended use, if DOE determines that products within such group: (A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature that other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE must consider such factors as the utility to the consumer of the feature and other factors DOE deems appropriate.

Id.

Any rule prescribing such a standard must include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q)(2))

Under 42 U.S.C. 6295(o)(6), which was added to EPCA by section 306(a) of the Energy Independence and Security Act of 2007 (EISA 2007; Public Law. 110-140), DOE may consider the establishment of regional standards for central air conditioners and heat pumps. Specifically, in addition to a base national standard for a product, DOE may for central air conditioners and heat pumps, establish one or two more-restrictive regional standards. (42 U.S.C. 6295(o)(6)(B)) The regions must include only contiguous States (with the exception of Alaska and Hawaii, which may be included in regions with which they are not contiguous), and each State may be placed in only one region (

i.e.,

an entire State cannot simultaneously be placed in two regions, nor can it be divided between two regions). (42 U.S.C. 6295(o)(6)(C)) Further, DOE can establish the additional regional standards only: (1) Where doing so would produce significant energy savings in comparison to a single national standard, (2) if the regional standards are economically justified, and (3) after considering the impact of these standards on consumers, manufacturers, and other market participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 6295(o)(6)(D))

Federal energy conservation requirements generally supersede State laws or regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions set forth under 42 U.S.C. 6297(d).

Pursuant to further amendments to EPCA contained in EISA 2007, Pub. L. 110-140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) The SEER and HSPF metrics for central air conditioners and heat pumps already account for standby mode energy use, and the current standards include limits on off mode energy use. Section III.E further discusses standby mode and off mode energy use.

As mentioned previously, EISA 2007 amended EPCA, in relevant part, to grant DOE authority to issue a final rule (hereinafter referred to as a “direct final rule”) establishing an energy conservation standard on receipt of a statement submitted jointly by interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered products, States, and efficiency advocates), as determined by the Secretary, that contains recommendations with respect to an energy or water conservation standard that are in accordance with the provisions of 42 U.S.C. 6295(o). (42 U.S.C. 6295(p)(4)) Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine whether a jointly-submitted recommendation for an energy or water conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable.

A notice of proposed rulemaking (NOPR) that proposes an identical energy efficiency standard must be published simultaneously with the direct final rule, and DOE must provide a public comment period of at least 110 days on this proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) While DOE typically provides a comment period of 60 days on proposed standards, in this case, DOE provides a comment period of the same length as the comment period on the direct final rule—

i.e.

110 days. Based on the comments received during this period, the direct final rule will either become effective, or DOE will withdraw it not later than 120 days after its issuance if (1) one or more adverse comments is received, and (2) DOE determines that those comments, when viewed in light of the rulemaking record related to the direct final rule, provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o) and for DOE to continue this rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C)) Receipt of an alternative joint recommendation may also trigger a DOE withdrawal of the direct final rule in the same manner.

Id.

Typical of other rulemakings, it is the substance, rather than the quantity, of comments that will ultimately determine whether a direct final rule will be withdrawn. To this end, the substance of any adverse comment(s) received will be weighed against the anticipated benefits of the jointly-submitted recommendations and the likelihood that further consideration of the comment(s) would change the results of the rulemaking. DOE notes that, to the extent an adverse comment had been previously raised and addressed in the rulemaking proceeding, such a submission will not typically provide a basis for withdrawal of a direct final rule. Nevertheless, if the Secretary makes such a determination, DOE must withdraw the direct final rule

and proceed with the simultaneously-published NOPR. DOE must publish in the

Federal Register

the reason why the direct final rule was withdrawn.

Id.

B. Background

1. Current Standards

This section briefly summarizes the history leading up to and including the conception of the current standards for residential air conditioners and heat pumps. Congress initially prescribed statutory standard levels for residential central air conditioners and heat pumps through amendments to EPCA included in the National Appliance Energy Conservation Act of 1987 (NAECA), Public Law 100-12. (42 U.S.C. 6295(d)(1)-(2)) DOE was required to subsequently conduct two rounds of rulemaking to consider amended standards for these products. (42 U.S.C. 6295(d)(3)) The first cycle culminated in a final rule published in the

Federal Register

on August 17, 2004 (the August 2004 final rule). The August 2004 final rule prescribed energy conservation standards for central air conditioners and heat pumps manufactured or imported on and after January 23, 2006. 69 FR 50997.

DOE completed the second of the two rulemaking cycles by publishing a direct final rule on June 27, 2011. 76 FR 37408. The June 2011 DFR combined the rulemakings for residential furnaces, central air conditioners, and heat pumps; divided the country into three regions for CAC/HP: Southeast “hot humid” region, southwest “hot-dry” region, and northern “rest of country” (national standard); and amended standards, including different standards for each region, for central air conditioners and heat pumps manufactured on or after January 1, 2015.

On October 31, 2011, DOE published a notice of effective date and compliance dates for the direct final rule responding to comments it received. 76 FR 67037. Ultimately, DOE determined that the comments received in response to the direct final rule for amended energy conservation standards for residential central air conditioners and heat pumps did not provide a reasonable basis for withdrawal of the DFR.

Id.

The current standards, which differ by region, were published in the June 27, 2011 DFR. 76 FR 37408, 37546-47. These standards are codified in DOE's regulations in the Code of Federal Regulations (CFR) at 10 CFR 430.32(c)(2)-(5). The standards consist of a minimum SEER for each class of air conditioner and a minimum SEER and HSPF for each class of heat pump. 10 CFR 430.32(c)(2)-(3). In addition, the June 2011 DFR also established regional standards on EER for the southwest region

for split-system air conditioner and single-package air conditioner product classes. 10 CFR 430.32(c)(4). All covered central air conditioners and heat pumps were also required to meet standards for average off mode electrical power consumption. 10 CFR 430.32(c)(5). DOE's current regulatory requirements for central air conditioners and heat pumps are listed in Table II.1.

The 2011 Direct Final Rule divides the United States into three different climate zones based on the number of heating degree days: Southeast region, southwest region, and the north (also referred to as “rest of the country”) which represents the national standard.

Table II-1—Energy Conservation Standards for Central Air Conditioners and Heat Pumps Manufactured On or After January 1, 2015 †

Product class

National

standard

levels

Southeastern

region ††

standard

levels

Southwestern region ‡ standard levels

Split-system air conditioners

SEER = 13

SEER = 14

EER = 12.2 (for units with a rated cooling capacity less than 45,000 Btu/h)

EER = 11.7 (for units with a rated cooling capacity equal to or greater than 45,000 Btu/h)

Split-system heat pumps

SEER = 14

HSPF = 8.2

Single-package air conditioners

SEER = 14

EER = 11.0

Single-package heat pumps

SEER = 14

HSPF = 8.0

Small-duct, high-velocity systems ‡‡

SEER = 12

HSPF = 7.2

Space-constrained products—air conditioners ‡‡

SEER = 12

Space-constrained products—heat pumps ‡‡

SEER = 12

HSPF = 7.4

† “SEER” is Seasonal Energy Efficiency Ratio; “EER” is Energy Efficiency Ratio; “HSPF” is Heating Seasonal Performance Factor; and “Btu/h” is British thermal units per hour.

†† The Southeastern region for central air conditioners contains the following States: Alabama,, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia, and the District of Columbia.

‡ The Southwestern region for central air conditioners contains the States of Arizona, California, Nevada, and New Mexico.

‡‡ DOE did not amend energy conservation standards for these product classes.

The June 2011 DFR also established off mode energy conservation standards for residential central air conditioners and heat pumps, as summarized in Table II.2 and described in section III.E.

Table II-2—Off Mode Energy Conservation Standards for Central Air Conditioners and Heat Pumps Manufactured On or After January 1, 2015 *

Product class

Off mode standard levels †

Split-system air conditioners

W,OFF

= 30 watts.

Split-system heat pumps

W,OFF

= 33 watts.

Single-package air conditioners

W,OFF

= 30 watts.

Single-package heat pumps

W,OFF

= 33 watts.

Small-duct, high-velocity systems

W,OFF

= 30 watts.

Space-constrained air conditioners

W,OFF

= 30 watts.

Space-constrained heat pumps

W,OFF

= 33 watts.

* “P

W,OFF

” is off mode electrical power consumption for central air conditioners and heat pumps.

† DOE is not adopting a separate standby mode standard level for central air conditioners and heat pumps, because standby mode power consumption for these products is already regulated by SEER and HSPF.

2. History of the Current CAC/HP Rulemaking

This section provides an overview of the history of the current central air conditioner and heat pump rulemaking following the June 2011 DFR up to this direct final rule.

Following DOE's adoption of the June 2011 DFR, the American Public Gas Association (APGA) filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit, seeking to invalidate the June 2011 DFR as it pertained to non-weatherized gas furnaces (NWGFs) and mobile home gas furnaces (MHGFs). Petition for Review,

American Public Gas Association, et al.

Department of Energy, et al.,

No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). APGA requested the court to vacate and remand the direct final rule for further notice and comment rulemaking, with its main arguments being that DOE inappropriately banned noncondensing furnaces in the northern region and adopted a standard that would cause significant fuel switching without economic justification.

Brief for Petitioner, American Public Gas Association, et al. v. Department of Energy, et al., No. 11-1485 (D.C. Cir. filed May 14, 2012). See also:

http://www.achrnews.com/ext/resources/2013/06-2013/06-03-13/APGA-Petition-DC-Cir_11-1485.pdf

On April 24, 2014, the Court granted a motion that approved a settlement agreement reached between DOE, APGA, and the various intervenors.

Under this settlement agreement, DOE agreed to a court vacatur and remand of the regional standards for non-weatherized natural gas and mobile home furnaces and to use best efforts to complete a new standards rulemaking for those products within two years. Accordingly, the Court's order vacated the June 2011 DFR in part (

i.e.,

those portions relating to NWGFs and MHGFs) and remanded to the agency for further rulemaking. Notwithstanding this litigation, the regional standards for residential central air conditioners and heat pumps contained in the June 27, 2011 DFR went into effect as originally scheduled with a compliance date of January 1, 2015. Around this time, DOE also decided to initiate a negotiated rulemaking with stakeholders on regional standards enforcement for central air conditioners and heat pumps.

See:

http://www.acca.org/wp-content/uploads/2014/03/joint-motion-to-vacate-and-remand-2014-to-file.pdf

On August 26, 2014, DOE published a notice of open meetings for the central air conditioner and heat pump regional standards enforcement working group, which was tasked to discuss and reach consensus on a proposed rule

for the enforcement of regional standards for split-system and single-package air conditioners. 79 FR 50856. This working group was scheduled to periodically convene from August through October of 2014. DOE issued a final rule on central air conditioner and heat pump regional standards enforcement on July 14, 2016. 81 FR 45387.

More details on the issues considered can be found in the docket:

http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-CE-0077-0070

According to the Energy Policy and Conservation Act's 6-year review requirement (42 U.S.C. 6295(m)(1)), DOE must publish a notice of proposed rulemaking to propose new standards for residential central air conditioner and heat pump products or a notice of determination that the existing standards do not need to be amended by June 6, 2017. On November 5, 2014, DOE initiated efforts pursuant to the 6-year lookback requirement by publishing a request for information (RFI) regarding central air conditioners and heat pumps to solicit comments on whether to amend the current energy conservation standards for residential central air conditioner and heat pump products. 79 FR 65603. The November 2014 RFI also described the procedural and analytical approaches that DOE anticipated using in order to evaluate potential amended energy conservation standards for central air conditioners and heat pumps.

On August 28, 2015, DOE published a notice of data availability (NODA) describing analysis to be used in support of the central air conditioners and heat pumps standards rulemaking. 80 FR 52206. The analysis for this notice provided the results of a series of DOE provisional analyses regarding potential energy savings and economic impacts of amending the central air conditioner and heat pump energy conservation standards. These analyses were conducted for the following categories: Engineering, consumer impacts, national impacts, and manufacturer impacts.

In response to the November 2014 RFI, Lennox formally requested that DOE convene a negotiated rulemaking to address potential amendments to the current standards, which would help ensure that all stakeholders have input into the discussion, analysis, and outcome of the rulemaking. (Lennox, No. 22) Other key industry stakeholders made similar suggestions. (American Council for an Energy-Efficient Economy, No. 23; Air Conditioning Contractors of America, No. 25; Heating, Air Conditioning & Refrigeration Distributors International, No. 26) ASRAC carefully evaluated this request, and the Committee voted to charter a working group to support the negotiated rulemaking effort requested by these parties.

Subsequently, DOE determined that the complexity of the CAC/HP rulemaking necessitated a combined effort to address these equipment types to ensure a comprehensive vetting of all issues and related analyses to support any final rule setting standards. To this end, DOE solicited the public for membership nominations to the CAC/HP Working Group that would be formed under the ASRAC charter by issuing a Notice of Intent to Establish the Central Air Conditioners and Heat Pumps Working Group To Negotiate a

Notice of Proposed Rulemaking for Energy Conservation Standards. 80 FR 40938 (July 14, 2015). The CAC/HP Working Group was established under ASRAC in accordance with the Federal Advisory Committee Act (FACA) and the Negotiated Rulemaking Act—with the purpose of discussing and, if possible, reaching consensus on a set of energy conservation standards to propose/finalize for CACs and HPs. The CAC/HP Working Group was to consist of fairly representative parties having a defined stake in the outcome of the proposed standards, and would consult, as appropriate, with a range of experts on technical issues.

DOE received 26 nominations for membership. Ultimately, the CAC/HP Working Group consisted of 15 members, including one member from ASRAC and one DOE representative.

The CAC/HP Working Group met ten times (nine times in-person and once by teleconference). The meetings were held on August 26, 2015, September 10, 2015, September 28-29, 2015, October 13-14, 2015, October 26-27, 2015. November 18-19, 2015, December 1-2, 2015, December 16-17, 2015, January 11-12, 2016, and a webinar on January 19, 2016.

The group members were Tony Bouza (U.S. Department of Energy), Marshall Hunt (Pacific Gas & Electric Company, San Diego Gas & Electric Company, Southern California Edison, and Southern California Gas Company), Andrew deLaski (Appliance Standards Awareness Project and ASRAC representative), Meg Waltner (Natural Resources Defense Council), John Hurst (Lennox), Karen Meyers (Rheem Manufacturing Company), Charles McCrudden (Air Conditioning Contractors of America), Harvey Sachs (American Council for an Energy Efficient Economy), Russell Tharp (Goodman Manufacturing), Karim Amrane (Air-Conditioning, Heating, and Refrigeration Institute), Don Brundage (Southern Company), Kristen Driskell (California Energy Commission), John Gibbons (United Technologies), Steve Porter (Johnstone Supply), and Jim Vershaw (Ingersoll Rand).

During the CAC/HP Working Group discussions, participants discussed setting new standards for single-package air conditioners. Specifically, arguments were made against raising the standard level for single-package systems due to the unavailability of full product lines, which span the entire range of cooling capacities, with efficiencies that are only modestly greater (

i.e.,

15 SEER) than the current standard level (

i.e.,

14 SEER). (ASRAC Public Meeting, No. 80 at pp. 75-6) After being informed that the national energy savings from a 15 SEER standard for single-package systems would be small (

i.e.,

approximately 0.1 quads), the Working Group agreed not to recommend raising the standards for these product classes. (ASRAC Public Meeting, No. 80 at pp. 90-91). In addition, some parties wanted the Group to recommend a level for standards for split-system heat pumps that would encourage use of two-speed equipment (

i.e.,

greater than 15 SEER), but the manufacturer representatives objected to this proposal due to two primary concerns: (1) Only a single compressor manufacturer supplies two-stage compressors, thereby creating the possibility of a limited or constrained supply of the most critical component of a two-speed system and (2) the likelihood, in replacement installations, that the utilization of existing thermostat control wiring could result in the use of only high-speed, thereby eliminating the efficiency gain resulting from low-speed operation during part-load conditions.

The CAC/HP Working Group successfully reached consensus on recommended energy conservation standards, as well as test procedure amendments for CACs and HPs. On January 19, 2016, the CAC/HP Working Group submitted the Term Sheet to ASRAC outlining its recommendations, which ASRAC subsequently adopted.

Available at (copy and paste into browser):

https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0076

3. 2015-2016 ASRAC CAC/HP Working Group Recommended Standard Levels

This section summarizes the standard levels recommended in the Term Sheet submitted by the CAC/HP Working Group for CAC/HP standards and the subsequent procedural steps taken by DOE. Recommendation #8 of the Term Sheet recommends standard levels based on the test procedure at the time of the 2015-2016 Negotiations. (ASRAC Term Sheet, No. 76 at pp. 4-5) These recommended standard levels are presented in Table II-3. Note that the test procedure at the time of the 2015-2016 Negotiations did not include the amendments adopted in the November 2016 test procedure final rule, which are outlined in section III.F. Recommendation #9 tabulates the translated standard levels based on the amended test procedure (ASRAC Term Sheet, No. 76 at p. 5). Details of the other Term Sheet recommendations can be found in the Term Sheet posted in the docket.

Available at (copy and paste into browser):

https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0076

Table II-3—Recommended Amended Energy Conservation Standards for Residential Central Air Conditioners and Heat Pumps as Determined by the DOE Test Procedure at the Time of the 2015-2016 ASRAC Negotiations

[Recommended TSL]

Product class

National

SEER

HSPF

Southeast *

SEER

Southwest **

SEER

EER ***

Split-System Air Conditioners with a Certified Cooling Capacity <45,000 Btu/h

**** 12.2/10.2

Split-System Air Conditioners with a Certified Cooling Capacity ≥45,000 Btu/h

14.5

**** 11.7/10.2

Split-System Heat Pumps

8.8

Single-Package Air Conditioners and Heat Pumps

8.0

11.0

** Southwest includes the states of Arizona, California, Nevada, and New Mexico.

*** EER requirements only apply to air conditioners, not heat pumps within each product class.

**** The 10.2 EER amended energy conservation standard applies to split-system air conditioners with a seasonal energy efficiency ratio greater than or equal to 16.

Note:

The energy conservation standards for small-duct high velocity and space-constrained remain unchanged from current levels.

After carefully considering the consensus recommendations for amending the energy conservation standards for CACs and HPs submitted by the CAC/HP Working Group and adopted by ASRAC, DOE has determined that these recommendations are in accordance with the statutory requirements of 42 U.S.C. 6295(p)(4) for the issuance of a direct final rule.

More specifically, these recommendations comprise a statement submitted by interested persons who are fairly representative of relevant points of view on this matter. In reaching this determination, DOE took into consideration the fact that the CAC/HP Working Group, in conjunction with ASRAC members who approved the recommendations, consisted of representatives of manufacturers of the covered equipment at issue, States, and efficiency advocates—all of which are groups specifically identified by Congress as relevant parties to any consensus recommendation. (42 U.S.C. 6295(p)(4)(A)) As delineated above, the Term Sheet was signed and submitted by a broad cross-section of interests, including the manufacturers who produce the subject products, trade associations representing these manufacturers and installation contractors, environmental and energy-efficiency advocacy organizations, and electric utility companies. Although States were not direct signatories to the Term Sheet, the ASRAC Committee approving the CAC/HP Working Group's recommendations included at least two members representing States—one representing the National Association of State Energy Officials (NASEO) and one representing the State of California.

Moreover, DOE does not read the statute as requiring a statement submitted by all interested parties before the Department may proceed with issuance of a direct final rule. By explicit language of the statute, the Secretary has the discretion to determine when a joint recommendation for an energy or water conservation standard has met the requirement for representativeness (

i.e.,

“as determined by the Secretary”).

Id.

These individuals were Deborah E. Miller (NASEO) and David Hungerford (California Energy Commission).

DOE also evaluated whether the recommendation satisfies 42 U.S.C. 6295(o), as applicable. In making this determination, DOE conducted an analysis to evaluate whether the potential energy conservation standards under consideration achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified and result in significant energy conservation. The evaluation is the same comprehensive approach that DOE typically conducts whenever it considers potential energy conservation standards for a given type of product or equipment.

Upon review, the Secretary determined that the Term Sheet comports with the standard-setting criteria set forth under 42 U.S.C. 6295(p)(4)(A). Accordingly, the consensus-recommended efficiency levels were included as the “recommended TSL” for CACs/HPs (see section V.A for description of all of the considered TSLs). The details regarding how the consensus-recommended TSLs comply with the standard-setting criteria are discussed and demonstrated in the relevant sections throughout this document.

In sum, as the relevant criteria under 42 U.S.C. 6295(p)(4) have been satisfied, the Secretary has determined that it is appropriate to adopt the consensus-recommended amended energy conservation standards for CACs and HPs through this direct final rule. Also in accordance with the provisions described in section II.A, DOE is simultaneously publishing a NOPR proposing that the identical standard levels contained in this direct final rule be adopted.

III. General Discussion

This section covers subjects that are not explicitly discussed in other sections but provide additional necessary context for understanding this direct final rule.

A. Regulatory Approach

When DOE initiated this rulemaking, DOE had intended to rate and certify split-system central air conditioners based on a blower-coil configuration. This approach was reflected in the August 2015 NODA TSD. However, in the June 2016 test procedure final rule, DOE adopted a different approach based on CAC/HP Working Group recommendations. 81 FR 36992, 37001-03 (June 8, 2016). At its meeting on November 19, 2015, DOE presented two potential regulatory approaches, one based on both coil only and blower-coil configurations (approach 1, similar to the existing regulatory structure) and one based on blower-coil configurations (approach 2), both of which DOE regarded as feasible. During discussion, the CAC/HP Working Group generally supported approach 1 based on concerns with approach 2. Working Group members' primary concern with approach 2 is that the majority of sales are for coil-only installations, so blower-coil only ratings would not be representative of the majority of field installations, which could contribute to consumer confusion. (ASRAC Public Meeting, No. 85 at pp. 6-42)

The CAC/HP Working Group ultimately recommended that DOE adopt approach 1 and require rating and certifying split-system central air conditioners based on any configuration (

i.e.,

coil-only or blower-coil). The regulatory approach to split-system central air conditioners is identified as recommendation #7 in the CAC/HP Working Group Term Sheet. (ASRAC Term Sheet, No. 76 at p. 4) The June 2016 test procedure final rule includes a detailed discussion of these recommended changes and DOE's adoption of them. 81 FR 36992, 37001-37003 (June 8, 2016).

For discussion supporting approach 1, or the approach not based solely on blower coil ratings, see for example, Karen Meyers, pp. 27-28; Rusty Tharp, p. 29; Jim Vershaw, p. 36.

For the August 2015 NODA, DOE developed cost-efficiency relationships in the engineering analysis for blower coil systems. Then DOE established a correlation between blower coil system efficiency and coil-only efficiency based on ratings from the AHRI database. DOE used this correlation to calculate the cost-efficiency relationship for coil-only systems. Given the revised regulatory approach for this DFR, DOE analyzed coil-only cost-efficiency directly. Section IV.C describes in detail how DOE determined the cost-efficiency relationship for coil-only systems in this DFR.

B. Compliance Dates

EPCA prescribes a five-year period between the standard's publication date and the compliance date (42 U.S.C. 6295(m)(4)(A)(i)). The compliance date for the 2011 DFR is January 1, 2015. The statute further provides that no manufacturer shall be required to apply new standards to a product to which other new standards have been required during the prior six-year period (42 U.S.C. 6295(m)(4)(B)). Given these statutory provisions, the earliest date that DOE could require compliance with amended standards would be January 1, 2021 (

i.e.,

six years after January 1, 2015, the compliance date of the standards adopted in the June 27, 2011 DFR). Thus, DOE contemplated a compliance date in 2021 in analyzing the impacts of the TSLs other than the Recommended TSL, which represents the recommended standards.

For the Recommended TSL, the CAC/HP Working Group recommended a compliance date of January 1, 2023. While this implies a period between the

standards final rule's publication date and the compliance date that is longer than five years, DOE understands that EPCA provides some measure of discretion when adopting recommended standards submitted as part of a consensus agreement, provided that DOE determines that the recommended standards are otherwise in accordance with the required provisions. See 42 U.S.C. 6295(p)(4). DOE has made the determination that the rulemaking record in this case supports the adoption of the recommended compliance date.

C. Regional Standards

As described previously, EISA 2007 amended EPCA to allow for the establishment of one or two more-restrictive regional standards in addition to the base national standard for residential central air conditioners and heat pumps. (42 U.S.C. 6295(o)(6)(B)) The regions must include only contiguous States (with the exception of Alaska and Hawaii, which can be included in regions with which they are not contiguous), and each State may be placed in only one region (

i.e.,

a State cannot be divided among or otherwise included in two regions). (42 U.S.C. 6295(o)(6)(C))

Further, EPCA mandates that a regional standard must produce significant energy savings in comparison to a single national standard, and provides that DOE must determine that the additional standards are economically justified and consider the impact of the additional regional standards on consumers, manufacturers, and other market participants, including product distributors, dealers, contractors, and installers. (42 U.S.C. 6295(o)(6)(D)) In the 2011 Direct Final Rule, DOE considered the above-delineated impacts of regional standards in addition to national standards for central air conditioners and heat pumps, and the analyses indicated that regional standards will provide additional positive impacts. See chapter 10 of the 2011 DFR TSD.

Reference to Technical Support Document for Residential Central Air Conditioners, Heat Pumps, and Furnaces, Chapter 10 National and Regional Impact Analyses (copy and paste into browser):

http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-STD-0011-0012.

Consistent with the consensus agreement

submitted to DOE by a number of interested stakeholders on January 15, 2011, the 2011 Direct Final Rule established regional standards on EER for split-system and single-package air conditioners for the southwest region. Pursuant to 42 U.S.C. 6295(o)(1) (

i.e.,

the “anti-backsliding clause”), DOE may not prescribe any amended standard which increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. As such, DOE intends to maintain the application of a regional standard requirement for the same product classes in the same regions. Accordingly, DOE has addressed the potential impacts from regional standards in the relevant analyses, including the mark-ups to determine product price, the LCC and payback period analysis, the national impact analysis (NIA), and the manufacturer impact analysis (MIA). DOE's approach for addressing regional standards is included in the methodology section corresponding to each individual analysis in section IV of this direct final rule.

Reference to Joint Stakeholders Comments on Energy Conservation Standards for Residential Central Air Conditioners, Heat Pumps, and Residential Furnaces (copy and paste into browser):

https://www.regulations.gov/document?D=EERE-2011-BT-STD-0011-0016.

D. Alternative Refrigerants

Residential central air conditioners and heat pumps currently on the market primarily utilize R-410A as the refrigerant. R-410A is a mixture of hydrofluorocarbons (HFCs), specifically HFC-32 (R-32) and HFC-125 (R-125) with a 50 percent/50 percent mass ratio. Stakeholders have raised concern that the high global warming potential of HFCs has put pressure on the industry to phase out HFC-containing refrigerants in favor of alternatives with a lower global warming potential (GWP). In response to the November 2014 RFI, ACEEE recommended that DOE consider the potential impact of changes in refrigerants on the standards. (ACEEE, No. 21 at p.3) Lennox suggested that DOE consider equipment redesigns resulting from the transition to alternate refrigerants. (Lennox, No. 10 at p. 4) Southern Co. suggested that DOE also model efficiencies using low-Global Warming Potential (GWP) refrigerants. (Southern Co., No. 11 at p. 2) EIA strongly urged DOE to consider the use of low-GWP refrigerants and alternative refrigerants such as CO2, and indirect evaporative cooling technology. (EIA, No. 12 at p. 1) Rheem suggested that DOE reevaluate the efficacy of design options with respect to the elimination of R410a. (Rheem, No. 17 at p. 3).

In response, DOE is aware that the U.S. Environmental Protection Agency (EPA) has proposed and finalized amendments to its lists of approved refrigerants under its significant new alternatives policy program

(SNAP); however, these changes do not address central air conditioners and heat pumps.

It would not be appropriate for DOE to speculate on the outcome of a rulemaking in progress or potential proposals that have not yet been issued. Therefore, DOE has not included possible outcomes of a potential EPA SNAP rulemaking affecting central air conditioners and heat pumps in the engineering or LCC analyses. This decision is consistent with past DOE practice, such as in the 2011 direct final rule for room air conditioners. 76 FR 22454 (April 21, 2011). DOE is aware of stakeholder concerns that EPA may broaden the applications for which HFC refrigerants are phased out at some point in the future. DOE is confident that there will be an adequate supply of R-410A for compliance with the standards being adopted in this notice. However, consistent with Executive Order 13563, “Improving Regulation and Regulatory Review,” DOE will prioritize its review of the potential effects of any future phase-out of HFCs (should there be one) on the efficiency standards related to this rulemaking. If a manufacturer believes that its design is subjected to undue hardship by regulations, the manufacturer may petition DOE's Office of Hearing and Appeals (OHA) for exception relief or exemption from the standard pursuant to OHA's authority under section 504 of the DOE Organization Act (42 U.S.C. 7194), as implemented at subpart B of 10 CFR part 1003. OHA has the authority to grant such relief on a case-by-case basis if it determines that a manufacturer has demonstrated that meeting the standard would cause hardship, inequity, or unfair distribution of burdens.

EPA regulates refrigerants for air conditioning, refrigeration, and other end uses under the stratospheric ozone protection provisions under Section 612(c) the Clean Air Act (CAA). EPA's SNAP Program evaluates and regulates the availability of refrigerants for the U.S. market by identifying and publishing lists of acceptable and unacceptable refrigerant substitutes.

EPA on July 9, 2014 proposed new alternative refrigerants for several applications, but not central air conditioners or heat pumps. 79 FR 38811. On February 27, 2015, EPA issued the final rule for this rulemaking, which was published in the

Federal Register

on April 10, 2015 (see

http://www.epa.gov/ozone/snap/download/SAN_5745-SNAP_Low_GWP_Refrigerants_FRM_Signature_Version-signed-2-27-2015.pdf

). 80 FR 19454. Also, on August 6, 2014, EPA proposed delisting refrigerants for several applications, but not central air conditioners or heat pumps. 79 FR 46126. On July 20, 2015, EPA published the final rule for this rulemaking, which went into effect on August 19, 2015. 80 FR 42870. Refer to the docket (copy and paste into browser):

https://www.regulations.gov/docket?D=EPA-HQ-OAR-2014-0198.

As such, DOE did not conduct additional analysis based on alternative

refrigerants to replace R-410A in this rulemaking.

E. Standby Mode and Off Mode

As noted in section II.A of this document, any final rule for amended or new energy conservation standards for consumer products that is published on or after July 1, 2010 must address standby mode and off mode energy use. (42 U.S.C. 6295(gg))

As set forth in 10 CFR 430.2,

Standby mode

means the condition in which an energy-using product—

(1) Is connected to a main power source; and

(2) Offers one or more of the following user-oriented or protective functions:

(i) To facilitate the activation or deactivation of other functions (including active mode) by remote switch (including remote control), internal sensor, or timer; or

(ii) Continuous functions, including information or status displays (including clocks) or sensor-based functions.

For residential central air conditioners and heat pumps, the standby mode refers to the state when a system is connected to the power supply but the compressor and fans are not running (

i.e.,

the system is not actively cooling or heating but it is primed to be activated by the thermostat). The SEER and HSPF metrics for cooling and heating already account for standby mode energy use. Specifically, the degradation coefficients used to adjust the steady-state efficiency levels to account for cyclic operation of the unit when calculating SEER or HSPF are based on electric energy measurements that include the energy use of the unit during the compressor-off cycles, and they include power input associated with all unit components, including the control system.

As set forth in 10 CFR 430.2,

off mode

means the condition in which an energy using product is connected to a main power source, and is not providing any standby or active mode function. For central air conditioners and heat pumps, off mode generally occurs during all non-cooling seasons for air conditioners, and during the “shoulder seasons” (

i.e.,

fall and spring) for heat pumps when consumers neither heat nor cool their homes. Unlike standby mode, off mode energy use is not captured in the SEER and HSPF metrics. As such, the June 2011 Direct Final Rule established off mode energy conservation standards for central air conditioners and heat pumps. In the technology assessment of the June 2011 Direct Final Rule, DOE considered five technologies associated with off mode for central air conditioners and heat pumps: (1) Toroidal transformers; (2) ECM control relays; (3) thermostatically-controlled crankcase heaters; (4) self-regulating crankcase heaters, and (5) compressor insulation covers. DOE continues to screen out the ECM control relay because DOE is not aware of any commercially-available systems that use this technology, and DOE is also not aware of any improvements to the technology that would address the associated reliability issues. DOE did, however, consider the remaining four technologies as design options for establishing the off mode energy conservation standards. The adopted standards were ultimately based upon this list of technologies. 76 FR 37408, 37447-37450 (June 27, 2011).

For the current direct final rule, DOE further researched the four technologies considered as design options in the June 2011 DFR. DOE was able to find thermostatically-controlled and self-regulating crankcase heaters in commercially-available central air conditioners and heat pumps. However, manufacturer specifications do not provide detailed wattage information for DOE to determine if these technologies could lower the off mode energy use for central air conditioners and heat pumps based on the existing off mode standards. Toroidal transformers may have higher efficiencies than conventional laminate transformers, but their savings potential is small compared to the precision of the test procedure as applied to baseline products. Crankcase heater wattage, rather than transformer loss, represents most of the measured off mode power input. DOE also believes that compressor covers can reduce heat loss and, therefore, reduce the off mode energy consumption. However, the existing off mode standards established by the June 2011 Direct Final Rule are already consistent with the energy use achievable using these technologies, and DOE does not have evidence to indicate that further energy savings based on these technologies are achievable.

In addition to the four technologies considered in the June 2011 Direct Final Rule, DOE identified another two technologies that could potentially reduce the off mode energy use for central air conditioners and heat pumps: (1) Hermetic crankcase heaters and (2) integral compressor motor heaters. However, DOE did not find any commercially-available applications of these two technologies in central air conditioners and heat pumps and did not consider these technologies further. More details on these technologies can be found in chapter 3 of the DFR TSD.

As such, DOE concludes that amending the off mode energy conservation standards at this time is not justified. This review satisfies, for off mode energy conservation standards for CAC/HP products, the periodic review of energy conservation standards required by EPCA. (42 U.S.C. 6295(m)(1))

F. Test Procedure

This section provides a brief overview of DOE's requirements with respect to test procedures as well as the history of the most recent central air conditioner and heat pump test procedure rulemakings and an overview of the significant changes adopted.

EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with energy conservation standards and to quantify the efficiency of their product.

DOE notes that Appendix A established procedures, interpretations, and policies to guide DOE in the consideration and promulgation of new or revised appliance efficiency standards under EPCA. (See section 1 of 10 CFR of 430 subpart C, appendix A) These procedures are a general guide to the steps DOE typically follows in promulgating energy conservation standards. The guidance recognizes that DOE can and will, on occasion, deviate from the typical process. (See 10 CFR part 430, subpart C, appendix A, section 14(a)) In this particular instance, DOE deviated from its typical process by conducting a negotiated rulemaking process, per the request of multiple key stakeholders and as chartered by ASRAC. The CAC/HP Working Group met ten times (nine times in-person and once by teleconference) and successfully reached consensus on recommended amended energy conservation standards, as well as test procedure amendments for CACs and HPs. On January 19, 2016, the CAC/HP Working Group submitted the Term Sheet to ASRAC outlining its recommendations, which ASRAC subsequently adopted. As discussed in section II.B.3, the Term Sheet meets the criteria of a consensus recommendation, and DOE has determined that these recommendations are in accordance with the statutory requirements of 42 U.S.C. 6295(p)(4) for the issuance of a direct final rule. DOE ultimately adopted many of the test procedure provisions and recommended standard levels that the CAC/HP Working Group included in the Term Sheet, which

illustrates that DOE's deviations from the typical rulemaking process in this instance did not adversely impact the manufacturers' ability to understand and provide input to DOE's rulemaking process. The process that DOE used, in this case, was a more collaborative negotiated rulemaking effort resulting in an agreement on recommended standard levels, which DOE is fully implementing in this direct final rule.

The most recent test procedure rulemaking included the following key rulemaking documents: The June 2016 test procedure final rule (81 FR 36992), the August 2016 test procedure SNOPR (81 FR 58164), and the November 2016 test procedure final rule (Docket No. EERE-2016-BT-TP-0029). This section does not address specific comments received on these test procedure documents, as those comments are addressed in the three notices listed. Rather, the main purpose of this section is to provide context for understanding the efficiency levels used in analyses for this direct final rule and the translated levels following the walkdown analysis. To reiterate, efficiency levels used throughout the analyses for this DFR are based on the test procedure in effect at the time of the CAC/HP Working Group negotiations, which did not include the changes outlined in this section. Standard levels set in this final rule have a compliance date simultaneous with the date that the test procedure as modified by the November 2016 test procedure final rule must be used to represent product efficiency. The translation of these standard levels based on the November 2016 test procedure final rule—which does include the changes outlined in this section—is presented in section V.C.1.

DOE initiated a test procedure rulemaking for central air conditioners and heat pumps in advance of the June 2011 DFR, publishing a NOPR on June 2, 2010 (June 2010 test procedure NOPR). 75 FR 31224. In this NOPR, DOE proposed adding calculations for the determination of sensible heat ratio, incorporating of a method to evaluate off mode power consumption, and also adding parameters for establishing regional measures of energy efficiency.

Id.

DOE published a supplemental notice of proposed rulemaking (SNOPR) regarding the test procedure for central air conditioners and heat pumps on April 1, 2011. 76 FR 18105. In this SNOPR, DOE proposed to amend the testing requirements for off mode power consumption in response to the comments DOE received on the June 2010 test procedure NOPR. DOE also discussed issues related to low-voltage transformers used when testing coil-only units, and the use of a regional standard efficiency metric.

Id.

DOE received further comments regarding the off mode testing requirement for central air conditioners and heat pumps after the publication of the April 2011 test procedure SNOPR. In response to these comments, DOE published a second SNOPR on October 24, 2011. 76 FR 65616. In the October 2011 test procedure SNOPR, DOE addressed comments only related to off mode testing for central air conditioners and heat pumps.

Id.

DOE received comments on the October 2011 test procedure SNOPR, as well as comments relevant to the test procedure in response to the November 2014 RFI. In response to these comments, DOE published a third SNOPR on November 9, 2015. 80 FR 69278. DOE proposed the following in the November 2015 test procedure SNOPR:

• A new basic model definition as it pertains to central air conditioners and heat pumps and revised rating requirements;

• Revised alternative efficiency determination methods;

• Termination of active waivers and interim waivers;

• Revised procedures to determine off mode power consumption;

• Changes to the test procedure that would improve test repeatability and reduce test burden;

• Clarifications to ambiguous sections of the test procedure intended also to improve test repeatability;

• Inclusion of, amendments to, and withdrawals of test procedure revisions proposed in published test procedure notices in the rulemaking effort leading to this SNOPR; and

• Changes to the test procedure that would improve field representativeness.

Some of these proposals also included incorporation by reference of updated industry standards.

Id.

On June 8, 2016, DOE published a final rule with amendments to the test procedure that did not change the measured energy efficiency of central air conditioners and heat pumps when compared to the test procedure previously in effect. 81 FR 36992. Broadly, amendments included revisions to:

• Definitions, testing, rating, and compliance of basic models;

• Requirements for Alternative Efficiency Determination Methods (AEDMs);

• Procedures for specific products that had been granted test procedure waivers (

e.g.,

multi-circuit products and triple-capacity northern heat pumps);

• Test methods and calculations for off mode power; and

• Specific procedures concerning test repeatability and test burden, including for example, setting fan speeds, determining the maximum speed for variable-speed compressors, charging refrigerant lines, and determining the coefficient of cyclic degradation (C

), among others.

In the June 2016 test procedure final rule, DOE did not finalize several proposals of the November 2015 SNOPR that were intended to improve field representativeness, opting instead to revise these proposals and obtain further stakeholder input on them. DOE did this by publishing a SNOPR on August 24, 2016, which proposed amendments to the test procedure established by the June 2016 test procedure final rule. 81 FR 58164 DOE indicated that several of these amendments would change the measured energy efficiency of central air conditioners and heat pumps, while others would provide additional improvements for clarity and consistency. Amendments of the August 2016 SNOPR that would change measured efficiency were proposed for a new appendix M1 that would be required for representations coincident with the compliance date of the new efficiency standards These included proposals to:

• Increase minimum external static pressure requirements for most products, but limit the increase for certain products;

• For coil-only systems, introduce a new default fan power based on the new minimum external static pressure, and a unique, lower default fan power for manufactured home coil-only systems;

• Revise the heating load line slope factor and the heating load line zero-load temperature to better reflect field heating loads; and

• Revise certain aspects of the calculation procedures for calculating HSPF, including modified and clarified requirements regarding compressor speeds used for testing variable-speed heat pumps, and allowing use of a 5 °F test as an option for variable-speed heat pumps.

Other proposed changes to improve clarity and consistency, which DOE proposed as amendments to the current appendix M, as well as in sections of 10 CFR part 429, were to take effect 30 days after publication of the final rule. These included:

• Additional changes to definitions and compliance requirements;

• Extending the requirements for no-match testing to other kinds of outdoor units that are predominantly installed as

replacements where the indoor unit is not replaced;

• Revision to the off-mode test procedure for systems with self-regulating crankcase heaters.

• A revised calculation for variable-speed heat pumps for calculating maximum speed performance below 17 °F;

• A revised method for calculating EER and COP for all variable-speed units, when operating at an intermediate compressor speed;

• Modifications to the outdoor air enthalpy method;

• New restrictions on refrigerant pressure measurement system internal volume;

• A new limit on indoor coil surface area; and

• Clarifying amendments addressing break-in periods, multi-split system part load requirements, and cased coil installation requirements.

On November 30, 2016 DOE issued a test procedure final rule that adopted most of the amendments proposed in the August 2016 SNOPR, many of these with revisions addressing stakeholder comments. Changes in final implementation of the amendments as compared to the proposals of the August 2016 SNOPR included:

• No adoption of restrictions on indoor coil surface area;

• Delay in implementation of certain amendments, moving them to appendix M1, including the change to the off-mode test procedure and some of the provisions for testing of variable-speed heat pumps;

• Revisions to specific requirements for determining whether an outdoor unit must be tested using the no-match test procedure;

• For all secondary test methods (not just for the outdoor air enthalpy method as proposed), requiring a match to confirm primary capacity measurements only for certain tests, rather than for all tests;

• Modifications reducing the restrictions on refrigerant pressure system internal volumes;

• A change in the required external static pressure used for testing for one kind of product; and

• Extending optional use of a 5 °F test to single- and two-speed heat pumps in addition to variable-speed.

Note that, as discussed in section I, the analyses conducted to support this direct final rule were based on the test procedure at the time of the 2015-2016 ASRAC negotiations, per the request of the CAC/HP Working Group. Consequently, the efficiency ratings and levels referenced throughout this document are not impacted by the test procedure amendments described above for the November 2016 test procedure final rule. However, central air conditioners and heat pumps will be required to be certified to the efficiency levels selected in this direct final rule and based on the test procedure established by the November 2016 test procedure final rule. The selected efficiency levels—presented throughout this document in terms of the test procedure at the time of the 2015-2016 ASRAC negotiations—are translated to levels in terms of the November 2016 test procedure final rule following the walk down analysis in section V.C.1.

G. Technological Feasibility

1. General

In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. (See chapter 3 of the direct final rule Technical Support Document (“TSD”) for a discussion of the list of technology options that DOE identified.) DOE then determines which of those efficiency-improving options are technologically feasible. DOE considers technologies incorporated in commercially-available products or in working prototypes to be technologically feasible. 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(i).

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

DOE notes that these screening criteria do not directly address the proprietary status of design options. As noted previously, DOE only considers efficiency levels achieved with the use of proprietary designs in the engineering analysis if they are not part of a unique path to achieve that efficiency level (

i.e.,

if there are other non-proprietary technologies capable of achieving the same efficiency). DOE believes the amended standards for the products covered in this rulemaking would not mandate the use of any proprietary technologies, and that all manufacturers would be able to achieve the amended levels through the use of non-proprietary designs. The efficiency levels considered in the analysis are all represented by commercially-available technologies that are available to all manufacturers.

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such a product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for central air conditioners and heat pumps, using the design parameters for the most-efficient products available on the market or in working prototypes (see chapter 5 of the direct final rule TSD). The max-tech levels considered for the analysis represent commercially-available products. For most of the product classes, these max-tech products are listed in the AHRI Directory.

For the SDHV and space-constrained air conditioner classes, the max-tech levels are as reported in manufacturers' product literature.

AHRI is the trade association representing manufacturers of heating, ventilation, air conditioning and refrigeration (HVACR) and water heating equipment within the global industry. Products of different manufacturers are certified to AHRI and listed in the AHRI Directory at:

https://www.ahridirectory.org/ahridirectory/pages/home.aspx.

directory:

https://www.ahridirectory.org/ahridirectory/pages/home.aspx.

The max-tech levels that DOE determined for this rulemaking are presented in Table III-1. Note that these max-tech levels are in terms of the efficiency metrics measured consistent with the test procedure at the time of the 2015-2016 ASRAC negotiations.

The max-tech levels themselves are discussed in more detail in section IV.C of this direct final rule and in chapter 5 of the accompanying TSD.

Table III-1—Max-Tech SEER and Corresponding EER and HSPF Levels Considered in the Central Air Conditioner and Heat Pump Analyses

Product class

Representative cooling capacity

(tons)

Max-tech efficiency levels

SEER *

HSPF *

Split-Systems

Air Conditioners **

21.0

N/A

21.0

20.0

Heat Pumps

19.0

9.9

19.0

9.9

17.5

9.4

Single-Package Systems

Air Conditioners

All

17.5

N/A

Heat Pumps

All

15.0

8.2

Small-Duct High-Velocity Air Conditioners

All

14.0

N/A

Space-Constrained Air Conditioners

All

14.0

N/A

* SEER and HSPF listed in the table are as measured using the test procedure proposed in the November 9, 2015 TP SNOPR. 80 FR 69278 EER is also measured by the test procedure, but as discussed in section IV.C.2, DOE did not analyze EER-based efficiency levels for this direct final rule.

** Max-Tech SEER levels are based on a blower-coil configuration.

H. Energy Savings

1. Determination of Savings

For each TSL, DOE projected energy savings from the application of the TSL to the central air conditioners and heat pumps that are the subject of this rulemaking purchased in the 30-year period that begins in the year of expected compliance with amended standards (2021-2050 or 2023-2052).

The savings are measured over the entire lifetime of central air conditioner and heat pump products purchased in the 30-year analysis period. DOE quantified the energy savings attributable to each TSL as the difference in energy consumption between each standards case and the no-new-standards case. The latter case represents a projection of energy consumption in the absence of amended energy conservation standards, and it considers market forces and policies that may affect future demand for more-efficient products.

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

DOE used its national impact analysis (NIA) spreadsheet model to estimate national energy savings (NES) from potential amended standards for central air conditioners and heat pumps. The NIA spreadsheet model (described in section IV.H of this direct final rule and chapter 10 of the TSD) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE calculates national energy savings on an annual basis in terms of primary (source) energy savings, which is the savings in the energy that is used to generate and transmit electricity to the site. To calculate primary energy savings from site electricity savings, DOE derives annual conversion factors from data provided in the Energy Information Administration's (EIA) most recent

Annual Energy Outlook

(

AEO

). For natural gas, the primary energy savings are considered to be equal to the site energy savings.

DOE also calculates NES in terms of full-fuel-cycle (FFC) energy savings. As discussed in DOE's statement of policy, the FCC metric includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy conservation standards. 76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 (August 17, 2012). DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.H.4.

2. Significance of Savings

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

Natural Resources Defense Council

Herrington,

768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended “significant” energy savings in the context of EPCA to be savings that are not “genuinely trivial.” The energy savings for all of the TSLs considered in this rulemaking, including the amended standards (presented in section V.B.3), are nontrivial, and, therefore, DOE considers them “significant” within the meaning of section 325 of EPCA.

I. Economic Justification

1. Specific Criteria

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

a. Economic Impact on Manufacturers and Consumers

In quantifying the impacts of a potential amended standard on manufacturers, DOE conducts a manufacturer impact analysis (MIA), as discussed in section IV.J, using an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include: (1) Industry net present value (INPV), which values the industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in revenue

and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.

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

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

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

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

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

For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with amended standards. The LCC savings for the considered efficiency levels are calculated relative to a case that reflects projected market trends in the absence of amended standards.

DOE's LCC and PBP analyses are discussed in further detail in section IV.F.

c. Energy Savings

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

d. Lessening of Utility or Performance of Products

In establishing product classes and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards considered in this document would not reduce the utility or performance of the products under consideration in this rulemaking.

e. Impact of Any Lessening of Competition

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

Federal Register

in a separate notice.

f. Need for National Energy Conservation

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

The amended standards also are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases (GHGs) associated with energy production and use. DOE conducts an emissions analysis to estimate how the amended standards may affect these emissions, as discussed in section IV.K the emissions impacts are reported in section V.5 of this document. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L.

g. Other Factors

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

In developing the direct final rule, DOE has also considered the submission of the jointly-submitted Term Sheet from the CAC/HP Working Group, as approved by ASRAC. In DOE's view, the Term Sheet sets forth a statement by interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered equipment, States, and efficiency advocates) and contains recommendations with respect to energy conservation standards that are in accordance with 42 U.S.C. 6295(o), as required by EPCA's direct

final rule provision. See 42 U.S.C. 6295(p)(4). DOE has encouraged the submission of agreements such as the one developed and submitted by the CAC/HP Working Group as a way to bring diverse stakeholders together, to develop an independent and probative analysis useful in DOE standard setting, and to expedite the rulemaking process. DOE also believes that standard levels recommended in the Term Sheet may increase the likelihood for regulatory compliance, while decreasing the risk of litigation.

2. Rebuttable Presumption

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

IV. Methodology

This section addresses the analyses DOE has performed for this rulemaking with regard to residential central air conditioners and heat pumps. Each subsection will address a component of DOE's analyses.

DOE used several analytical tools to estimate the impact of the amended standards. The first tool is a spreadsheet that calculates the LCC and PBP of amended energy conservation standards. The national impacts analysis (NIA) requires a second spreadsheet set that provides shipments forecasts and calculates national energy savings and net present value resulting from amended energy conservation standards. DOE used the third spreadsheet tool, the Government Regulatory Impact Model (GRIM), to assess manufacturer impacts of amended standards. These three spreadsheet tools are available on the DOE Web site.

Additionally, DOE used output from the latest version of EIA's

Annual Energy Outlook

(AEO)

for the emissions and utility impact analyses.

See:

http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=104.

All three spreadsheet tools are available online at the rulemaking portion of DOE's Web site:

http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/72.

A. Market and Technology Assessment

In conducting a market and technology assessment, DOE develops information that provides an overall picture of the market for covered products. This overall picture includes the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used. DOE uses both quantitative and qualitative assessments, based primarily on publicly-available information. The market and technology assessment for this residential central air conditioning and heat pump rulemaking covers issues that include: (1) A determination of the scope of the rulemaking and product classes; (2) manufacturers and industry structure; (3) quantities and types of products sold and offered for sale; (4) retail market trends; (5) regulatory and non-regulatory programs; and (6) technologies or design options that could improve the energy efficiency of the product(s) under examination. The key findings of DOE's market assessment are summarized below. For additional detail, see chapter 3 of the DFR TSD.

1. Definition and Scope of Coverage

A residential central air conditioner or heat pump is an important component of a home's central heating and cooling system, providing cooled and/or heated air to the conditioned space, often through ductwork. Split-system air conditioners are comprised of an indoor unit, which contains the indoor coil and may contain the indoor fan (blower); and an outdoor unit, which contains the compressor, outdoor coil, and outdoor fan. The indoor unit either includes its own blower (“blower-coil unit”) or uses the furnace fan (“coil-only unit”) to circulate air over the indoor coil, transferring heat between the circulating air and the refrigerant. The cooled (or heated) air is then distributed via ductwork to the conditioned space. The compressor raises the refrigerant pressure, which raises its saturation temperature so that it is warm enough to transfer heat either to the ambient air (for cooling mode) or the indoor air (for heat-pump mode). Single-package systems contain all of these components in a single-package. A residential central heat pump utilizes the same components as a central air conditioner, but also includes a reversing valve and other components that allow it to reverse the functions of the indoor and outdoor coils, thus operating in heat pump mode.

EPCA defines a central air conditioner as a product, other than a packaged terminal air conditioner,

which is powered by single phase electric current, air cooled, rated below 65,000 Btu per hour, not contained within the same cabinet as a furnace, the rated capacity of which is above 225,000 Btu per hour, and is a heat pump or a cooling only unit. (42 U.S.C. 6291(21)) DOE has incorporated this definition in its regulations at 10 CFR 430.2.

“Packaged terminal air conditioner” is defined in 10 CFR 430.2 as “a wall sleeve and a separate unencased combination of heating and cooling assemblies specified by the builder and intended for mounting through the wall. It includes a prime source of refrigeration, separable outdoor louvers, forced ventilation, and heating availability energy.”

EPCA defines a “heat pump” as a product, other than a packaged terminal heat pump,

which consists of one or more assemblies, powered by single phase electric current, rated below 65,000 Btu per hour, utilizing an indoor conditioning coil, compressor, and refrigerant-to-outdoor air heat exchanger to provide air heating, and may also provide air cooling, dehumidifying, humidifying circulating, and air cleaning. (42 U.S.C. 6291(24)) DOE has incorporated this definition into its regulations at 10 CFR 430.2. These products, also known as unitary air conditioners, do not include room air conditioners.

“Packaged terminal heat pump” is defined in 10 CFR 430.2 as “a packaged terminal air conditioner that utilizes reverse cycle refrigeration as its prime heat source and should have supplementary heating availability by builder's choice of energy.”

“Room air conditioner” is defined in 10 CFR 430.2 as “a consumer product, other than a `packaged terminal air conditioner,' which is powered by a single phase electric current which is an encased assembly designed as a unit for mounting in a window or through the wall for the purpose of providing delivery of conditioned air to an enclosed space. It includes a prime source of refrigeration and may include a means for ventilating and heating.”

In this DFR, DOE is amending energy conservation standards for the products covered by DOE's current standards for central air conditioners and heat pumps, specified at 10 CFR 430.32(c)(2), which DOE adopted in the June 2011 DFR.

These products consist of: (1) Split-system air conditioners; (2) split-system heat pumps; (3) single package air conditioners; and (4) single package heat pumps.

DOE's current standards for central air conditioners are expressed as the minimum seasonal energy efficiency ratio (SEER), the minimum heating seasonal performance factor (HSPF) for heat pumps, and the maximum off-mode power (P

W, OFF

). SEER is a seasonal efficiency metric that accounts for electricity consumption in active cooling and standby operating modes during the cooling season, while HSPF is a seasonal efficiency metric that accounts for active heating and standby operating modes for heat pumps during the heating season. For the Southwest region of the United States, (four states including Arizona, California, Nevada, and New Mexico) DOE's current standards also include additional requirements for energy efficiency ratio (EER) for both central air conditioners and heat pumps. 10 CFR 430.32(c).

2. Product Classes

When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used, by capacity, or by another performance-related feature that justifies a different standard. In making a determination whether a performance-related feature justifies a different standard, DOE must consider factors such as the utility to the consumer of the feature. (42 U.S.C. 6295(q)). DOE has divided residential central air conditioners and heat pumps into seven product classes:

These product classes were last examined by the June 2011 DFR. 76 FR 37408, 37446 (June 27, 2011), prior to this current round of rulemaking.

• Split-system air conditioners

• Split-system heat pumps

• Single-package air conditioners

• Single-package heat pumps

• Small-duct high-velocity systems

• Space-constrained air conditioners

• Space-constrained heat pumps

In the November 2014 RFI, DOE requested feedback on whether it should consider any changes the existing product classes for central air conditioners and heat pumps. 79 FR 65603, 65605 (Nov. 5, 2014). In response, AHRI and Southern Co. commented that they supported retaining the listed product classes used in the previous rulemaking (

i.e.,

the June 2011 Final Rule). (AHRI, No. 13 at p. 3; Southern Co., No. 11 at p. 2) NEEA and NPCC suggested that DOE consider the possibility of a separate product class for variable capacity systems, given their potential increased cost effectiveness relative to fixed capacity systems. (NEEA & NPCC, No. 19 at p. 3) Rheem recommended that a product class be added for combined appliances which contribute to heat recovery for water heating. (Rheem, No. 17 at p. 2).

For this rulemaking, DOE has retained the product classes associated with the 2011 DFR that were listed in the November 2014 RFI. In response to NEEA & NPCC, DOE sees no need for the suggested change because variable capacity products have no difficulty meeting the current standards—or the standards set in this notice. In response to Rheem's comment, DOE has not found evidence that the capability for heat recovery for water heating reduces a product's ability to meet a given efficiency level, and Rheem's comment did not indicate that this is the case, nor did it explain why such product might have a different efficiency level when tested according to the DOE test procedure for central air conditioners and heat pumps (which does not include transfer of heat to water). Hence, DOE believes that the threshold for setting separate product classes for these products under EPCA is not met. 42 U.S.C. 4295(q)(B)

3. Technology Options

As part of the market and technology assessment performed for the November 2014 RFI and for this DFR, DOE developed a comprehensive list of technologies to improve the energy efficiency of central air conditioners and heat pumps. Chapter 3 of the DFR TSD contains a detailed description of each technology that DOE identified.

DOE received comments on the technology options proposed in the November 2014 RFI. ACEEE requested that DOE consider the addition of multi-stage systems to the list of design options. (ACEEE, No. 21 at p.3) Southern Co. also commented that it supported design options associated with variable speed operation because of humidity control considerations. (Southern Co., No. 19 at p. 2) NEEA and NPCC, as well as PG&E, suggested that DOE add a design options for the reduction of off and standby-mode energy use and for control systems. (NEEA & NPCC, No. 19 at p. 10; PG&E, No. 15 at p. 2) Rheem proposed that DOE add combined appliance technology to the list of design options. (Rheem, No. 17 at p. 3) On the other hand, AHRI commented that DOE should consider only design options that DOE included for central air conditioners in the June 2011 DFR. (AHRI, No. 13 at p. 3). ACEEE also suggested that DOE conduct a systematic evaluation of the energy savings potential of products used in the Southeast and Southwest, particularly the benefits of enhanced latent heat work to condition the air. (ACEEE, No. 21 at p. 3)

In response to the comments made by ACEEE and Southern Co., DOE has included both two-stage and variable speed compressors as design options. Regarding the addition of design options for reducing off and standby-mode energy use, DOE conducted a market and technology assessment (as described in section IV.A.3) and has found that the design options used in the June 2011 DFR are the same ones that are viable today. Additionally, DOE refers to discussions during the CAC/HP CAC/HP Working Group Negotiations, in which no objections were raised by stakeholders to the proposed design option list. (ASRAC Public Meeting, No. 88 at p. 188) Further discussion regarding the viability of the technology options is provided in chapter 4 of the TSD. Regarding the NEEA and NPPC comment regarding controls, there are many ways that controls might be employed to improve rated efficiency, but NEEA and NPPC's comment does not specify, nor could DOE infer from the comment, what type of control design option should be considered. DOE notes that it considered a comprehensive scope of technologies in its market and tech assessment, and is confident that its engineering analysis accounts for these controls. In response to Rheem, EPCA defines “central air conditioner” as a product that is air-cooled. (42 U.S.C. 6291(21)(B)) In contrast, combination appliances reject heat to water. Hence, water-heating operation of such appliances is not covered by DOE's regulations for central air conditioners and heat pumps. In response to ACEEE's comment about creating a design option for higher or lower latent capacity, any differential benefit for systems designed for a different latent capacity or different return air humidity would also not be captured in DOE's current or amended test procedures, and hence was not considered as part of the analysis to establish amended efficiency levels. Finally, in response to all of the comments suggesting specific design options, DOE conducted an efficiency-level-based engineering analysis based on existing product designs. While DOE has assembled a specific list of design options that reflect known design differences among these existing products, there are other design differences that affect the rated efficiencies used in the analysis that

represent design options, the use of which is probable but not certain. Some of these would likely be classified as “controls” design options, which would address the NEEA & NPPC comment.

These comments, as well as others, were addressed during the CAC/HP Working Group Negotiations. Based on the RFI comments and the 2015-2016 CAC/HP Working Group discussions, DOE constructed a list of technology options for consideration in the analysis for this direct final rule. Table IV-1 compiles this list.

Table IV-1 Technology Options

Component

Technology

Compressor

Higher-EER compressor.

Two-stage compressor.

Variable speed compressor.

Heat exchanger

Larger heat exchanger.

Fan Motor

Constant torque permanent-magnet motor.

Constant air flow permanent-magnet motor.

Fan

Higher-efficiency fan blades, fan wheels, and fan configurations.

Expansion valve

Thermostatic expansion valve.

Electronic expansion valve.

Controls

Heat pump defrost controls.

DOE expanded the “higher efficiency compressor” technology option to indicate that, in addition to consideration of compressors with higher energy efficiency ratio (EER, the compressor capacity divided by its power input at the compressor rating condition expressed in Btu/h-W), manufacturers can also consider use of two-capacity or variable-speed compressors. DOE limited the specific technology options for heat exchangers to only larger-size heat exchangers because most heat exchanger technology (

e.g.

round-tube/flat fin, microchannel, etc.) can be used either in baseline or higher-efficiency products. The list includes the two general types of higher-efficiency fan motors used in products. For fans, the revised list more generally indicates that efficiency improvements can be associated with the fan blades of outdoor fans, the fan wheels of indoor fans, and the general fan configuration, including all details of design that affect efficiency (

e.g.

overall size, inlet and outlet flow transitions, clearance gaps between rotating and stationary components, etc.) The revised list includes two specific examples of higher-efficiency expansion valves. The list does not separately include inverter technology, which would be captured as part of the variable-speed compressor and/or the constant-air-flow permanent magnet motor technology options.

B. Screening Analysis

After identifying potential technology options for improving the efficiency of residential central air conditioners and heat pumps, DOE performed the screening analysis (see section IV.B of this direct final rule or chapter 4 of the DFR TSD) on these technologies to determine which could be considered further in the analysis and which should be eliminated. DOE uses the following four screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking:

Technological feasibility.

Technologies that are neither incorporated in commercial products nor in working prototypes will not be considered further.

Practicability to manufacture, install, and service.

If DOE determines that mass production, reliable installation, and servicing of a technology in commercial products could not be achieved on the scale necessary to serve the relevant market at the time of the compliance date of the standard, then that technology will not be considered further.

Impacts on product utility or product availability.

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

Adverse impacts on health or safety.

If DOE determines that a technology would have significant adverse impacts on health or safety, then that technology will not be considered further. (10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))

If DOE determines that a technology, or a combination of technologies, fails to meet one or more of the above four criteria, it will be excluded from further consideration in the engineering analysis. DOE found that all of the identified technologies listed in Table IV-1 met all four screening criteria and consequently, are suitable for further examination in DOE's analysis. For off-mode technologies, DOE determined that there is no commercial application for the hermetic crankcase heater and the integral compressor motor heater in central air conditioners and heat pumps. Therefore, DOE screened out these two technologies. For additional details, please see chapter 4 of the direct final rule TSD.

C. Engineering Analysis

The engineering analysis establishes a relationship between energy efficiency and manufacturing production cost (MPC) for units that will be impacted by amended energy conservation standards. This relationship serves as the basis of cost-benefit analyses for individual consumers, manufacturers, and the Nation.

DOE began the engineering analysis by identifying energy efficiency levels to analyze. The current energy conservation standard served as the baseline efficiency level from which DOE analyzed possible energy efficiency improvements. In addition to the baseline, DOE identified higher efficiency levels that correspond to higher-efficiency products available on the market, including the most efficient, or max-tech, products. Using a variety of data sources, DOE estimated market-weighted MPCs at the baseline efficiency level and the market-weighted incremental MPC increases required to achieve each higher efficiency level, for each product class. Following the quantification of MPCs, DOE estimated the additional costs to residential consumers from markups by the manufacturers, distributors, and contractors. This information was then used in the downstream analyses to examine the costs and benefits associated with increased equipment efficiency.

For the August 2015 NODA, DOE used a top-down analysis approach in which an exponential curve-fit was applied to a database of MPC vs. efficiency values to generate a cost-efficiency relationship for each representative capacity in each product class. 80 FR 52206 (Aug. 28, 2015). DOE did not receive comments on the NODA specifically regarding the NODA engineering analysis methodologies and results. During the CAC/HP Working Group meetings, however, DOE's engineering analysis was discussed in detail. ASRAC Working Group members expressed concern that the approach used in the August 2015 NODA did not reflect critical aspects of the relationship between MPC and efficiency. Ingersoll Rand and Southern Company requested to see efficiency levels differentiated by single speed and two-speed products. (ASRAC Public Meeting, No. 40 at p. 232, 248)

Manufacturers generally agreed that certain efficiency levels could only be achieved by switching from single speed to two-stage compressor designs, which represented a considerable increase in MPC. The manufacturers believed this design path would result in a step function in the cost-efficiency relationship from the perspective of a given manufacturer, which was not reflected in the relationships used by DOE in the August 2015 NODA. (ASRAC Public Meeting, No. 40 at p. 248) AHRI presented its own cost-efficiency data to illustrate this step function at the October 14th CAC/HP Working Group meeting. AHRI's cost-efficiency data showed a $280 increase in manufacturing costs at 16 SEER associated with switching from a single speed to two-speed design for a three-ton system. AHRI was unable to share specific details about its methodology or the components included in the $280 cost difference because of confidentiality concerns. (ASRAC Public Meeting, No. 89 at p. 210)

In response, DOE agrees that switching from a single speed to two-speed design could result in a considerable increase in manufacturer production cost. DOE also understands that not all manufacturers choose to make this switch at the same point in the efficiency range. For example, one manufacturer may be able to achieve 15 SEER with a single speed design and need to switch to a two-stage design to achieve above 15 SEER, while other manufacturers may only be able to achieve 14.5 SEER with a single speed design, which would require them to switch to a two-stage design. DOE's NODA cost-efficiency relationships reflect the industry and therefore, represent multiple manufacturers. Step functions in single manufacturer's cost-efficiency relationship occurring at different points in the range of efficiency resulted in the smoother, continuous industry cost-efficiency curves that DOE used in the NODA. For these reasons, DOE does not believe its NODA cost-efficiency relationships are inappropriate, but does recognize that they may not perfectly represent the increase in cost associated with switching from single speed to two-stage designs in the range of efficiency in which manufacturers are making these design changes. In response to the CAC/HP working group discussions, DOE revised its engineering analysis to better reflect the impacts on manufacturer production cost of switching from a single speed to a two-stage design, which is reflected in this direct final rule. DOE's revised direct final rule engineering analysis is described in more detail in the subsequent paragraphs of this section.

Today's direct final rule engineering analysis is different from the August 2015 NODA analysis in five main ways. First, DOE analyzed single speed and two-stage split systems separately (

i.e.,

DOE developed MPC values at each efficiency level analyzed for single speed and two-stage systems independently). Once combined, this approach resulted in single cost-efficiency relationships that reflected the MPC step associated with switching from a single speed to two-stage design. The second key difference was that DOE analyzed individual manufacturer cost-efficiency relationships independently, then used marketshare information to generate a single marketshare-weighted cost-efficiency relationship. This approach better represented the effect of these cost-efficiency relationships on the total market and better accounted for differences between manufacturers in the design paths they use to achieve higher efficiency.

Third, DOE based the manufacturer-specific cost-efficiency relationships used in this direct final rule analysis on the least-cost units offered at each efficiency level, as opposed to all units offered at each efficiency level. DOE believes this approach results in cost-efficiency relationships that better reflect the design decisions manufacturers will make in response to new standards. The fourth key difference was that DOE analyzed coil-only and blower-coil systems separately for this direct final rule. This approach is aligned with the certification requirements finalized in the June 2016 CAC TP final rule, which require compliance for all indoor/outdoor unit combinations and also require certification of at least one coil-only combination for all single speed and two-stage outdoor units. 81 FR 36992 (June 8, 2016).

The final critical difference was that this engineering analysis was conducted based on efficiencies as measured according to the test procedure in place at the time of the CAC/HP Working Group meetings, the October 2007 CAC TP final rule. 72 FR 59906 (Oct. 22, 2007). Following downstream analyses, DOE translated the chosen efficiency levels to minimum standards based on measurement according to the November 2016 test procedure final rule, which is summarized in section III.F. DOE notes that the August 2015 NODA

efficiency levels were presented in terms of efficiency per test procedure amendments being proposed at the time of the August 2015 NODA analysis

(i.e.

using the October 2011 test procedure SNOPR (see section III.F)). 76 FR 65616 (October 24, 2011).

More specifically, refer to Chapter 5 of the NODA Technical Support Document (copy and paste link into browser):

https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0029.

For a more detailed description of the methodology used to determine the efficiency levels and manufacturer production costs as well as the key similarities and differences from the August 2015 NODA, please refer to Chapter 5 of the DFR TSD.

1. Segmentation of Covered Products

For the purpose of the engineering analysis, DOE further divided product classes into many segments to capture important differences in the cost-efficiency relationships. As a primary example, DOE recognizes that the cost-efficiency relationship between central air conditioners and heat pumps varies by capacity. For this direct final rule analysis, DOE performed separate analyses for two-ton, three-ton and five-ton split system air conditioners and heat pumps in order to characterize the efficiency levels at different representative capacities. For single-package air conditioner and heat pump product classes, DOE developed a cost-efficiency relationship based on three-ton capacity units. For space-constrained and small-duct high-velocity (SDHV) air conditioners, DOE used systems in the two to two-and-a-half-ton capacity range.

As described in the introduction to this section, DOE further segmented each split-system air conditioner representative capacity into blower coil and coil-only systems. All split-system product classes were further divided into single speed and two-stage outdoor units.

Within each single-package representative capacity, DOE segmented products according to two heat exchanger types—all-aluminum with microchannel or tube-and-fin geometries or copper-tube aluminum fin heat exchangers. This followed the approach DOE had previously taken in the August 2015 NODA. 80 FR 52206. DOE has found that the reduced cost of aluminum per pound results in significantly different cost-efficiency relationships between products employing the two different heat exchanger types.

2. Determination of Efficiency Levels

This section describes the RFI comments received with regard to and the ultimate methodology adopted for

determining energy efficiency levels within each product class. The levels are tabulated along with the MPC results in section IV.C.4.

In response to the November 2014 RFI, ACEEE suggested that DOE consider technologically feasible and economically justifiable efficiency levels based on capacity. (ACEEE, No. 21 at p. 3) DOE has considered variation of efficiency level with capacity in its analysis for split systems, and has adopted some variation of standard levels with capacity, as recommended by the CAC/HP Working Group.

AHRI suggested DOE consider the impacts of the final rule for residential furnace fans on the baseline and max-tech levels for each product class. (AHRI, No. 13 at pp. 3-4) In response, DOE notes that it has developed default fan power levels for testing of coil-only systems, which reflect the improved efficiency of the furnaces likely to be used with the air conditioners considered in the analysis—the November 2016 test procedure final rule discusses this topic in greater detail. (November 2016 Test Procedure Final Rule, pp. 104, 105). These default fan power levels account for higher efficiency fan motors and increased external static pressure, and thus are higher than the previous default fan power used for testing of coil-only systems.

NEEA & NPCC agreed with the proposed baseline and max-tech levels. They did, however, urge DOE to consider “high-tech” design options for small duct high velocity (SDHV) systems. (NEEA & NPCC, No. 19 at p. 3) In response, DOE did evaluate “high-tech” design options for SDHV systems, but did not find increased efficiency levels for such systems to be cost-effective, based on review of efficiency levels attained by existing products.

Rheem commented that max-tech efficiency levels proposed for all product classes in the November 2014 RFI could not be economically justified within any climate zone in the US. Rheem also questioned the max-tech efficiency differential between split system CAC/HPs, SDHVs, and space constrained AC/HPs. (Rheem, No. 17 at p. 4) In response, DOE notes that its economic analysis is consistent with Rheem's assertion that max-tech efficiency levels are not economically justified, and has not set standard levels at max-tech efficiency. DOE notes that the max-tech efficiency differentials as reported in the RFI have been adjusted in this DFR analysis based on more a thorough review of available products.

PG&E recommended that DOE account for larger evaporator coil areas when evaluating max tech levels for small duct high velocity systems and space-constrained systems due to the special constraints and limited heat transfer associated with lower volumetric flow rates. (PG&E, No. 15 at p. 2). In response, DOE notes that its efficiency-level-based engineering analysis was based on existing product designs. DOE found that for the higher-efficiency products of these classes, evaporator coil areas were larger. However, as discussed, this analysis did not show that increasing the efficiency level of these products was cost-effective.

First, DOE characterized the baseline efficiency levels. Generally, the baseline unit in each product class: (1) Represents the basic characteristics of equipment in that class; (2) just meets the current Federal energy conservation standards, if any; and (3) provides basic consumer utility. For the covered product classes analyzed in this direct final rule, the baseline efficiency levels are represented by the standards that were set in the June 2011 Direct Final Rule and codified at 10 CFR 430.32(c). 76 FR 37408 (June 27, 2011). The baseline efficiency levels are reference points for each product class, against which changes in product cost and energy use resulting from potential amended energy conservation standards are compared.

Next, DOE established intermediate efficiency levels at 0.5 SEER increments increasing from each baseline efficiency level. DOE did not analyze intermediate efficiency levels for which there are few products available on the market. DOE also determined the maximum improvement in energy efficiency that is technologically feasible (max-tech) for central air conditioners and heat pumps, as required under 42 U.S.C. 6295(p)(1). DOE selected max-tech efficiency levels for most of the product classes equal to the highest efficiency levels reported in the AHRI Directory of Certified Product Performance. For space-constrained air conditioners, DOE selected the max-tech efficiency level based on the efficiency reported in product literature. The resulting efficiency levels for all product classes considered are tabulated with MPCs in section IV.C.4IV.C.4.

As discussed in section II.A, DOE also uses EER to characterize CAC/HP efficiency. During the CAC/HP Working Group meetings, some parties suggested dropping EER as a metric all together. These parties argued that the proposed SEER value would be high enough to ensure that the EER level would be at or above the current standard. They also stated that EER requirements are an additional burden and could discourage two-stage and variable speed product designs for which SEER and EER values have a higher divergence than single speed designs. Other parties were firm about keeping EER because it would mitigate peak load issues and improve the health of the utility grid. They added that EER can be a better descriptor than SEER for energy use in certain regions, such as the Southwest. (ASRAC Public Meeting, No. 81 at pp. 10-73; ASRAC Public Meeting, No. 82 at pp. 10-93; ASRAC Public Meeting, No. 83 at pp. 11, 22, 36, 39-42)

Eventually, the CAC/HP Working Group decided to retain the current minimum EER requirements for split-system air conditioners and single-package air conditioners in the Southwest region with a SEER less than 15.2 and a relaxed EER requirement for split-system air conditioners and single-package air conditioners in the Southwest region with a SEER greater than 15.2. (ASRAC Term Sheet, No. 76 at p. 4, Recommendation #8) The CAC/HP Working Group's decision was based on negotiation rather than any analysis to quantify the impacts of increasing EER along with SEER and/or HSPF or the lower EER level for systems with SEER of 16 or higher. Maintaining an EER requirement in the Southwest region aligns with the position of EER advocates, while not increasing the EER requirement and relaxing it for higher SEER products addresses the concerns of the parties that recommended eliminating the EER requirement. DOE did not explicitly analyze the impact of increasing EER on total installed cost, energy consumption, or life-cycle cost for this direct final rule. Consequently, DOE did not define EER-based efficiency levels.

To set the heating mode efficiency levels for residential heat pumps, DOE developed correlations for split-system and single-package heat pumps relating HSPF to SEER based on ratings in the AHRI Directory of Certified Product Performance. Using the correlations, DOE assigned an HSPF value to each SEER-based efficiency level. For split-system products, DOE based the correlations on pairings of outdoor units with indoor units designated in the AHRI Directory as the highest sales volume indoor units. DOE also conducted the split-system analysis for units with two-ton, three-ton and five-ton capacities. The analysis showed that the relationship between SEER and HSPF does not differ significantly across these capacities. Hence, DOE did not differentiate HSPF standards by capacity in this direct final rule. For single-package units, DOE used all the rated two-ton units to develop the

SEER-HSPF correlations. The development of these correlations is described in more detail in Chapter 5 of the TSD.

During the 2015 CAC/HP Negotiations, the CAC/HP Working Group recommended HSPF standards for both split-system and single package heat pumps—8.8 and 8.0 HSPF, respectively. (ASRAC Term Sheet, Docket No. EERE-2014-BT-STD-0048, No. 0076). For split-system heat pumps, the recommenda

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