Energy Conservation Program: Energy Conservation Standards for Commercial Water Heating Equipment

Federal RegisterOct 6, 2023

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DEPARTMENT OF ENERGY

10 CFR Part 431

[EERE-2021-BT-STD-0027]

RIN 1904-AD34

Energy Conservation Program: Energy Conservation Standards for Commercial Water Heating Equipment

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including Commercial Water Heating (“CWH”) equipment. EPCA also requires the U.S. Department of Energy (“DOE”) to periodically review standards. In this final rule, DOE is adopting amended energy conservation standards for CWH equipment.

DATES:

The effective date of this rule is December 5, 2023. Compliance with the amended standards established for CWH equipment in this final rule is required on and after October 6, 2026.

ADDRESSES:

The docket for this rulemaking, 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, not all documents listed in the index may be publicly available, such as information that is exempt from public disclosure.

The docket web page can be found at

www.regulations.gov/docket/EERE-2021-BT-STD-0027.

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

For further information on how to review the docket, contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:

ApplianceStandardsQuestions@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT:

Ms. Julia Hegarty, 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: (240) 597-6737. Email:

ApplianceStandardsQuestions@ee.doe.gov.

Mr. Matthew Ring, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-2555. Email:

Matthew.Ring@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the 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 Standards Rulemaking for CWH Equipment

C. Deviation From Appendix A

III. General Discussion

A. General Comments

1. Clear and Convincing Threshold

2. Analytical Structure and Inputs

3. Final Selection of Standards Levels

B. Scope of Coverage

1. Oil-Fired Commercial Water Heating Equipment

2. Unfired Hot Water Storage Tanks

3. Electric Instantaneous Water Heaters

4. Commercial Heat Pump Water Heaters

5. Electric Storage Water Heaters

6. Instantaneous Water Heaters and Hot Water Supply Boilers

C. Test Procedure

D. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

E. Energy Savings

1. Determination of Savings

2. Significance of Savings

F. 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

G. Revisions to Notes in Regulatory Text

H. Certification, Compliance, and Enforcement Issues

IV. Methodology and Discussion of Related Comments

A. Market and Technology Assessment

1. Definitions

2. Equipment Classes

a. Storage-Type Instantaneous Water Heaters

b. Venting for Gas-Fired Water Heating Equipment

c. Tankless Water Heaters and Hot Water Supply Boilers

d. Gas-Fired and Oil-Fired Storage Water Heaters

e. Grid-Enabled Water Heaters

3. Review of the Current Market for CWH Equipment

4. Technology Options

B. Screening Analysis

1. Screened-Out Technologies

2. Remaining Technologies

C. Engineering Analysis

1. Efficiency Analysis

2. Cost Analysis

3. Representative Equipment for Analysis

4. Efficiency Levels for Analysis

a. Thermal Efficiency Levels

b. Standby Loss Levels

c. Uniform Energy Efficiency Levels

5. Standby Loss Reduction Factors

6. Teardown Analysis

7. Manufacturing Production Costs

8. Manufacturing Markups and Manufacturer Selling Price

9. Shipping Costs

D. Markups Analysis

1. Distribution Channels

2. Comments on the May 2022 CWH ECS NOPR

3. Markups Used in This Final Rule

E. Energy Use Analysis

F. Life-Cycle Cost and Payback Period Analysis

1. Equipment Cost

2. Installation Cost

a. Data Sources

b. Condensate Removal and Disposal

c. Vent Replacement

d. Extraordinary Venting Cost Adder

e. Common Venting

f. Vent Sizing/Material Cost

g. Masonry Chimney/Chimney Relining

h. Downtime During Replacement

3. Annual Energy Consumption

4. Energy Prices

5. Maintenance and Repair Costs

a. Maintenance Costs

b. Repair Costs

6. Product Lifetime

7. Discount Rates

8. Energy Efficiency Distribution in the No-New-Standards Case

9. Payback Period Analysis

10. Embodied Emissions and Recycling Costs

11. LCC Model Error Messages and Other

G. Shipments Analysis

1. Commercial Gas Fired and Electric Storage Water Heaters

2. Residential-Duty-Gas-Fired Storage and Instantaneous Water Heaters

3. Available Products Database and Equipment Efficiency Trends

4. Electrification Trends

5. Shipments to Residential Consumers

6. Final Rule Shipment Model

H. National Impact Analysis

1. Product Efficiency Trends

2. Fuel and Technology Switching

3. National Energy Savings

4. Net Present Value Analysis

I. Consumer Subgroup Analysis

1. Residential Sector Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model and Key Inputs

a. Manufacturer Production Costs

b. Shipments Projections

c. Conversion Costs and Stranded Assets

d. Manufacturer Markup Scenarios

K. Emissions Analysis

1. Air Quality Regulations Incorporated in DOE's Analysis

L. Monetizing Emissions Impacts

1. Monetization of Greenhouse Gas Emissions

a. Social Cost of Carbon

b. Social Cost of Methane and Nitrous Oxide

2. Monetization of Other Emissions Impacts

M. Utility Impact Analysis

N. Employment Impact Analysis

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period

b. Consumer Subgroup Analysis

c. Rebuttable Presumption Payback

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results

b. 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 Utility or Performance of Products

5. Impact of Any Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors

8. Summary of Economic Impacts

C. Conclusion

1. Benefits and Burdens of TSLs Considered for CWH Equipment Standards

2. Annualized Benefits and Costs of the Adopted Standards

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

B. Review Under the Regulatory Flexibility Act

1. Need For, and Objectives of, the Rule

2. Significant Issues Raised in Response to the IRFA

3. Description and Estimate of the Number of Small Entities Affected

4. Description and Estimate of Compliance Requirements

5. Significant Alternatives to the Rule

C. Review Under the Paperwork Reduction Act

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Information Quality

M. Congressional Notification

VII. Approval of the Office of the Secretary

I. Synopsis of the Final Rule

The Energy Policy and Conservation Act, Public Law 94-163, as amended (“EPCA”),

authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part C of EPCA,

established the Energy Conservation Program for Certain Industrial Equipment. (42 U.S.C. 6311-6317) Such equipment includes CWH equipment, the subject of this rulemaking.

All references to EPCA in this document refer to the statute as amended through the Energy Act of 2020, Public Law 116-260 (Dec. 27, 2020), which reflect the last statutory amendments that impact Parts A and A-1 of EPCA.

For editorial reasons, upon codification in the U.S. Code, Part C was re-designated Part A-1.

Pursuant to EPCA, DOE is to consider amending the energy efficiency standards for certain types of commercial and industrial equipment, including the equipment at issue in this document, whenever the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (“ASHRAE”) amends the standard levels or design requirements prescribed in ASHRAE Standard 90.1, “Energy Standard for Buildings Except Low-Rise Residential Buildings,” (“ASHRAE Standard 90.1”), and at a minimum, every 6 years. (42 U.S.C. 6313(a)(6)(A)-(C))

In accordance with these and other statutory provisions discussed in this document, DOE analyzed the benefits and burdens of trial standard levels (TSLs) for CWH equipment. The TSLs and their associated benefits and burdens are discussed in detail in sections V.A-C of this section. As discussed in section V.C of this section, DOE has determined that TSL 3 represents the maximum improvement in energy efficiency that is technologically feasible and economically justified. DOE is adopting amended energy conservation standards for certain classes of CWH equipment. The adopted standards, which are expressed in terms of thermal efficiency, standby loss, and uniform energy factor (“UEF”), are shown in Table I.1 and Table I.2. These adopted standards apply to all CWH equipment listed in Table I.1 and Table I.2, manufactured in, or imported into the United States starting on the date 3 years after the publication of the final rule for this rulemaking. DOE is also codifying standards for electric instantaneous CWH equipment from EPCA into the Code of Federal Regulations (“CFR”). Finally, DOE is amending the footnotes to tables of energy conservation standards at 10 CFR 431.110 to clarify existing regulations for CWH equipment. The adopted standards for electric instantaneous CWH equipment and changes to the footnotes are also shown in Table I.1.

Table I.1—Adopted Energy Conservation Standards for Commercial Water Heating Equipment Except for Residential-Duty Commercial Water Heaters

Equipment

Size

Energy conservation standards (%)

Minimum

thermal

efficiency

(%)

Maximum

standby loss **

Gas-fired storage water heaters and storage-type instantaneous water heaters

All

0.86 × [Q/800 + 110(V

)

1/2

] (Btu/h).

Electric instantaneous water heaters

<10 gal

N/A.

≥10 gal

2.30 + 67/V

(%/h).

Gas-fired instantaneous water heaters and hot water supply boilers except storage-type instantaneous water heaters

<10 gal

≥10 gal

N/A.

Q/800 + 110(V

)

1/2

(Btu/h).

is the measured storage volume, and V

is the rated volume, both in gallons. Q is the rated input in Btu/h, as determined pursuant to 10 CFR 429.44.

Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not meet the standby loss requirement if: (1) the tank surface area is thermally insulated to R-12.5 or more, (2) a standing pilot light is not used, and (3) for gas or oil-fired storage water heaters, they have a flue damper or fan-assisted combustion.

The compliance date for these energy conservation standards is January 1, 1994.

Table I.2—Adopted Energy Conservation Standards for Gas-Fired Residential-Duty Commercial Water Heaters

Equipment

Specification *

Draw

pattern **

Uniform energy factor †

Gas-fired Residential-Duty Storage

>75 kBtu/h and ≤105 kBtu/h and ≤120 gal and ≤180 °F

Very Small

Low

Medium

High

0.5374 − (0.0009 × V

0.8062 − (0.0012 × V

0.8702 − (0.0011 × V

0.9297 − (0.0009 × V

* Additionally, to be classified as a residential-duty water heater, a commercial water heater must meet the following conditions: (1) if requiring electricity, use single-phase external power supply; and (2) the water heater must not be designed to heat water at temperatures greater than 180 °F.

** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial water heater, based upon the first-hour rating. The draw pattern is determined using the

Uniform Test Method for Measuring the Energy Consumption of Water Heaters

in appendix E to subpart B of 10 CFR part 430.

† V

is the rated storage volume (in gallons), as determined pursuant to 10 CFR 429.44.

A. Benefits and Costs to Consumers

Table I.3 summarizes DOE's evaluation of the economic impacts of the adopted standards on consumers of CWH equipment, as measured by the average life-cycle cost (“LCC”) savings and the simple payback period (“PBP”).

The analysis inputs are described in section IV of this document. The average LCC savings are positive for all equipment classes, and the PBP is less than the average lifetime of CWH equipment, which is estimated to range from 10 years for commercial gas-fired storage water heaters to 25 years for instantaneous water heaters and hot water supply boilers (see section IV.F.6 of this document).

The average LCC savings refer to consumers that are affected by a standard and are measured relative to the efficiency distribution in the no-new-standards case, which depicts the market in the compliance year in the absence of new or amended standards (see section IV.F.8 of this document). The simple PBP, which is designed to compare specific efficiency levels, is measured relative to the baseline product (see section IV.F.9 of this document).

Table I.3—Impacts of Adopted Energy Conservation Standards on Consumers of CWH Equipment

Equipment

Average LCC

savings

(2022$)

Simple

payback

period

(years)

Commercial Gas-Fired Storage and Storage-Type Instantaneous

367

5.8

Residential-Duty Gas-Fired Storage

119

7.2

Gas-Fired Instantaneous Water Heaters and Hot Water Supply Boilers

898

9.3

—Instantaneous, Gas-Fired Tankless

120

8.9

—Instantaneous Water Heaters and Hot Water Supply Boilers

1,570

9.4

DOE's analysis of the impacts of the adopted standards on consumers is described 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 analysis period (2023-2055). Using a real discount rate of 9.1 percent, DOE estimates that the INPV for manufacturers of CWH equipment in the case without amended standards is $212.8 million in 2022$. Under the adopted standards, the change in INPV is estimated to range from −17.7 percent to −8.3 percent, which is approximately equivalent to a decrease of $37.6 million to a decrease of $17.7 million, respectively. In order to bring products into compliance with amended standards, it is estimated that the industry would incur total conversion costs of $42.7 million.

DOE's analysis of the impacts of the adopted standards on manufacturers is described in section IV.J of this document. The analytic results of the manufacturer impact analysis (“MIA”) are presented in section V.B.2 of this document.

C. National Benefits and Costs

All monetary values in this document are expressed in 2022 dollars, and, where appropriate, are discounted to 2023 unless explicitly stated otherwise.

DOE's analyses indicate that the adopted energy conservation standards for CWH equipment would save a significant amount of energy. Relative to the case without amended standards, the lifetime energy savings for CWH equipment purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2026-2055) amount to 0.70 quadrillion British thermal units (“Btu”), or quads.

This represents a savings of 5.6 percent relative to the energy use of these products in the case without amended standards (referred to as the “no-new-standards case”).

The quantity refers to full-fuel-cycle (“FFC”) energy savings. FFC energy savings include 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.2 of this document.

The cumulative net present value (“NPV”) of total consumer benefits of the standards for CWH equipment ranges from $0.43 billion (at a 7-percent discount rate) to $1.43 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 CWH equipment purchased in 2026-2055.

In addition, the adopted standards for CWH equipment are projected to yield significant environmental benefits. DOE estimates that the standards would result in cumulative emission reductions (over the same period as for energy savings) of 38 million metric

tons (“Mt”)

of carbon dioxide (“CO

”), 0.10 thousand tons of sulfur dioxide (“SO

”), 103 thousand tons of nitrogen oxides (“NO

”), 479 thousand tons of methane (“CH

”), 0.08 thousand tons of nitrous oxide (“N

O”), and −0.001 tons of mercury (“Hg”).

The estimated cumulative reduction in CO

emissions through 2030 amounts to 1.5 million metric tons, which is equivalent to the emissions resulting from the annual electricity use of more than 295,000 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 2023

(“

AEO2023”

AEO2023

represents current Federal and State legislation and final implementation of regulations as of the time of its preparation. See section IV.K for further discussion of

AEO2023

assumptions that effect air pollutant emissions.

DOE estimates the value of climate benefits from a reduction in greenhouse gases using four different estimates of the “social cost of carbon” (“SC-CO

”), the social cost of methane (“SC-CH

”), and the social cost of nitrous oxide (“SC-N

O”). Together these represent the social cost of greenhouse gases (“SC-GHG”).

DOE used interim SC-GHG values developed by an Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”).

The derivation of these values is discussed in section IV.L.1 of this document. For presentational purposes, the climate benefits associated with the average SC-GHG at a 3-percent discount rate over the 30-year analysis period is $2.30 billion. DOE does not have a single central SC-GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using all four SC-GHG estimates.

To monetize the benefits of reducing GHG emissions this analysis uses the interim estimates presented in the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the Interagency Working Group on the Social Cost of Greenhouse Gases (IWG).

See Interagency Working Group on Social Cost of Greenhouse Gases, Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide. Interim Estimates Under Executive Order 13990, Washington, DC February 2021.

www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf?

DOE estimated the monetary health benefits from SO

and NO

emissions reduction, using benefit per ton estimates from EPA's Benefits Mapping and Analysis Program, as discussed in section IV.L of this document.

DOE estimates the present value of the health benefits would be $1.36 billion using a 7-percent discount rate, and $3.29 billion using a 3-percent discount. DOE is currently only monetizing health benefits from changes in fine particulate matter (“PM

2.5

”) and (for NO

) ozone precursors, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM

2.5

emissions.

Estimating the Benefit per Ton of Reducing PM

2.5

Precursors from 21 Sectors.

www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors.

Table I.4 summarizes the monetized benefits and costs expected to result from the standards for CWH equipment. There are other important unquantified effects, including certain unquantified climate benefits, unquantified public health benefits from the reduction of toxic air pollutants and other emissions, unquantified energy security benefits, and distributional effects, among others. In the table, total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. DOE does not have a single central SC-GHG point estimate and it emphasizes the importance and value of considering the benefits calculated using all four SC-GHG estimates. The estimated total net benefits using each of the four SC-GHG estimates are presented in section V.B.6 of this document.

Table I.4—Present Value of Monetized Benefits and Costs of Adopted Energy Conservation Standards for CWH Equipment

[TSL 3]

Benefits

Billion 2022$

3% Discount rate

Consumer Operating Cost Savings

2.76

Climate Benefits *

2.30

Health Benefits **

3.29

Total Monetized Benefits †

8.35

Consumer Incremental Product Costs ‡

1.33

Net Monetized Benefits

7.02

Change in Producer Cashflow (INPV ‡‡)

(0.04)-(0.02)

7% Discount rate

Consumer Operating Cost Savings

1.28

Climate Benefits * (3% discount rate)

2.30

Health Benefits **

1.36

Total Monetized Benefits †

4.94

Consumer Incremental Product Costs ‡

0.85

Net Monetized Benefits

4.09

Change in Producer Cashflow (INPV ‡‡)

(0.04)-(0.02)

Note:

This table presents the present value of costs and benefits associated with commercial water heaters shipped in 2026-2055. These results include benefits (including climate and health benefits) to consumers which accrue after 2055 from the products shipped in 2026-2055. Numbers may not add due to rounding.

* Climate benefits are calculated using four different estimates of the SC-CO

, SC-CH

, and SC-N

O (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate) (see section IV.L of this final rule). Together these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated with the average SC-GHG at a 3 percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the

Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990

published in February 2021 by the IWG.

** Health benefits are calculated using benefit-per-ton values for NO

and SO

DOE is currently only monetizing PM

2.5

and (for NO

) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM

2.5

emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details.

† Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-percent discount rate.

‡ Costs include incremental equipment costs as well as installation costs.

‡‡ Operating Cost Savings are calculated based on the life cycle costs analysis and national impact analysis as discussed in detail below. See sections IV.F and IV.H of this document. DOE's NIA includes all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the manufacturer to manufacture the equipment and ending with the increase in price experienced by the consumer. DOE also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the detailed MIA, DOE models manufacturers' pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule's expected impact on the INPV. The change in INPV is the present value of all changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. Change in INPV is calculated using the industry weighted average cost of capital value of 9.1% that is estimated in the manufacturer impact analysis (see chapter 12 of the final rule TSD for a complete description of the industry weighted average cost of capital). For commercial water heaters, those values are −$38 million and −$18 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this document. DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the Preservation of Operating Profit Markup scenario, where DOE assumed manufacturers would not be able to increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes the range of estimated INPV in the above table, drawing on the MIA explained further in section IV.J, of this document to provide additional context for assessing the estimated impacts of this rule to society, including potential changes in production and consumption, which is consistent with OMB's Circular A-4 and E.O. 12866. If DOE were to include the INPV into the net benefit calculation for this final rule, the net benefits would range from $6.98 billion to $7.0 billion at 3-percent discount rate and would range from $4.05 billion to $4.07 billion at 7-percent discount rate. Parentheses ( ) indicate negative values.

The benefits and costs of the adopted standards can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are (1) the reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the monetized value of the benefits of GHG, NO

, and SO

emission reductions, all annualized.

To convert the time-series of costs and benefits into annualized values, DOE calculated a present value in 2023, 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.,

2030), and then discounted the present value from each year to 2023. 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.3. 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 and are measured for the lifetime of CWH equipment shipped in 2026-2055. The climate benefits associated with reduced GHG emissions achieved as a result of the adopted standards are also calculated based on the lifetime of CWH equipment shipped in 2026-2055. Total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. Estimates of SC-GHG values are presented for all four discount rates in section V.B.6. DOE considered any lessening of competition that would be likely to result from new or amended standards. As discussed in section III.F.1.e of this document, EPCA directs the Attorney General of the United States (“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 in writing 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. To assist the Attorney General in making this determination, DOE provided the Department of Justice (“DOJ”) with copies of the proposed rule and the TSD for review. In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for CWH equipment are unlikely to have a significant adverse impact on competition. DOE is publishing the Attorney General's assessment at the end of this final rule.

Table I.5 presents the total estimated monetized benefits and costs associated with the adopted standard, expressed in terms of annualized values.

Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced SO

and NO

emissions, and the 3-percent discount rate case for climate benefits from reduced GHG emissions, the estimated monetized cost of the standards adopted in this rule is $78 million per year in increased equipment costs, while the estimated annual benefits are $118 million in reduced equipment operating costs, $125 million in monetized climate benefits, and $125 million in monetized health benefits. In this case, the net monetized benefit would amount to $289 million per year.

Using a 3-percent discount rate for all benefits and costs, the estimated monetized cost of the standards is $72 million per year in increased equipment costs, while the estimated annual monetized benefits are $149 million in reduced operating costs, $125 million in monetized climate benefits, and $178 million in monetized air pollutant health benefits. In this case, the net benefit would amount to $380 million per year.

Table I.5—Annualized Monetized Benefits and Costs of Adopted Energy Conservation Standards for CWH Equipment

[TSL 3]

Category

Million 2022$/year

Primary

estimate

Low-net-

benefits

estimate

High-net-

benefits

estimate

3% Discount rate

Consumer Operating Cost Savings

149

144

154

Climate Benefits *

125

124

128

Health Benefits **

178

177

197

Total Monetized Benefits †

452

445

479

Consumer Incremental Product Costs ‡

Net Monetized Benefits

380

373

405

Change in Producer Cashflow (INPV ‡‡)

(4)-(2)

7% Discount rate

Consumer Operating Cost Savings

118

115

122

Climate Benefits * (3% discount rate)

125

124

128

Health Benefits **

125

124.4

138.1

Total Monetized Benefits †

368

364

388

Consumer Incremental Product Costs ‡

78.2

80.0

Net Monetized Benefits

289

285

308

Change in Producer Cashflow (INPV ‡‡)

(4)-(2)

Note:

This table presents the annualized costs and benefits associated with CWH equipment shipped in 2026-2055. These results include benefits to consumers which accrue after 2055 from the products purchased in 2026-2055. The primary, low net benefits, and high net benefits estimates utilize projections of energy prices from the

AEO2023

Reference case, low economic growth case, and high economic growth case, respectively. Note that the benefits and costs may not sum to the net benefits due to rounding.

* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this final rule). For presentational purposes of this table, the climate benefits associated with the average SC-GHG at a 3 percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the

Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990

published in February 2021 by the IWG.

** Health benefits are calculated using benefit-per-ton values for NO

and SO

DOE is currently only monetizing PM

2.5

and (for NO

) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM

2.5

emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details.

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-percent discount rate.

‡ Costs include incremental equipment costs as well as installation costs.

‡‡ Operating Cost Savings are calculated based on the life cycle costs analysis and national impact analysis as discussed in detail below. See sections IV.F and IV.H of this document. DOE's NIA includes all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the manufacturer to manufacture the equipment and ending with the increase in price experienced by the consumer. DOE also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the detailed MIA, DOE models manufacturers' pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule's expected impact on the INPV. The change in INPV is the present value of all changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized change in INPV is calculated using the industry weighted average cost of capital value of 9.1% that is estimated in the manufacturer impact analysis (see chapter 12 of the final rule TSD for a complete description of the industry weighted average cost of capital). For commercial water heaters, those values are −$4 million and −$2 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this document. DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the Preservation of Operating Profit Markup scenario, where DOE assumed manufacturers would not be able to increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes the range of estimated annualized change in INPV in the above table, drawing on the MIA explained further in Section IV.J, to provide additional context for assessing the estimated impacts of this rule to society, including potential changes in production and consumption, which is consistent with OMB's Circular A-4 and E.O. 12866. If DOE were to include the INPV into the annualized net benefit calculation for this final rule, the annualized net benefits would range from $376 million to $378 million at 3-percent discount rate and would range from $285 million to $287 million at 7-percent discount rate. Parentheses ( ) indicate negative values.

DOE's analysis of the national impacts of the adopted standards is described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

DOE concludes, based on clear and convincing evidence as presented in the following sections, that the standards adopted in this final rule are technologically feasible and economically justified, and would result in significant additional conservation of energy. Specifically, with regards to technological feasibility, CWH equipment achieving the adopted standard levels are already commercially available for all equipment classes covered by this final rule. As for economic justification, DOE's analysis shows that the benefits of the proposed standard exceed, to a great extent, the burdens of the adopted standards. Using a 7-percent discount rate for consumer benefits and costs and NO

and SO

reduction benefits, and a 3-percent discount rate case for GHG social costs, the estimated monetized cost of the proposed standards for CWH equipment is $78 million per year in increased equipment costs, while the estimated annual monetized benefits are $118 million in reduced equipment operating costs, $125 million in monetized climate benefits from GHG reductions, and $125 million in monetized air pollutant health benefits. In this case, the net monetized benefit would amount to $289 million per year.

The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.

For example, some

covered products and equipment have most of their energy consumption occur during periods of peak energy demand. The impacts of these products on the energy infrastructure can be more pronounced than products with relatively constant demand. Accordingly, DOE evaluates the significance of energy savings on a case-by-case basis. As previously mentioned, the standards are projected to result in estimated full-fuel cycle (“FFC”) national energy savings of 0.70 quad for equipment purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2026-2055), the equivalent of the electricity use of approximately 28 million homes in 1 year. In addition, they are projected to reduce CO

emissions by 38 Mt. Based on these findings, DOE has determined the energy savings from the standard levels adopted in this final rule are “significant” within the meaning of 42 U.S.C. 6313(a)(6)(A)(ii)(II). A more detailed discussion of the basis for these conclusions is contained in the remainder of this document and the accompanying TSD.

Procedures, Interpretations, and Policies for Consideration in New or Revised Energy

Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment, 86 FR 70892, 70901 (Dec. 13, 2021).

II. Introduction

The following section briefly discusses the statutory authority underlying this final rule, as well as some of the relevant historical background related to the establishment of standards for CWH equipment. CWH equipment includes storage water heaters, instantaneous water heaters, and unfired hot water storage tanks. Such equipment (besides unfired hot water storage tanks, which only store hot water) may use gas, oil, or electricity to heat potable water. CWH equipment generally have higher input ratings than residential water heaters and are used in a wide variety of applications (including restaurants, hotels, multi-family housing, schools, convention centers, etc.). Some CWH equipment (in particular, residential-duty CWH) may also be used in certain residential applications.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and industrial equipment. Title III, Part C of EPCA, added by Public Law 95-619, Title IV, section 441(a) (42 U.S.C. 6311-6317, as codified), established the Energy Conservation Program for Certain Industrial Equipment, which sets forth a variety of provisions designed to improve energy efficiency. This equipment includes the classes of CWH equipment that are the subject of this final rule. (42 U.S.C. 6311(1)(K)) EPCA prescribed energy conservation standards for CWH equipment. (42 U.S.C. 6313(a)(5)) Pursuant to EPCA, DOE is to consider amending the energy efficiency standards for certain types of commercial and industrial equipment, including CWH equipment, whenever ASHRAE amends the standard levels or design requirements prescribed in ASHRAE/IES Standard 90.1, and at a minimum, every 6 years. (42 U.S.C. 6313(a)(6)(A)-(C))

The energy conservation program under EPCA consists essentially of four parts: (1) testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 6315), and the authority to require information and reports from manufacturers (42 U.S.C. 6316).

Federal energy efficiency requirements for covered equipment established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6316(a) and (b); 42 U.S.C. 6297) 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 EPCA. (

See

42 U.S.C. 6316(b)(2)(D))

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 covered equipment. Manufacturers of covered equipment must use the Federal test procedures as the basis for (1) certifying to DOE that their equipment complies with the applicable energy conservation standards adopted pursuant to EPCA (42 U.S.C. 6316(b); 42 U.S.C. 6296), and (2) making representations about the efficiency of that equipment (42 U.S.C. 6314(d)). Similarly, DOE uses these test procedures to determine whether the equipment complies with relevant standards promulgated under EPCA. The DOE test procedures for CWH equipment appear at part 431, subpart G.

ASHRAE Standard 90.1 sets industry energy efficiency levels for small, large, and very large commercial package air-conditioning and heating equipment, packaged terminal air conditioners, packaged terminal heat pumps, warm air furnaces, packaged boilers, storage water heaters, instantaneous water heaters, and unfired hot water storage tanks (collectively “ASHRAE equipment”). For each type of listed equipment, EPCA directs that if ASHRAE amends Standard 90.1, DOE must adopt amended standards at the new ASHRAE efficiency level, unless DOE determines, supported by clear and convincing evidence,

that adoption of a more stringent level would produce significant additional conservation of energy and would be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) Under EPCA, DOE must also review energy efficiency standards for CWH equipment every 6 years and either: (1) issue a notice of determination that the standards do not need to be amended as adoption of a more stringent level is not supported by clear and convincing evidence; or (2) issue a notice of proposed rulemaking including new proposed standards based on certain criteria and procedures in subparagraph (B) of 42 U.S.C. 6313(a)(6).

(42 U.S.C. 6313(a)(6)(C))

The clear and convincing threshold is a heightened standard, and would only be met where the Secretary has an abiding conviction, based on available facts, data, and DOE's own analyses, that it is highly probable an amended standard would result in a significant additional amount of energy savings, and is technologically feasible and economically justified.

American Public Gas Association

U.S. Dep't of Energy,

22 F.4th 1018, 1025 (D.C. Cir. January 18, 2022) (citing

Colorado

New Mexico,

467 U.S. 310, 316, 104 S. Ct. 2433, 81 L. Ed. 2d 247 (1984)).

In relevant part, subparagraph (B) specifies that: (1) in making a determination of economic justification, DOE must consider, to the maximum extent practicable, the benefits and burdens of an amended standard based on the seven criteria described in EPCA; (2) DOE may not prescribe any standard that increases the energy use or decreases the energy efficiency of a covered product; and (3) DOE may not prescribe any standard that interested persons have established by a preponderance of evidence is likely to result in the unavailability in the United States of any product type (or class) of 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. 6313(a)(6)(B)(ii)-(iii))

In deciding whether a more-stringent standard is economically justified, under either the provisions of 42 U.S.C. 6313(a)(6)(A) or 42 U.S.C. 6313(a)(6)(C), DOE must determine whether the benefits of the standard exceed its burdens. DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors:

(1) The economic impact of the standard on manufacturers and consumers of 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 equipment that are likely to result from the standard;

(3) The total projected amount of energy savings likely to result directly from the standard;

(4) Any lessening of the utility or the performance of the covered product 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 conservation; and

(7) Other factors the Secretary of Energy considers relevant.

(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))

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 the standard will be less than three times the value of the energy (and, as applicable, water) savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) However, while this rebuttable presumption analysis applies to most commercial and industrial equipment (42 U.S.C. 6316(a)), it is not a required analysis for ASHRAE equipment (42 U.S.C. 6316(b)(1)). Nonetheless, DOE included the analysis of rebuttable presumption in its economic analysis and presents the results in section V.B.1.c of this document.

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. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of 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. 6313(a)(6)(B)(iii)(II)(aa))

B. Background

1. Current Standards

The current standards for all CWH equipment classes are set forth in DOE's regulations at 10 CFR 431.110, except for electric instantaneous water heaters that are not residential duty, which are included in EPCA (the history of the standards for electric instantaneous water heaters is discussed in section III.B.3 of this document). (42 U.S.C. 6313(a)(5)(D)-(E)) Table II.1 shows the current standards for all CWH equipment classes, except residential-duty commercial water heaters, which are shown in Table II.2 of this document.

Table II.1—Current Federal Energy Conservation Standards for CWH Equipment Except for Residential-Duty Commercial Water Heaters

Product

Size

Energy conservation standards *

Minimum thermal

efficiency

(equipment

manufactured on

and after

October 9,

2015) ** ***

(%)

Maximum standby loss

(equipment manufactured

on and after October 29,

2003) ** †

Electric storage water heaters

All

N/A

0.30 + 27/V

(%/h).

Gas-fired storage water heaters

≤155,000 Btu/h

>155,000 Btu/h

Q/800 + 110(V

)

1/2

(Btu/h).

Q/800 + 110(V

)

1/2

(Btu/h).

Oil-fired storage water heaters

≤155,000 Btu/h

>155,000 Btu/h

*** 80

Q/800 + 110(V

)

1/2

(Btu/h).

Q/800 + 110(V

)

1/2

(Btu/h).

Electric instantaneous water heaters ‡

<10 gal

≥10 gal

N/A.

2.30 + 67/V

(%/h).

Gas-fired instantaneous water heaters and hot water supply boilers

<10 gal

≥10 gal

N/A.

Q/800 + 110(V

)

1/2

(Btu/h).

Oil-fired instantaneous water heater and hot water supply boilers

<10 gal

≥10 gal

N/A.

Q/800 + 110(V

)

1/2

(Btu/h).

Minimum thermal insulation

Unfired hot water storage tank

All

R-12.5

* V

is the measured storage volume, and V

is the rated volume, both in gallons. Q is the nameplate input rate in Btu/h.

** For hot water supply boilers with a capacity of less than 10 gallons: (1) the standards are mandatory for products manufactured on and after October 21, 2005 and (2) products manufactured prior to that date, and on or after October 23, 2003, must meet either the standards listed in this table or the applicable standards in subpart E of this part for a “commercial packaged boiler.”

*** For oil-fired storage water heaters: (1) the standards are mandatory for equipment manufactured on and after October 9, 2015 and (2) equipment manufactured prior to that date must meet a minimum thermal efficiency level of 78 percent.

† Water heaters and hot water supply boilers having more than 140 gallons of storage capacity need not meet the standby loss requirement if: (1) the tank surface area is thermally insulated to R-12.5 or more, (2) a standing pilot light is not used, and (3) for gas or oil-fired storage water heaters, they have a fire damper or fan-assisted combustion.

‡ Energy conservation standards for electric instantaneous water heaters are included in EPCA. (42 U.S.C. 6313(a)(5)(D)-(E)) The compliance date for these energy conservation standards is January 1, 1994. In this final rule, DOE codifies these standards for electric instantaneous water heaters in its regulations at 10 CFR 431.110. Further discussion of standards for electric instantaneous water heaters is included in section III.B.3 of this final rule.

Table II.2—Current Energy Conservation Standards for Residential-Duty Commercial Water Heaters

Equipment

Specification *

Draw

pattern **

Uniform energy factor

Compliance date

Gas-fired storage

>75 kBtu/h and ≤105 kBtu/h and ≤120 gal

Very Small

Low

Medium

High

0.2674 − (0.0009 × V

)

0.5362 − (0.0012 × V

)

0.6002 − (0.0011 × V

)

0.6597 − (0.0009 × V

)

December 29, 2016.

Oil-fired storage

>105 kBtu/h and ≤140 kBtu/h and ≤120 gal

Very Small

Low

Medium

High

0.2932 − (0.0015 × V

)

0.5596 − (0.0018 × V

)

0.6194 − (0.0016 × V

)

0.6740 − (0.0013 × V

)

Electric instantaneous

>12 kW and ≤58.6 kW and ≤2 gal

Very Small

Low

Medium

High

0.80

** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial water heater, based upon the first-hour rating. The draw pattern is determined using the

Uniform Test Method for Measuring the Energy Consumption of Water Heaters

in appendix E to subpart B of 10 CFR part 430.

2. History of Standards Rulemaking for CWH Equipment

As previously noted, EPCA established initial Federal energy conservation standards for CWH equipment that generally corresponded to the levels in ASHRAE Standard 90.1-1989. On October 29, 1999, ASHRAE released Standard 90.1-1999, which included new efficiency levels for numerous categories of CWH equipment. DOE evaluated these new standards and subsequently amended energy conservation standards for CWH equipment in a final rule published in the

Federal Register

on January 12, 2001. 66 FR 3336 (“January 2001 final rule”). DOE adopted the levels in ASHRAE Standard 90.1-1999 for all classes of CWH equipment, except for electric storage water heaters. For electric storage water heaters, the standard in ASHRAE Standard 90.1-1999 was less stringent than the standard prescribed in EPCA and, consequently, would have increased energy consumption.

Under those circumstances, DOE could not adopt the new efficiency level for electric storage water heaters in ASHRAE Standard 90.1-1999. 66 FR 3336, 3350. In the January 2001 final rule, DOE also adopted the efficiency levels contained in the Addendum to ASHRAE Standard 90.1-1989 for hot water supply boilers, which were identical to the efficiency levels for instantaneous water heaters. 66 FR 3336, 3356.

On October 21, 2004, DOE published a direct final rule in the

Federal Register

(“October 2004 direct final rule”) that recodified the existing energy conservation standards, so that they are located contiguous with the test procedures that were promulgated in the same notice. 69 FR 61974. The October 2004 final rule also updated definitions for CWH equipment at 10 CFR 431.102.

The American Energy Manufacturing Technical Corrections Act (“AEMTCA”), Public Law 112-210 (Dec. 18, 2012), amended EPCA to require that DOE publish a final rule establishing a uniform efficiency descriptor and accompanying test methods for covered consumer water heaters and some CWH equipment. (42 U.S.C. 6295(e)(5)(B)) EPCA further required that the final rule must replace the energy factor (for consumer water heaters) and thermal efficiency and standby loss (for some commercial water heaters) metrics with a uniform efficiency descriptor. (42 U.S.C. 6295(e)(5)(C)) Pursuant to 42 U.S.C. 6295(e), on July 11, 2014, DOE published a final rule for test procedures for residential and certain commercial water heaters (“July 2014 final rule”) that, among other things, established UEF, a revised version of the current residential energy factor metric, as the uniform efficiency descriptor required by AEMTCA. 79 FR 40542, 40578. In addition, the July 2014 final rule defined the term “residential-duty commercial water heater,” an equipment category that is subject to the new UEF metric and the corresponding UEF test procedures. 79 FR 40542, 40586-40588 (July 11, 2014). Conversely, CWH equipment that does not meet the definition of a residential-duty commercial water heater is not subject to the UEF metric or corresponding UEF test procedures.

Id.

Further details on the UEF metric and residential-duty commercial water heaters are discussed in section III.C of this document.

In a notice of proposed rulemaking (“NOPR”) published on April 14, 2015 (“April 2015 NOPR”), DOE proposed, among other things, conversion factors from thermal efficiency and standby loss to UEF for residential-duty commercial water heaters. 80 FR 20116, 20143. Subsequently, in a final rule published on December 29, 2016 (the “December 2016 conversion factor final rule”), DOE specified standards for residential-duty commercial water heaters in terms of UEF. However, while the metric was changed from thermal efficiency and/or standby loss, the stringency was not changed. 81 FR 96204, 96239 (Dec. 29, 2016).

In ASHRAE Standard 90.1-2013, ASHRAE increased the thermal efficiency level for commercial oil-fired storage water heaters, thereby triggering DOE's statutory obligation to promulgate an amended uniform national standard at those levels, unless DOE were to determine that there is clear and convincing evidence supporting the adoption of more-stringent energy conservation standards than the ASHRAE levels.

In a final

rule published on July 17, 2015 (“July 2015 ASHRAE equipment final rule”), among other things, DOE adopted the standard for commercial oil-fired storage water heaters at the level set forth in ASHRAE Standard 90.1-2013, which increased the standard from 78 to 80 percent thermal efficiency with compliance required starting on October 9, 2015. 80 FR 42614 (July 17, 2015). Since that time ASHRAE has issued 2 updated versions of Standard 90.1, 90.1-2016 and 90.1-2019. However, DOE was not triggered to review amended standards for commercial water heaters by any updates in ASHRAE Standard 90.1-2016 or ASHRAE Standard 90.1-2019. Overall, DOE has not been triggered to review the standards for the equipment subject to this rulemaking (

i.e.,

commercial water heating equipment other than commercial oil-fired storage water heaters) based on an update to the efficiency levels in ASHRAE Standard 90.1 since the 1999 edition because ASHRAE has not updated the efficiency levels for such equipment since 1999.

ASHRAE Standard 90.1-2013 also appeared to change the standby loss levels for four equipment classes (gas-fired storage water heaters, oil-fired storage water heaters, gas-fired instantaneous water heaters, and oil-fired instantaneous water heaters) to efficiency levels that surpassed the Federal energy conservation standard levels. However, upon reviewing the changes DOE concluded that all changes to standby loss levels for these equipment classes were editorial errors because they were identical to SI (International System of Units; metric system) formulas rather than I-P (Inch-Pound; English system) formulas. As a result, DOE did not conduct an analysis of the potential energy savings from amended standby loss standards for this equipment in response to the ASHRAE updates. DOE did not receive any comments on this

issue. 80 FR 1171, 1185 (January 8, 2015). The standby loss levels for these equipment classes were reverted to the previous levels in ASHRAE Standard 90.1-2016 and have not been updated since then.

On October 21, 2014, DOE published a request for information (“RFI”) as an initial step for reviewing the energy conservation standards for CWH equipment. 79 FR 62899 (“October 2014 RFI”). The October 2014 RFI solicited information from the public to help DOE determine whether more-stringent energy conservation standards for CWH equipment would result in a significant amount of additional energy savings, and whether those standards would be technologically feasible and economically justified. 79 FR 62899, 62899-62900. DOE received a number of comments from interested parties in response to the October 2014 RFI.

On May 31, 2016, DOE published a NOPR and notice of public meeting in the

Federal Register

(“May 2016 CWH ECS NOPR”) that addressed all of the comments received in response to the RFI and proposed amended energy conservation standards for CWH equipment. 81 FR 34440. The May 2016 CWH ECS NOPR and the technical support document (“TSD”) for that NOPR are available at

www.regulations.gov/docket?D=EERE-2014-BT-STD-0042.

On June 6, 2016, DOE held a public meeting at which it presented and discussed the analyses conducted as part of this rulemaking (

e.g.,

engineering analysis, LCC, PBP, and MIA). In the public meeting, DOE presented the results of the analysis and requested comments from stakeholders on various issues related to the rulemaking in response to the May 2016 CWH ECS NOPR.

On December 23, 2016, DOE published a notice of data availability (“NODA”) for energy conservation standards for CWH equipment (“December 2016 CWH ECS NODA”). 81 FR 94234. The December 2016 CWH ECS NODA presented the thermal efficiency and standby loss levels analyzed in the May 2016 CWH ECS NOPR for residential-duty gas-fired storage water heaters in terms of UEF, using the updated conversion factors for gas-fired and oil-fired storage water heaters adopted in the December 2016 conversion factor final rule (81 FR 94234, 94237).

On January 15, 2021, in response to a petition for rulemaking submitted by the American Public Gas Association, Spire, Inc., the Natural Gas Supply Association, the American Gas Association, and the National Propane Gas Association (83 FR 54883; Nov. 1, 2018) DOE published a final interpretive rule (“the January 2021 final interpretive rule”) determining that, in the context of residential furnaces, commercial water heaters, and similarly-situated products/equipment, use of non-condensing technology (and associated venting) constitute a performance-related “feature” under EPCA that cannot be eliminated through adoption of an energy conservation standard. 86 FR 4776. Correspondingly, DOE withdrew the May 2016 CWH ECS NOPR.

86 FR 3873 (Jan. 15, 2021). However, DOE has subsequently published a final interpretive rule that returns to the previous and long-standing interpretation (in effect prior to the January 15, 2021 final interpretive rule), under which the technology used to supply heated air or hot water is not a performance-related “feature” that provides a distinct consumer utility under EPCA. 86 FR 73947 (Dec. 29, 2021). In conducting the analysis for this final rule, DOE evaluates condensing technologies and associated venting systems (

i.e.,

trial standard levels (“TSLs”) 2, 3, and 4) in its analysis of potential energy conservation standards. Any adverse impacts on utility and availability of non-condensing technology options are considered in DOE's analyses of these TSLs.

The rulemaking for CWH equipment has been subject to multiple rounds of public comment, including public meetings, and extensive records have been developed in the relevant dockets. (

See

Docket Number EERE-2014-BT-STD-0042). Consequently, although the May 2016 CWH ECS NOPR was withdrawn, the information obtained through those earlier rounds of public comment, information exchange, and data gathering have been considered in this rulemaking.

On May 19, 2022, DOE published a NOPR (“May 2022 CWH ECS NOPR”) for CWH equipment, in which DOE proposed amended energy conservation standards for certain classes of CWH equipment and proposed to codify existing standards from EPCA for commercial electric instantaneous water heaters (except for residential-duty commercial electric instantaneous water heaters).

87 FR 30610. DOE received 28 comments in response to the May 2022 CWH ECS NOPR from the interested parties listed in Table II.3.

On July 20, 2022, DOE published a notice that re-opened the comment period for the May 2022 CWH ECS NOPR to allow comments to be submitted until August 1, 2022. 87 FR 43226.

Table II.3—May 2022 CWH ECS NOPR Written Comments

Commenter(s)

Abbreviation

Comment

No. in the

docket

Commenter

type *

Sean Erwin

The American Gas Association (“AGA”), American Public Gas Association (“AGPA”), National Propane Gas Association (“NPGA”), Spire Inc., and ONE Gas, Inc

Joint Gas Commenters

7, 14, 34

JJM Alkaline Technologies

JJM Alkaline

Atmos Energy Corporation

Atmos Energy

11, 36

American Public Gas Association

APGA

13 **

Bradford White Corporation

Bradford White

12, 23

Law Offices of Barton Day, PLLC (representing Spire)

Barton Day Law

13 **

American Society for Testing and Materials

ASTM

Suburban Propane Partners, L.P

Suburban Propane

Center for Climate and Energy Solutions, Institute for Policy Integrity at New York University School of Law, Montana Environmental Information Center, Natural Resources Defense Council, Sierra Club, Union of Concerned Scientists

Joint Climate Commenters

Bock Water Heaters, Inc

Bock Water Heaters

Northwest Power and Conservation Council

NWPCC

A.O. Smith Corporation

A.O. Smith

Rheem Manufacturing Company

Rheem

WM Technologies, LLC

WM Technologies

Patterson-Kelley, LLC

Patterson-Kelley

California Energy Commission

CEC

Plumbing-Heating-Cooling Contractors National Association

PHCC

Appliance Standards Awareness Project (ASAP), American Council for an Energy-Efficient Economy (ACEEE), Natural Resources Defense Council (NRDC), and Rocky Mountain Institute (RMI)

Joint Advocates

New York State Energy Research and Development Authority

NYSERDA

Air-Conditioning, Heating, and Refrigeration Institute

AHRI

The Aluminum Association; American Coke and Coal Chemicals Institute; American Farm Bureau Federation; American Gas Association; American Public Gas Association; Council of Industrial Boiler Owners; Independent Petroleum Association of America; National Mining Association; U.S. Chamber of Commerce

The Associations

California Investor-Owned Utilities (Pacific Gas and Electric Company (PG&E), San Diego Gas and Electric (SDG&E), and the Southern California Edison (SCE))

CA IOUs

33, 37

Northwest Energy Efficiency Alliance

NEEA

* TA: trade association, EA: efficiency/environmental advocate, IR: industry representative, M: manufacturer, OS: other stakeholder, U: utility, utilities filing jointly, or utility representative, UA: utility association, and I: individual.

** Comments raised during the June 23, 2022 public meeting. Docket No. 13 refers to the public meeting transcript.

A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record.

To the extent that interested parties have provided written comments that are substantively consistent with any oral comments provided during the June 23, 2022 public meeting, DOE cites the written comments throughout this final rule. Any oral comments provided during the webinar that are not substantively addressed by written comments are summarized and cited separately throughout this final rule.

The parenthetical reference provides a reference for information located in the docket of DOE's rulemaking to develop energy conservation standards for CWH equipment. (Docket No. EERE-2021-BT-STD-0027, which is maintained at

www.regulations.gov

). The references are arranged as follows: (commenter name, comment docket ID number, page of that document).

C. Deviation From Appendix A

On June 21, 2023, DOE published a test procedure final rule for consumer water heaters and residential-duty commercial water heaters. 88 FR 40406. In accordance with section 3(a) of 10 CFR part 430, subpart C, appendix A (“appendix A”), DOE notes that it is deviating from the provision in appendix A specifying that test procedures be finalized at least 180 days before new or amended standards are proposed for the same equipment. 10 CFR part 430, subpart C, appendix A, section 8(d)(2). DOE is opting to deviate from this step because the DOE has determined that the test procedure amendments for residential-duty commercial water heaters will not impact the current efficiency ratings. 88 FR 40406, 40412. See section III.C of this document for additional information on the test procedures for CWH equipment.

III. General Discussion

DOE developed this final rule after considering oral and written comments, data, and information from interested parties that represent a variety of interests. The following discussion addresses issues raised by these commenters.

A. General Comments

This section summarizes general comments received from interested parties regarding rulemaking timing and process.

1. Clear and Convincing Threshold

In response to the May 2022 CWH ECS NOPR in which DOE concluded that it had clear and convincing evidence to propose a standard more stringent than ASHRAE Standard 90.1, the Joint Gas Commenters stated that since CWH are included in ASHRAE Standard 90.1, DOE must presume that standards more stringent than the ASHRAE standards would not be desirable in the absence of clear and convincing evidence that they are justified. Therefore, the commenters argued that DOE must resolve doubts against the need for more stringent standards, but in developing the NOPR, the Joint Gas Commenters stated that DOE has done the opposite. (Joint Gas Commenters, No. 34 at pp. 15-16) The Joint Gas Commenters stated that DOE should follow the rulings of ASHRAE 90.1, and noted that to date, the ASHRAE committee has not considered an increase in the energy efficiency of these commercial water heaters in order to lower overall energy consumption. (Joint Gas Commenters, No. 34 at p. 34)

Contrary to the Joint Gas Commenters' suggestion, EPCA does not require DOE to presume that standards more stringent than the ASHRAE standards would not be desirable in the absence of clear and convincing evidence that they are justified. As noted by the Joint Gas Commenters and as discussed in section II.A of this final rule, pursuant to EPCA, DOE must determine, supported by clear and convincing evidence, that amended standards for CWH equipment would result in significant additional conservation of energy and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II); 42 U.S.C. 6313(a)(6)(C)(i)) In making the

determination of economic justification of an amended standard, DOE must determine whether the benefits of the proposed standard exceed the burdens of the proposed standard by considering, to the maximum extent practicable, the seven criteria described in EPCA (see 42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII)). The clear and convincing threshold is a heightened standard, and would only be met where the Secretary has an abiding conviction, based on available facts, data, and DOE's own analyses, that it is highly probable an amended standard would result in a significant additional amount of energy savings, and is technologically feasible and economically justified.

See American Public Gas Association

U.S. Dept of Energy,

22 F. 4th at 1025 (D.C. Cir. January 18, 2022) (citing

Colorado

New Mexico,

467 U.S. 310, 316, 104 S.Ct. 2433, 81 L.Ed.2d 247 (1984)). However, this standard does not require a presumption of desirability for the efficiency levels in ASHRAE 90.1. As noted previously, DOE has determined that there is clear and convincing evidence for standards for CWH equipment more stringent than those found in ASHARE 90.1. A discussion of DOE's consideration of the statutory factors is contained in section V of this final rule.

2. Analytical Structure and Inputs

In response to both the withdrawn May 2016 CWH ECS NOPR and the May 2022 CWH ECS NOPR, DOE received comments and information regarding the assumptions that it used for inputs in the rulemaking analyses. DOE considered these comments in appropriate analyses conducted in this final rule and modified its assumptions and inputs as necessary to account for the information or feedback provided by industry representatives. Section IV of this final rule provides details on DOE's updates to its various analyses.

Addressing the specific analysis that supports this rulemaking, Bradford White highlighted that some sources are as many as 14 years old and urged DOE to conduct updated surveys and studies in order to inform these major regulatory policy decisions. (Bradford White, No. 23 at p. 7) Additionally, the Joint Gas Commenters stated that in several cases, DOE lacks the data required to provide or support critical inputs to its analysis. (The Joint Gas Commenters, No. 34 at p. 16) In response, DOE uses the most recent data sources available at the time of the analysis whenever possible, as discussed further throughout section IV of this document.

The Joint Gas Commenters urged DOE to implement recommendations from the recent National Academies of Sciences, Engineering, and Medicine (“NASEM”) report into all its appliance rulemakings, highlighting recommendations 2-2, 3-5, 4-1, 4-13, and 4-14 as the most pertinent. (Joint Gas Commenters, No. 34 at pp. 38-39) In response, the Department notes that the rulemaking process for standards of covered products and equipment are outlined at appendix A to subpart C of 10 CFR part 430 (“appendix A”), and DOE periodically examines and revises these provisions in separate rulemaking proceedings. The recommendations in the NASEM report, which pertain to the processes by which DOE analyzes energy conservation standards, will be considered in a separate rulemaking considering all product categories.

PHCC noted that this rule impacts the resources of PHCC; therefore, PHCC feels it is necessary to present the contractors' perspective on these issues. PHCC stated that certain customers would bear extraordinary costs as a result of this rule, and claimed that PHCC's members will ultimately be the ones to shoulder the effects to those consumers by finding economical solutions for their clients. (PHCC, No. 28 at p. 11) In response, DOE recognizes that contractors play an important role in helping consumers purchase and install CWH equipment. DOE appreciates the perspective of all interested parties, including contractors and realizes that contractors will likely be responsible for characterizing the costs for new and replacement equipment installations to their customers as well as assisting in identifying and implementing economical solutions. DOE's evaluation of the cost and benefits of this final rule is discussed in section V of this document, including impacts on certain consumers.

3. Final Selection of Standards Levels

DOE received several comments expressing general approval or disapproval for the proposed standards.

The Joint Advocates, NYSERDA, the CA IOUs, and CEC supported the proposed standards. (Joint Advocates, No. 29 at p. 1; NYSERDA No. 30 at p. 2; CEC, No. 27 at p. 1; CA IOUs, No. 33 at p. 1) NYSERDA stated that DOE should act swiftly to finalize the proposed standards and noted that these standards will play an important role in meeting their State climate goals through decarbonization of the water heater market. (NYSERDA, No. 30 at pp. 1-2)

The CA IOUs expressed general support for DOE's proposal to increase the efficiency requirements of commercial gas water heaters to condensing levels and suggested that market data show that the market is ready for this increase. (CA IOUs, No. 33 at p. 1) NEEA also stated support for DOE's proposal to increase the efficiency levels of CWH equipment to reflect condensing performance, and asserted that they find the DOE analysis to be sound. They similarly commented in support of DOE's proposal to increase the efficiency requirements of gas-fired residential-duty commercial storage products. They explained that doing so will realize the energy efficiency goals that were intended with the residential standard, and would harmonize commercial and residential requirements. (NEEA, No. 35 at p. 1)

The Joint Advocates echoed similar support for the proposed standards and mentioned that updated standards for commercial gas-fired water heaters are long overdue as they have not been amended since 2001. (The Joint Advocates, No. 29 at p. 1)

The CEC stated that based on data from its Modernized Appliance Efficiency Database System (“MAEDbS”), CWH products meeting the proposed standard are already certified for sale in California; 50 percent (969 out of 1936) meet the proposed requirement of 95 percent thermal efficiency and 24 percent (299 out of 1259) of the instantaneous models meet the proposed 96 percent thermal efficiency. The CEC argues that these data indicate no market barrier to the proposed standards. (CEC, No. 27 at p. 4) The CEC also encouraged DOE to finalize its proposal to phase out non-condensing technology, thus closing what they consider a significant loophole for standards of residential-duty CWHs.

Id.

at p. 3. Further, according to CEC, MAEDbS includes 324 residential-duty commercial gas water heaters, and none have storage above 55 gallons. Therefore, CEC claims that residential water heaters in California's market are exploiting this “loophole” since consumer gas ratings with input ratings above 75,000 Btu/hour would only be subject to a condensing standard if the storage volume is greater than 55 gallons.

Id.

The CA IOUs supported DOE's proposed standards, and raised the same concern as CEC, stating that the energy efficiency standards for residential gas storage water heaters with a capacity greater than 55 gallons are currently higher than the requirements for commercial residential-duty gas storage heaters of similar capacity. As a result,

they claim that the greater-than-55-gallon-capacity segment of the residential gas storage water heater market is exclusively served by commercial residential-duty products. (CA IOUs, No. 33 at p. 2) Rheem also suggested that DOE evaluate the proposed efficiency levels for residential-duty commercial gas-fired storage water heaters to ensure more equitable treatment for these products and consumer water heaters with a rated storage volume greater than 55 gallons because, they said, these categories can be used for the same applications. (Rheem, No. 24 at pp. 3-4)

Sean Erwin commented that DOE's proposal is agreeable, but also explained various types of solar water heating systems that could be a cost-effective means of generating hot water. (Erwin, No. 6 at p. 1)

A.O. Smith also commented noting support for DOE's proposal to move the minimum energy conservation standards for CWH to a standard that will require the utilization of condensing technology for gas-fired equipment, inclusive of both the proposed thermal efficiency and standby loss levels, with some modifications. (A.O. Smith, No. 22 at pp. 2, 7) A.O. Smith commented that that the adoption of this equipment will not only assist in reducing greenhouse gas emissions, but will also help property and business owners save money on their monthly energy bills, as well as preserve flexibility for businesses to install water heating equipment that is the most economical to meet the intended utility. A.O. Smith also recommended that high-efficiency gas-fired water heating equipment remain available for commercial customers.

Id.

at pp. 2-3. A.O. Smith suggested several modifications to the standards proposed in the May 2022 CWH ECS NOPR, which are discussed in the appropriate sections on this final rule.

Id.

at pp. 2-5. Additionally, Rheem raised concerns that many equipment sizes are not available at the proposed thermal efficiency levels and that, in some cases, the proposed levels are at the maximum technologically feasible (“max-tech”) levels evaluated. Rheem also stated that the DOE's analysis has not shown that the proposed TSL is economically viable for the entire range of equipment sizes. (Rheem, No. 24 at p. 2)

Several commenters suggested that DOE should analyze a 94 percent thermal efficiency level for gas-fired water heaters (A.O. Smith, No. 22 at pp. 2-4; AHRI, No. 31 at p. 2; Rheem, No. 24 at p. 3). These comments, and DOE's response, are discussed in more detail in section IV.C.4.a of this document. A.O. Smith also proposed an adjustment to the proposed efficiency level for gas-fired residential-duty commercial water heaters, as discussed in section IV.C.4.c of this document.

AHRI raised concerns that, because gas-fired storage and gas-fired instantaneous equipment are used in similar settings, setting higher efficiency standards for one class (

i.e.,

gas-fired instantaneous water heaters and hot water supply boilers) inappropriately disadvantages that class in the marketplace compared to the other class(es). Therefore, AHRI requested the Department align the efficiency standards for all gas-fired water heaters. (AHRI, No. 31 at p. 2). Bock Water Heaters asserted their agreement with comments submitted by AHRI. (Bock Water Heaters, No. 20 at p. 2) DOE received a similar comment from Bradford White expressing concern that DOE has proposed more stringent requirements for gas-fired instantaneous water heaters, including hot water supply boilers, for greater than 10 gallons. Bradford White recommended that the thermal efficiency requirements for gas-fired instantaneous and hot water supply boilers be harmonized with that for gas-fired storage water heaters. They further noted that this approach would allow DOE to avoid unfairly biasing the marketplace towards one technology over another. (Bradford White, No. 23 at p. 3)

The Joint Gas Commenters argued that a condensing standard would have numerous adverse impacts on building owners, including required building modifications, impacts on other equipment, impacts on occupied spaces or building aesthetics, inconvenience or loss to business as a result of additional time spent replacing equipment, additional installation services, or overall impracticality. (Joint Gas Commenters, No. 34 at pp. 9-10) They added that the proposed standards would violate the “unavailability” provision of EPCA and would leave many purchasers without gas products suitable for their needs. (Joint Gas Commenters, No. 34 at p. 39) WM Technologies called on DOE to rigorously review the inputs and the calculations in the LCC analysis because, they suggest, under the anti-backsliding provision of EPCA, the damage to the end user would be irreparable should the Department promulgate condensing requirements for commercial water heaters. WM Technologies asserted that such requirements would exceed the existing infrastructures' ability to adapt to condensing products and appliances in many places across the country, resulting in the unavailability of the product due to an increase in the minimum efficiency, violating the unavailability clause of EPCA (EPACT). As an example, WM Technologies stated that row houses in many urban East Coast regions do not have the ability to vent through an outside wall, which is a requirement for many condensing products. (WM Technologies, No. 25 at pp. 5-6) Atmos Energy stated that DOE should allow the continued manufacture and availability of water heaters that meet consumer needs (including businesses) and suggested that the elimination of affordable products would undermine the goals of the energy efficiency program overall. (Atmos Energy, No. 36 at pp. 1-2) DOE has provided more specific responses to these comments throughout this document, but specifically, DOE addresses comments regarding the downtime during replacement in section IV.F.2.h of this document, comments regarding the unavailability of noncondensing commercial water heaters in section IV.A.2.b of this document and comments regarding the unavailability of certain equipment sizes in IV.C.4.a of this document. Because there are comments relating to regional differences, DOE would note that the analysis accounts for the impact of entering water temperature on loads by type of building, both of which are linked to region by the location variables included in the source databases (see section IV.E of this document). However, DOE would specifically note that row houses tend to be comprised of single family dwellings that DOE believes are far more likely to use consumer water heaters or potentially a consumer boiler with unfired storage tanks rather than the CWH equipment that is the subject of this final rule.

Atmos Energy stated that where insufficient data exist, DOE should conclude it lacks evidence to support its proposed rule. It further offered its opinion that more data are needed to assess the proposed rule, including distributions of equipment by storage volume and input capacities, frequencies of installations that are infeasible or costly, installed costs, and customers' annual fuel use. Atmos Energy stated that real-world data exist for this information and stated that DOE should collect actual data rather than relying on estimates, though Atmos Energy does not provide any such data or suggested sources. To ensure standards are economically justified, Atmos Energy stated DOE must fully

assess LCC, potential for fuel switching, economic benefits of efficiency improvements, and actual installation costs. (Atmos Energy, No. 36 at pp. 2, 4)

As already noted, DOE uses the most current data available when performing rulemaking analyses, such as this CWH analysis. Atmos Energy is correct in the assertion that considerable data exist, but overlooks the fact that much of these data exists in forms not in the public domain. For example, consumers receive quotes for installing new or replacement water heaters, but such information is proprietary to the parties involved, and even if not proprietary, DOE is unaware of any existing service or process that aggregates such information. Contrary to the position Atmos Energy takes the fact that this information may exist in some form does not make this information necessarily available or usable to the general public or to DOE. Some of the data that Atmos Energy claims DOE should collect and use are not reasonably available to DOE. DOE uses publicly available and referenceable cost data, along with information collected during manufacturer interviews, to develop models to estimate such information in a fashion reasonably consistent with installation practice. For example, DOE uses U.S. Census data for developing contractor markup for installation costs; manufacturer shipment, DOE's Compliance Certification Management System, and Energy Star data to develop equipment efficiency distributions; and price data from RSMeans and/or from available and referenceable public sources. In short, DOE's method is to collect and use the best current data that are available to DOE and to develop analyses to estimate in a reasonable fashion the costs and benefits of proposed energy conservation standards. The specific analyses listed by Atmos Energy are addressed within this final rule document.

As a general response to the comments in this section, DOE notes that it may prescribe an energy conservation standard more stringent than the level for such equipment in ASHRAE Standard 90.1, as amended, only if “clear and convincing evidence” shows that a more-stringent standard would result in significant additional conservation of energy and is technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and 42 U.S.C. 6313(a)(6)(C)(i)) As described in section V.A of this document, DOE typically evaluates potential amended standards for products and equipment by grouping individual efficiency levels for each class into TSLs. The use of TSLs allows DOE to identify and consider, among other things, market cross elasticity from consumer purchasing decisions that may change when different standard levels are set. DOE typically evaluates potential amended standards for products and equipment by grouping individual efficiency levels for each class into TSLs. Furthermore, as described in section V.C of this document, DOE considered the impacts of amended standards for CWH equipment at each TSL, with respect to the aforementioned criteria, and determined that there is clear and convincing evidence that the adopted standards are both technologically feasible and economically justified and save a significant amount of energy. The benefits and costs of the standard levels adopted in this final rule are discussed in section V.C.2 of this document.

B. Scope of Coverage

1. Oil-Fired Commercial Water Heating Equipment

As discussed in the May 2022 CWH ECS NOPR, DOE has determined that amended efficiency standards (in terms of both thermal efficiency and standby loss) for commercial oil-fired storage water heaters (including residential-duty oil-fired storage water heaters) would not be warranted and did not analyze amended efficiency standards for this equipment in this final rule. 87 FR 30610, 30622.

Similarly, DOE did not analyze amended standards for commercial oil-fired instantaneous water heaters and hot water supply boilers in the May 2022 CWH ECS NOPR because the energy savings possible from amended standards for such equipment is expected to be negligible.

Id.

Based on this rationale and because DOE has not received information suggesting otherwise, DOE has continued to exclude commercial oil-fired water heating equipment from the analysis conducted for this final rule.

2. Unfired Hot Water Storage Tanks

Unfired hot water storage tanks are a class of CWH equipment. In response to the May 2022 CWH ECS NOPR, the CA IOUs stated that the efficiency requirements for unfired hot water storage tanks have been unrevised since 2001 and recommended that DOE develop performance requirements for unfired hot water storage tanks, which they said are often incorporated into heat pump water heating systems. (The CA IOUs, No. 33 at pp. 3-4) The CA IOUs requested that DOE develop performance-based testing and standards for unfired hot water storage tanks, stating that a performance-based metric would allow for innovation and would reward manufacturers who insulate well.

Id.

On May 24, 2022, DOE published a notice of final determination not to amend energy conservation standards for unfired hot water storage tanks. 87 FR 31359. Because amended energy conservation standards for unfired hot water storage tanks were considered as part of that proceeding, they were not considered further for this final rule. Similarly, amended test procedures for unfired hot water storage tanks and other CWH equipment will be considered in a separate rulemaking.

3. Electric Instantaneous Water Heaters

EPCA prescribes energy conservation standards for several classes of CWH equipment manufactured on or after January 1, 1994. (42 U.S.C. 6313(a)(5)) DOE codified these standards in its regulations for CWH equipment at 10 CFR 431.110. However, when codifying these standards from EPCA, DOE inadvertently omitted the standards put in place by EPCA for electric instantaneous water heaters. Specifically, for instantaneous water heaters with a storage volume of less than 10 gallons, EPCA prescribes a minimum thermal efficiency of 80 percent. For instantaneous water heaters with a storage volume of 10 gallons or more, EPCA prescribes a minimum thermal efficiency of 77 percent and a maximum standby loss, in percent/hour, of 2.30 + (67/measured volume (in gallons)). (42 U.S.C. 6313(a)(5)(D) and (E)) Although, DOE's regulations at 10 CFR 431.110 do not currently include energy conservation standards for electric instantaneous water heaters, these standards prescribed in EPCA are applicable. Therefore, in this final rule, DOE is codifying these standards in its regulations at 10 CFR 431.110.

In the May 2022 CWH ECS NOPR, DOE also discussed allowing the use of a calculation-based method for determining storage volume of electric instantaneous water heaters that is the same as the method for gas-fired and oil-fired instantaneous water heaters and hot water supply boilers found at 10 CFR 429.72(e) (added at 81 FR 79261, 79320 (Nov. 10, 2016)). DOE initially

concluded that the same rationale for including these provisions for gas-fired and oil-fired instantaneous water heaters and hot water supply boilers also applies to electric instantaneous water heaters (

i.e.,

it may be difficult to completely empty the instantaneous water heater in order to obtain a dry weight measurement, which is needed in a weight-based test for an accurate representation of the storage volume). Therefore, DOE tentatively concluded that including electric instantaneous water heaters in these provisions would provide manufacturers with flexibility as to how the storage volume is determined. 87 FR 30622. However, DOE is considering these certification changes in a separate rulemaking. Therefore, DOE is not enacting any changes at 10 CFR 429.72(e) to allow the use of a calculation-based method for determining the storage volume of electric instantaneous water heaters in this final rule.

Additionally, as discussed in the May 2022 CWH ECS NOPR, DOE notes that because electric instantaneous water heaters typically use electric resistance heating, which is highly efficient, the thermal efficiency of these units already approaches 100 percent. DOE has also determined that there are no options for substantially increasing the rated thermal efficiency of this equipment, and the impact of setting thermal efficiency energy conservation standards for these products would be negligible. Similarly, the stored water volume is typically low, resulting in limited potential for reducing standby losses for most electric instantaneous water heaters. As a result, amending the standards for electric instantaneous water heaters established in EPCA would result in minimal energy savings. Even if DOE were to account for the energy savings potential of amended standards for electric instantaneous water heaters, the contribution of any potential energy savings from amended standards for these units would be negligible and not appreciably impact the energy savings analysis for CWH equipment. Therefore, DOE did not analyze amended energy conservation standards for electric instantaneous water heaters in this final rule.

In the May 2022 CWH ECS NOPR, DOE noted that it did not analyze amended energy conservation standards for residential-duty electric instantaneous water heaters (87 FR 30631), which are a separate equipment class within DOE's regulations for CWH equipment.

See

79 FR 40541, 40588 (Jul. 11, 2014). Consistent with the May 2022 CWH ECS NOPR, DOE did not analyze amended standards for residential-duty electric instantaneous water heaters in this final rule for similar reasons as those stated for not analyzing standards for electric instantaneous water heaters.

4. Commercial Heat Pump Water Heaters

In response to the May 2022 CWH ECS NOPR, DOE received multiple comments regarding DOE's proposal not to consider energy conservation standards for commercial heat pump water heaters. Rheem supported DOE's decision not to consider heat pump technology in the current analysis but encouraged DOE to review and amend the equipment class structure to include heat pump water heaters as a technology option for specific applications in a future rulemaking. (Rheem, No. 24 at p. 5) In contrast, NEEA and the CA IOUs requested that DOE include heat pump water heaters in its analysis. Both NEEA and the CA IOUs mentioned that these technologies represent the current max-tech efficiency levels for CWH. (NEEA, No. 35 at p. 2; the CA IOUs, No. 33 at p. 3) NEEA also stated that an analysis of current commercial water heating is incomplete without this consideration. (NEEA, No. 35 at p. 2) Further, NEEA, the CA IOUs, and the Joint Advocates noted that many commercial-duty heat pump products from several different manufacturers are available on the market already, and NEEA and the CA IOUs provided numerous citations to specific models. (NEEA, No. 35 at p. 2; the CA IOUs, No. 33 at p. 3; Joint Advocates, No. 29 at p. 14) The CA IOUs further commented that commercial electric heat pump water heaters have already been successfully and efficiently providing hot water to commercial buildings across the country and can include electric resistance elements that allow them to deliver comparable peak demand performance to commercial electric-resistance-only storage water heaters. (CA IOUs, No. 33 at p. 3)

WM Technologies and Patterson-Kelley argued that they are not aware of compressor-based water heating products which can operate at the water temperatures required to achieve commercial hot water flow rate at adequate temperatures, let alone sanitizing conditions, and added that if such products become available, the sizing of various internal components would be significantly different than heat pumps utilized for other applications. (WM Technologies, No. 25 at p. 7; Patterson-Kelley, No. 26 at p. 5) WM Technologies and Patterson-Kelley also stated that if available, those products should be required to meet the efficiencies at operating conditions of adequate hot water flow rate at the required temperature.

Id.

Furthermore, WM Technologies said, if any part of the heat pump system is located in unconditioned spaces, that portion of the heat pump should be maintained at the worst-case national temperature at which the product may experience during efficiency testing. (WM Technologies, No. 25 at p. 7)

Rheem, AHRI, and Bradford White additionally suggested that it may be difficult to meet the same hot water loads with an integrated heat pump as with a commercial electric storage water heater. (AHRI, No. 31 at pp. 3-4; Rheem, No. 24 at p. 5; Bradford White, No. 23 at pp. 7-8) The commenters further noted that heat pump water heaters typically have a slower recovery time than commercial electric storage water heaters and may also have difficulty reaching the same temperatures as commercial electric storage water heaters without backup resistance elements.

Id.

Further, Rheem and AHRI noted in particular that integrated heat pump water heaters may have difficulty reaching sanitizing temperatures. (AHRI, No. 31 at pp. 3-4; Rheem, No. 24 at p. 5) Rheem also noted that the larger footprint may limit replacement opportunities and may result in a decrease in workspace (such as kitchen space) as opposed to a decrease in mechanical room space. (Rheem, No. 24 at p. 5) Furthermore, Bradford White stated that given that most heat pump water heaters recover at a much slower rate, additional storage capacity must be added to the hot water system, which likely means that a split system heat pump water heater would be used instead of an integrated heat pump water heater. (Bradford White, No. 23 at p. 7)

DOE did not consider commercial integrated heat pump water heaters in this final rule. DOE found only one such model on the market, at a single storage volume and heating capacity. Given the wide range of capacities and stored water volumes in products currently on the market, which are required to meet hot water loads in commercial buildings, it is unclear based on this single model whether heat pump water heater technology would be suitable to meet the range of load demands on the market. Similarly, based on the information currently available and comments regarding the performance of heat pump water heaters as compared to electric resistance water heaters in commercial settings, it is uncertain if split-system heat pump water heaters can serve all the applications currently filled by electric instantaneous water heaters. Therefore, DOE is not analyzing this equipment in the current analysis. However, DOE may analyze commercial heat pump water heaters in a future rulemaking, at which time DOE will

consider the appropriate equipment class structure for commercial electric water heaters, including commercial heat pump water heaters.

5. Electric Storage Water Heaters

In this rulemaking, DOE did not analyze thermal efficiency standards for electric storage water heaters. Electric storage water heaters are not currently subject to a thermal efficiency standard under 10 CFR 431.110. Electric storage water heaters typically use electric resistance heating elements, which are highly efficient. The thermal efficiency of these units already approaches 100 percent. As discussed in section III.B.4 of this document, DOE did not consider commercial integrated heat pump water heaters as the max-tech for electric storage water heaters at this time.

In the May 2022 CWH ECS NOPR, DOE concluded that the only technology option that DOE analyzed in the engineering analysis as providing standby loss reduction for electric storage water heaters (

i.e.,

increasing tank foam insulation thickness to 3 inches) is already currently included in some models rated at or near the current standby loss standard. Consequently, DOE did not analyze any technology options for reducing standby loss below (

i.e.,

more stringent than) the current standard. In response to the May 2022 CWH ECS NOPR, Bock Water Heaters indicated support for not amending the standby loss standard for electric storage water heaters. (Bock Water Heaters, No. 20 at p. 1) Bradford White similarly supported DOE's decision not to change standards for commercial electric storage, as there is no electric resistance or insulation technology that would allow them to comply with more stringent standards. (Bradford White, No. 23 at p. 3) DOE maintains its conclusion originally stated in the May 2022 CWH ECS NOPR and therefore, in this final rule, DOE did not further analyze and is not adopting amended standby loss standards for electric storage water heaters.

6. Instantaneous Water Heaters and Hot Water Supply Boilers

Other than storage-type instantaneous water heaters, DOE did not include instantaneous water heaters and hot water supply boilers in its analysis of potential amended standby loss standards.

Instantaneous water heaters and hot water supply boilers (other than storage-type instantaneous water heaters) with greater than 10 gallons of water stored have a standby loss requirement under 10 CFR 431.110. However, DOE did not analyze more stringent standby loss standards for these units because it has determined that such amended standards would result in minimal energy savings. Even if DOE were to account for the energy savings potential of amended standby loss standards for instantaneous water heaters and hot water supply boilers (other than storage-type instantaneous water heaters) with greater than 10 gallons of water stored CWH equipment, the contribution of any potential energy savings from amended standards for these units would be negligible and not appreciably impact the energy savings analysis for CWH equipment.

On November 10, 2016, DOE published a final rule amending the test procedures for certain CWH equipment (“November 2016 CWH TP final rule”). 81 FR 79261. DOE adopted a definition for “storage-type instantaneous water heater” in the November 2016 CWH TP final rule.

Id.

at 79289-79290. Storage-type instantaneous water heaters are discussed in section IV.A.2.a of this final rule.

DOE has determined that instantaneous water heaters (other than storage-type instantaneous water heaters) and hot water supply boilers with less than 10 gallons of water stored would not have significantly different costs and benefits as compared to instantaneous water heaters (other than storage-type instantaneous water heaters) and hot water supply boilers with greater than or equal to 10 gallons of water stored. (See section IV.C.7 of this document for further discussion of the costs for instantaneous water heaters and hot water supply boilers.) Therefore, DOE analyzed both equipment classes of instantaneous water heaters and hot water supply boilers (less than 10 gallons and greater than or equal to 10 gallons stored volume) together for thermal efficiency standard levels in this final rule, which is discussed further in section IV.C.3 of this document.

DOE also determined that establishing standby loss standards for instantaneous water heaters and hot water supply boilers with less than or equal to 10 gallons water stored would result in minimal energy savings. Even if DOE were to account for the energy savings potential of amended standby loss standards for instantaneous water heaters and hot waters supply boilers with less than or equal to 10 gallons of water stored, the contribution any potential energy savings from amended standards for these units would be negligible and not appreciably impact the energy savings analysis for CWH equipment. Bradford White commented in support of DOE's determination not to establish standby loss standards for gas-fired instantaneous and hot water supply boilers less than 10 gallons. (Bradford White, No. 23 at p. 3) For instantaneous water heaters and hot water supply boilers (other than storage-type instantaneous water heaters), DOE has not found and did not receive any information or data suggesting that DOE should analyze amended standby loss standards.

Bradford White commented that there is confusion in how different types of products are characterized by DOE and stated that there appears to be overlap in the structure of the proposed standards. (Bradford White, No. 23 at p. 1) In particular, Bradford White stated that gas-fired storage-type instantaneous water heaters and gas-fired instantaneous water heaters are handled differently and that certain products appear to fall into the two different categories with two different sets of energy conservation standards.

Id.

AHRI stated that it understands that the Department's intent is for the equipment class of “instantaneous water heaters and hot water supply boilers greater than 10 gallons” to refer specifically to hot water supply boilers with storage tanks and circulating water heaters with an external storage tank. AHRI stated that including separate standards for “gas-fired storage water heaters and storage-type instantaneous water heaters” and “gas-fired instantaneous water heaters with a storage capacity greater than or equal to 10 gallons” in Table 1 to 10 CFR 431.110(a) of the May 2022 CWH ECS NOPR could cause market confusion by creating unintentional overlap between these product types. (AHRI, No. 31 at pp. 2-3)

In response, DOE clarifies that in this final rule, it is adopting a minimum thermal efficiency of 95 percent for gas-fired storage-instantaneous water heaters and a minimum thermal efficiency of 96 percent for tankless water heaters and circulating water heaters and hot water supply boilers. As discussed in section IV.A.2.a of this document, gas-fired storage-type instantaneous water heaters were analyzed together with gas-fired storage water heaters because of the similarity of these types of equipment. Additionally, as discussed in section IV.A.2.c of this document, DOE analyzed tankless water heaters and circulating water heaters and hot water supply boilers as two separate kinds of representative equipment for this rulemaking analysis, to reflect the differences between these types of equipment, but they are part of the same equipment class (gas-fired instantaneous water heaters and hot water supply boilers), and DOE is adopting the same

minimum efficiency requirements for these equipment in this final rule. Similarly, DOE notes that storage-type instantaneous water heaters are instantaneous water heaters that include a storage tank with a storage volume greater than or equal to 10 gallons. Other instantaneous water heaters may also have greater than or equal to 10 gallons but if that storage volume is included within the heat exchanger itself rather than a storage tank, they are not considered storage-type instantaneous water heaters.

C. Test Procedure

EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6314(a)) 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's current test procedures for CWH equipment are specified at 10 CFR 431.106 and provide mandatory methods for determining the thermal efficiency, standby loss, and UEF, as applicable, of CWH equipment.

As discussed in the May 2022 CWH ECS NOPR, DOE analyzed standards for residential-duty gas-fired storage water heaters in terms of UEF. However, on January 11, 2022, DOE published a test procedure NOPR for consumer water heaters and residential-duty commercial water heaters. 87 FR 1554. Subsequently, on July 14, 2022, DOE published a supplemental NOPR (“SNOPR”) (“the July 2022 SNOPR”) proposing to amend the test procedure for consumer water heaters and residential-duty commercial water heaters. 87 FR 42270. Finally, on June 21, 2023, DOE published the final rule (“the June 2023 TP Final Rule”) amending the test procedure for consumer water heaters and residential-duty commercial water heaters. 88 FR 40406.

“Thermal efficiency” for an instantaneous water heater, a storage water heater or a hot water supply boiler means the ratio of the heat transferred to the water flowing through the water heater to the amount of energy consumed by the water heater as measured during the thermal efficiency test procedure prescribed in this subpart. “Standby loss” means: (1) For electric commercial water heating equipment (not including commercial heat pump water heaters), the average hourly energy required to maintain the stored water temperature expressed as a percent per hour (%/h) of the heat content of the stored water above room temperature and determined in accordance with appendix B or D to subpart G of part 431 (as applicable), denoted by the term “S”; or (2) For gas-fired and oil-fired commercial water heating equipment, the average hourly energy required to maintain the stored water temperature expressed in British thermal units per hour (Btu/h) based on a 70 °F temperature differential between stored water and ambient room temperature and determined in accordance with appendix A or C to subpart G of part 431 (as applicable), denoted by the term “SL.” 10 CFR 431.102.

In response to the May 2022 CWH ECS NOPR, DOE received several comments relating to the proposed test procedure amendments. A.O. Smith stated that they do not anticipate any meaningful impact on future energy efficiency ratings for residential-duty commercial water heaters resulting from the proposed changes. (A.O. Smith, No. 22 at p. 5) However, DOE also received several comments stating that the proposed changes could cause impacts to the efficiency ratings of residential-duty commercial water heaters. In particular, AHRI expressed concern about changes to how effective storage volume is calculated, how internal tank temperature is determined, the ramifications of overheating on ratings, and the definition of demand response. (AHRI, No. 31 at p. 3) Bradford White commented that they were still assessing the potential impacts of the proposed test procedure amendments but noted that a few of the proposed changes could possibly greatly impact the efficiency ratings. (Bradford White, No. 23 at p. 7). Rheem similarly raised concerns that the test procedure amendments proposed in the July 2022 SNOPR could impact efficiency ratings for residential-duty water heaters, and encouraged DOE to issue the final rule of the consumer water heater test procedure at least 180 days prior to the issuance of a CWH energy conservation standards rule, as recommended by the Process Rule provisions in section (8)(d)(10) of appendix A to subpart C of part 430. (Rheem, No. 24 at p. 4) The Joint Gas Commenters stated that completing the residential-duty gas storage water heater test procedure rulemaking before completing the CWH standards rulemaking may be required by the Process Rule. (Joint Gas Commenters, No. 34 at p. 37)

In response, as discussed in the June 2023 TP Final Rule, DOE has concluded that the test procedure changes that were adopted in the June 2023 Final Rule will not alter the UEF ratings of residential-duty water heaters. 88 FR 40406, 40412. In addition, DOE notes that it has discretion to deviate from the procedures in appendix A in certain cases. DOE's rationale for deviating from the 180day requirement in appendix A is discussed in section II.C of this document.

D. 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. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially available products or in working prototypes to be technologically feasible.

See generally

10 CFR 431.4; sections 6(b)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430 subpart C (“Process Rule”).

After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety and (4) unique-pathway proprietary technologies.

See generally

10 CFR 431.4; 10 CFR part 430, subpart C, appendix A, sections 6(c)(3)(ii)-(v) and 7(b)(2)-(5). Section IV.B of this document discusses the results of the screening analysis for CWH equipment, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the final rule TSD.

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt an amended standard for a type or class of covered equipment, it determines the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such equipment. Accordingly, in the engineering analysis, DOE determined the max-tech improvements in energy efficiency for CWH equipment, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C.4 of this final rule and in chapter 5 of the final rule TSD.

E. Energy Savings

1. Determination of Savings

For each TSL, DOE projected energy savings from application of the TSL to CWH equipment purchased in the 30-year period that begins in the year of compliance with the amended standards (2026-2055 for gas-fired CWH equipment).

The savings are measured over the entire lifetime of CWH equipment 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 no-new-standards case represents a projection of energy consumption that reflects how the market for a product would likely evolve in the absence of amended energy conservation standards.

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

DOE used its national impact analysis (“NIA”) spreadsheet models to estimate national energy savings (“NES”) from potential amended standards for CWH equipment. The NIA spreadsheet model (described in section IV.H of this document) 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 reports NES in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. For natural gas, the primary energy savings are considered to be equal to the site energy savings because they are supplied to the user without transformation from another form of energy.

DOE also calculates NES in terms of FFC energy savings. The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels (

i.e.,

coal, natural gas, petroleum fuels), and thus presents a more complete picture of the impacts of energy conservation standards.

DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered equipment.

For more information on FFC energy savings, see section IV.H.3 of this document.

The FFC metric is discussed in DOE's statement of policy and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as amended at 77 FR 49701 (Aug. 17, 2012).

Natural gas and electricity were the energy types analyzed in the FFC calculations.

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. (

See

42 U.S.C. 6313(a)(6)(C)(i); 42 U.S.C. 6313(a)(6)(A)(ii)(II))

In setting a more stringent standard for ASHRAE equipment, DOE must have “clear and convincing evidence” that doing so “would result in significant additional conservation of energy” in addition to being technologically feasible and economically justified. 42 U.S.C. 6313(a)(6)(A)(ii)(II). This language indicates that Congress had intended for DOE to ensure that, in addition to the savings from the ASHRAE standards, DOE's standards would yield additional energy savings that are significant. In DOE's view, this statutory provision shares the requirement with the statutory provision applicable to covered products and non-ASHRAE equipment that “significant conservation of energy” must be present (42 U.S.C. 6295(o)(3)(B))—and supported with “clear and convincing evidence”—to permit DOE to set a more stringent requirement than ASHRAE.

The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.

For example, some covered products and equipment have most of their energy consumption occur during periods of peak energy demand. The impacts of this equipment on the energy infrastructure can be more pronounced than equipment with relatively constant demand. Accordingly, DOE evaluates the significance of energy savings on a case-by-case basis, taking into account the significance of cumulative FFC national energy savings, the cumulative FFC emissions reductions, and the need to confront the global climate crisis, among other factors.

The numeric threshold for determining the significance of energy savings established in a final rule published on February 14, 2020 (85 FR 8626, 8670) was subsequently eliminated in a final rule published on December 13, 2021 (86 FR 70892).

As stated, the standard levels adopted in this final rule are projected to result in national energy savings of 0.70 quads. Based on the amount of FFC savings, the corresponding reduction in emissions, and need to confront the global climate crisis, DOE has determined (based on the methodology described in section IV.E of this document and the analytical results presented in section V.B.3.a of this document) that there is clear and convincing evidence that the energy savings from the standard levels adopted in this final rule are “significant” within the meaning of 42 U.S.C. 6313(a)(6)(A)(ii)(II).

F. Economic Justification

1. Specific Criteria

As noted previously, EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i)) The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.

a. Economic Impact on Manufacturers and Consumers

EPCA requires DOE to consider the economic impact of a standard on manufacturers and the consumers of the products subject to the standard. (42 U.S.C. 6313(a)(6)(B)(I) and (C)(i)) In determining the impacts of potential amended standards on manufacturers, DOE conducts an MIA, as discussed in section IV.J of this document. For the MIA, DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include: (1) INPV, which values the industry on the basis of expected future cash flows; (2) cash flows by year; (3) changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers (manufacturer subgroups), including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers.

For individual consumers, measures of economic impact include the changes in LCC and PBP associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national NPV of the economic impacts applicable to a particular rulemaking. DOE also evaluates the 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 CWH equipment 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. 6313(a)(6)(B)(ii)(II); 42 U.S.C. 6313(a)(6)(C)(i)) DOE conducts this comparison in its LCC and PBP analysis.

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

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

The LCC savings for the considered efficiency levels are calculated relative to the no-new-standards case that reflects projected market trends in the absence of new or amended standards. DOE identifies the percentage of consumers estimated to receive LCC savings or experience an LCC increase, in addition to the average LCC savings associated with a particular standard level. DOE's LCC and PBP analysis is discussed in further detail in section IV.F of this document.

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. 6313(a)(6)(B)(ii)(III)) As discussed in section IV.H of this document and chapter 10 of the final rule TSD, DOE uses the NIA spreadsheet models to project national energy savings.

d. Lessening of Utility or Performance of Products

In establishing classes of equipment, and in evaluating design options and the impact of potential standard levels, DOE must consider any lessening of the utility or performance of the considered equipment likely to result from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) Based on data available to DOE, the standards in this document would not reduce the utility or performance of the products under consideration in this rulemaking. As discussed in section IV.A.2.b of this document, DOE considered whether different venting technologies should be considered a necessary feature.

Although the standards in this final rule would effectively eliminate non-condensing technology (and associated venting), DOE has recently published a final interpretive rule that returns to the previous and long-standing interpretation (in effect prior to the January 15, 2021 final interpretive rule), under which the technology used to supply heated air or hot water is not a performance-related “feature” that provides a distinct utility under EPCA. 86 FR 73947 (Dec. 29, 2021). Therefore, for the purpose of the analysis conducted for this rulemaking, DOE has determined that it is not prohibited from setting energy conservation standards that preclude non-condensing technology and did not analyze separate equipment classes for non-condensing and condensing CWH equipment in this final rule. A more detailed explanation of DOE's determination may be found in section IV.A.2 of this document.

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 standard. (

See

42 U.S.C. 6313(a)(6)(B)(ii)(V)) To assist the Department of Justice (“DOJ”) in making such a determination, DOE transmitted copies of its proposed rule and the NOPR TSD to the Attorney General for review, with a request that the DOJ provide its determination on this issue. In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for CWH equipment are unlikely to have a significant adverse impact on competition. DOE is publishing the Attorney General's assessment at the end of this final rule.

f. Need for National Energy Conservation

DOE also considers the need for national energy and water conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)(VI)) The energy savings from the adopted 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 of this document.

DOE maintains that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The adopted standards 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. As part of the analysis of the need for national energy and water conservation, DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K of this document; the estimated emissions impacts are reported in section V.B.6 of this document.

DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this document. DOE emphasizes that the SC-GHG analysis presented in this final rule and TSD was performed in support of the cost-benefit analyses required by Executive Order (“E.O.”) 12866, and is provided to inform the public of the impacts of emissions reductions resulting from this rule. The SC-GHG estimates were not factored into DOE's EPCA analysis of the need for national energy and water conservation.

As discussed in section IV.L of this document, for the purpose of complying with the requirements of E.O. 12866, DOE also estimates the economic value of emissions reductions resulting from the considered TSLs. DOE calculates this estimate using a measure of the social cost (“SC”) of each pollutant (

e.g.,

SC-CO

). Although this estimate is calculated for the purpose of complying with E.O. 12866, the Seventh Circuit Court of Appeals confirmed in 2016 that DOE's consideration of the social cost of carbon in energy conservation standards rulemakings is permissible under EPCA.

Zero Zone

Dept of Energy,

832 F.3d 654, 678 (7th Cir. 2016).

g. Other Factors

In determining whether an energy conservation standard is economically justified, DOE may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII) and (C)(i)) DOE did not consider other factors for this document.

2. Rebuttable Presumption

EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE's LCC and PBP analyses generate values used to calculate the effects that potential amended energy conservation standards would have on the PBP for consumers. These analyses include, but are not limited to, the 3-year PBP 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. 6313(a)(6)(B)(ii) and 42 U.S.C. 6313(a)(6)(C)(i). The results of this analysis serve as the basis for DOE's evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section V.B.1.c of this document.

G. Revisions to Notes in Regulatory Text

In the May 2022 CWH ECS NOPR, DOE proposed to modify the three notes to the table of energy conservation standards in 10 CFR 431.110. 87 FR 30610, 30626-30627. First, DOE proposed to modify the note to the table of energy conservation standards denoted by subscript “a” to replace the term “nameplate input rate” with the term “rated input.” DOE noted that this change ensures consistency in nomenclature throughout DOE's regulations for CWH equipment.

Id.

DOE also proposed in the May 2022 CWH ECS NOPR to remove the note to the table of energy conservation standards denoted by subscript “b.” This note clarifies the compliance date for energy conservation standards for hot water supply boilers with capacity less than 10 gallons. However, the note is no longer needed because the specific compliance date for hot water supply boilers with less than 10 gallons of storage is well in the past, with all such equipment being required to meet the standards in the table in 10 CFR 431.110 since October 21, 2005.

Id.

In the May 2022 CWH ECS NOPR, DOE also proposed to modify the note to the table of energy conservation standards denoted by subscript “c,” which establishes design requirements for water heaters and hot water supply boilers having more than 140 gallons of storage capacity that do not meet the standby loss standard. DOE proposed to replace the phrase “fire damper” with the phrase “flue damper,” because “flue damper” was more consistent with commonly used terminology and likely the intended meaning, and that “fire damper” was a typographical error. 87 FR 30610, 30626-30627. This revised footnote, new footnote b on Table 1 to 10 CFR 431.110(a), was inadvertently omitted in the May 2022 CWH ECS NOPR. DOE did not intend to remove this footnote and is retaining that footnote in this final rule.

Finally, in the May 2022 CWH ECS NOPR, DOE proposed to add a footnote to Table 1 at 10 CFR 431.110(a) (new footnote c) to clarify that the compliance date for energy conservation standards for electric instantaneous water heaters is January 1, 1994. 87 FR 30610, 306728. As discussed in section III.B.3 of this document, DOE is codifying standards for electric instantaneous water heaters that were originally set by EPCA but were inadvertently omitted in DOE's regulations at 10 CFR 431.110.

In response to the May 2022 CWH ECS NOPR, Bradford White stated that they support DOE's decision not to change the requirements for a model's rated input. (Bradford White, No. 23 at p. 8) WM Technologies and Patterson-Kelley also indicated support for using the term “rated input”, as long as the method to determine this value is unchanged. They also encouraged DOE to maintain the “b” and “c” subscripts for posterity to maintain chronological information. (WM Technologies, No. 25 at p. 7; Patterson-Kelley No. 26 at p. 5) In response, DOE notes that the Electronic Code of Federal Regulations (eCFR)

allows users to access historical versions of the CFR by using the “Timeline” or “Go to Date” functions when viewing a page of the CFR. Therefore, because chronological information about changes to the CFR remain available to the public, DOE does not consider it necessary to retain these notes in the current version of the CFR.

The eCFR is available at

ecfr.gov.

In footnote b(1), DOE is amending the text to refer to the existing definition of R-value in § 431.102, rather than refer directly to industry standards in this note. This does not change the standards regarding standby loss, or the thermal insulation requirement as detailed in this note, but improves consistency and prevents future discrepancies between § 431.102 and § 431.110. DOE is adopting the changes to notes “b” and “c” as proposed in the May 2022 CWH ECS NOPR, with this editorial revision.

H. Certification, Compliance, and Enforcement Issues

In the withdrawn May 2016 CWH ECS NOPR, DOE proposed to add requirements to its certification, compliance, and enforcement regulations at 10 CFR 429.44 that the rated value of storage volume must equal the mean of the measured storage volume of the units in the sample. 81 FR 34440, 34458 (May 31, 2016). Additionally, in the withdrawn May 2016 CWH ECS NOPR, DOE proposed changes to the equations for maximum standby losses that would be consistent with the proposed changes to DOE's certification, compliance, and enforcement regulations. 81 FR 34440, 34458-34459. In the May 2022 CWH ECS NOPR, DOE explained that after considering comments from stakeholders related to this topic, it decided not to propose changes to the requirements regarding certification of storage volume or the related changes to the equations for maximum standby loss. 87 FR 30610, 30628.

Bock and Bradford White indicated support for DOE's proposal not to change the requirements regarding certification of storage volume for storage-type water heaters. (Bock, No. 20 at p. 1; Bradford White, No. 23 at p. 8) After considering the comments, DOE is not adopting any changes to the requirements regarding certification of storage volume in this final rule.

Additionally, in response to the May 2022 CWH ECS NOPR, Rheem recommended that the certification criteria at 10 CFR 429.44(c)(2) be amended to require manufacturers to state whether a basic model is a “storage-type instantaneous water heater.” Rheem also recommended that DOE should publish an example certification template. (Rheem, No. 24 at p. 3) In response, DOE notes that manufacturers of commercial gas-fired and oil-fired instantaneous water heaters and hot water supply boilers with storage capacity greater than or equal to 10 gallons are already required to certify whether the water heater

includes a storage tank with a storage volume greater than or equal to 10 gallons. 10 CFR 429.44(c)(2)(iv). Such units that include a storage tank with a storage volume greater than or equal to 10 gallons would meet DOE's definition of storage-type water heaters as set out at 10 CFR 431.102.

Lastly, in the May 2022 CWH ECS NOPR, DOE stated that it was not proposing to establish equipment-specific certification requirements for electric instantaneous water heaters, but may propose to establish certification requirements for electric instantaneous water heaters in future rulemakings. 87 FR 30610, 30628. DOE did not receive any comments related to this topic and is not establishing certification requirements specific to electric instantaneous water heaters in this final rule.

IV. Methodology and Discussion of Related Comments

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

In overview, DOE used several analytical tools to estimate the impact of the standards considered in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended or new energy conservation standards. The NIA uses a second spreadsheet set that provides shipments forecasts and calculates NES and NPV resulting from potential new or amended energy conservation standards.

These spreadsheet tools are available on the DOE website for this rulemaking:

www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=36.

Additionally, DOE used output from the latest version of the Energy Information Administration's (“EIA's”)

Annual Energy Outlook

(“

AEO”

) for the emissions and utility impact analyses.

DOE uses a third spreadsheet tool, the Government Regulatory Impact Model (“GRIM”), to assess the financial impacts of potential new or amended standards on manufacturers.

A. Market and Technology Assessment

For the market and technology assessment for CWH equipment, DOE gathered information in the market and technology assessment that provides an overall picture of the market for the equipment concerned, including the purpose of the equipment, the industry structure, manufacturers, market characteristics, and technologies used in the equipment. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this rulemaking include the following: (1) a determination of the scope of the rulemaking and equipment classes, (2) manufacturers and industry structure, (3) types and quantities of CWH equipment sold, (4) existing efficiency programs, and (5) technologies that could improve the energy efficiency of CWH equipment. The key findings of DOE's market assessment are summarized in the following sections. See chapter 3 of the final rule TSD for further discussion of the market and technology assessment.

1. Definitions

EPCA includes the following categories of CWH equipment as covered industrial equipment: storage water heaters, instantaneous water heaters, and unfired hot water storage tanks. EPCA defines a “storage water heater” as a water heater that heats and stores water internally at a thermostatically-controlled temperature for use on demand. This term does not include units that heat with an input rating of 4,000 Btu per hour or more per gallon of stored water. EPCA defines an “instantaneous water heater” as a water heater that heats with an input rating of at least 4,000 Btu per hour per gallon of stored water. Lastly, EPCA defines an “unfired hot water storage tank” as a tank that is used to store water that is heated external to the tank. (42 U.S.C. 6311(12)(A)-(C))

DOE first codified the following more specific definitions for CWH equipment at 10 CFR 431.102 in the October 2004 direct final rule. 69 FR 61974, 61983. Several of these definitions were subsequently amended in the November 2016 CWH TP final rule. 81 FR 79261, 79287-79288 (Nov. 10, 2016).

Specifically, DOE now defines “hot water supply boiler” in 10 CFR 431.102 as a packaged boiler that is industrial equipment and that (1) has an input rating from 300,000 Btu/h to 12,500,000 Btu/h and of at least 4,000 Btu/h per gallon of stored water; (2) is suitable for heating potable water; and (3) meets either or both of the following conditions: (i) it has the temperature and pressure controls necessary for heating potable water for purposes other than space heating; or (ii) the manufacturer's product literature, product markings, product marketing, or product installation and operation instructions indicate that the boiler's intended uses include heating potable water for purposes other than space heating.

DOE also defines an “instantaneous water heater” in 10 CFR 431.102 as a water heater that uses gas, oil, or electricity, including: (1) gas-fired instantaneous water heaters with a rated input both greater than 200,000 Btu/h and not less than 4,000 Btu/h per gallon of stored water; (2) oil-fired instantaneous water heaters with a rated input both greater than 210,000 Btu/h and not less than 4,000 Btu/h per gallon of stored water; and (3) electric instantaneous water heaters with a rated input both greater than 12 kW and not less than 4,000 Btu/h per gallon of stored water.

DOE defines a “storage water heater” in 10 CFR 431.102 as a water heater that uses gas, oil, or electricity to heat and store water within the appliance at a thermostatically-controlled temperature for delivery on demand including: (1) gas-fired storage water heaters with a rated input both greater than 75,000 Btu/h and less than 4,000 Btu/h per gallon of stored water; (2) oil-fired storage water heaters with a rated input both greater than 105,000 Btu/h and less than 4,000 Btu/h per gallon of stored water; and (3) electric storage water heaters with a rated input both greater than 12 kW and less than 4,000 Btu/h per gallon of stored water.

Lastly, DOE defines an “unfired hot water storage tank” in 10 CFR 431.102 as a tank used to store water that is heated externally, and that is industrial equipment.

Relating to these definitions, Rheem recommended that the definition of “storage-type instantaneous water heater” at 10 CFR 431.102 should be based on “rated storage volume” and that the certification criteria at 10 CFR 429.44 be amended to be based on “measured storage volume.” (Rheem, No. 24 at p. 3) DOE agrees that basing the categorizations of storage-type instantaneous water heaters based on the rated storage volume is consistent with the criteria DOE uses to identify such equipment. Therefore, DOE is amending the definition of “storage-type instantaneous water heater” at 10 CFR 431.102 to clarify that the storage volume refers to the rated storage volume. However, as discussed in section III.H of this document, DOE has decided not to amend its requirements regarding certification of storage volume of commercial water heaters (including storage-type instantaneous water heaters) in this final rule. Rheem also suggested that DOE's requirements for non-storage-type commercial gas-fired instantaneous water heaters at 10 CFR 429.44(C)(2)(iv) be changed so that manufacturers are required to state whether a calculation-based method

was used to determine the “rated storage volume” instead of the “measured storage volume.” (Rheem, No. 24 at p. 3) Consistent with its decision not to address certification requirements in this final rule, DOE is not making such clarification in this final rule. However, DOE may consider a clarification to this certification language in a separate rulemaking.

2. Equipment Classes

When evaluating and establishing energy conservation standards, DOE divides covered equipment into equipment classes by the type of energy used. DOE will also establish separate equipment classes if a group of equipment has a capacity or other performance-related feature that other equipment within such type do not have and such feature justifies a different standard. (42 U.S.C. 6295(q); 42 U.S.C. 6316(a)) In determining whether a performance-related feature justifies a different standard, DOE considers such factors as the utility to the consumers of the feature and other factors DOE determines are appropriate.

CWH equipment classes are divided based on the energy source, equipment category (

i.e.,

storage vs. instantaneous and hot water supply boilers), and size (

i.e.,

input capacity and rated storage volume). Unfired hot water storage tanks are also included as a separate equipment class, but as discussed in section III.B.2 of this rulemaking, were considered as part of a separate proceeding and therefore were not analyzed for this final rule. Table IV.1 shows the current equipment classes and energy conservation standards for CWH equipment other than residential-duty commercial water heaters, and Table IV.2 shows DOE's current equipment classes and energy conservation standards for residential-duty commercial water heaters.

Consumer water heaters are separately covered products that are distributed in commerce for personal use or consumption by individuals, as opposed to commercial applications. These products generally have lower input ratings than commercial water heaters. Energy conservation standards for consumer water heaters can be found at 10 CFR 430.32(d), and the test procedure for these products can be found at appendix E to subpart B of 10 CFR part 430. Residential-duty commercial water heaters are commercial water heater that meet additional criteria, including using only single-phase electrical power (if they use electricity) and not being designed to heat water at temperatures greater than 180 °F, as discussed in the footnotes to Table IV.2 of this document.

Table IV.1—Current Equipment Classes and Energy Conservation Standards for CWH Equipment Except for Residential-Duty Commercial Water Heaters

Equipment class

Size

Energy conservation standards *

Minimum thermal

efficiency

(equipment

manufactured

on and after

October 9,

2015)** ***

(%)

Maximum standby

loss (equipment

manufactured

on and after

October 29,

2003)** ‡

Electric storage water heaters

All

N/A

0.30 + 27/V

(%/h).

Gas-fired storage water heaters

≤155,000 Btu/h

>155,000 Btu/h

Q/800 + 110(V

)

1/2

(Btu/h).

Q/800 + 110(V

)

1/2

(Btu/h).

Oil-fired storage water heaters

≤155,000 Btu/h

>155,000 Btu/h

*** 80

Q/800 + 110(V

)

1/2

(Btu/h).

Q/800 + 110(V

)

1/2

(Btu/h).

Electric instantaneous water heaters ‡

<10 gal

≥10 gal

N/A.

2.30 + 67/V

(%/h).

Gas-fired instantaneous water heaters and hot water supply boilers

<10 gal

≥10 gal

N/A.

Q/800 + 110(V

)

1/2

(Btu/h).

Oil-fired instantaneous water heater and hot water supply boilers

<10 gal

≥10 gal

N/A.

Q/800 + 110(V

)

1/2

(Btu/h).

Minimum thermal insulation.

Unfired hot water storage tank

All

R-12.5.

* V

is the measured storage volume, and V

is the rated volume, both in gallons. Q is the nameplate input rate in Btu/h.

‡ Energy conservation standards for electric instantaneous water heaters are included in EPCA. In this rule, DOE codifies these standards for electric instantaneous water heaters in its regulations at 10 CFR 431.110. Further discussion of standards for electric instantaneous water heaters is included in section III.B.3 of this document.

Table IV.2—Current Equipment Classes and Energy Conservation Standards for Residential-Duty Commercial Water Heaters

Equipment

Specification *

Draw

pattern **

Uniform energy factor

Gas-fired storage

>75 kBtu/h and

≤105 kBtu/h and

≤120 gal and

≤180 °F

Very Small

Low

Medium

High

0.2674 − (0.0009 × V

0.5362 − (0.0012 × V

0.6002 − (0.0011 × V

0.6597 − (0.0009 × V

Oil-fired storage

>105 kBtu/h and

≤140 kBtu/h and

≤120 gal and

≤180 °F

Very Small

Low

Medium

High

0.2932 − (0.0015 × V

0.5596 − (0.0018 × V

0.6194 − (0.0016 × V

0.6740 − (0.0013 × V

Electric instantaneous

>12 kW and

≤58.6 kW and

≤2 gal and

≤180 °F

Very Small

Low

Medium

High

0.80

0.80.

* To be classified as a residential-duty water heater, a commercial water heater must, if requiring electricity, use single-phase external power supply; and not be designed to heat water at temperatures greater than 180 °F.

** Draw pattern is a classification of hot water use of a consumer water heater or residential-duty commercial water heater, based upon the first-hour rating. The draw pattern is determined using the

Uniform Test Method for Measuring the Energy Consumption of Water Heaters

in appendix E to subpart B of 10 CFR part 430.

The following subsections include further discussion of comments received on equipment classes and DOE's approach to equipment classes for this final rule.

a. Storage-Type Instantaneous Water Heaters

Based on a review of equipment on the market, DOE has found that gas-fired storage-type instantaneous water heaters are very similar to gas-fired storage water heaters, but with a higher ratio of input rating to tank volume. This higher input-volume ratio is achieved with a relatively larger heat exchanger paired with a relatively smaller tank. Increasing either the input capacity or storage volume increases the hot water delivery capacity of the water heater. However, through a review of product literature, DOE did not identify any significant design differences that would warrant different energy conservation standard levels (for either thermal efficiency or standby loss) between models in these two equipment classes. Therefore, DOE grouped the two equipment classes together in the May 2022 CWH ECS NOPR analyses and proposed the same standard levels for each equipment class. 87 FR 30610, 30631-30632.

Barton Day Law questioned whether gas-fired storage water heaters and storage-type instantaneous water heaters can be categorized as the same product within the analysis, and whether the same numbers can be used to represent both product types. (Barton Day Law, Public Meeting Transcript No. 13 at p. 23) However, Barton Day Law did not provide any specific reasons that these products are functionally different. In contrast, the Joint Advocates agreed with DOE's methodology for analyzing equipment types and stated that it was appropriate to analyze commercial gas-fired storage and storage-type instantaneous water heaters together due to the commonalities in design and shared features. (The Joint Advocates, No. 29 at pp. 1, 2)

As noted, DOE has found that gas-fired storage-type instantaneous water heaters have a higher ratio of input rating to tank volume than gas-fired storage water heaters (

i.e.,

the ratio exceeds the 4,000 Btu/h per gallon of stored water threshold included in the definition of instantaneous water heaters at 10 CFR 431.102). However, through a review of product literature, neither DOE nor any commenters identified any significant design differences that would warrant different energy conservation standard levels (for either thermal efficiency or standby loss) between models in these two equipment classes. Therefore, DOE continued to group the two equipment classes together in this final rule.

The standard levels considered in this document reflect the similarity of these types of equipment, with the same standard levels considered for both storage water heaters and storage-type instantaneous water heaters.

b. Venting for Gas-Fired Water Heating Equipment

In response to the May 2022 CWH ECS NOPR, Patterson-Kelley and WM Technologies stated that increasing efficiencies beyond the capabilities of Category I Venting as defined in the National Fuel Gas Code NFPA 54 will result in the unavailability of products that use category I venting. (Patterson-Kelley, No. 26 at pp. 1-2; WM Technologies, No. 25 at p. 2) Patterson-Kelley explained that converting to Category I appliances may be costly and application prohibitive in establishments in densely populated areas. (Patterson-Kelley, No. 26 at p. 2) The Joint Gas Commenters stated that DOE's treatment of venting issues raised by condensing-level standards is unreasonable and contrary to law. Specifically, the Joint Gas Commenters described that the imposition of standards that non-condensing products cannot achieve would raise significant practical, economic, and legal issues. Cumulatively, they said, inaccurate assumptions undermine the May 2022 CWH ECS NOPR's economic evaluation and its estimate of the market impacts of the proposed standards. (The Joint Gas Commenters, No. 34 at p. 3)

Similarly, the Joint Gas Commenters argued that venting type is indeed a performance feature and pointed to the January 2021 Final Rule for Residential Furnaces and Commercial Water Heaters that agreed with this logic but has since been withdrawn. (Joint Gas Commenters, No. 34 at p. 10) Patterson-Kelley and WM Technologies agreed and commented that they maintain the same justification per 42 U.S.C. 6295(q)(l) documented in the Final Interpretive Rule provided in 86 FR 4776 applies to fuel-fired commercial water heaters. As such, Patterson-Kelley and WM Technologies also continue to support DOE's January 2021 acceptance of the Gas Industry Petition to recognize non-condensing as a product feature per EPCA. (WM Technologies, No. 25 at p. 2; Patterson-Kelly, No. 26 at pp. 1-2) WM Technologies believes that 42 U.S.C. 6313(a)(6)(B)(II)(aa) prohibits the elimination of non-condensing water heaters. (WM Technologies, No. 25 at p.

1) The Joint Gas Commenters further claimed that DOE should recognize the compatibility of a product with the existing atmospheric venting systems is a performance-related feature that would require separate standards for condensing and non-condensing products if standards specific to condensing products are justified. (The Joint Gas Commenters, No. 34 at p. 11) They explained that DOE is precluded by EPCA from amending standards in such a way that renders existing venting systems unusable by eliminating products consistent with the venting type. (Joint Gas Commenters, No. 34 at p. 10) The Joint Gas Commenters stated that Congress understood that buildings are designed to accommodate standard installations and sought to ensure that standards would not deprive consumers of the utility and convenience of products that can be installed without the need to modify the existing buildings to accommodate them.

Id.

The Joint Gas Commenters drew parallels between the question of vent-type consistency and other instances in which DOE avoided setting standards that would make it impossible for consumers to install a space constrained product.

Id.

The Joint Gas Commenters requested that any final rule in this proceeding include a written finding that interested persons have established by a preponderance of the evidence that the proposed standards are likely to result in the unavailability in the United States of commercial water heaters with “performance characteristics (including reliability, features, sizes, capacities, and volumes) that are substantially the same as those generally available in the United States” on the date any such rule issues. (Joint Gas Commenter

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