Energy Conservation Program: Energy Conservation Standards for Oil, Electric, and Weatherized Gas Consumer Furnaces

Federal RegisterNov 29, 2023

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DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2021-BT-STD-0031]

RIN 1904-AF19

Energy Conservation Program: Energy Conservation Standards for Oil, Electric, and Weatherized Gas Consumer Furnaces

AGENCY:

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

ACTION:

Notification of proposed determination and request for comment.

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 non-weatherized oil-fired furnaces (“NWOFs”), mobile home oil-fired furnaces (“MHOFs”), weatherized gas furnaces (“WGFs”), weatherized oil-fired furnaces (“WOFs”), and electric furnaces (“EFs”). EPCA also requires the U.S. Department of Energy (“DOE”) to periodically review its existing standards to determine whether more-stringent, amended standards would be technologically feasible and economically justified, and would result in significant energy savings. In this notification of proposed determination (“NOPD”), DOE has initially determined that amended energy conservation standards for EFs, NWOFs, MHOFs, WOFs, and WGFs do not need to be amended. DOE requests comment on this proposed determination and the associated analyses and results.

DATES:

Meeting:

DOE will hold a public meeting webinar upon request. Please request a public meeting webinar no later than December 13, 2023. See section VI, “Public Participation,” for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.

Comments:

Written comments and information are requested and will be accepted on or before January 29, 2024.

ADDRESSES:

Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at

www.regulations.gov

under docket number EERE-2021-BT-STD-0031. Follow the instructions for submitting comments.

Alternatively, interested persons may submit comments, identified by docket number EERE-2021-BT-STD-0031 and/or RIN 1904-AF19, by any of the following methods:

Email: OEWGFurnaces2021STD0031@ee.doe.gov.

Include the docket number EERE-2021-BT-STD-0031 and/or RIN 1904-AF19 in the subject line of the message.

Postal Mail:

Appliance and Equipment Standards Program, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 287-1445. If possible, please submit all items on a compact disc (“CD”), in which case it is not necessary to include printed copies.

Hand Delivery/Courier:

Appliance and Equipment Standards Program, U.S. Department of Energy, Building Technologies Office, 950 L'Enfant Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202) 287-1445. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

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

Docket:

The docket, which includes

Federal Register

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

www.regulations.gov.

All documents in the docket are listed in the

www.regulations.gov

index. However, 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-0031.

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

www.regulations.gov.

FOR FURTHER INFORMATION 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. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 586-5827.

Email: Eric.Stas@hq.doe.gov.

For further information on how to submit a comment or review other public comments and the docket contact the Appliance and Equipment Standards Program staff at (202) 287-1445 or by email:

ApplianceStandardsQuestions@ee.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Determination

II. Introduction

A. Authority

B. Background

1. Current Standards

2. History of Standards Rulemakings for Consumer Furnaces

C. Deviation From Appendix A

III. General Discussion and Rationale

A. General Comments

1. Comments Supporting Amended Standards

2. Comments Opposing Amended Standards

3. Standby Mode and Off Mode

B. Scope of Coverage and Product Classes

C. Test Procedure

D. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

E. Cost-Effectiveness

F. Energy Savings

1. Determination of Savings

2. Significance of Savings

G. Additional Considerations

IV. Methodology and Discussion of Related Comments

A. Market and Technology Assessment

1. Scope of Coverage

a. Electric Furnaces

b. Weatherized Oil-Fired Furnaces

c. Fuel-Fired Heat Pumps

2. Technology Options

3. Screening Analysis

a. Screened-Out Technologies

b. Remaining Technologies

4. Product Classes

B. Engineering Analysis

1. Efficiency Analysis

a. Baseline Efficiency

b. Intermediate Efficiency Levels

c. Maximum Technology (“Max-Tech”) Efficiency Levels

d. Summary of Efficiency Levels Analyzed

2. Cost Analysis

a. Teardown Analysis

b. Cost Estimation Method

3. Cost-Efficiency Results

C. Markups Analysis

D. Energy Use Analysis

E. Life-Cycle Cost and Payback Period Analysis

1. Product Cost

2. Installation Cost

3. Annual Energy Consumption

4. Energy Prices

5. Maintenance and Repair Costs

6. Product Lifetime

7. Discount Rates

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

9. Payback Period Analysis

F. Shipments Analysis

G. National Impact Analysis

1. Product Efficiency Trends

2. National Energy Savings

3. Net Present Value Analysis

V. Analytical Results and Conclusions

A. Economic Impacts on Individual Consumers

B. National Impact Analysis

1. Significance of Energy Savings

2. Net Present Value of Consumer Costs and Benefits

C. Proposed Determination

1. Technological Feasibility

2. Cost-Effectiveness

3. Significant Conservation of Energy

4. Further Considerations

5. Summary

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866, 13563, and 14094

B. Review Under the Regulatory Flexibility Act

C. Review Under the Paperwork Reduction Act of 1995

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

VII. Public Participation

A. Participation in the Public Meeting Webinar

B. Submission of Comments

C. Issues on Which DOE Seeks Comment

VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Determination

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

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

established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products include oil, electric, and weatherized gas consumer furnaces, the subject of this NOPD. (42 U.S.C. 6292(a)(5))

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 B was redesignated Part A.

Pursuant to EPCA, DOE is required to review the existing energy conservation standards for covered consumer products, at a minimum, every six years after issuance of any final rule establishing or amending a standard (42 U.S.C. 6295(m)(1)). DOE is conducting this review of the energy conservation standards for oil, electric, and weatherized gas consumer furnaces under EPCA's six-year-lookback authority. (

Id.

) Pursuant to that statutory provision, DOE must publish either a notification of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking (“NOPR”) including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (

Id.

) For the reasons explained in the paragraphs that follow and elsewhere in this document, DOE has tentatively determined it appropriate to issue this NOPD for the consumer furnaces subject to this rulemaking.

For this proposed determination, DOE analyzed oil, electric, and weatherized gas consumer furnaces subject to energy conservation standards specified in 10 CFR 430.32(e)(1).

DOE first analyzed the technological feasibility of more energy-efficient oil, electric, and weatherized gas furnaces and determined that amended standards for electric furnaces are not technologically feasible. For those oil and weatherized gas furnaces for which DOE determined higher standards to be technologically feasible, DOE evaluated whether higher standards would be cost-effective by conducting life-cycle cost (“LCC”) and payback period (“PBP”) analyses. In addition, DOE estimated energy savings that would result from potential energy conservation standards by conducting a national impacts analysis (“NIA”), in which it estimated the net present value (“NPV”) of the total costs and benefits experienced by consumers.

Based on the results of the analyses, including the consideration of impacts on manufacturers and product availability as summarized in section V of this document, DOE has tentatively determined that current standards for oil, electric, and weatherized gas furnaces do not need to be amended.

II. Introduction

The following section briefly discusses the statutory authority underlying this proposed determination, as well as some of the historical background relevant to the establishment of energy conservation standards for oil, electric, and weatherized gas furnaces.

A. Authority

Among other things, EPCA, Public Law 94-163 (42 U.S.C. 6291-6317, as codified) authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles. These products include consumer furnaces, the subject of this document. (42 U.S.C. 6292(a)(5)) EPCA prescribed the initial energy conservation standards for these products (42 U.S.C. 6295(f)(1)-(2)), and directs DOE to conduct future rulemakings to determine whether to amend these standards. (42 U.S.C. 6295(f)(4) and 42 U.S.C. 6295(m)(1))

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. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).

Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for consumer furnaces appear at title 10 of the Code of Federal Regulations (“CFR”) part 430, subpart B, appendix N.

Federal energy conservation requirements for covered products established under EPCA generally supersede state laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of federal preemption in limited

circumstances for particular state laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (42 U.S.C. 6297(d))

Pursuant to the amendments to EPCA contained in the Energy Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) DOE's current test procedures for oil, electric, and weatherized gas furnaces address standby mode and off mode energy use. DOE's energy conservation standards address standby mode and off mode energy use only for non-weatherized oil-fired furnaces (including mobile home furnaces) and electric furnaces. 10 CFR 430.32(e)(1)(iii). In this analysis, DOE considers such energy use in its determination of whether energy conservation standards need to be amended.

EPCA also requires that DOE must periodically review its already established energy conservation standards for a covered product no later than six years from the issuance of a final rule establishing or amending a standard for a covered product. (42 U.S.C. 6295(m)) This six-year-lookback provision requires that DOE publish either a notice of determination that standards do not need to be amended or a NOPR, including new proposed standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) EPCA further provides that, not later than 3 years after the issuance of a final determination not to amend standards, DOE must publish either a notification of determination that standards for the product do not need to be amended, or a NOPR including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(3)(B)) DOE must make the analysis on which a determination is based publicly available and provide an opportunity for written comment. (42 U.S.C. 6295(m)(2))

A determination that amended standards are not needed must be based on consideration of whether amended standards will result in significant conservation of energy, are technologically feasible, and are cost-effective. (42 U.S.C. 6295(m)(1)(A) and 42 U.S.C. 6295(n)(2)) Additionally, any new or amended energy conservation standard prescribed by the Secretary for any type (or class) of covered product shall be designed to achieve the maximum improvement in energy efficiency which the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Among the factors DOE considers in evaluating whether a proposed standard level is economically justified includes whether the proposed standard at that level is cost-effective, as defined under 42 U.S.C. 6295(o)(2)(B)(i)(II). Under 42 U.S.C. 6295(o)(2)(B)(i)(II), an evaluation of cost-effectiveness requires DOE to consider savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard. (42 U.S.C. 6295(n)(2) and 42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE is publishing this NOPD in satisfaction of the six-year-lookback review requirement in EPCA.

B. Background

1. Current Standards

DOE most recently completed a review of its consumer furnace standards in a direct final rule (“DFR”) published in the

Federal Register

on June 27, 2011 (“June 2011 DFR”), through which DOE amended the existing energy conservation standards for non-weatherized gas furnaces (“NWGFs”), mobile home gas furnaces (“MHGFs”), weatherized gas furnaces (“WGFs”), NWOF, MHOFs, and weatherized oil furnaces (“WOFs”).

76 FR 37408. The June 2011 DFR amended the existing energy conservation standards for NWGFs, MHGFs, and NWOFs (which are specified in terms of annual fuel utilization efficiency “AFUE”), and amended the compliance date (but left the existing standards in place) for WGFs. The June 2011 DFR also established electrical standby mode and off mode standards for NWGFs, MHGFs, NWOFs, MHOFs, and electric furnaces. As a result of a settlement agreement approved by the Court of Appeals for the D.C. Circuit, the standards established by the June 2011 DFR for NWGFs and MHGFs did not go into effect.

However, the court order left in place the standards for WGFs, NWOFs, MHOFs, WOFs, and electric furnaces, which are the subject of this NOPD.

This rulemaking was undertaken pursuant to the voluntary remand in

State of New York, et al.

Department of Energy, et al.,

08-311-ag(L); 08-312-ag(con) (2d Cir. Filed Jan. 17, 2008).

DOE confirmed the standards and compliance dates promulgated in the June 2011 DFR in a notice of effective date and compliance dates published in the

Federal Register

on October 31, 2011 (“October 2011 notice”). 76 FR 67037. After publication of the October 2011 notice, the American Public Gas Association (“APGA”) sued DOE to invalidate the rule as it pertained to NWGFs and MHGFs. Petition for Review,

American Public Gas Association, et al.

Department of Energy, et al.,

No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). On April 24, 2014, the Court granted a motion that approved a settlement agreement that was reached between DOE, APGA, and the various intervenors in the case, in which DOE agreed to a remand of the non-weatherized gas furnace and mobile home gas furnace portions of the June 2011 DFR in order to conduct further notice-and-comment rulemaking. Accordingly, the Court's order vacated the June 2011 DFR in part (

i.e.,

those portions relating to non-weatherized gas furnaces and mobile home gas furnaces) and remanded to the agency for further rulemaking. NWGFs and MHGFs are being addressed in a separate rulemaking proceeding (

see

Docket No. EERE-2014-BT-STD-0031).

The AFUE standards currently applicable to all consumer furnaces, including the product classes for which DOE is conducting analyses in this NOPD, are set forth in DOE's regulations at 10 CFR 430.32(e)(1)(ii). Table II.1 presents the currently applicable standards for oil, electric, and weatherized gas furnaces and the date on which compliance with each such standard was required.

Table II.1—Federal AFUE Standards for Oil, Electric, and Weatherized Gas Furnaces

Product class

AFUE

(percent)

Compliance date

Non-weatherized oil-fired furnaces (not including mobile home furnaces)

May 1, 2013.

Mobile home oil-fired furnaces

September 1, 1990.

Weatherized gas furnaces

January 1, 2015.

Weatherized oil-fired furnaces

January 1, 1992.

Electric furnaces

January 1, 1992.

Table II.2—Federal Standby Mode and Off Mode Standards for Oil and Electric Furnaces

Product class

Maximum

standby mode

electrical

power

consumption,

W,SB

(watts)

Maximum

off mode

electrical power

consumption,

W,OFF

(watts)

Compliance date

Non-weatherized oil-fired furnaces (including mobile home furnaces)

May 1, 2013.

Electric furnaces

May 1, 2013.

2. History of Standards Rulemakings for Consumer Furnaces

Amendments to EPCA in the National Appliance Energy Conservation Act of 1987 (“NAECA”; Pub. L. 100-12) established EPCA's original energy conservation standards for furnaces, consisting of the minimum AFUE levels for mobile home furnaces and for all other furnaces except “small” gas furnaces. (42 U.S.C. 6295(f)(1)-(2)) The original standards established a minimum AFUE of 75 percent for mobile home furnaces and 78 percent for all other furnaces. Pursuant to authority conferred under 42 U.S.C. 6295(f)(1)(B), DOE subsequently adopted a mandatory minimum AFUE level for “small” furnaces through a final rule published in the

Federal Register

on November 17, 1989 (“the November 1989 Final Rule”). 54 FR 47916. The standards established by NAECA and the November 1989 Final Rule for “small” gas furnaces are still in effect for MHOFs, WOFs, and EFs.

Pursuant to EPCA, DOE was required to conduct two rounds of rulemaking to consider amended energy conservation standards for all consumer furnaces, and an additional round of rulemaking for mobile home furnaces. (42 U.S.C. 6295(f)(4)(A), (B), and (C)) In satisfaction of the first round of amended standards rulemaking under 42 U.S.C. 6295(f)(4)(B), on November 19, 2007, DOE published in the

Federal Register

a final rule (“November 2007 Final Rule”) that revised the standards for most furnaces but left them in place for two product classes (

i.e.,

MHOFs and WOFs).

The standards amended in the November 2007 Final Rule were to apply to furnaces manufactured or imported on and after November 19, 2015. 72 FR 65136 (Nov. 19, 2007). The energy conservation standards in the November 2007 Final Rule consist of a minimum AFUE level for each of the six classes of furnaces.

Id.

at 72 FR 65169. Based on the market analysis for the November 2007 Final Rule and the standards established under that rule, the November 2007 Final Rule eliminated the distinction between furnaces based on their certified input capacity, (

i.e.,

the standards applicable to “small” furnaces were established at the same level and as part of their appropriate class of furnace generally).

Id.

The November 2007 Final Rule adopted amended standards for “oil-fired furnaces” generally. However, on July 28, 2008, DOE published a technical amendment final rule in the

Federal Register

that clarified that the amended standards adopted in the November 2007 Final Rule for oil-fired furnaces did not apply to mobile home oil-fired furnaces and weatherized oil-fired furnaces; rather they were only applicable for non-weatherized oil-fired furnaces. 73 FR 43611, 43613 (July 28, 2008).

Following DOE's adoption of the November 2007 Final Rule, several parties jointly sued DOE in the United States Court of Appeals for the Second Circuit (“Second Circuit”) to invalidate the rule. Petition for Review,

State of New York, et al.

Department of Energy, et al.,

Nos. 08-0311-ag(L); 08-0312-ag(con) (2d Cir. filed Jan. 17, 2008). The petitioners asserted that the standards for furnaces promulgated in the November 2007 Final Rule did not reflect the “maximum improvement in energy efficiency” that “is technologically feasible and economically justified” under 42 U.S.C. 6295(o)(2)(A). On April 16, 2009, DOE filed with the Court a motion for voluntary remand that the petitioners did not oppose. The motion did not state that the November 2007 Final Rule would be vacated, but it indicated that DOE would revisit its initial conclusions outlined in the November 2007 Final Rule in a subsequent rulemaking action. DOE also agreed that the final rule in that subsequent rulemaking action would address both regional standards for furnaces and the effects of alternate standards on natural gas prices. The Second Circuit granted DOE's motion on April 21, 2009. DOE notes that the Second Circuit's order did not vacate the energy conservation standards set forth in the November 2007 Final Rule, and during the remand, the standards went into effect as originally scheduled.

On June 27, 2011, DOE published a direct final rule (“DFR”) in the

Federal Register

(“June 2011 DFR”) revising the energy conservation standards for residential furnaces pursuant to the voluntary remand in

State of New York, et al.

Department of Energy, et al.

76 FR 37408. In the June 2011 DFR, DOE considered the amendment of the same six product classes considered in the November 2007 Final Rule analysis plus electric furnaces. As discussed previously, the June 2011 DFR amended the existing AFUE energy conservation standards for NWGFs, MHGFs, and NWOFs and amended the compliance date (but left the existing standards in place) for WGFs. The June 2011 DFR also established electrical standby mode and off mode energy conservation standards for NWGFs, MHGFs, NWOFs, MHOFs, and EFs. DOE confirmed the standards and compliance dates promulgated in the June 2011 DFR in a notice of effective date and compliance

dates published in the

Federal Register

on October 31, 2011 (“October 2011 Notice”). 76 FR 67037. The November 2007 Final Rule and the June 2011 DFR represented the first and the second rounds, respectively, of the two rulemakings required under 42 U.S.C. 6295(f)(4)(B)-(C) to consider amending the energy conservation standards for consumer furnaces.

The June 2011 DFR and October 2011 Notice of effective date and compliance dates amended, in relevant part, the AFUE energy conservation standards and compliance dates for three product classes of consumer furnaces (

i.e.,

NWGFs, MHGFs, and NWOFs).

The existing AFUE standards were left in place for three classes of consumer furnaces (

i.e.,

WOFs, MHOFs, and EFs). For WGFs, the existing standard was left in place, but the compliance date was amended. Electrical standby mode and off mode energy consumption standards were established for non-weatherized gas and oil-fired furnaces (including mobile home furnaces) and EFs. Compliance with the energy conservation standards promulgated in the June 2011 DFR was to be required on May 1, 2013, for non-weatherized gas furnaces, mobile home gas furnaces, and non-weatherized oil furnaces, and on January 1, 2015, for weatherized furnaces. 76 FR 37408, 37547-37548 (June 27, 2011); 76 FR 67037, 67051 (Oct. 31, 2011). The amended energy conservation standards and compliance dates in the June 2011 DFR superseded those standards and compliance dates promulgated by the November 2007 Final Rule for NWGFs, MHGFs, and NWOFs. Similarly, the amended compliance date for WGFs in the June 2011 DFR superseded the compliance date in the November 2007 Final Rule.

For NWGFs and MHGFs, the standards were amended to a level of 80-percent AFUE nationally with a more-stringent 90-percent AFUE requirement in the Northern Region. For NWOF furnaces, the standard was amended to 83-percent AFUE nationally. 76 FR 37408, 37410 (June 27, 2011).

Following DOE's adoption of the June 2011 DFR, the American Public Gas Association (“APGA”) filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) to invalidate the DOE rule as it pertained to NWGFs and MHGFs. Petition for Review,

American Public Gas Association, et al.

Department of Energy, et al.,

No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). The parties to the litigation engaged in settlement negotiations, which ultimately led to filing of an unopposed motion on March 11, 2014, seeking to vacate DOE's rule in part and to remand to the agency for further rulemaking.

On April 24, 2014, the Court granted the motion and ordered that the standards established for NWGFs and MHGFs be vacated and remanded to DOE for further rulemaking. As a result, the standards established by the June 2011 DFR for NWGFs and MHGFs did not go into effect, and, thus, required compliance with the standards established in the November 2007 Final Rule for these products began on November 19, 2015. As stated previously, the AFUE standards for WOFs, MHOFs, and EFs were unchanged, and as such, the original standards for those product classes remain in effect. Further, the amended standard for NWOFs was not subject to the Court order and went into effect as specified in the June 2011 DFR. The AFUE standards currently applicable to all residential furnaces,

including the five product classes for which DOE is analyzing amended standards in this NOPD, are set forth in DOE's regulations at 10 CFR 430.32(e)(1)(ii) and (iii).

DOE divides consumer furnaces into seven classes for the purpose of setting energy conservation standards: (1) NWGFs, (2) MHGFs, (3) WGFs, (4) NWOFs, (5) MHOFs, (6) WOFs, and (7) electric furnaces. 10 CFR 430.32(e)(1)(ii). As noted previously, DOE has been analyzing amended standards for NWGFs and MHGFs as part of a separate, ongoing rulemaking (

see

Docket No. EERE-2014-BT-STD-0031).

On January 28, 2022, DOE published in the

Federal Register

a request for information (“January 2022 RFI”) to initiate a review to determine whether any new or amended standards would satisfy the relevant requirements of EPCA for a new or amended energy conservation standard for oil, electric, and weatherized gas consumer furnaces. 87 FR 4513. On November 29, 2022, DOE published in the

Federal Register

a notice of availability of a preliminary technical support document (“TSD”) (“the November 2022 Preliminary Analysis”) that presented initial technical analyses in the following areas: (1) market and technology; (2) screening; (3) engineering; (4) markups to determine product price; (5) energy use; (6) life-cycle cost (“LCC”) and payback period (“PBP”); and (7) national impacts. 87 FR 73259. DOE held a public meeting webinar on December 19, 2022 in order to receive public input and information related to the November 2022 Preliminary Analysis for the subject furnaces.

DOE received comments in response to the November 2022 Preliminary Analysis from the interested parties listed in Table II.3.

Table II.3—November 2022 Preliminary Analysis Public Comments

Commenter(s)

Reference in this NOPD

Comment No. in the docket

Commenter type

Air-Conditioning, Heating, & Refrigeration Institute

AHRI

Manufacturer Trade Association.

American Gas Association

AGA

* 28

Utility Trade Association.

American Gas Association, American Public Gas Association, National Propane Gas Association, Spire Inc., Spire Missouri Inc

Joint Commenters

Utilities and Utility Trade Associations.

Appliance Standards Awareness Project, American Council for an Energy-Efficiency Economy, Consumer Federation of America, Natural Resources Defense Council

Joint Advocates

Efficiency Advocacy Organizations.

Johnson Controls International

JCI

Manufacturer.

Lennox International

Lennox

Manufacturer.

New York State Energy Research and Development Authority

NYSERDA

State Agency.

Northwest Energy Efficiency Alliance

NEEA

Efficiency Advocacy Organization.

* Comment No. 28 corresponds to the transcript for the webinar held on December 19, 2022. These commenters made oral comments during the public meeting that are summarized and discussed in this document.

Any oral comments provided during the webinar that are not substantively the same as those presented in written comments are summarized and cited separately. throughout this NOPD. A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record.

The parenthetical reference provides a reference for information located in the docket. (Docket No. EERE-2021-BT-STD-0031, 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

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 regarding the pre-NOPR and NOPR stages for an energy conservation standards rulemaking.

Section 6(a)(2) of the Process Rule states that if DOE determines it is appropriate to proceed with a rulemaking, for the preliminary stages of a rulemaking to issue or amend an energy conservation standard, DOE will undertake a framework document and preliminary analysis, or an advance notice of proposed rulemaking. While DOE published a preliminary analysis for this rulemaking (

see

87 FR 73529 (Nov. 29, 2022)), DOE did not publish a framework document in conjunction with the preliminary analysis. DOE notes, however, that chapter 2 of the preliminary technical support document that accompanied the preliminary analysis—titled

Analytical Framework, Comments from Interested Parties, and DOE Responses

—describes the general analytical framework that DOE uses in evaluating and developing potential amended energy conservation standards.

Further, DOE provided an overview of the analysis it would use to evaluate new or amended energy conservation standards in the January 2022 RFI (

see

87 FR 4513 (Jan. 28, 2022)). As such, publication of a separate Framework Document would be largely redundant of previously published documents.

The preliminary technical support document is available at

www.regulations.gov/document/EERE-2021-BT-STD-0031-0011.

III. General Discussion and Rationale

DOE developed this proposed determination after a review of the market for the subject furnaces, including product listings in the DOE Compliance Certification Database (“CCD”) database.

DOE also considered comments, data, and information from interested parties that represent a variety of interests. This NOPD addresses issues raised by these commenters.

U.S. Department of Energy Compliance Certification Database. (Available at:

www.regulations.doe.gov/certification-data/

) (Last accessed Sept. 1, 2023).

A. General Comments

1. Comments Supporting Amended Standards

In response to the November 2022 Preliminary Analysis, several commenters expressed their support of amended energy conservation standards for oil, electric, and weatherized gas consumer furnaces.

The Joint Advocates stated that DOE's preliminary analysis demonstrates that condensing-level standards for NWOFs are technologically feasible and could result in significant consumer savings. The Joint Advocates further commented that fuel regulations in many northern States have helped to reduce the sulfur content in heating oil, adding that this results in condensing NWOFs becoming technologically feasible and commercially available. (Joint Advocates, No. 22 at p. 1) The Joint Advocates pointed out that Adams Manufacturing commented on the January 2022 RFI in support of a 95-percent AFUE standard for NWOFs.

(Joint Advocates, No. 22 at p. 2)

The comment from Adams Manufacturing, Co. in response to the January 2022 RFI can be found at:

www.regulations.gov/comment/EERE-2021-BT-STD-0031-0010.

NYSERDA stated support for DOE increasing the furnace standards, particularly for oil furnaces and for standby and off modes. NYSERDA argued that there are cost-effective and beneficial energy and associated greenhouse gas savings available through improvements to electric, weatherized gas, and particularly oil furnaces. (NYSERDA, No. 19 at p. 1)

As part of the rulemaking process, DOE carefully considers the benefits and burdens of amended energy conservation standards to determine whether such standards are the maximum standard levels that are technologically feasible and economically justified and would conserve a significant amount of energy, as required by EPCA (

see

42 U.S.C. 6295(o)(2)-(3)). Section IV of this document outlines DOE's approach to analyzing various potential amended energy conservation standard levels, and section V of this document provides the results of those analyses, as well as a detailed explanation of DOE's weighing of the benefits and burdens. Based upon its analysis and consideration of the relevant statutory criteria, DOE is proposing not to amend the existing standards for oil, electric, and weatherized gas furnaces at this time. The rationale for DOE's proposed determination is discussed in detail in section V of this document.

2. Comments Opposing Amended Standards

In response to the November 2022 Preliminary Analysis, several commenters expressed opposition to amended energy conservation standards for oil, electric, and weatherized gas consumer furnaces.

The Joint Commenters stated that they are guided by the congressional mandate that appliance efficiency standards should not impose unjustified costs on consumers or deprive consumers of gas products that are suitable for their needs. The Joint Commenters stated that such standards are not authorized by statute and would be harmful to fuel gas providers and the consumers they serve. (Joint Commenters, No. 24 at p. 2) AHRI commented that DOE should adopt a no-new-standards determination for mobile home oil-fired and non-weatherized oil-fired furnaces, given the burden placed on manufacturers to meet more-stringent standards that will provide insubstantial energy savings. (AHRI, No. 23 at pp. 3-4)

AHRI also commented that DOE should adopt a no-new-standards determination for weatherized gas-fired furnaces. The commenter argued that DOE should adopt the same determination for consumer weatherized gas furnaces as was done for commercial warm air furnaces, given that they are technologically similar. AHRI and Lennox commented that a move to an AFUE greater than 90 percent for weatherized gas furnaces is unjustified, adding that EL 1 showed a 9.1-year payback period and 45.8 percent of consumers experiencing a net cost. (AHRI, No. 23 at p. 3; Lennox, No. 26 at p. 2)

Lennox urged DOE to consider the cumulative regulatory burden of all ongoing rulemakings on furnace manufacturers. (Lennox, No. 26 at p. 9) The commenter also stated that weatherized gas, non-weatherized oil, and electric furnaces are niche products and total less than 10 percent of the consumer furnace market. More specifically, Lennox stated that weatherized gas furnaces comprise approximately 7 percent of the market, and non-weatherized oil and electric furnaces each account for less than 1 percent of the market. (Lennox, No. 26 at p. 1) Lennox acknowledged that

technologies exist that could advance the efficiency of gas and oil furnaces included in the preliminary TSD. However, Lennox stated that consumer cost and utility issues render more-stringent standards unjustified for the subject oil and gas furnaces. In particular, for weatherized gas products, Lennox recommended that DOE find that a no-new-standards determination is warranted for these product categories. (

Id.

at p. 6)

Lennox stated that the market adoption of condensing weatherized furnaces has been minimal. Lennox estimated that condensing weatherized furnaces are at less than 0.12 percent of the weatherized gas market and that there is no indication of growth in the market. Therefore, Lennox surmised that condensing efficiency levels would not be appropriate for DOE to consider as a basis for a national efficiency standard for weatherized gas furnaces and that DOE should not seek to mandate WGF condensing technology. (Lennox, No. 26 at p. 7)

Lennox stated that many consumers have been adversely impacted by the ongoing COVID pandemic and high inflation, particularly consumers who might already be struggling to afford new furnace equipment. Accordingly, Lennox argued that DOE increasing furnace equipment costs with new efficiency standards is not economically justified at this juncture. (Lennox, No. 26 at p. 2)

In response, as discussed in section II.A of this document, DOE must periodically review its already established energy conservation standards for consumer furnaces no later than six years from the issuance of a final rule establishing or amending a standard for consumer furnaces. This six-year-lookback provision requires that DOE publish either a determination that standards do not need to be amended or a NOPR, including new proposed standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) As part of the rulemaking process, DOE carefully considers the benefits and burdens of amended standards to determine whether the amended standards are the maximum standard levels that are technologically feasible and economically justified and would conserve a significant amount of energy, as required by EPCA (

see

42 U.S.C. 6295(o)(2)-(3)). Section IV of this document outlines DOE's approach to analyzing various potential amended standard levels, and section V of this document provides the results of those analyses. Section V also provides a detailed explanation of DOE's weighing of the benefits and burdens and the rationale for proposing not to amend standards for oil, electric, and weatherized gas furnaces at this time. Regarding DOE's consideration of cumulative regulatory burden, DOE is not proposing to amend the energy conservation standards for oil, electric, and weatherized gas furnaces, so, therefore, the Department does not expect this rulemaking to contribute to the cumulative regulatory burden of manufactures.

3. Standby Mode and Off Mode

As discussed in section II.A of this document, EPCA requires any final rule for new or amended energy conservation standards promulgated after July 1, 2010 to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3))

“Standby mode” and “off mode” energy use are defined in the DOE test procedure for residential furnaces and boilers (

i.e.,

“Uniform Test Method for Measuring the Energy Consumption of Consumer Furnaces Other Than Boilers,” 10 CFR part 430, subpart B, appendix N; “appendix N”). In that test procedure, DOE defines “standby mode” as any mode in which the furnace is connected to a mains power source and offers one or more of the following space heating functions that may persist: (a) To facilitate the activation of other modes (including activation or deactivation of active mode) by remote switch (including thermostat or remote control), internal or external sensors, and/or timer; and (b) Continuous functions, including information or status displays or sensor based functions. 10 CFR part 430, subpart B, appendix N, section 2. “Off mode” for consumer furnaces is defined as a mode in which the furnace is connected to a mains power source and is not providing any active mode or standby mode function, and where the mode may persist for an indefinite time. The existence of an off switch in off position (a disconnected circuit) is included within the classification of off mode. 10 CFR part 430, subpart B, appendix N, section 2. An “off switch” is defined as the switch on the furnace that, when activated, results in a measurable change in energy consumption between the standby and off modes. 10 CFR part 430, subpart B, appendix N, section 2. Currently, the standby mode and off mode energy conservation standards for NWOFs and EFs are outlined in 10 CFR 430.32 (e)(1)(iii) and are shown in Table II.2 of this document. Compliance with the Federal standards for standby mode and off mode electricity consumption for NWOFs, MHOFs, and EFs, as measured by standby power consumption in watts (“P

W,SB

”) and off mode power consumption in watts (“P

W,OFF

”), was required on May 1, 2013.

In the November 2022 Preliminary Analysis, DOE analyzed amended standby/off mode standards for NWOFs, MHOFs and EFs. DOE did not consider amended standby mode and off mode standards for WGFs and WOFs, because DOE has previously concluded in a direct final rule published in the

Federal Register

on June 27, 2011 that these products are packaged with either an air conditioner or heat pump and that the standards for those products, specified in terms of power consumption in watts and Seasonal Energy Efficiency Ratio (“SEER”), already account for the standby mode and off mode energy consumption for these classes of furnaces. 76 FR 37408, 37433. Based on market analysis conducted for the November 2022 Preliminary Analysis, DOE tentatively concludes that WGFs and WOFs continue to be packaged with an air conditioner or heat pump.

In the analysis for the November 2022 Preliminary Analysis, DOE established the baseline for NWOFs, MHOFs, and EFs as the current Federal standby mode and off mode standards (see Table II.2). DOE also defined and identified baseline components as those that consumed the most electricity during standby mode and off mode operation. For intermediate efficiency levels, DOE utilized a design-option approach to identify design options that could be applied to the baseline design to reduce standby mode and off mode energy consumption. Above the baseline efficiency level, DOE implemented design options in the order of incremental energy savings relative to baseline until all available design options were employed (

i.e.,

at a max-tech level). DOE identified two design options between the baseline and max-tech design that were used as the basis for intermediate standby mode and off mode design options. Specifically, DOE replaced the linear transformer found in models at the baseline with a low-loss transformer (“LL-LTX”) for the first intermediate efficiency level and replaced the linear power supply found in baseline models with a switching mode power supply (“SMPS”) for the second intermediate efficiency level.

The max-tech standby mode and off mode efficiency level in the November 2022 Preliminary Analysis was based on a combination of the two design options that were analyzed for the intermediate efficiency levels. To reach max-tech, DOE analyzed using an LL-LTX in combination with an SMPS to reach the

minimum standby mode or off mode power consumption (without eliminating other consumer- or performance-related electronic features). For this design option, a transformer is only needed to step down the voltage for the thermostat because the SMPS is able to step down the voltage for the other components of the furnace. As such, a smaller, lower-cost LL-LTX is used at the max-tech level, as compared to the LL-LTX used at EL 1 (

i.e.,

the first intermediate efficiency level).

In response to the November 2022 Preliminary Analysis, Lennox commented that it is not aware of new or improved technology options regarding standby mode and off mode energy use beyond those previously identified that significantly impact the range of efficiencies for the product covered in this rulemaking. (Lennox, No. 26 at p. 4) However, Lennox also pointed out that consumers, utilities, third-party aggregators, and regulators through programs such as EPA ENERGY STAR are looking to further deploy features that enable installation verification, ongoing monitoring, diagnostics, and prognostic features that can save significantly more energy than

de minimis

standby power limits achieve. (

Id.

)

AHRI and Lennox stated that the following functions and components utilize the furnace's power supply in the on, standby, and off modes: indoor and outdoor air conditioner (“AC”)/heat pump (“HP”) Motors (“ECM”); AC/HP outdoor control board; heat pump defrost control; indoor and outdoor electronic expansion valve; heat pump reversing valve; zoning systems; UV germicidal light; humidifier; communicating controls that aid in proper commissioning, system performance monitoring and reporting, identification of faults, and consumer interface; temperature sensors; air pressure sensors; refrigerant pressure sensors; gas pressure sensors; and proprietary diagnostic-prognostic sensors. (AHRI, No. 23, at p. 2; Lennox, No. 26 at p. 5) Lennox further added that thermostats utilize the furnace's power supply in the on, standby, and off modes. (Lennox, No. 26 at p. 5) AHRI added that integrated furnace controls, gas valves, and combustion air inducers utilize the furnace power in on, standby, and off modes. (AHRI, No. 23, at p. 2) AHRI and Lennox commented that additional safety-related sensors are being considered for furnaces that could further render more-stringent standby power limits impractical, including refrigerant leak detection mitigation sensors and CO sensors. (Lennox, No. 26 at p. 5; AHRI, No. 23, at p. 2) Lennox also added CO

sensors to the list of potential future diagnostic features and stated that this list is likely to grow over time. (Lennox, No. 26 at p. 5)

Lennox commented that increased stringency in standards for standby power levels would inhibit other innovations that save energy and benefit consumers. Lennox further stated that increased stringency would also inhibit implementation of additional safety features. (Lennox, No. 26 at p. 2) In addition, Lennox stated that the energy savings for standby mode and off mode standards for all of the products considered in this rulemaking do not meet the DOE criteria of significant energy savings. (

Id.

) AHRI commented that DOE should consider the standby mode and off mode requirements of higher technology features when evaluating the standby mode and off mode efficiency levels. (AHRI, No. 23 at p. 3) AHRI and Lennox commented that overly stringent standby mode and off mode standards would inhibit the integration of smart communicating controls, installation and diagnostic features, and zoning that can enable much larger energy savings than the minor savings achieved by the standby power limit itself. Lennox stated that these advanced features have entered the market for fully featured communicating products and require more standby mode and off mode energy than the baseline products. (Lennox, No. 26 at p. 4; AHRI, No. 23 at p. 3)

Lennox and AHRI agreed that standby mode and off mode power consumption for WGFs that are part of a single-package air conditioner or heat pump are captured in the P

W,OFF

and SEER metrics for these products. (Lennox, No. 26 at p. 3; AHRI, No. 23 at p. 4) Lennox stated that the current DOE metrics capture the standby energy regardless of the mode of operation. (Lennox, No. 26 at p. 3) Lennox commented that it is not aware of seasonal differences in standby mode and off mode energy consumption. Further, Lennox commented that a condensing standard for WGF may force additional factory- or field-installed components to prevent freezing (

i.e.,

heat tape or other) of the condensate system, which may increase standby energy consumption in heating mode. (Lennox, No. 26 at p. 3)

AHRI commented that an 8.5 W maximum standard for standby mode and off mode power does not allow for the addition of the aforementioned communication, diagnostic, and safety features. (AHRI, No. 23 at p. 2) AHRI recommended that DOE re-evaluate the necessary power draw for communication and safety-related features and the max-tech level based upon the use of a 20 VA LL-LTX transformer and SMPS to meet these utilities. (

Id.

at p. 3) AHRI commented that a 20 VA transformer cannot supply the needs of all interconnected controls for all types of systems. AHRI added that if the transformer cannot power the necessary internal functions, then DOE must reconsider the proposed 8.5-watt standby power limit and whether the 11-watt baseline is sufficient. AHRI further commented that if DOE must go higher than 11 watts, DOE may need to make allowance in future test procedures so that the effects of safety and other control measures do not count against the proposed 11-watt limit. (

Id.

)

AHRI commented that an incorrectly set minimum standard will drive connected products such as thermostats, WIFI controls,

etc.

to use add-on power supplies and cause an additional economic burden on consumers, asserting that this would defeat the purpose of the proposed maximum watts limit. AHRI commented that there are already auxiliary power supplies on the market for thermostats and other devices. (

Id.

at p. 3)

NYSERDA commented that the technology options for standby mode that rely on switching mode power supply with a low-loss linear transformer have been considered by DOE for several years and are anticipated to be transferable across furnace types, including the oil and electric furnaces addressed in this rulemaking. NYSERDA explained that as switch-mode power supply and low-loss linear transformers become the standard for much of the furnace market, it becomes more feasible for those technologies to apply to oil and electric furnaces as well. (NYSERDA, No. 19 at p. 2)

NYSERDA recommended that DOE propose the max-tech levels for standby mode and off mode at the NOPR stage. NYSERDA explained that, as this rulemaking is finalized, the broader furnace manufacturing industry is anticipated to evolve toward technology for standby mode that relies on switching mode power supply with a low-loss linear transformer. (NYSERDA, No. 19 at p. 2)

After considering this feedback, DOE understands that typical and baseline levels of power consumption of consumer furnaces in standby mode or off mode are likely to increase in the future as manufacturers continue to build increasingly complex controls into consumer furnaces, and that many of the likely changes are related to features such as safety sensors or to other improvements in functionality that

would provide utility for the consumer. Based on these comments, DOE has found that there is some degree of uncertainty that exists with respect to the appropriateness of the standby mode/off mode efficiency levels analyzed in the November 2022 Preliminary Analysis—particularly for products that are in development but also possibly in some products already on the market. There is also uncertainty related to the potential impacts that standby mode and off mode power consumption standards could have on overall system energy consumption and consumer utility. Consequently, DOE has determined that it lacks the necessary information to amend the standby mode and off mode standards at this time. Particularly, since some of the functionalities at issue could have significant safety or energy-savings benefits, DOE does not wish to stymie such developments through well-intentioned but ultimately counterproductive standby mode/off mode standards. Instead, DOE needs to have a better understanding of the legitimate power consumption needs of the subject furnaces when operating in standby mode and off mode. Although DOE remains cognizant of the relevant requirements of 42 U.S.C. 6295(gg)(3), DOE has concluded that it does not currently have the requisite evidence to support amended standby mode and off mode standards under the applicable statutory criteria in EPCA. Therefore, DOE is not proposing to amend the standby mode/off mode power standards for NWOFs, MHOFs, and EFs this time, but instead, DOE will continue to investigate these issues and may consider such standards in a future rulemaking.

B. Scope of Coverage and Product Classes

This proposed determination covers certain product classes of consumer furnaces (

i.e.,

ones for oil, electric, and weatherized gas furnaces). A consumer “furnace” is defined as a product which utilizes only single-phase electric current, or single-phase electric current or DC current in conjunction with natural gas, propane, or home heating oil, and which—

(A) Is designed to be the principal heating source for the living space of a residence;

(B) Is not contained within the same cabinet with a central air conditioner whose rated cooling capacity is above 65,000 Btu per hour;

(C) Is an electric central furnace, electric boiler, forced-air central furnace, gravity central furnace, or low-pressure steam or hot water boiler; and

(D) Has a heat input rate of less than 300,000 Btu per hour for electric boilers and low-pressure steam or hot water boilers and less than 225,000 Btu per hour for forced-air central furnaces, gravity central furnaces, and electric central furnaces.

10 CFR 430.2. The scope of coverage is discussed in further detail in section IV.A.1 of this document.

When evaluating and establishing/amending energy conservation standards, DOE divides covered products into product classes by the type of energy used or by capacity or other performance-related features that justify differing standards. In making a determination whether a performance-related feature justifies a different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (42 U.S.C. 6295(q)) The product classes for this proposed determination are discussed in further detail in section IV.A.4 of this document.

C. Test Procedure

EPCA sets forth generally applicable criteria and procedures for DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to quantify the efficiency of their product and as the basis for certifying to DOE that their product complies with energy conservation standards and when making representations to the public regarding the energy use or efficiency of the product. (42 U.S.C. 6295(s) and 42 U.S.C. 6293(c)) Similarly, DOE must use these test procedures to determine whether the product complies with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) DOE's current energy conservation standards for consumer furnaces are expressed in terms of AFUE for all furnace product classes (

i.e.,

active mode) and, for NWOFs, MHOFs, and electric furnace product classes, also in terms of P

W,SB

and P

W,OFF

(

i.e.,

standby mode and off mode). (

See

10 CFR 430.32(e)(1))

The test procedure for determining AFUE, P

W,SB

, and P

W,OFF

is established at 10 CFR part 430, subpart B, appendix N. AFUE is an annualized fuel efficiency metric that accounts for fossil fuel consumption in active, standby, and off modes. P

W,SB

and P

W,OFF

are measurements of the standby mode and off mode electrical power consumption, respectively, in watts. The test procedure for consumer furnaces was last amended by a final rule published in the

Federal Register

on January 15, 2016 (“January 2016 TP Final Rule”). 81 FR 2628.

On March 13, 2023, DOE published in the

Federal Register

a test procedure final rule for consumer boilers, which are a type of furnace under EPCA (

see

42 U.S.C. 6291(23)) but are not included within the scope of this rulemaking (

see

section IV.A.1 of this document). 88 FR 15510. This test procedure final rule separated the test method for consumer boilers from the test method for other types of furnaces and moved the boilers test method to a new appendix EE to 10 CFR part 430, subpart B. Accordingly, it amended appendix N so as to remove provisions applicable only to boilers, but it did not materially change the test method for the oil, electric, and weatherized gas furnaces that are the subject of this rulemaking.

The revisions to the consumer furnaces test procedure in the January 2016 TP Final Rule included:

• Clarification of the electrical power term “PE”;

• Adoption of a smoke stick test for determining use of minimum default draft factors;

• Allowance for the measurement of condensate under steady-state conditions;

• Reference to manufacturer's installation and operation manual and clarifications for when that manual does not specify test set-up;

• Specification of duct-work requirements for units that are installed without a return duct;

• Specification of testing requirements for units with multi-position configurations; and

• Revision of the requirements regarding AFUE reporting precision.

81 FR 2628, 2629-2630 (Jan. 15, 2016).

The changes in the January 2016 TP Final Rule were mandatory for representations of furnace efficiency made on or after July 13, 2016. As such, the most current version of the test procedure (published in January 2016) has now been in place for several years.

D. Technological Feasibility

1. General

In evaluating potential amendments to energy conservation standards, 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 determination. 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. 10 CFR part 430, subpart C, appendix A, sections 6(b)(3)(i) and 7(b)(1).

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. 10 CFR part 430, subpart C, appendix A, sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5). Section IV.A.3 of this document discusses the results of the screening analysis for oil, electric, and weatherized gas furnaces, particularly the design options DOE considered, those it screened out, and those that are the basis for the potential standards considered in this proposed determination.

2. Maximum Technologically Feasible Levels

As when DOE proposes to adopt a new or amended standard for a type or class of covered product, in this NOPD analysis, DOE must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for the product under consideration. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for oil, electric, and weatherized gas furnaces, 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 analysis are described in section IV.B.1.c of this proposed determination.

E. Cost-Effectiveness

In making a determination of whether amended energy conservation standards are needed, EPCA requires DOE to consider the cost-effectiveness of amended standards in the context of the savings in operating costs throughout the estimated average life of the covered product compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(m)(1)(A); 42 U.S.C. 6295(n)(2)(C); 42 U.S.C. 6295(o)(2)(B)(i)(II))

In determining cost-effectiveness of potential amended standards for oil, electric, and weatherized gas furnaces, DOE conducted LCC and PBP analyses that estimate the costs and benefits to users from those potential standards. To further inform DOE's consideration of the cost-effectiveness of potential amended standards, DOE considered the NPV of total costs and benefits estimated as part of the NIA. The inputs for determining the NPV of the total costs and benefits experienced by consumers are: (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. The results of this analysis are discussed in section V.C.2 of this NOPD.

F. Energy Savings

1. Determination of Savings

For each efficiency level (“EL”) evaluated, DOE projected anticipated energy savings from application of the EL to the oil, electric, and weatherized gas furnace purchased in the 30-year period that begins in the assumed year of compliance with the potential standards (2030-2059). The savings are measured over the entire lifetime of the oil, electric, and weatherized gas furnaces purchased in the previous 30-year period. DOE quantified the energy savings attributable to each EL 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 used its NIA spreadsheet model to estimate national energy savings (“NES”) from potential amended or new standards for oil, electric, and weatherized gas furnaces. The NIA spreadsheet model (described in section IV.G 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. DOE also calculates NES in terms of full-fuel-cycle (“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 products or equipment. For more information on FFC energy savings, see section IV.G of this document.

The FFC metric is discussed in DOE's statement of policy and notice of policy amendment. 76 FR 51281 (August 18, 2011), as amended at 77 FR 49701 (August 17, 2012).

2. Significance of Savings

In determining whether amended standards are needed, DOE must consider whether such standards will result in significant conservation of energy. (42 U.S.C. 6295(m)(1)(A)) 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. The significance of energy savings is further discussed in section V.B.1 of this NOPD.

The numeric threshold for determining the significance of energy savings established in a final rule published in the

Federal Register

on February 14, 2020 (85 FR 8626, 8670-8672) was subsequently rescinded through a final rule published in the

Federal Register

on December 13, 2021 (86 FR 70892, 70901-70906).

G. Additional Considerations

Pursuant to EPCA, absent DOE publishing a notification of determination that energy conservation standards for the subject furnaces do not need to be amended, DOE must issue a NOPR that includes new proposed standards. (42 U.S.C. 6295(m)(1)(B)) The new proposed standards in any such NOPR must be based on the criteria established under 42 U.S.C. 6295(o) and follow the procedures established under 42 U.S.C. 6295(p). (42 U.S.C. 6295(m)(1)(B)) The criteria in 42 U.S.C. 6295(o) require that standards be designed to achieve the maximum improvement in energy efficiency, which the Secretary determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination 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 the products subject to the standard;

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

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

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

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

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

(7) Other factors the Secretary considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this proposed determination with regard to oil, electric, and weatherized gas furnaces. Separate subsections address each component of DOE's analyses. DOE used several analytical tools to estimate the impact of potential energy conservation standards. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential energy conservation standards. The NIA uses a second spreadsheet set that provides shipments projections and calculates NES and net present value of total consumer costs and savings expected to result from potential energy conservation standards. These spreadsheet tools are available on the website:

www.regulations.gov/docket/EERE-2021-BT-STD-0031.

The Joint Commenters stressed the importance of implementing the recommendations of the recent National Academies of Sciences, Engineering, and Medicine (“NAS”) report into all appliance rulemakings. Specifically, the Joint Commenters highlighted three recommendations from the report that they argued should be implemented in rulemakings impacting WGFs: (1) DOE should pay greater attention to the justification for the standards, adding that DOE should attempt to find significant failures of private markets or irrational behavior by consumers in the no-new-standards case to conclude that the standards are economically justified; (2) DOE should place greater emphasis on providing an argument for the plausibility and magnitude of any market failure related to the energy efficiency gap in DOE's analysis; and (3) DOE should give greater attention to a broader set of potential market failures on the supply side, further commenting that this would include not just how standards might reduce the number of competing firms but also how they might impact price discrimination, technological diffusion, and collusion. The Joint Commenters suggested DOE should address these recommendations before analyzing whether new efficiency standards are warranted. (Joint Commenters, No. 24 at pp. 2-3)

In response, DOE is addressing the recommendations of the NAS report in a separate rulemaking in parallel with other ongoing rulemakings, including this oil, electric, and weatherized gas furnace NOPD. As discussed in section V.C of this document, DOE is tentatively proposing that standards do not need to be amended, and the Department has made this tentative determination consistent with EPCA's requirements, including evaluation of economic justification of standards, and applicable Executive orders.

A. Market and Technology Assessment

DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly-available information. The subjects addressed in the market and technology assessment for this proposed determination include: (1) a determination of the scope and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of consumer furnaces. The key findings of DOE's market assessment are summarized in the following sections.

1. Scope of Coverage

In this analysis, DOE relied on the definition of a furnace in 10 CFR 430.2, which defines a consumer “furnace” as a product which utilizes only single-phase electric current, or single-phase electric current or DC current in conjunction with natural gas, propane, or home heating oil, and which—

(A) Is designed to be the principal heating source for the living space of a residence;

(B) Is not contained within the same cabinet with a central air conditioner whose rated cooling capacity is above 65,000 Btu per hour;

(C) Is an electric central furnace, electric boiler, forced-air central furnace, gravity central furnace, or low-pressure steam or hot water boiler; and

Any product meeting the definition of a “furnace” is included in DOE's scope of coverage. In the analysis for this NOPD, DOE focused only on oil, electric, and weatherized gas furnaces. Non-weatherized gas furnaces and mobile home gas furnaces are considered in a separate rulemaking.

See

Docket No. EERE-2014-BT-STD-0031 which can be accessed at

www.regulations.gov.

a. Electric Furnaces

A basic electric furnace comprises an electric resistance heating element and blower assembly. (Additionally, there are products that include electrically-powered heat pumps, but these are separately covered products not addressed here.) The electric resistance heating elements of electric furnaces are highly efficient, and the efficiency of these units already approaches 100 percent. DOE is unaware of any technology options that can improve the efficiency of electric furnaces, so DOE has tentatively determined that more-stringent standards for electric furnaces would not be technologically feasible. Therefore, DOE anticipates that the energy savings potential from amended standards for EFs would be minimal. Consequently, DOE did not consider amended AFUE standards for electric furnaces in the current analysis.

b. Weatherized Oil-Fired Furnaces

DOE is not aware of any WOFs on the market, and, therefore, DOE did not analyze amended standards for that product class. DOE has tentatively determined that because there are no WOFs on the market, there would be no potential energy savings from amended standards.

c. Fuel-Fired Heat Pumps

NEEA commented that DOE should consider fuel-fired heat pumps within the broader WGF product category by updating the definition of “central forced-air furnace” in the Code of Federal Regulations. (NEEA, No. 21 at p. 1) NEEA argued that fuel-fired heat

pumps with a heat input rate of less than 225,000 Btu per hour meet all the criteria in the EPCA definition for a residential “furnace” with the exception that the terms, “electric central furnace, electric boiler, forced-air central furnace, gravity central furnace, or low-pressure steam or hot water boiler” do not currently cover fuel-fired heat pumps. NEEA commented that DOE has the authority to change those definitions and stated that redefining “forced-air central furnace” would allow fuel-fired heat pumps to be regulated under the energy conservation standards for oil, electric, and weatherized gas consumer furnaces. (

Id.

at p. 2) Specifically, NEEA suggested that DOE should change the definition of “forced air central furnace” to a gas or oil burning furnace designed to supply heat through a system of ducts with air as the heating medium. The combustion of gas or oil generates heat that is either transferred to the air within a casing by conduction through heat exchange surfaces or utilized to run a refrigeration cycle that transfers heat to the air and is circulated through the duct system by means of a fan or blower. NEEA commented that this definition covers the two main fuel-fired heat pump technologies: fuel-fired absorption heat pumps and engine-driven heat pumps. (

Id.

) NEEA also commented that weatherized fuel-fired heat pumps should be considered as another technology option within the WGF product category. NEEA requested that DOE consider all possible technology options for gas-fired furnaces to be on an even playing field. (

Id.

at p. 3)

NEEA argued that fuel-fired heat pumps are designed to replace existing furnaces and boilers without the need to update existing infrastructure and to provide flexibility for decarbonized fuels. However, NEEA stated that fuel-fired heat pumps are not direct replacements for heat pumps, since the primary fuel sources are different. (NEEA, No. 21 at p. 3) NEEA commented that a 2020 case study

of a pre-commercial residential fuel-fired heat pump prepared for DOE showed that the system can achieve over 140-percent AFUE, and field demonstrations show 36-43 percent fuel savings compared to a condensing furnace and 46-50 percent fuel savings compared to a non-condensing furnace. (

Id.

) NEEA further commented that the 2020 case study showed that there is significant potential in the residential market for a reasonably priced, gas-fired absorption heat pump product. (

Id.

)

The case study, titled “Pre-Commercial Scale-Up of a Gas-Fired Absorption Heat Pump” is available at

www.osti.gov/biblio/1726247

(Last accessed June 14, 2023).

NEEA encouraged DOE to consider the building energy simulation and comparison to field-derived results for fuel-fired heat pumps, published by Purdue University in 2021.

NEEA commented that this report demonstrates that fuel-fired heat pumps provided the lowest operating cost and highest carbon emissions savings compared to furnaces, boilers, electric heat pumps, and various water heating options. NEEA commented that fuel-fired heat pumps provide the same primary heating function as conventional fuel-to-air furnaces with the potential for significant energy savings. (

Id.

)

The Purdue report, titled “Pathways to Decarbonization of Residential Heating,” is available at

docs.lib.purdue.edu/ihpbc/354/

(Last accessed June 14, 2023).

In response to the comments by NEEA, DOE notes that fuel-fired heat pumps do not meet the current definition of “furnace,” as they do not meet criteria (C) in the definition outlined in section IV.A of this document. As such, they were not considered in the scope of this analysis. Further, the current test procedure for consumer furnaces, as outlined in appendix N, does not include provisions for testing fuel-fired heat pumps. Therefore, DOE is not considering amending the consumer “furnace” definition to include these products at this time. However, DOE will continue to investigate fuel-fired heat pumps and may evaluate test procedure provisions for related to fuel-fired heat pumps in a future rulemaking.

2. Technology Options

DOE has identified the following components as technology options that have the potential to improve the AFUE rating of oil and weatherized gas furnaces:

• Condensing secondary heat exchanger

• Heat exchanger improvements

○ Increased heat exchanger surface area

○ Heat exchanger surface features

○ Heat exchanger baffles and turbulators

• Two-stage and modulating combustion

• Pulse combustion

• Premix burners

• Burner derating

• Insulation improvements

○ Increased jacket insulations

○ Advanced forms of insulation

• Off-cycle dampers

○ Electromechanical flue damper

○ Electromechanical burner inlet damper

• Direct venting

• Concentric venting

• Low-pressure, air-atomized oil burner

• High-static oil burner

• Delayed-action oil pump solendoid valve

These technology options are described in more detail of chapter 3 of the November 2022 Preliminary Analysis TSD.

As discussed in section IV.A.1.a of this document, DOE did not identify any technology options that would improve the AFUE of electric furnaces.

For this NOPD, DOE will not publish a Technical Support Document (TSD) because no amended standard is proposed. The methodology for the analyses conducted for the NOPD is largely the same as in the Preliminary Analysis, and, thus, DOE references the Preliminary Analysis TSD throughout this document.

In response to the November 2022 Preliminary Analysis, AHRI, Lennox, and JCI commented that WGF accounts for a relatively small share of the overall furnace market (~7 percent). (AHRI, No. 23 at p. 5; Lennox, No. 26 at p. 1; JCI, No. 25 at p. 2)

AHRI and JCI stated that the maximum feasible AFUE for WGF is 81 percent. (AHRI, No. 23 at p. 5; JCI, No. 25 at p. 2)

JCI's comments stated that WGFs are 7 percent of the WGF market, but DOE interprets this comment to mean that WGFs are 7 percent of the overall furnace market.

JCI commented that further improvements in systems efficiency of WGFs would require the product class use of condensing technology. JCI commented that this change in the product offering is not practical and, based on observed market share, not justified due to system design and application constraints. (JCI, No. 25 at p. 2) JCI argued that the practical application of condensing WGFs creates condensation in the heat exchangers within the unit, which is not readily drained. JCI added that the retained condensate will freeze in the off cycle, preventing further operation of the furnace. (

Id.)

Lennox stated that applicable furnace technology has not significantly improved to overcome barriers to deploying higher-efficiency noncondensing and condensing technologies that would justify more-stringent AFUE standards for WGFs. (Lennox, No. 26 at p. 4)

In response to comments regarding condensing WGFs, DOE notes that it has identified WGFs available on the market that use condensing technology to achieve AFUE ratings up to 95 percent. Because these types of products are available on the market, DOE finds them to be technologically feasible and

considers condensing secondary heat exchangers to be an appropriate technology option to analyze for these products. Additionally, in response to JCI, when evaluating the cost of implementing technologies such as condensing heat exchangers, DOE aims to include the additional costs of other components that may be associated with installing a unit with such technology, such as a condensate pump and drain hoses. The analyses of these costs are discussed in subsequent sections of this document (

e.g.,

the LCC and PBP analyses and the NIA (

see

sections IV.E and IV.G of this document, respectively)).

During the public meeting webinar, AGA requested clarification on how vent dampers were applied in the analysis for weatherized gas furnaces and noted that the test procedure would not give credit for a vent damper on an outdoor weatherized gas furnace. (AGA, Public Meeting Transcript, No. 28 at pp. 20-22) In response, dampers were not considered for WGFs and are not part of the design pathway for improving AFUE for those products. (

See

section IV.B.1.d of this document for the efficiency levels and associated technology options for WGFs.) DOE notes that Tables ES.3.2, ES.3.3, ES.3.19, and 7.4.1 in the November 2022 Preliminary Analysis TSD indicated that vent dampers were included for NWOFs and MHOFs; however, this was a typographical error. DOE clarifies that vent dampers also were not part of the design pathway considered for improving AFUE of NWOFs and MHOFs for the preliminary analysis (nor are they for this NOPD analysis).

In chapter 3 of the November 2022 Preliminary Analysis TSD, DOE also considered three technology options that could potentially reduce the standby mode and off mode energy consumption of NWOFs, MHOFs, and EFs. However, for the reasons explained in section III.A.3 of this document, DOE has tentatively determined that it cannot establish standby mode and off mode standards that meet the criteria of EPCA at this time, so such technologies and standards are not considered further.

3. Screening Analysis

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

(1)

Technological feasibility.

Technologies that are not incorporated in commercial products or in commercially-viable, existing prototypes will not be considered further.

(2)

Practicability to manufacture, install, and service.

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

(3)

Impacts on product utility.

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

(4)

Safety of technologies.

If it is determined that a technology would have significant adverse impacts on health or safety, it will not be considered further.

(5)

Unique-pathway proprietary technologies.

If a technology has proprietary protection and represents a unique pathway to achieving a given efficiency level, it will not be considered further, due to the potential for monopolistic concerns.

10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).

In summary, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the listed five criteria, it will be excluded from further consideration in the engineering analysis.

a. Screened-Out Technologies

DOE eliminated the technologies listed in Table IV.1 from further consideration as options to improve the AFUE (as measured by the DOE test procedure) of NWOFs, MHOFs, and WGFs. The reasons for exclusion associated with each technology are marked with an

Additional details about the reasons for exclusion are discussed in this section.

Table IV.1—Screened-Out Technologies

Excluded technology

options

Applicable product class(es)

Reasons for exclusion

Technological

feasibility

Practicability to

manufacture,

install, and

service

Adverse

impacts on

product utility

Adverse

impacts on

health or

safety

Unique-

pathway

proprietary

technology

Pulse combustion

WGF

Burner derating

WGF, NWOF, MHOF

Low-pressure, air-atomized oil burner

NWOF, MHOF

Pulse Combustion

Pulse combustion burners operate on self-sustaining resonating pressure waves that alternately rarefy the combustion chamber (drawing a fresh fuel-air mixture into the chamber) and pressurize it (causing ignition by compression heating of the mixture to its flash point). Pulse combustion systems are capable of direct venting without the assistance of mechanical draft. Because the pulse combustion process is very efficient, pulse combustion is generally used in condensing appliances.

In contrast to natural draft and induced draft furnaces, pulse combustion furnaces generate positive pressure in the heat exchanger. Although these products are generally safe, this could create a potential safety problem if the heat exchanger breeches, because combustion products can contaminate the circulation air stream.

Pulse combustion gas furnaces were available in the United States for more than two decades. However, they were withdrawn from the market within the past 20 years because manufacturers found that competing technologies, such as condensing secondary heat exchangers, cost significantly less to

manufacture and operate. In light of the ability of furnace manufacturers to cost-effectively achieve high efficiencies without the use of pulse combustion, the technology's risks do not outweigh its benefits for consumer furnace applications. Accordingly, DOE did not further analyze this technology option as part of this NOPD.

Burner Derating

Decreasing the burner size to increase the ratio of heat transfer area to fuel input, or burner derating, can increase the AFUE rating of furnaces. However, because heat output rate is directly related to burner size, derating also reduces the amount of heated air available to the consumer. This reduction in heat output adversely affects the utility to consumers. Therefore, DOE did not consider this technology option.

Low-Pressure, Air-Atomized Oil Burner

To overcome the low input limitations of conventional oil burners, Brookhaven National Laboratory developed a low-pressure, air-atomized oil burner that can operate at firing rates as low as 0.25 gallons of oil per hour (10 kW). In addition, it can operate with low levels of excess combustion air (less than 10 percent) for lean-burning, ultra-clean combustion. A lower level of excess air generally improves AFUE rating. This burner design is also capable of firing fuel at a high or low input rate, which is manually actuated by a switch, allowing the burner to closely match the smaller heating loads of well-insulated modern homes.

While tests performed at the Brookhaven National Laboratory seem to have successfully demonstrated enhanced oil boiler AFUE performance per the DOE test procedure for furnaces and boilers, the prototype was never tested on a furnace. Therefore, the technological feasibility of the burner prototype for incorporation into a residential oil-fired furnace remains unknown, so DOE does not consider low-pressure, air-atomized oil burners to be a viable technology for efficiency improvement at this time.

b. Remaining Technologies

After reviewing each technology, DOE did not screen out the following technology options and considers them as design options in the engineering analysis:

• Condensing secondary heat exchanger

• Heat exchanger improvements

○ Increased heat exchanger surface area

○ Heat exchanger surface features

○ Heat exchanger baffles and turbulators

• Two-stage and modulating combustion

• Premix burners

• Insulation improvements

○ Increased jacket insulations

○ Advanced forms of insulation

• Off-cycle dampers

○ Electromechanical flue damper

○ Electromechanical burner inlet damper

• Direct venting

• Concentric venting

• High-static oil burner

• Delayed-action oil pump solendoid valve

DOE determined that these technology options are technologically feasible because they are being used or have previously been used in commercially-available products or working prototypes. DOE also finds that all of the remaining technology options meet the other screening criteria (

i.e.,

practicable to manufacture/install/service, do not result in adverse impacts on consumer utility, product availability, health, or safety, and do not utilize unique-pathway proprietary technologies).

In response to the November 2022 Preliminary Analysis, Lennox commented that DOE has adequately captured most of the technology options and screened appropriately for gas and oil products. (Lennox, No. 26 at p. 4) However, Lennox stated that the alternatives for insulation improvement generally have not been demonstrated in furnace applications and may not be suitable for use in high-temperature applications near combustion surfaces. The commenter stated that insulation used in furnace applications must meet temperature, flame spread, and smoke requirements per the applicable safety standards, and that toxicity and off-gassing must also be considered. Lennox argued that just because an insulation material has better insulating characteristics does not mean that it is suitable for high-temperature furnace applications. (Lennox, No. 26 at p. 6)

In response, DOE notes that insulation improvements may be achieved with thicker layers of existing insulation materials as opposed to necessarily requiring new insulating materials. Therefore, DOE is not screening out insulation improvements in this NOPD. Additionally, as outlined in section IV.B.1 of this document, insulation improvements are not required to meet any of the efficiency levels analyzed in this NOPD.

4. Product Classes

In general, when evaluating and establishing energy conservation standards for a type (or class) of covered product, DOE divides the covered product into classes by: (1) the type of energy used; (2) the capacity of the product, or (3) any other performance-related feature which other products within such type (or class) do not have that affects energy efficiency and justifies different standard levels, considering factors such as consumer utility and any other factors the Secretary deems appropriate. (42 U.S.C. 6295(q))

In this case, DOE divides furnaces into seven product classes based on fuel type (gas, oil, or electric), whether the furnace is weatherized or not, and whether the furnace is designed for use only in mobile homes or not. The current product classes for furnaces are (1) non-weatherized gas furnaces, (2) mobile home gas furnaces, (3) non-weatherized oil-fired furnaces, (4) mobile home oil-fired furnaces, (5) weatherized gas furnaces, (6) weatherized oil-fired furnaces, and (7) electric furnaces. 10 CFR 430.32(e)(1)(ii). As noted previously, non-weatherized gas furnaces and mobile home gas furnaces are being addressed in a separate rulemaking process.

Therefore, the product classes that DOE considered for this NOPD are NWOFs, MHOFs, WGFs, WOFs, and EFs. However, for the reasons discussed in sections IV.A.1.a and IV.A.1.b of this document, potential amended energy conservation standards were not analyzed for EFs or WOFs.

See Docket No. EERE-2014-BT-STD-0031.

In summary, DOE assessed potential amended energy conservation standards in terms of AFUE for the NWOF, MHOF, and WGF product classes in this NOPD. Again, for the reasons discussed in section III.A.3 of this document, DOE did not analyze new or amended standby mode/off mode power standards for any product classes this time.

B. Engineering Analysis

The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of NWOFs, MHOFs, and WGFs. There are two elements to consider in the engineering analysis: (1) the selection of efficiency levels to analyze (

i.e.,

the “efficiency analysis”) and (2) the determination of product cost at each efficiency level (

i.e.,

the “cost analysis”). In determining the performance of higher-efficiency products, DOE considers technologies and design option combinations not eliminated by the screening analysis. For each product class, DOE estimates

the baseline cost, as well as the incremental cost for the product at efficiency levels above the baseline efficiency. The output of the engineering analysis is a set of cost-efficiency “curves” that are used in downstream analyses (

i.e.,

the LCC and PBP analyses and the NIA).

1. Efficiency Analysis

DOE typically uses one of two approaches to develop energy efficiency levels for the engineering analysis: (1) relying on observed efficiency levels in the market (

i.e.,

the efficiency-level approach), or (2) determining the incremental efficiency improvements associated with incorporating specific design options to a baseline model (

i.e.,

the design-option approach). Using the efficiency-level approach, the efficiency levels established for the analysis are determined based on the market distribution of existing products (in other words, based on the range of efficiencies and efficiency level “clusters” that already exist on the market). Using the design option approach, the efficiency levels established for the analysis are determined through detailed engineering calculations and/or computer simulations of the efficiency improvements from implementing specific design options that have been identified in the technology assessment. DOE may also rely on a combination of these two approaches. For example, the efficiency-level approach (based on actual products on the market) may be extended using the design option approach to interpolate to define “gap fill” levels (

i.e.,

to bridge large gaps between other identified efficiency levels) and/or to extrapolate to the “max-tech” level (particularly in cases where the “max-tech” level exceeds the maximum efficiency level currently available on the market).

For the current analysis, DOE generally employed an efficiency-level approach.

a. Baseline Efficiency

For each product class, DOE generally selects a baseline model as a reference point for each class, and measures anticipated changes to the product resulting from potential energy conservation standards against the baseline model. The baseline model in each product class represents the characteristics of a product typical of that class (

e.g.,

capacity, physical size). Generally, a baseline model is one that just meets current energy conservation standards, or, if no standards are in place, the baseline is typically the most common or least-efficient unit on the market.

A basic consumer gas furnace comprises a hot surface or direct spark ignition system, tubular in-shot burners, noncondensing heat exchanger, blower assembly (including motor and forward-swept fan blade), mechanical draft combustion fan assembly, and automatic controls. A basic consumer oil-fired furnace comprises an interrupted spark ignition system, power burner, noncondensing heat exchanger, and blower assembly. Details and descriptions of each of these components can be found in chapter 3 of the November 2022 Preliminary Analysis TSD.

The identification of baseline units requires establishing the baseline efficiency level. In cases where there is an existing standard, DOE typically defines baseline units as units with efficiencies equal to the current Federal energy conservation standards. However, for MHOFs, DOE did not identify any currently available units at the minimum standard level (75-percent AFUE), and, therefore, DOE analyzed 80-percent AFUE as the baseline level for MHOFs, as it was the lowest efficiency available on the market. The baseline AFUE levels analyzed for the subject NWOFs, MHOFs, and WGFs, as measured by AFUE, along with the typical characteristics of a baseline unit, are shown in Table IV.2.

Table IV.2—Baseline AFUE Levels Analyzed

Product class

Baseline

AFUE level

(%)

Typical characteristics

NWOF

—Single-stage burner.

—Electronic ignition.

—Aluminized-steel heat exchanger.

—Indoor blower fan including PSC motor * and forward-curved blower impeller blade.

MHOF

—Single-stage burner.

—Electronic ignition.

—Aluminized-steel heat exchanger.

—Indoor blower fan including PSC motor * and forward-curved blower impeller blade.

—Direct venting system.

—Built-in evaporator coil cabinet.

WGF

—Draft inducer.

—Single-stage burner.

—Electronic ignition.

—Aluminized-steel tubular heat exchanger.

—Indoor blower fan including BPM * motor and forward-curved blower impeller blade.

* Residential furnace fans incorporated into NWOFs, MHOFs, and WGFs manufactured on and after July 3, 2019 must meet fan energy rating (“FER”) standards specified in 10 CFR 430.32(y). The blower fan motor (among other factors) can affect FER. Brushless permanent magnet (“BPM”) motors have become the predominant motor type at the baseline AFUE levels for WGFs, and permanent split capacitor (“PSC”) motors, which are less efficient than BPM motors, are common for NWOFs and MHOFs.

Typically, baseline units are representative of the minimum technology and lowest-cost product that manufacturers can produce. Accordingly, in the teardown analysis, DOE examined a variety of baseline units that incorporate the various baseline design options for furnace components.

b. Intermediate Efficiency Levels

DOE also analyzed intermediate efficiency levels for NWOFs and MHOFs. However, for WGFs, DOE has

not found any models on the market between the baseline (81-percent AFUE) and max-tech level (95-percent AFUE) and has, therefore, not analyzed any intermediate efficiency levels for this product class. The intermediate efficiency levels analyzed for NWOFs are 85-percent and 87-percent AFUE, and the intermediate efficiency levels analyzed for MHOFs are 83-percent and 85-percent AFUE. To improve efficiency from the baseline to these intermediate efficiency levels, manufacturers generally increase the surface area of the heat exchanger, which increases the heat transfer area and, thus, allows manufacturers to achieve higher efficiencies. The intermediate efficiency levels analyzed are representative of common efficiency levels available on the market. DOE reviewed its own Compliance Certification Database (“CCD”), as well as AHRI's product certification directories,

California Energy Commission's (“CEC's”) database,

manufacturer catalogs, and other publicly-available literature to inform its selection of intermediate efficiency levels.

AHRI's Directory of Certified Product Performance (Available at:

www.ahridirectory.org/Search/SearchHome

) (Last accessed Sept. 1, 2023).

California Energy Commission's MAEDbs (Available at:

cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx

) (Last accessed Sept. 1, 2023).

In response to the November 2022 Preliminary Analysis, NYSERDA encouraged DOE to consider an additional efficiency level (EL) between 87-percent and 96-percent AFUE for oil-fired furnaces. NYSERDA stated it anticipates that an AFUE above 90 percent may maximize savings for consumers. NYSERDA added that based on its review of the preliminary TSD material, the DOE Compliance Certification Management System, and AHRI's database, NYSERDA has seen availability of oil furnaces above DOE's proposed EL 2. (NYSERDA, No. 19 at p. 2)

The Joint Advocates similarly encouraged DOE to evaluate an intermediate condensing EL for NWOFs. The Joint Advocates commented that they strongly support DOE's decision to include a max-tech EL at 96-percent AFUE and that DOE should also consider an EL between EL 2 (

i.e.,

87-percent AFUE) and EL 3 (

i.e.,

96-percent AFUE). The Joint Advocates further commented that the CCD shows condensing models suggesting that an intermediate EL with condensing technology is feasible for condensing NWOFs. (Joint Advocates, No. 22 at pp. 2-3)

As discussed previously, DOE's choice of intermediate efficiency levels was informed by publicly-available databases and manufacturer literature, and the chosen efficiency levels were intended to be representative of common efficiency levels available on the market. In contrast, as discussed in section III.D.2 of this document, DOE is statutorily obligated to analyze the efficiency level that corresponds to the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for each product class. (42 U.S.C. 6295(p)(1)) However, because there are very few condensing-level NWOFs on the market, efficiency levels between 87-percent and 96-percent AFUE would not be representative of typical efficiency levels. Therefore, DOE is not analyzing an EL between 87-percent and 96-percent AFUE for NWOFs in this NOPD.

c. Maximum Technology (“Max-Tech”) Efficiency Levels

As part of DOE's analysis, the maximum available efficiency level is the highest efficiency unit currently available on the market. DOE also defines a “max-tech” efficiency level to represent the maximum possible efficiency for a given product.

DOE conducted an analysis of the market and a technology assessment and researched current product offerings to determine the max-tech efficiency levels. The max-tech level identified in each product class corresponds to the highest-AFUE furnace available on the market, which DOE tentatively concludes corresponds to the maximum technologically feasible levels at this time. For NWOFs, DOE identified a design that achieves a max-tech efficiency level of 96-percent AFUE. For MHOFs, the maximum efficiency level that DOE identified was 87-percent AFUE. For WGFs, DOE identified a max-tech efficiency level design that achieves 95-percent AFUE. For WGFs and NWOFs, the max-tech efficiency level is currently achieved by use of a condensing secondary heat exchanger. A constant-airflow BPM indoor blower motor was also implemented as the motor design option for the max-tech efficiency level for NWOFs because the only NWOF model on the market available at this level includes a constant-airflow BPM motor, and it is unclear if this level is achievable without a constant-airflow fan. For MHOFs, the max-tech efficiency level is currently achieved by use of a heat exchanger with increased surface area.

Lennox stated that the DOE weatherized gas furnace standard of 81-percent AFUE is at the maximum practical level that is economically justified and provides reliable performance. (Lennox, No. 26 at p. 6) Lennox stated that, as the AFUE of weatherized gas furnace products is increased, heat exchanger and flue temperatures are reduced, which increases the risk of condensing operation and corrosion to the heat exchanger. (

Id.

) Lennox stated that while condensing weatherized gas furnaces are feasible, they require secondary heat exchangers that increase static pressure in the airstream and pressure drop within the heat exchanger. Further, Lennox stated that the additional resistance must be overcome with increased electrical power at all operating conditions, including cooling and ventilation mode. (

Id.

at pp. 6-7) Lennox stated that the measures to prevent freezing of condensate in weatherized gas furnaces and condensate disposal add cost and consume additional energy. (

Id.

at p. 7) Lennox commented that these methods include maintaining the temperature of the condensate system above freezing by either conditioning the condensate system using electric heat tape or routing the condensate disposal system through conditioned space. The commenter stated that the use of heat tape consumes additional energy. Lennox stated that routing the condensate disposal system through conditioned space is not technically feasible or economically viable for a weatherized product that is contained outdoors. (

Id.

) Lennox further commented that another method to prevent freezing in weatherized gas furnaces is to install a pit or trench condensate drainage system that extends below the frostline and also neutralizes the acidic condensate created during combustion. Lennox stated that the frost line in the United States varies greatly by region from 5″ in Georgia to 80″ in Minnesota. Lennox stated that the method of installing a pit or trench condensate drainage system that extends below the frostline and neutralizes the acidic condensate created during condensing combustion may work in some mild climates at a reasonable cost but would be expensive to install and maintain in colder climates. (

Id.

)

In response, the Department notes the fact that condensing weatherized gas furnaces currently exist on the market demonstrates that they are technologically feasible. DOE accounts for costs that may be associated with the installation of condensing systems, including additional costs of heat tape

and/or a condensate pump suitable to meet the need of an unconditioned space, which is discussed further in section IV.E of this document. The financial feasibility of higher efficiency levels is discussed further in section V of this document.

JCI commented it is unaware of any condensing MHOFs commercially available today. (JCI, No. 25 at p. 2) AHRI also commented that it is unaware of any commercially-available condensing MHOFs. (AHRI, No. 23 at p. 5) AHRI commented that the feasibility of moving to a condensing heat exchanger for MHOFs is low. AHRI added that there are challenges with maintaining airflow options and footprint size to allow for an easy replacement. (

Id.

)

In response, DOE agrees that there are currently no condensing MHOFs on the market, and the Department has not considered an efficiency level for MHOFs that requires a condensing heat exchanger as there are no data to indicate that it would be feasible for use in MHOFs.

d. Summary of Efficiency Levels Analyzed

DOE presents AFUE efficiency levels analyzed along with the technologies that are expected to be used to increase energy efficiency above the baseline efficiency level for NWOFs, MHOFs, and WGFs in Table IV.3, Table IV.4 and Table IV.5, respectively.

Table IV.3—AFUE Efficiency Levels and Technologies Used at Each Efficiency Level Above Baseline for NWOFs

Efficiency level

AFUE

(%)

Description of technologies typically incorporated

0—Baseline

See Table IV.2 for baseline features.

Baseline EL + Increased heat exchanger area.

EL 1 + Increased heat exchanger area.

3—Max-tech

EL 2 + Addition of condensing secondary heat exchanger (and associated components, sensors,

etc.

) + Constant-airflow BPM motor.

Table IV.4—AFUE Efficiency Levels and Technologies Used at Each Efficiency Level Above Baseline for MHOFs

Efficiency level

AFUE

(%)

Description of technologies typically incorporated

0—Baseline

See Table IV.2 for baseline features.

Baseline EL + Increased heat exchanger area.

EL 1 + Increased heat exchanger area.

3—Max-tech

EL 2 + Increased heat exchanger area.

Table IV.5—AFUE Efficiency Levels and Technologies Used at Each Efficiency Level Above Baseline for WGFs

AFUE

(%)

Description of technologies typically incorporated

0—Baseline

See Table IV.2 for baseline features.

1—Max-tech

Baseline EL + Addition of condensing secondary heat exchanger (and associated components, sensors,

etc.

2. Cost Analysis

The cost analysis portion of the Engineering Analysis is conducted using one or a combination of cost approaches. The selection of cost approach depends on a suite of factors, including the availability and reliability of public information, characteristics of the regulated product, and the availability and timeliness of purchasing the product on the market. The cost approaches are summarized as follows:

☐ Physical teardowns:

Under this approach, DOE physically dismantles a commercially-available product, component-by-component, to develop a detailed bill of materials for the product.

☐ Catalog teardowns:

In lieu of physically deconstructing a product, DOE identifies each component using parts diagrams (available from manufacturer websites or appliance repair websites, for example) to develop the bill of materials for the product.

☐ Price surveys:

If neither a physical nor catalog teardown is feasible (

e.g.,

for tightly integrated products such as fluorescent lamps, which are infeasible to disassemble and for which parts diagrams are unavailable), cost-prohibitive, or otherwise impractical (

e.g.,

large commercial boilers), DOE conducts price surveys using publicly-available pricing data published on major online retailer websites and/or by soliciting prices from distributors and other commercial channels.

In the present case, DOE conducted the analysis using a combination of physical and catalog teardowns. DOE estimated the manufacturer production cost (“MPC”) associated with each efficiency level to characterize the cost-efficiency relationship of improving consumer furnace performance, in terms of AFUE.

The units selected for the teardown analysis spanned a range of manufacturers and efficiencies for commercially-available products that are the subject of this rulemaking. Products were selected that have characteristics of typical products on the market at a representative input capacity. WGFs selected for physical teardown generally had input capacities of approximately 80 thousand British thermal units per hour (“kBtu/h”), while oil units selected for physical teardown generally had input capacities of approximately 105 kBtu/h. These capacities were determined to be a

representative input capacity for WGFs and for NWOFs and MHOFs, respectively, based on information gathered as part of the market and technology assessment (

see

section IV.A of this document), as well as discussions with manufacturers. Where needed, catalog teardowns were also conducted to supplement the physical teardowns. DOE estimated the manufacturing cost for each furnace selected for teardown by disassembling the furnace and developing a bill of materials (“BOM”). The resulting BOM provides the basis for the MPC estimates for products at various efficiency levels spanning the full range of efficiencies from the baseline to max-tech.

To account for manufacturers' non-production costs and profit margin, DOE applies a non-production cost multiplier (the manufacturer markup) to the MPC. The resulting manufacturer selling price (“MSP”) is the price at which the manufacturer distributes a unit into commerce. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission (“SEC”) 10-K reports filed by publicly-traded manufacturers primarily engaged in heating, ventilation, and air conditioning (“HVAC”) manufacturing whose combined product range includes oil and weatherized gas furnaces. The manufacturer markup estimates are consistent with the manufacturer markups developed for a final rule for furnace fan energy conservation standards published in the

Federal Register

on July 3, 2014. 79 FR 38130. Specifically, DOE estimates the industry average manufacturer markup to be 1.35 for NWOFs, 1.29 for MHOFs, and 1.27 for WGFs.

a. Teardown Analysis

For the teardown analysis, DOE used a total of 31 teardowns of consumer furnaces as the basis for calculating industry MPCs. The units DOE selected for teardown are manufactured in considerable volume, are commonly available, and have features that DOE believes are representative of the most common characteristics (

i.e.,

input capacity, configuration, and heat exchanger type) of each product class. As discussed previously, most physical teardown units had input capacities of approximately 80 kBtu/h for WGFs or 105 kBtu/h for NWOFs and MHOFs, which DOE considers to be representative of those furnace product classes. To the extent possible, all major efficiency levels and technologies were captured in the selection of models for the teardown analysis. WGF and NWOF teardowns were considered separately.

Due to the similarity observed in NWOF and MHOF designs available in the market, DOE tentatively concluded that the costs associated with increasing the energy efficiency of MHOFs are equivalent to the costs for NWOFs. A MHOF teardown was used to examine key differences between NWOFs and MHOFs and confirmed that the MPCs of MHOFs could be estimated based on the NWOF teardowns. Therefore, DOE based MPC estimates for MHOFs at each efficiency level analyzed largely on teardowns of NWOFs at that efficiency level.

Whenever possible, DOE examined multiple models from a given manufacturer that capture different design options and used them as direct points of comparison. The teardown selections also minimized the incorporation of non-efficiency-related premium features, which otherwise could inflate the incremental manufacturing cost of achieving higher efficiency levels.

DOE examined products with a variety of indoor blower motor technologies and combustion systems (

i.e.,

single-stage, two-stage, or modulating). DOE also examined products with PSC, constant-torque BPM, and constant-airflow BPM indoor blower motors. As further discussed in section IV.B.2.b of this document, cost adders were developed for these technologies and applied in the downstream analyses to estimate the manufacturing cost of going from one technology to another with higher efficiency (

e.g.,

using a constant-airflow BPM instead of a constant-torque BPM, or two-stage combustion instead of single-stage combustion).

b. Cost Estimation Method

DOE assigned costs of labor, materials, and overhead to each part, whether purchased or produced in-house. DOE then aggregated single-part costs into major assemblies (

e.g.,

packaging, cabinet assembly, heat exchanger, burner system/gas train, exhaust subassembly, fan system, controls) and summarized these costs in a spreadsheet BOM. DOE repeated this same process for every physical and catalog teardown in the engineering analysis.

Analytical inputs related to manufacturer practices and cost structure play an important role in estimating the final cost of a product. DOE used inputs regarding the manufacturing process parameters (

e.g.,

equipment use, labor rates, tooling depreciation, and cost of purchased raw materials) to determine the value for each furnace component. DOE collected information on labor rates, tooling costs, raw material prices, and other factors to use as inputs into the cost estimates. DOE determined values for these parameters using internal expertise and confidential information available to its contractors, some of which was obtained via confidential interviews with manufacturers. For purchased parts, DOE estimates the purchase price based on volume-variable price quotations and detailed discussions with manufacturers and component suppliers. DOE then summed the values of the furnace components into assembly costs and, finally, the total MPC for the entire furnace.

The MPC includes material, labor, and depreciation costs, as well as the overhead costs associated with the manufacturing facility. Material costs include both raw materials and purchased-part costs. Labor costs include fabrication, assembly, and indirect and overhead (burdened) labor rates. Depreciation costs include production equipment depreciation, tooling depreciation, and building depreciation. The overhead costs associated with the manufacturing facility include indirect process costs, utilities, equipment and building maintenance, and reworking defective parts/units.

DOE determined the costs of raw materials based on manufacturer interviews, quotes from suppliers, and secondary research. Past results are updated periodically and/or inflated to present-day prices using indices from resources such as MEPS Intl.,

PolymerUpdate,

the U.S. Geologic Survey (“USGS”),

and the Bureau of Labor Statistics (“BLS”).

Metal raw material prices, such as stainless steel and other sheet metals, are estimated on the basis of five-year averages to smooth out spikes in demand. Other “raw” materials such as plastic resins, insulation materials,

etc.

are estimated on a current-market basis. For non-metal raw material prices, DOE used prices based on current market data (as of December 2022), rather than a 5-year average, because non-metal raw materials have not experienced the same

level of price volatility in recent years as metal raw materials.

For more information on MEPS Intl, please visit:

www.meps.co.uk/

(Last accessed Sept. 5, 2023).

For more information on PolymerUpdate, please visit:

www.polymerupdate.com

(Last accessed Sept. 5, 2023).

For more information on the USGS metal price statistics, please visit

www.usgs.gov/centers/nmic/commodity-statistics-and-information

(Last accessed Sept. 5, 2023).

For more information on the BLS producer price indices, please visit:

www.bls.gov/ppi/

(Last accessed Sept. 5, 2023).

DOE characterized parts based on whether manufacturers fabricated them in-house or purchased them from outside suppliers. For fabricated parts, DOE estimated the price of intermediate materials (

e.g.,

tube, sheet metal) and the cost of forming them into finished parts. For purchased parts, DOE estimated the purchase prices paid to the original equipment manufacturers (“OEMs”) of these parts, based on discussions with manufacturers during confidential interviews. Whenever possible, DOE obtained price quotes directly from the component suppliers used by furnace manufacturers whose products were examined in the engineering analysis. DOE determined that the components in Table IV.6 are generally purchased from outside suppliers.

Table IV.6—Purchased Furnace Components

Assembly

Purchased sub-assemblies

Burner/Exhaust

Gas valve.

Spark igniter.

Draft inducer assembly.

Blower

Indoor blower fan blade.

Indoor blower fan motor.

Controls

Control boards.

Capacitors, transformers, contactors, switches,

etc.

Certain factory parameters, such as fabrication rates, labor rates, and wages, also affect the cost of each unit produced. DOE factory parameter assumptions were based on internal expertise and manufacturer feedback. Table IV.7 lists the factory parameter assumptions used in the analysis. For the engineering analysis, these factory parameters, including production volume, are the same at every efficiency level. The production volume used at each efficiency level corresponds with the average production volume, per manufacturer, if 100 percent of all units manufactured were at that efficiency level. This production volume was estimated based on historical shipments. These assumptions are generalized to represent typical production and are not intended to model a specific factory.

Table IV.7—Factory Parameter Assumptions

Parameter

Oil furnace

estimate

WGF estimate

Actual Annual Production Volume (units/year)

5,000 units/year

500,000 units/year.

Purchased Parts Volume

5,000 units/year

100,000 units/year.

Workdays Per Year (days)

250

250.

Assembly Shifts Per Day (shifts)

Fabrication Shifts Per Day (shifts)

Fabrication Labor Wages ($/h)

16.

Assembly Labor Wages ($/h)

16.

Length of Shift (hrs)

Average Equipment Installation Cost (% of purchase price)

10%

10%.

Fringe Benefits Ratio

50%

50%.

Indirect to Direct Labor Ratio

33%

33%.

Average Scrap Recovery Value

30%

30%.

Worker Downtime

10%

10%.

Burdened Assembly Labor Wage ($/h)

24.

Burdened Fabrication Labor Wage ($/h)

24.

Supervisor Span (workers/supervisor)

25/1

25/1.

Supervisor Wage Premium (over fabrication and assembly wage)

30%

30%.

Indoor Blower Motor Costs

As discussed in section IV.B.1.a of this document, the baseline design for WGFs includes a BPM motor. DOE research suggests that the predominant BPM indoor blower motors sold on the market today are either a constant-torque (“CT-BPM”) or a constant-airflow (“CA-BPM”) design. Both types of motors rely on electronic variable-speed motor systems that are typically mounted in an external chassis to the back of the motor. CA-BPM motors utilize feedback control to adjust torque based on ESP in order to maintain a desired airflow. This differentiates them from CT-BPM motors, which will maintain torque and likely decrease airflow output in environments with high ESPs. CT-BPMs are capable of achieving airflows similar to CA-BPMs but are generally less expensive. Therefore, DOE considered the baseline design to include a CT-BPM motor for the WGF product class and determined the incremental cost of a CA-BPM motor.

DOE's review of the market showed that PSC motors are still being used in some NWOFs and MHOFs, so the final MPC results are presented based on a PSC motor at the baseline through 87-percent AFUE. To account for the variety of motor technologies available on the market, DOE determined the incremental cost associated with use of various types of more-efficient BPM fan motors as compared to baseline PSC motors for NWOFs and MHOFs. Additionally, for NWOFs, a constant-airflow BPM indoor blower motor was implemented as the motor design option for the max-tech efficiency level because the only NWOF model on the market available at this level includes a constant-airflow BPM motor, and it is unclear if this level is achievable without a constant-airflow fan. For the NWOF efficiency levels below max-tech and for all MHOF efficiency levels, DOE calculated the additional cost to switch from a PSC blower motor to either a constant-torque or a constant-airflow BPM motor. As discussed in Chapter 8 of the November 2022 Preliminary Analysis TSD, these costs are applied in the LCC and PBP analyses to determine the MPC of a furnace with each motor technology in order to better represent typical costs to consumers for NWOFs and MHOFs. Constant-airflow BPM blower motors are sometimes used as a utility-enhancing feature on units below the max-tech efficiency level. The adders are outlined in Table IV.8.

Table IV.8—Cost Adders for BPM Blower Motors

Product class

Input

capacity

(kBtu/h)

Incremental

cost increase

for BPM-CT

(2022$)

Incremental

cost increase

for BPM-CA

(2022$)

NWOF, MHOF

105

$30.65

$80.48

WGF

37.94

59.92

Multistage Furnaces

The market for WGFs contains a significant number of two-stage furnaces that are rated at the same efficiency as single-stage furnaces. DOE believes consumers sometimes choose to purchase two-stage products for the additional thermal comfort offered by furnaces with multiple stages of heating output. DOE determined that oil units with multi-staging were rare and, thus, not representative of the market, so adders were not developed for the NWOF and MHOF product classes. Where applicable, the additional cost to change to a two-stage furnace includes the added cost of a two-stage gas valve, a two-speed inducer assembly, an additional pressure switch, and additional controls and wiring. The additional cost to change to a modulating furnace includes the added cost of a modulating gas valve, an inducer assembly, an upgraded pressure switch, and additional controls and wiring. The incremental costs to implement multi-staging in WGFs are outlined in Table IV.9.

Table IV.9—Multi-Staging Incremental Cost Increase

Adder

Incremental cost

increase for

multi-staging

(2022$)

Two-Stage

$21.07

Modulating

75.36

Low-NO

and Ultralow-NO

Furnaces

Some furnaces are marketed as “low-NO

,” which indicates that their NO

emissions are less than 40 nanograms of NO

per joule of useful heat energy (“ng/J”). Certain local jurisdictions require natural gas furnaces to comply with NO

emissions restrictions as low as 14 ng/J,

which is referred to as “ultralow-NO

.” A common method of reducing furnace NO

emissions is to slightly delay the natural gas combustion process, which in turn produces a cooler flame and results in suppressed formation of NO

DOE has observed during its teardown analysis that to achieve low-NO

operation, manufacturers implement low-NO

baffles. For ultralow-NO

operation, DOE used NWGF teardowns to approximate the cost to implement this technology option in WGFs, as DOE understands that the methodology would be the same for both product classes. Through these teardowns of NWGFs, DOE has observed that in order to achieve ultralow-NO

operation, the in-shot burners typically used in residential furnaces were replaced with a mesh premix burner. In addition, the model used a variable-speed BPM inducer fan motor. DOE identified an ultralow-NO

WGF on the market and compared the burner construction for the torn-down NWGF and the ultralow-NO

WGF. DOE found that the approach used for achieving ultralow-NO

in WGFs is similar to that used in NWGFs. DOE also determined that oil units with ultralow-NO

operation were rare and, thus, not representative of the market, so adders were not developed for the NWOF and MHOF product classes.

Rule 1111 of the South Coast Air Quality Management District (“SCAQMD”) of southern California currently requires that all NWGF and MHGF not exceed a 14 ng/J restriction on NO

emissions. For more information on Rule 1111, see

www.aqmd.gov/docs/default-source/rule-book/reg-xi/rule-1111.pdf?sfvrsn=4

(Last accessed Sept. 5, 2023).

U.S. Environmental Protection Agency. Natural Gas Combustion (Available at:

www3.epa.gov/ttnchie1/ap42/ch01/final/c01s04.pdf

) (Last accessed June 28, 2023).

Using raw material price data, teardown data from NWGFs, and manufacturing expertise DOE estimated the manufacturing cost difference between standard NO

burners and low-NO

and ultralow-NO

burners. For low-NO

, MPC cost values were developed for the implementation of low-NO

baffles in WGFs at the representative input capacity of 80 kBtu/h. For ultralow-NO

, MPC values were developed for the implementation of a mesh premix burner and variable-speed BPM inducer fan (along with other related components necessary). The resulting MPC estimates to achieve low-NO

and ultralow-NO

operation are shown in Table IV.10.

In the LCC and PBP analysis (

see

section IV.E of this document), DOE estimated the fractions of furnaces that are installed in jurisdictions that require low-NO

or ultralow-NO

compliance and applied these cost adders to those fractions of furnace installations accordingly. The application of these adders is discussed in more detail in Chapter 8 of the November 2022 Preliminary Analysis TSD.

Table IV.10—Additional MPCs for Low-NO

and Ultralow-NO

WGFs

Adder

Value

(2022$)

Low-NO

$3.10

Ultralow-NO

113.68

Shipping Costs

Freight is not a manufacturing cost, but because it is a substantial cost incurred by the manufacturer, DOE accounts for shipping costs separately from other costs. DOE calculated shipping costs based on a typical 53-foot straight-frame trailer with a storage volume of 4,240 cubic feet.

DOE first calculated the cost per cubic foot of space on a trailer based on a cost of $3,643 per shipping load and the standard dimensions of a 53-foot trailer. This cost was determined based on a combination of full truck load (“FTL”) freight quotations, manufacturer feedback, and BLS producer price indices for the “fuels and related products and power” grouping.

Then, DOE examined the average sizes of products in each product class at each efficiency and capacity combination analyzed. DOE estimated the shipping costs by multiplying the product volume by the cost per cubic foot of space on the trailer. Furnace dimensions typically do not change as a result of increases in efficiency, and accordingly, DOE's shipping costs show no change across efficiency levels. In determining volumetric shipping costs, DOE also used manufacturer feedback regarding product mix on each trailer, packing efficiency, and methods and equipment used to load the trailers to revise the shipping costs. Table IV.11 shows the

shipping costs for the products analyzed in this rulemaking.

U.S. Department of Labor, Bureau of Labor Statistics,

Producer Price Indices

(Available at:

data.bls.gov/timeseries/WPU057303?data_tool=XGtable

) (Last accessed Feb. 17, 2022).

Table IV.11—Shipping Costs Per Unit

Product class

Representative

capacity

(kBtu/h)

Per-unit

shipping cost

(2022$)

WGF

55.69

NWOF

105

19.92

MHOF

105

19.92

3. Cost-Efficiency Results

Using the MPCs for individual teardowns and adders described in section IV.B.2.b of this document, DOE develops aggregated MPCs for each product class. The final results of the AFUE engineering analysis are the MPCs for WGFs, NWOFs, and MHOFs at each efficiency level. The cost-efficiency results are shown in tabular form in Table IV.12 through Table IV.14 as efficiency versus MPC and MSP. These results include the furnace fan and combustion system staging incorporated into most furnace designs.

Table IV.12—Cost-Efficiency Data for WGFs With a Constant-Torque BPM Indoor Blower Motor and a Single-Stage Burner

AFUE

MPC

(2022$)

MSP

(2022$)

$1,412.32

$1,793.65

1,505.40

1,911.85

Table IV.13—Cost-Efficiency Data for NWOFs With a PSC Indoor Blower Motor and a Single-Stage Burner

AFUE

MPC

(2022$)

MSP

(2022$)

$700.73

$945.98

730.94

986.77

761.16

1,027.57

1,334.85

1,802.05

Table IV.14—Cost-Efficiency Data for MHOFs With a PSC Indoor Blower Motor and a Single-Stage Burner

AFUE

MPC

(2022$)

MSP

(2022$)

$664.47

$857.16

709.79

915.63

740.01

954.61

770.23

993.59

C. Markups Analysis

The markups analysis develops appropriate markups (

e.g.,

retailer markups, distributor markups, contractor markups) in the distribution chain and sales taxes to convert the MSP estimates derived in the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis. At each step in the distribution channel, companies mark up the price of the product to cover business costs and profit margin. Before developing markups, DOE defines key market participants and identifies distribution channels.

For the subject consumer furnaces, the main parties in the distribution chains are: (1) manufacturers; (2) wholesalers or distributors; (3) retailers; (4) mechanical contractors; (5) builders; (6) manufactured home manufacturers, and (7) manufactured home dealers/retailers. For this NOPD, DOE maintained the same approach as in the preliminary analysis. DOE characterized two distribution channel market segments to describe how NWOFs, MHOFs, and WGFs pass from the manufacturer to residential and commercial consumers:

(1) replacements and new owners

and (2) new construction.

DOE estimates that five percent of WGFs and three percent of NWOFs are installed in commercial buildings.

New owners are new furnace installations in buildings that did not previously have a NWOF, MHOF, or WGF, or existing owners that are installing an additional consumer furnace. These primarily consist of households that add or switch to these furnaces during a major remodel.

In replacement and new owner market, the primary distribution channel for NWOFs, MHOFs, and WGFs is characterized as follow:

Manufacturer → Wholesaler → Mechanical Contractor → Consumer

DOE estimates that the above distribution channel applies to a majority of the shipment of the subject consumer furnaces.

However, the retail distribution channel (including internet sales) has grown significantly in the last five years (previously it was negligible), and some consumers purchase the appliance directly and then have contractors install it. Accordingly, DOE considered the following additional distribution channels:

In the residential sector, DOE estimates that this distribution channel is applicable to 90 percent of the shipments for NWOFs and MHOFs, and 80 percent for WGFs; in commercial sector, it is applied to 75 percent of NWOF and 70 percent of WGF distributions.

In the residential sector, DOE estimates that these two distribution channels combined are applicable to 5 percent of the shipments for NWOFs and MHOFs, and 15 percent for WGFs (in mobile home applications, 10 percent of the WGFs distributed to mobile homes is assumed to go through these channels); in the commercial sector, they are applied to 10 percent of NWOF and 15 percent of WGF distributions.

Manufacturer → Retailer → Consumer

Manufacturer → Retailer → Mechanical Contractor → Consumer

For mobile home applications, there is another distribution channel considered on top of the aforementioned, where the MHOF or WGF is purchased via a mobile home specialty retailer or dealer:

DOE estimates that 5 percent of MHOFs and 10 percent of WGFs that go to mobile homes are distributed through this channel.

Manufacturer → Mobile Home Specialty Retailer/Dealer → Consumer

In the new construction market, DOE identified three primary distribution channels that involve builders, or manufactured home builders when considering mobile home applications:

Manufacturer → Wholesaler → Mechanical Contractor → Builder → Consumer

Manufacturer → Wholesaler → Builder → Consumer

Manufacturer → Mobile Home Manufacturer → Mobile Home Dealer → Consumer

For both the replacements and new owners and the new construction markets, DOE additionally considered the national accounts or direct-from-manufacturer distribution channel, where the manufacturer through a wholesaler sells directly to consumers.

The national accounts channel where the buyer is the same as the consumer is mostly applicable

to NWOFs and WGFs installed in small to mid-size commercial buildings, where on-site contractors purchase equipment directly from wholesalers at lower prices due to the large volume of equipment purchased, and perform the installation themselves. DOE's analysis assumes that approximately 5 and 15 percent of NWOFs and WGFs installed in the residential and commercial sector, respectively, use national accounts distribution channel for replacements. For new construction, DOE assumes 10 percent of the subject furnaces installed in residential sector and 20 percent installed in commercial are distributed through national accounts.

Manufacturer → Wholesaler (National Account) → Buyer → Consumer

DOE developed baseline and incremental markups for each participant in the distribution chain to ultimately determine the consumer purchase cost. Baseline markups are applied to the price of products with baseline efficiency, while incremental markups are applied to the difference in price between baseline and higher-efficiency models (the incremental cost increase). The incremental markup is typically less than the baseline markup and is designed to maintain similar per-unit operating profit before and after new or amended standards.

Because the projected price of standards-compliant products is typically higher than the price of baseline products, using the same markup for the incremental cost and the baseline cost would result in higher per-unit operating profit. While such an outcome is possible, DOE maintains that in markets that are reasonably competitive, it is unlikely that standards would lead to a sustainable increase in profitability in the long run.

Lennox stated that the application of lower incremental markups for increased consumer furnace standard levels considered in the TSD should be reviewed. Lennox stated that a significantly discounted incremental markup for high EL levels from baseline markup is not logical or aligned with business practices. (Lennox, No. 26 at p. 8) Lennox added that the assumption of reduced incremental markups for higher efficiency standards is contrary to normal industry practice and the expectations of its shareholders. (Lennox, No. 26 at p. 8)

In response, DOE's incremental markup approach assumes that an increase in profitability, which is implied by keeping a fixed markup when the product price goes up, is unlikely to be viable over time in reasonably competitive markets. DOE recognizes that actors in the distribution chains are likely to seek to maintain the same markup on appliances in response to changes in manufacturer sales prices after an amendment to energy conservation standards. However, DOE believes that retail pricing is likely to adjust over time as those actors are forced to readjust their markups to reach a medium-term equilibrium in which per-unit profit is relatively unchanged before and after standards are implemented.

DOE acknowledges that markup practices in response to amended standards are complex and vary with business conditions. However, DOE's analysis necessarily only considers changes in appliance offerings that occur in response to amended standards. DOE continues to maintain that its assumption that standards do not facilitate a sustainable increase in profitability is reasonable. Chapter 6 of the November 2022 Preliminary Analysis TSD provides details on DOE's development of markups for oil and weatherized gas furnaces.

In this NOPD, DOE is referencing the November 2022 Preliminary TSD for general methodology; note that some inputs have been updated for this NOPD.

D. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual energy consumption of oil and weatherized gas furnaces at different efficiencies in representative U.S. residential buildings, commercial buildings, and residential mobile homes, and to assess the energy savings potential of increased oil and weatherized gas furnace efficiency. The energy use analysis estimates the range of energy use of oil and weatherized gas furnaces in the field (

i.e.,

as they are actually used by consumers). The energy use analysis provides the basis for other analyses DOE performed, particularly assessments of the potential energy savings and the savings in consumer operating costs that could result from adoption of amended or new standards.

DOE estimated the annual energy consumption of oil and weatherized gas consumer furnaces at specific energy efficiency levels across a range of climate zones, building characteristics, and space heating needs. The annual energy consumption includes the natural gas, liquid petroleum gas (“LPG”), oil, and electricity, as applicable, used by the furnace.

To determine the field energy use of the subject furnaces, DOE developed a building sample based on the Energy Information Administration's (“EIA”) 2015 Residential Energy Consumption Survey (“RECS 2015”)

and 2012 Commercial Building Energy Consumption Survey (“CBECS 2012”).

39 40

DOE used RECS 2015-reported or CBECS 2012-reported heating energy consumption (based on the existing heating system) to calculate the heating load of each household or building. The heating load represents the amount of heating required to keep a housing unit or building comfortable throughout an average year. DOE assigned the energy efficiency of existing systems based on the design of the distribution systems, a historical distribution of energy efficiencies for NWOFs, MHOFs, and WGFs, and data about the age of the existing furnace. The estimation of heating loads also required calculating the electricity consumption of the blower, because heat from the operation of the blower contributes to space heating. In addition, DOE made adjustments based on historical weather data, projections of building shell efficiency, and building square footage, as well as for homes that had secondary heating equipment that used the same fuel as the furnace. To complete the analysis, DOE calculated the anticipated energy consumption of alternative (more energy-efficient) products if they were to replace existing systems in each housing unit or commercial building.

Energy Information Administration (EIA), 2015 Residential Energy Consumption Survey (RECS). (Available at:

www.eia.gov/consumption/residential/

) (Last accessed August 1, 2023).

Energy Information Administration (EIA), 2012 Commercial Buildings Energy Consumption Survey (CBECS). (Available at:

www.eia.gov/consumption/commercial/

) (Last accessed August 1, 2023).

At the time DOE performed the analyses underlying this proposed determination, the RECS 2015 and CBECS 2012 were the latest available full data releases.

DOE also included the electricity use of auxiliary equipment, such as condensate pumps and heat tape, which are sometimes installed with higher-efficiency products. The electricity consumption of the auxiliary equipment (“ElecUse

Aux

”) is added to the total electricity consumption.

Chapter 7 of the November 2022 Preliminary Analysis TSD provides details on DOE's energy use analysis for oil and weatherized gas furnaces.

AHRI commented that standard heat tape has an average energy consumption of 9 W/ft, adding that this additional load would increase energy use and is not accounted for in DOE's energy use analysis for these products. AHRI stated that there are additional challenges surrounding prevention of freezing condensate for WGF units, and although AHRI suggested that electric strip heating could be used to overcome this problem, such solution would add electrical losses. (AHRI, No. 23 at p. 5)

In response, DOE accounted for heat tape use in cases when a WGF is installed in an outdoor environment that could face freezing conditions. DOE assumed that such installations would occur in locations facing freezing conditions based on the outdoor heating

design temperature (or the 99th percentile). For the WGF sample, which is largely in warmer parts of the country, DOE estimated that about 5 percent of those installations would require heat tape, and DOE assumed that a larger fraction (around 50 percent) would deal with freeze protection through other methods, such as running the condensate lines through the ground or inside the WGF unit and into the building. For the energy use analysis, DOE used on average 45 watts (or 9 W/ft times 5 feet) for the energy consumption of installations requiring heat tape. For another 5 percent of installations, DOE accounted for the use of a condensate pump with an average energy consumption of 60 watts. DOE notes that any additional installation costs would not change DOE's tentative decision not to amend standards for the subject products.

E. Life-Cycle Cost and Payback Period Analysis

DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for oil and weatherized gas furnaces. The effect of new or amended energy conservation standards on individual consumers usually involves a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts:

☐ Life-Cycle Cost (LCC) is the total consumer expense of an appliance or product over the life of that product, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product.

☐ Payback Period (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 at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect.

For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-new-standards case, which reflects the estimated efficiency distribution of oil and weatherized gas furnaces in the absence of new or amended energy conservation standards. In contrast, the PBP for a given efficiency level is measured relative to the baseline product.

For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of housing units and, where appropriate, commercial buildings. As stated previously, DOE developed household and commercial building samples from RECS 2015 and CBECS 2012. For each sample household or commercial building, DOE determined the energy consumption for the oil and weatherized gas furnaces and the appropriate energy price. By developing a representative sample of households and commercial buildings, the analysis captured the variability in energy consumption and energy prices associated with the use of oil and weatherized gas furnaces.

Inputs to the LCC calculation include the installed cost to the consumer, operating expenses, the lifetime of the product, and the discount rate that applies to projected expenses. Inputs to the calculation of total installed cost include the cost of the product—which includes MPCs, manufacturer markups, retailer and distributor markups, and sales taxes (where appropriate)—and installation costs. Inputs to the calculation of operating expenses include annual energy consumption, energy prices and price projections, repair and maintenance costs, product lifetimes, and discount rates. Inputs to the payback period calculation include the installed cost to the consumer and first year operating expenses. DOE created distributions of values for installation cost, repair and maintenance, product lifetime, and discount rates with probabilities attached to each value, to account for their uncertainty and variability.

The computer model DOE uses to calculate the LCC and PBP relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and oil, electric, and weatherized gas furnace user samples. For this determination, the Monte Carlo approach is implemented in MS Excel together with the Crystal Ball

add-on.

The model calculated the LCC and PBP for products at each efficiency level for 10,000 furnace installations in housing units or commercial buildings per simulation run. The analytical results include a distribution of 10,000 data points showing the range of LCC savings for a given efficiency level relative to the no-new-standards case efficiency distribution. In performing an iteration of the Monte Carlo simulation for a given consumer, product efficiency is chosen based on its probability. If the chosen product efficiency is greater than or equal to the efficiency of the standard level under consideration, the LCC and PBP calculation reveals that a consumer is not impacted by the standard level. By accounting for consumers who are projected to purchase more-efficient furnaces than the baseline furnace in the simulation, DOE avoids overstating the potential benefits from increasing product efficiency.

Crystal Ball

is a commercially-available software tool to facilitate the creation of these types of models by generating probability distributions and summarizing results within Excel (Available at:

www.oracle.com/middleware/technologies/crystalball.html

) (Last accessed August1, 2023).

DOE calculated the LCC and PBP for all consumers of oil and weatherized gas furnaces as if each were to purchase a new product in the expected first year of required compliance with new or amended standards. Any amended standards would apply to oil and weatherized gas furnaces manufactured five years after the date on which any new or amended standard is published in the

Federal Register

. (42 U.S.C. 6295(m)(4)(A)(ii)) For purposes of its analysis, DOE used 2030 as the first year of compliance with any amended standards for oil and weatherized gas furnaces.

Table IV.15 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and how all inputs to the LCC and PBP analyses are applied, are contained in chapter 8 of the November 2022 Preliminary Analysis TSD and its appendices.

Table IV.15—Summary of Inputs and Methods for the LCC and PBP Analysis *

Input

Source/method

Product Cost

Derived by multiplying MPCs by manufacturer and distribution chain markups and sales tax, as appropriate. Used historical data to derive a price-scaling index to project product costs.

Installation Costs

Baseline installation cost determined with data from RSMeans 2023, manufacturer literature, and expert consultant. DOE assumed increased installation costs for condensing furnaces.

Annual Energy Use

The annual energy consumption per unit at each efficiency level (see section IV.D of this document). Variability: Based on RECS 2015 and CBECS 2012.

Energy Prices

Natural Gas: Based on EIA's Natural Gas Navigator data for 2022 and RECS 2015 and CBECS 2012 billing data.

Propane and Fuel Oil: Based on EIA's State Energy Data System (“SEDS”) for 2021.

Electricity: Based on EIA's Form 861 data for 2022 and RECS 2015 and CBECS 2012 billing data.

Variability: State energy prices determined for residential and commercial applications.

Marginal prices used for natural gas, propane, and electricity prices.

Energy Price Trends

Residential and commercial prices were escalated by using EIA's 2023

Annual Energy Outlook

(

AEO 2023

) forecasts to estimate future energy prices. Escalation was performed at the Census Division level.

Repair and Maintenance Costs

Baseline installation cost determined with data from RSMeans 2023, manufacturer literature, and expert consultant. DOE assumed increased repair and maintenance costs for condensing furnaces.

Product Lifetime

Based on shipments data, multi-year RECS, American Housing Survey, American Home Comfort Survey data. Average: 20.2-22.5 years

Discount Rates

For residential end users, approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances or might be affected indirectly. Primary data source was the Federal Reserve Board's Survey of Consumer Finances. For commercial end users, DOE calculates commercial discount rates as the weighted average cost of capital using various financial data.

Compliance Date

2030.

Note:

References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the November 2022 Preliminary Analysis TSD.

1. Product Cost

To calculate consumer product costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described previously (along with sales taxes). DOE used different markups for baseline products and higher-efficiency products, because DOE applies an incremental markup to the increase in MSP associated with higher-efficiency products.

DOE estimated product prices in the year of compliance by using a least-squares power-law fit on the inflation-adjusted, unified price index (historical Producer Price Index (“PPI”) data for warm-air furnaces from the Bureau of Labor Statistics (“BLS”) spanning the time period 1990-2018 versus cumulative shipments.

U.S. Department of Labor, Bureau of Labor Statistics, Produce Price Indices Series ID PCU333415333415C (Available at:

www.bls.gov/ppi/

) (Last accessed August 1, 2023).

In order to improve real-world representativeness, NYSERDA recommended that DOE consider using piecewise power-law curves for different time intervals to estimate the learning rate parameter in the LCC analysis. NYSERDA provided data to explain that prices decreased until 2017 and then started to increase. NYSERDA added that one possible explanation for this is that growing economies are consuming more raw materials that go into manufacturing furnaces, and such an increase in global aggregate demand for raw materials exerts upward pressure on product prices. The commenter explained that piecewise power-law curves are a common approach in cases where there is a reversal in directionality of trends and cited an example journal article. NYSERDA commented that using one power-law curve before 2017 and another after would more accurately capture the reduction in furnace prices in the future. (NYSERDA, No. 19 at pp. 3-4)

DOE reviewed NYSERDA's suggestion for an alternative price learning approach; however, insufficient data are available to implement the approach for the products considered in this rulemaking. In addition, the recommendation to segment the curve before and after 2017 is similar to the alternative price scenarios that DOE typically explores when proposing or finalizing amended standards, but in this case, DOE has tentatively determined not to amend standards. For these reasons, DOE has not changed its methodology for this NOPD.

2. Installation Cost

The installation cost is the expense to the consumer of installing the furnace, in addition to the cost of the furnace itself. Installation cost includes all labor, overhead, and any miscellaneous materials and parts needed that are associated with the replacement of an existing furnace or the installation of a furnace in a new home, as well as delivery of the new furnace, removal of the existing furnace, and any applicable permit fees. Higher-efficiency furnaces may require a consumer to incur additional installation costs. DOE used data from RSMeans,

manufacturer literature, and expert consultants to estimate the installation cost, including labor costs, for oil and weatherized gas furnaces. DOE's analysis of installation costs accounted for regional differences in labor costs by aggregating city-level labor rates from RSMeans into the 50 distinct State plus Washington DC to match RECS 2015 and CBECS 2012 data. The installation cost methodology accounts for all potential installation cases, including when a noncondensing furnace is replaced with a condensing fur

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